Court Rules That Technical Violations Of Michigan Video Rental Privacy Act Give Rise To $5,000 Per Person In Statutory Damages, Alleged Violation Enough To Stay In Federal Court

A Michigan federal judge has held that plaintiffs could proceed in federal court on their claims under the Video Rental Privacy Act (VRPA), a state law akin to the federal Video Privacy Protection Act (VPPA). The ruling came in three similar putative class actions that alleged Bauer Publishing Co., Hearst Communications, Inc, and Time, Inc., respectively, sold their customers' personal information without permission. (The three cases were assigned to the same judge for their similar allegations.)

To have jurisdiction over a case, a federal court must find that the plaintiffs satisfy Article III of the United States Constitution, including by alleging that they have suffered an injury-in-fact. Many privacy class actions falter because plaintiffs allege only a technical violation, but cannot point to any actual or imminent impact that this supposed violation had, or will have, on their lives. The plaintiffs' bar has therefore tried to find federal and state privacy laws, with associated statutory or liquidated damage hooks, in an attempt to avoid dismissal for lack of harm.

In these cases, plaintiffs brought suit under the VRPA. Michigan's VRPA provides that a person "engaged in the business of selling at retail, renting, or lending books or other written materials, sound recordings, or video recordings shall not disclose to any person, other than the customer, a record or information concerning the purchase, lease, rental, or borrowing of those materials by a customer that indicates the identity of the customer," with certain exceptions. The statute also provides that "a person who violates this act shall be liable in a civil action for damages to the customer identified" for "[a]ctual damages, including damages for emotional distress, or $5,000.00, whichever is greater" (emphasis added) and costs and reasonable attorneys' fees. Because of the provision for $5,000 per person in statutory damages, the VRPA threatens businesses with the prospect of catastrophic class damages.

Defendants moved to dismiss these cases. In part, the defendants argued that the plaintiffs had alleged no injury-in-fact...