Litigation

A statutory claim is not enough. No concrete harm, no standing.

Summary

In a 5-4 decision, the Supreme Court held that the existence of a statutory claim (with statutory damages) combined with a risk of future harm, is not enough to confer standing to sue for damages in federal court.  Citing Spokeo v. Robbins, 578 U. S. 330, the Court held that “[t]o have Article III standing to sue in federal court, plaintiffs must demonstrate, among other things, that they suffered a concrete harm.”  Slip Op.at1. “Central to assessing concreteness is whether the asserted harm has a ‘close relationship’ to a harm traditionally recognized as providing a basis for a lawsuit in American courts.”  Id.

Background

In February 2011, Sergio Ramirez learned that TransUnion’s credit reports incorrectly described him as a “potential match” to an entry on a list of individuals with whom U.S. companies are barred from doing business for national security reasons (the OFAC list.).  In response, Ramirez requested a copy of his credit report and TransUnion mailed him two items: a standard credit report and a letter notifying him that he was being identified as a potential match for the OFAC list.  The OFAC notification letter did not provide any information about ways to correct erroneous matches.  Ramirez suffered injuries that included the inability to buy a car in his own name and the inability to leave the country.

Ramirez was not alone.  TransUnion compared data subjects’ first and last names to the OFAC list but did not check whether their date of birth, social security number, or other information in TransUnion’s database matched the information on the OFAC list.  “Unsurprisingly, TransUnion’s Name Screen product generated many false positives [since] [t]housands of law-abiding Americans happen to share a first and last name with one of the terrorists, drug traffickers, or serious criminals on OFAC’s list of specially designated nationals.”  Slip Op at 4.

Ramirez filed a class action under the Fair Credit Reporting Act (“FCRA”).  The class contained two sub-groups, both of whom were incorrectly identified as potential OFAC matches.  The first group, which contained 1,853 people, consisted of people for whom an incorrect OFAC designation had been disseminated to a credit report customer.  The second group, which consisted of 6,332 people, consisted of people for whom there was no evidence that an erroneous credit report had been transmitted.

Mr. Ramirez alleged two types of FCRA claims.  First, he alleged that TransUnion failed to maintain reasonable procedures to ensure the accuracy of its reports (the “reasonable procedures claim”).  Second, he alleged that TransUnion violated the FCRA requirement to provide consumers with a summary of all information in their files that included a summary of their rights under the FCRA (the “mailing claims’).

A jury found in favor of the class on all three claims and awarded $8 million in statutory damages and $52 million in punitive damages.

A divided Ninth Circuit panel held that the entire class had standing because a “material risk of harm” existed because all the files with incorrect information were immediately available to TransUnion customers upon request. The Ninth Circuit also held every class member suffered an injury because the erroneous designations were “inherently shocking and confusing.”

The Supreme Court’s Opinion

Writing for the majority, Justice Kavanaugh summarized the holding as “No concrete harm, no standing.”  Slip Op at 1.  He explained that the concreteness of a harm can be established by showing “a ‘close relationship’ to a harm traditionally recognized as providing a basis for a lawsuit in American courts—such as physical harm, monetary harm, or various intangible harms.”  Id. at 1.  Intangible harms “include, for example, reputational harms, disclosure of private information, and intrusion upon seclusion.”  Id. at 9.  The Court divided the class into two groups and held as follows.

The 6,332 class members whose erroneous credit reports were not disseminated did not establish standing, even though the FCRA confers a statutory cause of action and statutory damages.  Plaintiff argued that these class members had standing because their credit files, and the attendant erroneous OFAC information, could be obtained on demand at any time by TransUnion’s customers.  The Court then held that, although a material risk of harm may confer standing for injunctive relief, it is insufficient to confer standing for a claim for damages.

The 1,853 class members whose reports had been disseminated suffered a concrete injury sufficient to confer standing.  They suffered a reputational harm that bore a close relationship to a harm associated with the traditional tort of defamation.  The Court rejected TransUnion’s argument that the information was not false, and therefore not defamatory, because the class members were only identified as “potential matches.”  The Court explained that, although the harm must be similar to a traditional common law harm, it need not be an “exact duplicate” of the traditional cause of action.

The Court dismissed the mailings claims because plaintiff presented no evidence that any class members other than Ramirez were harmed by the technical violations associated with those claims

The Court did not decide whether Ramirez’s claims were “typical” of the other class members’ claims. Instead, the Court remanded the case so the Ninth Circuit could determine whether class certification continues to be appropriate.

The Dissents

In dissent, Justice Thomas—joined by Justices Breyer, Sotomayor, and Kagan—decried the Court’s decision as “remarkable in both its novelty and effects” because the Court has “[n]ever before . . . declared that legal injury is inherently insufficient to support standing.”  Kagan wrote a separate dissent (which Breyer and Sotomayor joined) asserting that the majority “transforms standing law from a doctrine of judicial modesty into a tool of judicial aggrandizement,” holding for the first time “that a specific class of plaintiffs whom Congress allowed to bring a lawsuit cannot do so under” the Constitution.

Author: Christian Andreu-von Euw is an attorney at Morrison & Foerster, LLP.  His practice focuses on complex commercial litigation, trade secret litigation, patent litigation, and other disputes involving technology companies.

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