Update: Supreme Court Holds No Concrete Injury in FCRA Class Action Case
In an impactful and split Opinion, the United States Supreme Court has reversed a $40 million class action judgment award in light of its finding that thousands of class members had no standing for two of three Fair Credit Reporting Act (“FCRA”) claims, and that the majority of those class members lacked standing for the remaining claim.
As we advised in our December 2020 Financial Services Law Blog post, the Ramirez case, filed in the Northern District of California, arose when Mr. Ramirez faced an alarming situation at a car dealership: he was denied financing for a car loan due to an erroneous credit report alert indicating that he was listed on an OFAC advisor “terrorist list.” Although Mr. Ramirez’ wife was able to obtain approval to purchase the car, Mr. Ramirez later received a letter from TransUnion indicating that he was listed as a “prohibited Specially Designated National (SDN).” TransUnion removed the alert after Mr. Ramirez disputed the designation.
It was later learned that 8,185 other individuals had been falsely labeled as prohibited SDNs. Although only 1,853 of those individuals’ credit reports were furnished to potential creditors during the relevant time period, all 8,185 individuals were certified as class members and found by the lower courts to have Article III standing.
Mr. Ramirez filed suit on behalf of himself and the 8,185 class members, asserting that TransUnion failed to follow reasonable procedures to ensure the accuracy of credit files, and that it failed to provide consumers with complete credit files and a summary of rights upon request of the consumer. At trial, the jury awarded approximately $1,000 in statutory damages and $6,300 in punitive damages per class member. The Ninth Circuit Court of Appeals held that the class members all had standing but reduced the punitive damages award by roughly 50% on the basis that it was excessive. Now, the Supreme Court has reversed the judgment altogether.
The Supreme Court began its Opinion by citing the longstanding principle that, in order to have standing, claimants must have suffered a “concrete harm” that resulted from the defendant’s conduct and that is capable of being redressed by the Court.
Applying this standard to the “reasonable procedures” claim, the Court first found that the 1,853 plaintiffs whose credit reports were provided to third parties did suffer a concrete harm similar to the type of reputational harm that would be caused by a defamatory statement. The remaining 6,332 class members, on the other hand, suffered no such harm because the false information was not “published,” or furnished, to any third parties. The Court reasoned that the harm suffered from false information stored in a credit file would be similar to an insulting letter that sat in the author’s desk drawer – nonexistent.
The Court then considered whether any of the 8,185 unnamed class members had standing to assert their claims for failure to provide complete credit files and a summary of rights upon request. Plaintiffs did not demonstrate that TransUnion’s potentially faulty mailings caused any harm at all to plaintiffs. Therefore, the Court found there was no standing under Spokeo because these mere technical violations were “divorced from any concrete harm.” The Court rejected any argument by plaintiffs that there was a threat of future harm for any of the asserted claims.
The Opinion was bookended with this simple phrase, penned by Justice Kavanaugh: “No concrete harm, no standing.” And with that, the $40 million judgment out of the Ninth Circuit is reversed, and the case is remanded for proceedings consistent with the Supreme Court’s findings concerning standing.
The Court was split 5-4, and Justice Thomas authored the dissenting opinion.
The Ramirez case will, no doubt, have a reach far beyond FCRA claims. Baker Sterchi will continue to monitor for subsequent litigation interpreting the Ramirez decision.