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USA: Actual damages under Privacy Act restricted to economic loss

The Supreme Court of the United States ruled - on 28 March 2012 - that mental or emotional distress does not amount to ''actual damages'' recoverable under 5 U. S. C. §552a(g)(4)(a) of the Privacy Act 1974 in the case Federal Aviation Administration (FAA) v Cooper [566 U. S. ____ (2012)].

''What constitutes actual damages is what was at issue here'', Timothy Tobin, Partner at Hogan Lovells, told DataGuidance. ''The Privacy Act of 1974 applies only to US Government agency records that contain personally identifiable information. It is yet to be seen whether it will impact private entities' claims against other private entities in statutes that allow for the recovery of 'actual damages', such as under the Fair Credit Reporting Act, and other statutory regimes.''

The case concerned Stanmore Cooper, a licensed pilot who applied and continued to renew his medical certificate from the FAA in 1994, 1998, 2000, 2002 and 2004 while intentionally withholding his human immunodeficiency virus (HIV) diagnosis. When his health deteriorated in 1995, he applied and obtained long-term disability benefits for his medical condition with the Social Security Administration (SSA). His medical condition was revealed when the Department of Transportation (DOT) launched a joint criminal investigation with the SSA - Operation Safe Pilot - and compared records with the FAA's medical file. Cooper's pilot license was revoked, and he was charged with making false statements to a government agency.

Cooper subsequently sought damages under the Privacy Act claiming 'humiliation, embarrassment, mental anguish, fear of social ostracism, and other severe emotional distress’ as a result of the FAA, DOT, SSA's 'unlawful disclosure' of his records; Cooper did not, however, allege any economic loss. The District Court denied Cooper's recovery of damages from the alleged mental and emotional harm alone. The Court of Appeals reversed the decision, stated that ''actual damages'' includes damages for mental and emotional distress and awarded Cooper with damages. The FAA, DOT, and SSA consequently appealed to the Supreme Court.

The Supreme Court ruled: 'The basic idea is that Privacy Act victims, like victims of libel per quod or slander, are barred from any recovery unless they can first show actual - that is, pecuniary or material - harm. Upon showing some pecuniary harm, no matter how slight, they can recover the statutory minimum of $1,000, presumably for any unproven harm. Because the term ''actual damages'' has this chameleon like quality, we cannot rely on any all-purpose definition but must consider the particular context in which the term appears.'

Tobin said: ''[This ruling] will make it much more difficult for a plaintiff that establishes that a US Government Agency has not followed the requirements of the Privacy Act, even if the plaintiff can demonstrate the Agency did so intentionally or willfully, to obtain a monetary recovery in an action against the US Government. [Additionally], under a class action, the putative plaintiff would have to prove financial harm for the claim to be viable and because for classes to be certified in the US, all members of the class must have common circumstances, even if a named plaintiff can show financial harm, if the rest of the putative class members are not similarly situated, in particular, if they have not suffered financial harm, the class would not be certified.''

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