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San Diego Business Law: Legally Speaking, What is Standing?

Recently, the U.S. Supreme Court reversed the U.S. federal Ninth Circuit Court of Appeals in San Francisco in the case of Frank v. Gaos, No. 17-961 (US Supreme Court Mar. 20, 2019). The case involved an allegation by various plaintiffs who sued Google, Inc. They claimed that Google violated various provisions of a federal law called the Stored Communications Act. The Act prohibits a business like Google, which stores electronic communications, from divulging “… the contents of a communication while in electronic storage by that service.” See 18 U.S.C. § 2702(a)(1). The case was filed as a class action meaning that there were a few representative plaintiffs, but the total number of potential claimants was tens of millions of Google users. Google and the plaintiffs negotiated a settlement agreement whereby Google agreed to pay about $8.5 million and to begin including certain disclosures on various Google webpages. The settlement was approved by the trial court and then approved by the Ninth Circuit. However, as noted, the US Supreme Court reversed and sent the case back to San Francisco for a determination of the legal issue of “standing.”

What is “Standing” and Why is it Important for San Diego Businesses?

The easiest analogy is between “standing” and the right to sue on business contracts. Every San Diego business uses business contracts even if only occasionally and informally. If there is a breach of the contract, an important question that is often overlooked is “who can sue on the basis of the contract?” In general, the only persons or entities that can sue are the parties to the contract. This is common sense. No business would want to allow some stranger to the contract to have the ability to bring a lawsuit. There is an exception called the third-party beneficiary rule where a contract is made specifically to benefit a third party. Example: Maria signs a contract with ABC Home Repair to make repairs to Maria’s mother’s house. In this simple example, Maria’s mother would be able to sue if the repair company breached the contract. The second important feature of suing for breach of contract is this: There must actually be a breach of the contract.

The legal concept of standing is similar, but with respect to statutes and laws. In general, to have standing, a person or entity must be one of those intended to be protected by the statute/law and there must be some sort of concrete injury. This is what the US Supreme Court stated in the case of Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (US Supreme Court 2016). This is a narrower view of standing than the Court has had in the past. This is good for San Diego businesses since a narrow/strict view of standing will reduce the number of cases filed.

In the Frank v. Gaos case, the Supreme Court sent the case back to the lower courts for a determination of whether any of the plaintiffs — any of the tens of millions of Google users — suffered any “actual concrete injury.”

Contact San Diego Corporate Law

For further information, please contact Michael Leonard, Esq. of San Diego Corporate Law. Contact Mr. Leonard via email or by calling (858) 483-9200. Mr. Leonard’s law practice is focused on business, transactional, and corporate matters including legal services related to private securities offerings/sales, the sale/purchase of a business, and mergers and acquisitions. Mr. Leonard can also assist with employee-related matters such as employment contracts, drafting and/or reviewing company employee policies and procedures, creating and/or updating employee handbooks, and more. Like us on Facebook.

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