On The Case

Business lobby wants SCOTUS to rein in ‘uninjured’ classes, DOJ wary of ‘atypical’ plaintiff

(Reuters) - I had a feeling that class action opponents were going to use the U.S. Supreme Court case TransUnion v. Ramirez to push the justices to adopt new restrictions on class certification. The business lobby met my expectations on Monday, even as the Justice Department gave class plaintiffs a bit of solace.

Amici including the U.S. Chamber of Commerce; the National Association of Manufacturers; the Retail Litigation Center; and Facebook, Google, eBay and internet trade groups – filed 11 briefs at the Supreme Court backing TransUnion. The credit agency wants the justices to undo a $40 million judgment in a class action alleging violations of the Fair Credit Reporting Act.

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TransUnion’s lawyers at Kirkland & Ellis contended in the credit rating agency’s Feb. 1 merits brief that the 9th U.S. Circuit Court of Appeals made two fundamental mistakes in the decision under review: The appeals court, according to TransUnion, blessed the certification of a class in which most class members suffered no actual injury - and no other class member experienced as egregious an injury as the named plaintiff. TransUnion argued that the 9th Circuit disregarded Supreme Court precedent on Article III standing, most notably Clapper v. Amnesty International and Spokeo v. Robins; and that it failed to abide by the requirement in Rule 23 of the Federal Rules of Civil Procedure that a named plaintiff’s claims be typical of those of the class.

Most of TransUnion’s amici jumped on the opportunity to criticize class actions that include ‘uninjured’ class members, a longtime bete noir for class action opponents who accuse plaintiffs’ lawyers of leveraging named plaintiffs’ Article III standing to demand damages for absent class members who don’t meet constitutional requirements. Both the Chamber, represented by Mayer Brown, and NAM, with counsel from Shook, Hardy & Bacon, explicitly called for the Supreme Court to state clearly and unambiguously that a class cannot be certified unless and until every class member can establish Article III standing.

O’Melveny & Myers, as counsel to Home Depot and United Health, made an interesting argument for why the Supreme Court must require stringent application of Rule 23’s typicality requirement. You need a little background to understand why. In the TransUnion case, the lead plaintiff, Sergio Ramirez, was turned down for a car loan in front of his wife and father-in-law. It turned out that TransUnion had placed a flag on his credit report because he shares a name with two people on a “terrorist list” maintained by the U.S. Office of Foreign Asset Control (OFAC). Ramirez eventually convinced TransUnion to remove the flag but not before he cancelled a vacation for fear that the “terror” flag would pop up again. He sued on behalf of a class of 8,185 people whose Transunion credit reports allegedly included “terror list” alerts even though they were not on the OFAC list and whose credit reports were requested between January and June 2011.

Ramirez’s classwide claims were tried to a jury verdict. The trial focused on his experience – which even TransUnion had conceded to have been “dramatic” and “embarrassing” – and jurors awarded nearly $950 to each class member after hearing what had happened to Ramirez. But TransUnion contended that Ramirez had introduced no evidence that any of the other 8,185 people in the class had been turned down for a loan because of the terror flag. In fact, TransUnion said less than 25% of the people in the certified class even had a credit report sent to a third party during the class period. There wasn’t even evidence at trial, the company said, that absent class members so much as noticed the TransUnion mailings that allegedly violated the FCRA. So, according to TransUnion, Ramirez’s injury was not typical and the court should never have certified a class with him as the lead plaintiff.

O’Melveny’s Home Depot amicus brief argued that class certification in Ramirez’s case wasn’t just a subversion of Rule 23 but a violation of the defendant’s basic due process rights. Defendants have a right to present a defense against every claim, the brief argued, but because the trial focused on Ramirez’s “humiliation and embarrassment,” TransUnion was “never afforded any opportunity to answer the much weaker claims of the absent class members.” The second and entwined due process problem, O’Melveny said, is that the jury based its damages award on Ramirez’s uniquely strong claim, subjecting TransUnion to arbitrary liability.

The typicality argument brings me to perhaps the most notable and unpredictable of the amicus briefs filed Monday in the TransUnion case. The Justice Department weighed in on behalf of neither party. Importantly for class action plaintiffs (and their lawyers), DOJ sidestepped the question of whether plaintiffs must establish Article III standing for every class member before their classes can be certified. In the TransUnion case, the government said, every class member met constitutional standing requirements for their FCRA claims. The injuries they suffered from unwarranted “terror” flags on their accounts, and TransUnion’s alleged violations of FCRA procedural regulations, are closely tied to common law defamation claims, the DOJ brief said.

The government also said, however, that Ramirez’s claims may not have been sufficiently typical to justify class certification. DOJ called for the Supreme Court to vacate the judgment and remand the case so the 9th Circuit can reevaluate whether Ramirez’s uniquely bad experience typifies claims by the rest of the class – and whether, as Ramirez’s counsel have argued, TransUnion forfeited a typicality defense by failing to highlight Ramirez’s unusual experience at trial and in jury instructions.

Ramirez’s counsel of record, law professor Sam Issacharoff of New York University, declined to provide a statement on TransUnion’s amici or the DOJ brief. TransUnion counsel Paul Clement of Kirkland didn’t respond to an email request for comment.

On balance, DOJ’s brief is probably better for class action plaintiffs than not, considering the government’s steadfast backing for the class’ Article III standing to sue over FCRA violations. DOJ’s remand suggestion could be a disaster for the Ramirez case but not for the entire class action bar.

But if the Supreme Court is swayed by the business lobby’s calls for a requirement that lower courts assure the Article III standing of every absent class member before certifying cases, that’s going to be quite a wrench in the machinery of class actions.

Ramirez’s brief is due next month.

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