By Colin D. A. MacDonald
On June 25, the U.S. Supreme Court may have significantly restricted certain consumer class action lawsuits’ ability to proceed in federal court. The Court held that class members must have suffered a concrete injury to have standing under Article III of the Constitution, even when suing under a statute that allows for statutory damages without showing actual injury. The 5-4 ruling in TransUnion LLC v. Ramirez could make it difficult to enforce certain consumer informational rights through federal class action lawsuits because of the difficulty of proving the link between particular violations and later injuries.
The suit began when Sergio Ramirez attempted to buy a car. Ramirez alleged that, when the dealer obtained a copy of his credit report, he learned that his TransUnion credit report noted his name as matching a list of persons designated by the U.S. Office of Foreign Asset Control (OFAC) as posing a risk to national security. Ramirez could not buy the car (though his wife was able to purchase it in her own name), and he claimed the incident caused embarrassment in front of his wife and father-in-law and caused him to cancel a vacation abroad for fear of the label causing issues with his travel. The trial court found that TransUnion had not used anything besides first and last names to confirm that the consumer reported as a “potential match” was the same as the person on the OFAC list.
Ramirez sued TransUnion and sought class certification on behalf of 8,185 consumers incorrectly identified as being on the Treasury Department list. The suit raised three claims, all under the Fair Credit Reporting Act. First, it alleged that TransUnion had published false credit information to third parties. Second, it alleged that TransUnion provided incomplete information to consumers requesting their own credit reports because the OFAC list information was only sent in a separate mailing. Finally, it alleged that TransUnion failed to provide a notice of consumer rights in the second mailing containing the notification about the OFAC list. The case went to trial in the Northern District of California and the class prevailed on all counts. The Ninth Circuit affirmed the verdict.
The Supreme Court’s ruling significantly narrows the class’ victory. According to the majority opinion by Justice Brett Kavanaugh, a plaintiff class must prove that its members suffered some real harm beyond a “bare procedural violation” to satisfy the Constitution’s requirements. Thus, the court reasoned, only the 1,853 members of the class whose credit reports with the inaccurate information were sent to third parties have standing, and even then only as to the first count. The court acknowledged that “reputational harm” could be a concrete injury, even if it is not readily quantifiable. For the remaining 6,332 class members, the Court held that merely receiving inaccurate information oneself is not a sufficient injury to create standing.
Justice Clarence Thomas, joined by the Court’s three traditionally liberal justices, dissented. Thomas argued that, where Congress has created by statute a claim to enforce a private right, that alone is enough to create standing. Furthermore, the dissenters argued, the realization that one has been identified as a possible terrorist should also be considered a meaningful harm.
Several consumer groups, including Public Justice and the National Consumer Law Center, submitted amicus curiae supporting the plaintiff class, warning that a ruling like that ultimately reached by the majority could undermine important consumer protections. The FCRA, like many federal consumer protection statutes with a private right of action, permits plaintiffs to choose between seeking actual damages based on proven harm or statutory damages based on a fixed range. Where information is inaccurate or is improperly released, it can often be difficult to place a clear value on actual damages. Statutory damages provisions provide an incentive for plaintiffs to enforce and companies to respect consumer rights.
Privacy rights groups raised similar concerns. The Electronic Privacy information Center and Electronic Frontier Foundation both submitted amicus briefs in support of the class. They note that the improper release of truthful but sensitive information, just like the release of inaccurate information, can have real harm to consumers, but that those harms are difficult to quantify. Several large tech companies, including eBay and Facebook, submitted their own amicus briefs supporting TransUnion, arguing that allowing large class actions alleging technical violations of privacy laws made it possible for plaintiff law firms to extract large settlements that did little to compensate consumers while resulting in windfalls for the lawyers. The ruling does not alter the legal requirements on credit reporting agencies like TransUnion, or the authority of government agencies at the state and federal level to enforce the FCRA or any other consumer law. With those agencies stretched thin, however, the Ramirez ruling may significantly alter companies’ compliance strategies and consumers’ options to protect their rights.
The Court declined to reach a separate question about whether Ramirez’s own experience was so much worse than other class members’ that he was not sufficiently “representative” of the class under the Federal Rules of Civil Procedure. The United States had suggested in its own amicus brief the Court take a third route, arguing that, while the Court should find the class as a whole had standing, Ramirez’s experience was too unique to give the jury and the trial court an accurate picture of the severity of the injury to those whose information was never sent to third parties.
The case returns to the Ninth Circuit for a new determination about the appropriateness of class certification for the narrower class and claims.
Colin D. A. MacDonald is a consumer protection attorney for the Federal Trade Commission’s Seattle-based Northwest Region. The views expressed in this article are his own and do not necessarily reflect those of the Commission or of any individual Commissioner.