SCOTUS limits Article III of the FCRA collective action for damages to members of the group who have suffered concrete harm – Consumer protection
United States: SCOTUS Limits Article III of FCRA Class Action For Damages To Class Members Who Have Suffered Concrete Injuries
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In a 5-4 decision, the United States Supreme Court ruled last week in
TransUnion, LLC. v. Ramirez that only class members who were materially harmed by TransUnion’s breach of the FCRA had standing to seek damages under Article III.
In the case, Sergio Ramirez, the named plaintiff, alleged that he had difficulty obtaining credit and other damages after a car dealership received a credit report from TransUnion indicating that his name matched a name on the list of terrorists and narcotics traffickers with whom US companies cannot conduct transactions managed by the Office of Foreign Assets Control (OFAC). He filed a class action lawsuit alleging that TransUnion violated the FCRA, including failing to follow reasonable procedures to ensure the accuracy of the information on his credit report.
Prior to trial, the parties stipulated that the group consisted of 8,185 members whose credit files contained deceptive OFAC alerts and that only 1,853 members (including Mr. Ramirez) had their credit reports released by TransUnion to potential creditors during the recourse period. The district court ruled that the 8,185 class members had standing under Section III and, following a trial, the jury awarded each class member $ 984.22 in damages. statutory interest and an additional $ 6,353.08 in punitive damages for a total amount of over $ 60 million. On appeal, the Ninth Circuit upheld the district court’s ruling that all class members had Article III standing to recover damages for their FCRA claims, but reduced punitive damages to $ 3,936.88 per class member (bringing the total amount down to about $ 40 million).
In the opinion of the Court, prepared by Justice Kavanaugh, the Court first considered the standing under Section III of the 1,853 class members whose reports were released to third parties. The plaintiffs argued that the intangible harm which they claimed to have been characterized as a potential terrorist qualified as tangible harm under Speak because it was closely linked to the prejudices traditionally recognized as being the basis of lawsuits in the United States, namely the damage to reputation associated with the tort of defamation. The Court ruled in favor of the plaintiffs, stating that “[w]We have no difficulty in concluding that the 1,853 class members suffered tangible harm which constitutes factual harm. ”
Turning to the remaining 6,332 class members whose credit information was not provided by TransUnion to any potential creditor, the court called them “another story.” She found that “the mere presence of an inaccuracy in an internal credit report, if it is not disclosed to a third party, does not cause any concrete harm”. In the court’s view, “the harm to the plaintiffs is about the same, legally speaking, as if someone wrote a defamatory letter and then put it in his desk drawer. A letter that is not sent does not hurt anyone, no matter how insulting the letter is. So also here. “
The court also rejected the plaintiffs’ attempt to satisfy Speak the requirement of tangible harm by asserting that they have suffered a significant risk of future harm. While recognizing that a plaintiff exposed to a risk of future harm may seek a prospective injunction, the Court distinguished the capacity of a plaintiff to seek injunctive relief from the capacity of the plaintiff to seek retrospective damages. He concluded that the plaintiffs’ argument to justify their claim for damages based on an alleged risk of future harm was unsuccessful because they had failed to demonstrate that the risk of future harm had materialized or presented the evidence. that the group members had suffered independent harm as a result of their exposure to the risk itself (for example, that they suffered emotional harm simply from the risk of their credit reports being 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 applicants had in fact failed to establish sufficient risk of future harm to justify standing. 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 intentionally or accidentally disclosed their information to third parties. Further, 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 records and observed that “[i]It is difficult to see how a risk of future harm could form the basis of a complainant’s standing when the complainant was not even aware that there was a risk of future harm. “
In addition to the FCRA’s allegation of “failure to follow reasonable procedures”, the complaint alleged that TransUnion violated the FCRA by failing to provide complainants with all the information in their credit reports upon request and by failing to provide them with a summary of the rights. In their request for disclosure, the plaintiffs alleged that TransUnion sent them copies of their credit files that omitted OFAC information, and then sent the OFAC information in a second mailing. In their summary of rights, the applicants alleged that TransUnion should have included another summary of rights in the second shipment containing the OFAC information. The Court considered that only Mr. Ramirez had suffered sufficient concrete damage to give standing to Article III to assert these claims. According to the court, the plaintiffs had not shown that they had suffered any prejudice as a result of these violations, having presented no evidence that a single member of the group other than Mr. Ramirez had “at least opened the duplicates shipments ”or that they would have tried to correct their credit reports if they had received the information in the correct format. (emphasis included).
The tribunal overturned the Ninth Circuit judgment and remitted the case for further processing, noting that in light of its finding on Article III standing, “we do not need to decide whether Mr. Ramirez’s claims were typical of the group’s claims under Street 23 “. He said that upon referral, “The Ninth Circuit can first examine whether the class certification is appropriate in light of our conclusion on quality.
In a surprising twist, Judge Thomas issued a dissenting opinion which was joined by the court’s three liberal justices. Judge Thomas wrote that the majority decision “may in fact be a Pyrrhic victory for TransUnion” because “[t]The Court does not prohibit Congress from creating statutory rights for consumers; it is simply arguing that the federal courts do not have jurisdiction to hear some of these cases.[this] the combination can leave state courts – which “are not bound by the boundaries of a case or controversy or other federal rules of justiciability, even when dealing with questions of federal law”, – as the only forum for such cases, the defendants cannot seek revocation in federal court. (Citations omitted). According to Judge Thomas, “[b]declaring that federal courts do not have jurisdiction, the Court thus ensured that state courts will exercise exclusive jurisdiction over these types of class actions.
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