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October Term, 2007

June 23, 2008

Article III Standing—Suits By Assignees for Collection Purposes.

Sprint Communications Co., L.P. v. APCC Services, Inc., No. 07-552 (previously discussed in the January 8, 2008 Docket Report).

The Supreme Court held today that an assignee of a legal claim for money damages has standing to sue on that claim in federal court, even if, as part of the assignment, the assignee has agreed to pay all proceeds of the suit to the assignor. The decision broadens the concepts of injury and redressability, allowing individuals who suffered an actual injury but do not have the resources to bring a claim on their own, or whose individual damages are too small to justify litigation, to assign their claims by contract to third parties better positioned to litigate in the aggregate. This development is particularly significant to the business community, because it approves a means by which plaintiffs may be able to apply leverage comparable to that available in a class action, without otherwise satisfying the requirements for bringing a class action in federal court.

The case involved so-called “dial-around” calls, in which payphone customers use a toll-free number to place a call with a particular long-distance carrier, and the carrier in turn compensates the payphone operator for placing the call. Payphone operators frequently contract with “aggregators,” collection firms to which the operators fully assign title to their relatively small individual claims against long-distance carriers. The aggregators are paid a fee for their services, and any recovery is paid to the operator. The long-distance carriers challenged this practice, arguing that, because the aggregators have no direct stake in the outcome of the litigation, and thus have no injury that can be redressed by the suit, they lack standing under Article III to bring the assigned claims.

In an opinion by Justice Breyer, the Court rejected the long-distance companies’ argument by a five-to-four vote. After reviewing historical practice regarding assigned claims, the Court held that the redressability element of Article III standing is satisfied even when proceeds from a successful suit are remitted to the assignor. The Court reasoned that the injury alleged is the failure of the long-distance carriers to pay the dial-around compensation they owed; their payment of damages would redress that injury, the Court explained, wherever the money ultimately went. The Court also rejected the long-distance companies’ alternative argument that the aggregators should be denied standing for prudential reasons, because, according to the companies, the practice of aggregation amounts to an effort to circumvent federal class-action requirements by constructing a suit that is functionally equivalent to a class action. The Court explained that class actions under Rule 23 are permissive, rather than mandatory; that a variety of methods exist under federal law for aggregating claims; and that the aggregators’ choice of one method rather than another is not a reason to deny standing.

Chief Justice Roberts filed a dissenting opinion, in which Justices Scalia, Thomas, and Alito joined. The dissent argued that the majority misconstrued historical practice and that the Court had never before concluded that a party lacking a direct, personal stake in the litigation could meet the standing requirements of Article III.



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