Adam K. Magid
Whether a plaintiff has Article III standing is the threshold issue in any federal action. Article III of the Constitution extends federal judicial power only to “Cases” and “Controversies.” Years of jurisprudence have construed those words to mean that a federal plaintiff must have a “personal stake” in every claim.
To avoid dismissal, a plaintiff must allege injury that:
1- Is concrete, particularized, and actual or imminent;
2- Was likely caused by the defendant; and
3- Will likely be redressed by the plaintiff’s requested relief.
The Second Circuit recently addressed Article III in three different contexts – firearm licensing, IRS tax-credit regulation, and alleged ERISA fiduciary misconduct – revealing a broad (but not limitless) conception of the injury needed to access federal court.
New York’s Concealed Carry Requirements
In 2022, the Supreme Court struck down New York’s “proper cause” requirement to receive a concealed carry handgun permit, which required applicants to demonstrate “a special need for self-protection.” In response, the state legislature passed the Concealed Carry Improvement Act (CCIA), which amended the state’s regulatory regime for in-home and concealed carry firearm licenses. Among other things, the CCIA requires license applicants to have “good moral character,” to attend in-person interviews, to disclose individuals residing in the applicant’s home and character references, and to complete safety training. The CCIA makes it a felony, even for license holders, to carry a firearm in certain “sensitive locations” (for example, Times Square and public transit). The CCIA also requires background checks for prospective purchasers of ammunition.
In recent decisions, the Second Circuit uniformly held that plaintiffs had standing to challenge the CCIA’s provisions, reasoning that deterrence from engaging in firearm-related conduct amounted to valid Article III injury.
– In Giambalvo v. Suffolk Cnty., New York, 155 F.4th 163, the court (Bianco, Parker, and Rakoff, sitting by designation) held that plaintiffs had standing to challenge CCIA application requirements, including for “good moral character,” having alleged those requirements deterred them from applying.
– In Frey v. City of New York, 157 F.4th 118, the court (Bianco, Sack, and Raggi) held that plaintiffs had standing to challenge the CCIA’s sensitive-location ban, given allegations that they only complied with the ban (i.e., were deterred from carrying firearms in sensitive locations) out of fear of “arrest or incarceration.”
– In New York State Firearms Ass’n v. James, 157 F.4th 232, the court (Bianco, Park, and Nardini) upheld the standing of would-be purchasers and sellers of ammunition to challenge background-check requirements (including fees and registration requirements) that allegedly deterred them from transacting.
As these decisions show, however, meeting Article III’s threshold injury requirements says little about the ultimate viability of a plaintiff’s claims. In Giambalvo, Frey, and James, the Second Circuit denied plaintiffs’ requests to enjoin the challenged CCIA provisions, ruling that the challenges were unlikely to succeed on the merits. The provisions, the court observed, were broadly consistent with the nation’s historical tradition of firearm regulation and did not unduly hinder individuals’ capacity for self-protection.
IRS Tax Credit Regulation
Standing was also at issue in New Jersey v. Bessent, 149 F.4th 127, which involved a challenge to the IRS’s rule limiting federal charitable deductions tied to state or local tax (SALT) credits. After the 2017 Tax Cuts and Jobs Act capped SALT deductions at $10,000, New Jersey, New York, Connecticut, and Scarsdale, New York, established programs to help residents recover some of the lost tax benefit, allowing residents to contribute to certain charitable funds in exchange for substantial SALT credits. The impact, however, was negated by a subsequent IRS rule requiring taxpayers to reduce their federal deduction by any state or local tax credits claimed.
Although upholding the IRS’s rule as a permissible exercise of the agency’s statutory authority, the Second Circuit (Sack, Robinson, and Pérez) affirmed New York and Scarsdale’s Article III standing to sue. The programs incentivized residents to make significant contributions to public funds, resulting in increased revenue to be spent on public works and services. The IRS rule eliminated the incentive for residents to contribute, effectively eliminating this revenue stream. That monetary loss was sufficiently concrete and particularized to establish Article III injury.
Alleged ERISA Violations
On the other hand, the Second Circuit reached its Article III limit in Collins v. Northeast Grocery, Inc., 149 F.4th 163, involving alleged violations of the Employee Retirement Income Security Act of 1974 (ERISA). In that case, former employees of grocery store chains brought a putative class action suit alleging that the plan’s fiduciaries mismanaged their 401(k) retirement plan in violation of ERISA by selecting imprudent investment options, allowing excessive fees, and failing to act solely in the interest of plan participants.
The Second Circuit (Walker, Wesley, and Bianco) affirmed Northern District of New York Judge David N. Hurd’s ruling, dismissing several claims for lack of Article III standing. Second Circuit precedent, the court explained, requires defined contribution plan participants seeking to obtain monetary relief for ERISA violations to allege a non-speculative financial loss actually affecting, or imminently threatening to affect, their individual retirement accounts. Absent specific allegations of loss to their individual accounts, plaintiffs’ “conclusory allegations” of plan-wide mismanagement did not pass Article III muster.
Conclusion
Although just snapshots, the Second Circuit’s recent jurisprudence indicates a broad and flexible conception of Article III standing. If a plaintiff can allege that it personally suffered injury from the conduct or matter to which its claims are directed (including deterrence from acting, as in the CCIA cases), Article III’s case-or-controversy requirement may be met. But diffuse proclamations of harm, untethered to a specific plaintiff or its claims, may be a bridge too far for the Second Circuit. Prospective plaintiffs should take any apparent Article III permissiveness with a grain of salt, as innumerable and myriad procedural and substantive obstacles await en route to final judgment in the Second Circuit and beyond.