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U.S. Supreme Court to Review FCRA Class Action Jury Verdict

The United States Supreme Court recently granted certiorari to TransUnion on a multimillion-dollar jury verdict arising out of a class action in the Ninth Circuit.

In Ramirez v. TransUnion, a case filed in the Northern District of California,the jury assessed $60 million in damages against TransUnion for three FCRA violations: (1) willful failure to follow reasonable procedures to assure accuracy of terrorist alerts in violation of 15 U.S.C. § 1681e(b); (2) willful failure to disclose to class members their entire credit reports by excluding the alerts from the reports in violation of § 1681g(a)(1); and (3) willful failure to provide a summary of rights in violation of § 1681g(c)(2). The facts relating to the alleged injury suffered by the named class member are compelling. When applying for a car loan, Mr. Ramirez was denied financing by the dealership because he was incorrectly listed a match on an OFAC Advisor “terrorist list” alert that came up when his credit report was pulled, based on information obtained through a third party vendor. Notably, the dealership did not conduct any further independent investigation to determine whether Mr. Ramirez was in fact a match but instead sold the car to Mr. Ramirez’ wife.

Mr. Ramirez thereafter requested and obtained his credit report from TransUnion, which did not contain the OFAC alert. However, a letter he received from TransUnion a day later notified him that he was listed as a “prohibited SDN (Specially Designated National)”. After speaking with an attorney, Mr. Ramirez learned of the procedure to dispute the OFAC data associated with his credit file and did so. The alert was removed. The record revealed that more than 8,000 other consumers’ credit files had also been falsely labeled as prohibited SDNs from January and July 2011 and that they received a letter similar to Mr. Ramirez’ when they requested their credit reports during that time. Mr. Ramirez subsequently brought the above class action on behalf of himself and those other consumers, who apparently did not suffer any actual injury for which damages could be awarded. The jury verdict amounted to roughly $1,000 in statutory damages per class member and $6,300 each in punitive damages.

After the jury verdict, TransUnion appealed to the Ninth Circuit Court of Appeals. The Ninth Circuit held that the class members had standing sufficient to be certified as a class under Rule 23, but found that the punitive damages award was excessive and cut the punitive damage award in half.

On review, the U.S. Supreme Court must consider and rule upon two critical issues: (1) Whether either Article III or Rule 23 permits a damages class action where the vast majority of the class suffered no actual injury, and (2) whether a punitive damages award violates a defendant’s due process rights where it is exponentially larger than any class-wide actual damages and multiples greater than the statutory damages awarded for the defendant’s violations.

The Ramirez case comes before the High Court at the end of another record-setting year for FCRA claims. But its implications far exceed FCRA litigation. With a historically conservative Court hearing this case, there is at least a possibility that class actions may be more heavily scrutinized in the future.

Baker Sterchi will continue to monitor the Ramirez case for important updates.