In a 5-4 decision, the U.S. Supreme Court ruled last week in TransUnion, LLC. v. Ramirez that only class members who were concretely harmed by TransUnion’s FCRA violation had Article III standing to seek damages.
In the case, Sergio Ramirez, the named plaintiff, alleged that he suffered difficulty in obtaining credit and other harm after an automobile dealer received a credit report from TransUnion indicating that his name matched a name found on the list of terrorists and narcotics traffickers with whom U.S. companies may not transact business that is maintained by the Office of Foreign Assets Control (OFAC). He filed a class action complaint alleging that TransUnion violated the FCRA, including by failing to follow reasonable procedures to ensure the accuracy of information in his credit file.
Before trial, the parties stipulated that the class consisted of 8,185 members whose credit files contained misleading OFAC alerts and that only 1,853 members (including Mr. Ramirez) had their credit reports disseminated by TransUnion to potential creditors during the class period. The district court ruled that all 8,185 class members had Article III standing and following a trial, the jury awarded each class member $984.22 in statutory damages and an additional $6,353.08 in punitive damages for a total award of more than $60 million. On appeal, the Ninth Circuit affirmed the district court’s ruling that all class members had Article III standing to recover damages for their FCRA claims but reduced the punitive damages to $3,936.88 per class member (thereby reducing the total award to approximately $40 million).
In the opinion of the Court written by Justice Kavanaugh, the Court first considered the Article III standing of the 1,853 class members whose reports were disseminated to third parties. The plaintiffs argued that their asserted intangible injury from being labeled a potential terrorist qualified as concrete harm under Spokeo because it bore a close relationship to harms traditionally recognized as providing a basis for lawsuits in American courts—namely, the reputational harm associated with the tort of defamation. The Court agreed with the plaintiffs, stating that “[w]e have no trouble concluding that the 1,853 class members suffered a concrete harm that qualifies as an injury in fact.”
In turning to the remaining 6,332 class members whose credit information was not provided by TransUnion to any potential creditors, the Court called them “a different story.” It found that “the mere presence of an inaccuracy in an internal credit file, if it is not disclosed to a third party, causes no concrete harm.” In the Court’s view, “the plaintiffs’ harm is roughly the same, legally speaking, as if someone wrote a defamatory letter and then stored it in her desk drawer. A letter that is not sent does not harm anyone, no matter how insulting the letter is. So too here.”
The Court also rejected the plaintiffs’ attempt to satisfy Spokeo’s concrete harm requirement through the assertion that they suffered a material risk of future harm. While acknowledging that a plaintiff exposed to a risk of future harm can pursue forward-looking injunctive relief, the Court distinguished a plaintiff’s standing to seek injunctive relief from the plaintiff’s standing to seek retrospective damages. It found the plaintiffs’ argument for standing for their damages claim based on an asserted risk of future harm to be unavailing because they had not demonstrated that the risk of future harm materialized or presented evidence that the class members were independently harmed by their exposure to the risk itself (e.g. that they suffered an emotional injury from the mere risk their credit reports would be provided to third parties.)
The Court also found that “even apart from this fundamental problem with their argument based on the risk of future harm,” the plaintiffs had not factually established a sufficient risk of future harm to support standing. More specifically, they had not demonstrated a sufficient likelihood that their individual credit information would be requested by third parties and provided by TransUnion during the relevant period or that TransUnion would intentionally or accidentally release their information to third parties. In addition, the Court noted that the plaintiffs had not presented evidence that the 6,332 class members even knew the OFAC alerts were in their credit files and observed that “[i]t is difficult to see how a risk of future harm could supply the basis for a plaintiff’s standing when the plaintiff did not even know that there was a risk of future harm.”
In addition to the “failure to follow reasonable procedures” FCRA claim, the complaint alleged that TransUnion violated the FCRA by failing to provide the plaintiffs with all of the information in their credit files upon request and by failing to provide them with a summary of rights. In their disclosure claim, the plaintiffs alleged that TransUnion sent them copies of their credit files that omitted the OFAC information and then sent the OFAC information in a second mailing. In their summary of rights claim, the plaintiffs alleged that TransUnion should have included another summary of rights in the second mailing with the OFAC information. The Court found that only Mr. Ramirez had suffered a concrete harm sufficient to provide Article III standing to assert these claims. According to the Court, the plaintiffs had not demonstrated they suffered any harm at all from these violations, having presented no evidence that a single class member other than Mr. Ramirez had “so much as opened the dual mailings” or that they would have tried to correct their credit files if they had been sent the information in the proper format. (emphasis included).
The Court reversed the Ninth Circuit’s judgment and remanded the case for further proceedings, noting that in light of its conclusion about Article III standing, “we need not decide whether Mr. Ramirez’s claims were typical of the claims of the class under Rue 23.” It stated that on remand, “the Ninth Circuit may consider in the first instance whether class certification is appropriate in light of our conclusion about standing.”
In a surprising twist, Justice Thomas issued a dissenting opinion which was joined by the Court’s three liberal justices. Justice Thomas wrote that the majority’s decision “might actually be a pyrrhic victory for TransUnion” because “[t]he Court does not prohibit Congress from creating statutory rights for consumers; it simply holds that federal courts lack jurisdiction to hear some of these cases.” He made the observation that “[this] combination may leave state courts — which ‘are not bound by the limitations of a case or controversy or other federal rules of justiciability even when they address issues of federal law,’ — as the sole forum for such cases, with defendants unable to seek removal to federal court.” (citations omitted). According to Justice Thomas, “[b]y declaring that federal courts lack jurisdiction, the Court has thus ensured that state courts will exercise exclusive jurisdiction over these sorts of class actions.”