7th Cir. OKs Sale of Educational Test Takers' Data

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By Jimmy H. Koo

Nov. 19 — Testing companies failing to disclose to students' that their personally identifiable information was sold at a profit to educational organizations doesn't provide injury sufficient for Article III standing, the U.S. Court of Appeals for the Seventh Circuit affirmed Nov. 18.

In yet another blow to putative class actions alleging privacy violations, Judge Michael S. Kanne agreed with the trial court that the plaintiffs didn't establish how ACT Inc. and The College Board “deprived them of the economic value” of their PII.

Every year, the appeals court said, “millions” of high school students take the ACT and the SAT to gain admission to a college or university. As a part of the examination process, some test takers allow the testing agencies to share or send their PII with educational organizations. According to the plaintiffs—former participants in this information exchange program—alleged that they were harmed when the testing agencies didn't disclose that the students' PII was sold for profit.

Alleging invasion of privacy, unfair and deceptive business practices, unjust enrichment and breach of contract, the plaintiffs filed a putative class action complaint. The defendants' sale of the plaintiffs' PII didn't “cause” plaintiffs to pay the examination fees because the fees were paid to take the exams, the district court found. It explained that a plaintiff's injury must be “based on the plaintiffs' loss, not the defendant's gain.”

No Loss = No Standing 

After a failed bid for leave to amend their complaint, the plaintiffs appealed, arguing again that the defendants deceived them by failing to disclose the sale of their PII and sought damages from the income derived from the alleged deception. The appeals court disagreed.

The Seventh Circuit explained that “a plaintiff who would have been no better off had the defendant refrained from the unlawful acts of which the plaintiff is complaining does not have standing under Article III of the Constitution to challenge those acts in a suit in federal court.” Here, the appeals court said, in both potential scenarios—sharing the PII with and without a fee—the plaintiffs' PII would have been shared with the participating organization in the same manner.

Further, it said the class complaint failed to show how the plaintiffs were deprived of the economic value of their PII. The plaintiffs claimed injury “based solely on a gain to defendants and without alleging a loss to themselves,” the appeals court said, finding that the plaintiffs'' only claim of economic value is “a portion of the value created by Defendants after Plaintiffs authorized the sending or sharing of their information.” Instead of being harmed, the plaintiffs “actually benefited from participation in the information exchange program,” the appeals court concluded.

Judges William J. Bauer and Ilana Rovner joined the opinion.

Larry D. Drury, Chicago represented the plaintiffs. SmithAmundsen LLC represented ACT. Sidley Austin LLP represented the College Board.

To contact the reporter on this story: Jimmy H. Koo in Washington at jkoo@bna.com

To contact the editor responsible for this story: Donald G. Aplin at daplin@bna.com

The full text of the court's opinion is available at http://www.bloomberglaw.com/public/document/Silha_v_ACT_Inc_No_151083_2015_BL_379598_7th_Cir_Nov_18_2015_Cour.