Articulating a "rational connection" requirement in Article III standing.

• Author: Haddock, John S.

INTRODUCTION I. STATING THE PROBLEM A. Warth v. Seldin and the Question of Underlying Injury B. Why Warth v. Seldin Is Not a "Free Pass" Through Article III C. Warth v. Seldin and the Risk of Circularity II. TRACING THE ORIGIN OF THE ARTICLE III DOCTRINAL GAP A. Article III Standing Requirements B. Cass Sunstein, William Fletcher, and the Contested Origin of Injury in Fact C. The Origin of Congressional Power to Confer Standing D. Lujan and the Requirement of a Differentiated Injury E. Akins and the Inconstant Bar Against Generalized Grievances III. LOCATING A "RATIONAL CONNECTION" REQUIREMENT A. Citizen Suits and Justice Kennedy's Concurrence in Lujan B. Zone of Interests C. Qui Tam IV. EVALUATING THE APPROPRIATE SCOPE OF JUDICIAL REVIEW A. Congress Should Have Broad Latitude to Decide When Persons Are at Risk of Injury B. Where the Statutory Right Bears a "Rational Connection" to the Proscribed Conduct, No Further Proof of Injury Is Required CONCLUSION INTRODUCTION

Amid the crush of media coverage on the day the Supreme Court announced its decision on the constitutionality of the Affordable Care Act, (1) few paid attention to the Court's order dismissing the writ of certiorari in First American Financial Corp. v. Edwards as improvidently granted. (2) The Court dismisses cases infrequently, (3) and, when it does, dismissal generally follows shortly after oral argument. (4) In First American, the dismissal--seven months after oral argument--was a notable departure from Court practice. (5) The outcome was all the more striking in light of the importance of the issue before the Court: the constitutional limits on Congress's power to confer standing upon plaintiffs bringing suit against other private parties. Given the high constitutional stakes involved, many Court observers had anticipated First American would be the "sleeper" of the Term. (6)

Denise Edwards sued her home title insurer, First American, for violating the Real Estate Settlement Procedures Act (RESPA). (7) The statutory provision at issue prohibits title insurers from paying kickbacks for client referrals. (8) Clients charged for services involving a kickback are entitled to recover three times the amount they paid. (9) In a typical suit, plaintiffs can argue they overpaid for their insurance as a result of a kickback. In a twist, Edwards purchased her home in Ohio, where insurance rates are set by law. (10) First American argued Edwards lacked standing to sue because she could not show she was actually injured by the kickback.

The Ninth Circuit rejected First American's argument and found Edwards had standing. (11) In reaching its decision, the Ninth Circuit applied the Supreme Court's formulation in Warth v. Seldin (12) that "injury required by Article III can exist solely by virtue of 'statutes creating legal rights, the invasion of which creates standing.'" (13) While over two-thirds of the Court's docket addresses splits among circuit courts, (14) all three circuits to confront the question agreed that plaintiffs had standing to bring a RESPA suit without proving they were overcharged. (15)

When the Court decided to review the Ninth Circuit decision, observers braced for reversal. (16) There was speculation that the Court would use the case "to establish new Article III limitations on Congress's power to create private rights of action." (17) Among the most likely outcomes, the Court could have decided that the violation of a statutorily created right could not satisfy Article III standing absent a showing of an underlying injury. This outcome would leave the Court with the unenviable task of defining what counts as an underlying injury. (18)

Even if the Court were to have affirmed standing, it could have done so on grounds "considerably narrower" than those offered by the Ninth Circuit. (19) As the Ninth Circuit applied Warth v. Seldin, Congress's power to confer standing seems virtually unlimited. (20) But an unbounded application of Warth v. Seldin is also in tension with the Court's view that Article III requires a plaintiffs injury be differentiated from that of the general public. Rather than decide these issues, the Court chose to pass on First American.

This Note takes up where the Court left off, examining potential reasons for the Court's discomfort with the formulation in Warth v. Seldin. It suggests that formulation is incomplete insofar as it permits plaintiffs to sue private parties without showing how the conduct injures them in a differentiated way. This Note argues that the formulation in Warth v. Seldin and the requirement of differentiated injury can be reconciled by requiring plaintiffs to show a "rational connection" between the violation of the statutory right and the conduct that Congress seeks to regulate.

