The U.S. has strict laws that punish misrepresenting the truth about people in public forums, but a new case before the Supreme Court could make even presenting innocuous, but mistaken information a punitive offense.

That's what's at stake for businesses in a case called Spokeo, Inc. vs. Robins, which the high court agreed to hear on Monday. The case is important to technology companies that may gather information about their millions of consumers, as well as any business that uses or collects consumer information. It could lead to more class action suits against such businesses in years to come.

"The exposure to businesses from having to defend against these kinds of lawsuits, as class actions, could cost millions of dollars," says Scott Vernick, partner and head of the data security and privacy practice at Fox Rothschild, in Philadelphia.

Some background

The plaintiff, Thomas Robins, is reportedly an unemployed Virginia resident who was seeking work in 2010 when he first brought the suit. He claims Spokeo damaged his reputation by disseminating allegedly incorrect personal information. Spokeo is a Pasadena, California tech company that aggregates public records and sells that information as personal profiles online.

The case definitely raises legitimate concerns--particularly, in an age of social media where so much information is suddenly available about anyone online, says Neal Hartman, senior lecturer and head of the managerial communications group at MIT Sloan School of Management.  Robins alleges Spokeo hurt him by reporting that he was in his 50s when he was actually in his 20s at the time, and by claiming he had a high level of income when he was actually jobless, among other things. His attorneys allege Spokeo violated his rights under the Fair Credit Reporting Act, which requires companies to correct inaccurate information in credit reports. 

The latter allegation is the part that could have ripple effects on other technology startups. The suit would lower the legal threshold for actionable cases, legal experts say, because Robins is claiming relief, not for actual injury, but simply because Spokeo violated a statute by presenting inaccurate information.

The suit has Silicon Valley's tech industry up in arms. Ebay, Facebook, Google and Yahoo have jointly filed an amicus brief urging the Supreme Court to rule against the plaintiff. They say a ruling that favors Robins would open the door to millions of consumers banding together in class actions to sue them.

The Implications

"This case has broad implications, even if the verdict is close, and could have a chilling effect for companies like Yahoo, Facebook, or Google, because they have data on so many people," says Maurice Schweitzer, a professor of management at University of Pennsylvania's Wharton School.

More specifically, legal experts say individuals may be entitled to damages ranging from $100 to $1,000 per violation. To put that in perspective, a class action suit like the one Spokeo faces could cost into the hundreds of millions or even billions of dollars for a Yahoo or Facebook, which have millions of customers, says Mary-Christine Sungaila, a partner at Haynes and Boone, in Costa Mesa, California.

With all that in mind, here are three things you should consider regarding the case, whether you're at a tech company whose bread and butter is consumer data, or a startup that merely collects it in the normal course of business:

1. Play it safe.

There are at least a dozen statutes, similar to the Fair Credit Reporting Act, which govern how companies gather, share, or sell consumer information, legal experts say. Those include the Video Privacy Protection Act (VPPA), the Telephone Consumer Protection Act (TCPA), and the Fair and Accurate Credit Transmission Act (FACTA). These laws regulate things like the potential sale of consumer information about video purchases and rentals, consumer phone solicitation, and even the number of digits you can send electronically to verify a credit card transaction, respectively.

Know which laws apply to your business, and if necessary, get legal advice about where you might be at risk, says Vernick.

2. Go the extra mile.

Once you've determined which laws govern your business, be transparent with your customers. If, for example, you know you're regulated by the TCPA, which deals with things like sending unsolicited faxes to customers, be sure you clearly post your opt-out procedure on the fax itself.

"While an opt-out wont insulate you from liability, it does comply with the statute," says Sungaila.

3. Protect your own reputation

On a regular basis, you should monitor the online information that's out there about you and your buiness, as faulty data could damage your brand. You should make that a job for your marketing department, or hire one of the many companies that have made online reputation defense their bread and butter. Either way, it requires a lot of leg work, including reaching out data aggregators like Spokeo to correct any faulty claims, or opting out of their aggregation altogether. 

Spokeo declined a request for comment.

Published on: Nov 6, 2015