The "rational connection" requirement proposed here addresses statutorily defined injury. Where a plaintiff suffers palpable harm from the conduct of a third party, injury in fact is never in doubt. (21) But where a plaintiffs only showing of injury is the violation of a statutory right, the "rational connection" requirement would limit standing to plaintiffs who can reasonably be said to have suffered at the hands of the conduct in question. This Note argues that the violation of a plaintiff's statutory right should constitute an injury in fact so long as the right is rationally connected to the conduct Congress seeks to regulate. It suggests that the Court articulate such a "rational connection" requirement to close the existing doctrinal gap in Article III standing.

The Note is divided into four Parts. Part I describes why the Ninth Circuit's application of Warth v. Seldin is in tension with the requirement that plaintiffs suffer a differentiated injury. Part II explains the origins of this doctrinal gap. Part III outlines a "rational connection" requirement by drawing on the Court's approach in several analogous areas of law. Part IV argues the standard of judicial review should be appropriately deferential to Congress.

1. STATING THE PROBLEM

   1. Warth v. Seldin and the Question of Underlying Injury

      Since deciding Warth v. Seldin, the Court has seldom invoked its formulation that injury required by Article III "may exist solely by virtue of 'statutes creating legal rights, the invasion of which creates standing.'" (22) In contrast, circuit courts regularly recite this language to find Article III standing on the basis of a statutory violation. (23) During oral argument in First American, several Justices expressed their discomfort with how this formulation had been applied to Edwards's claim. Justice Kennedy, for one, objected to its circularity. When Edwards suggested that the requisite injury was the denial of an untainted referral to which a homebuyer was entitled by statute, Justice Kennedy objected: "[I]t's circular for you to say he's denied something he's entitled to. The question is whether there's an injury.... [T]o say he was entitled to it and, therefore, it's an injury ... that's just circular. That gives no substance at all to the ... meaning of the term 'injury.'" (24) Chief Justice Roberts similarly expressed doubt that the deprivation of a statutorily created right, without more, could qualify as an injury for standing: "[W]hen you tell me all that you've got or all that you want to plead is violation of the statute, that doesn't sound like injury-in-fact." (25)

      With these concerns in mind, Justice Scalia posed the following hypothetical: aiming to ease the IRS's burden in collecting taxes, Congress passes a law giving the customer of any company that has not paid its taxes a cause of action to sue that company for $500. (26) In effect, the statute gives all such consumers the "right to a tax-observant seller." (27) Upon identifying a violation, would a consumer have standing to sue?

      For the current Court, the answer would likely be no. In Lujan v. Defenders of Wildlife, the Court held that Congress cannot "convert the undifferentiated public interest in executive officers' compliance with the law into an 'individual right' vindicable in the courts." (28) Lujan was a suit against a public agency, but for the reasons that follow, (29) the Court is likely to require that plaintiffs show a "differentiated" injury in suits against private parties as well.

      In the hypothetical, Congress attempts to avoid this hurdle by limiting the universe of plaintiffs to consumers of the company's products. But the result is no less problematic. A consumer has no differentiated interest in seeing that the producer pays its taxes. (30) Congress could just as well have limited the universe of plaintiffs to "people with college degrees or people who were born on a Monday." (31) For the limitation in Lujan to have meaning, something more must be required.

      This Note focuses on what that something more should be. It does not argue that Warth v. Seldin is incorrect, but rather that its formulation, without more, is incomplete.

   2. Why Warth v. Seldin Is Not a "Free Pass" Through Article III

      In the tax-observant seller hypothetical, Congress has created a statutory right (the right to a tax-observant seller), and it has conferred a cause of action (a consumer is entitled to $500). The literal terms of Warth v. Seldin are met. But, in creating this right, Congress has failed to explain why the consumer is a proper party to bring suit.

      This same question animates the Court's struggle in First American, but there it is obscured by a second complication: RESPA imposes a legal duty on insurers and confers a cause of action on homebuyers without defining the homebuyer's underlying legal right. In effect, Congress has skipped a step. RESPA provides that in title insurance transactions "[n]o person shall give and no person shall accept any ... kickback." (32) This is the insurer's legal duty. RESPA then provides that parties that breach that duty are liable to the "persons charged for the settlement service involved."...