(Reuters) - The U.S. Supreme Court granted review Wednesday in Transunion v. Ramirez, a $40 million Fair Credit Reporting Act class action that presents the question of whether the Constitution’s standing requirements or the federal procedural rule governing class actions precludes cases in which “the vast majority of the class suffered no actual injury, let alone an injury anything like what the class representative suffered.”
That, of course, is just how Transunion characterized the case, which went all the way through a rare class action trial, in its petition for Supreme Court review. The plaintiffs' lawyers who shepherded the class action through trial and challenge to the trial judgment at the 9th U.S. Circuit Court of Appeals argued in their brief opposing certiorari that the named plaintiff in the class action typified the FCRA injury that unified the 8,185 members of the class. Their brief rephrased Transunion’s description of the question presented by the case as a highly specific inquiry about whether a particular violation of the FCRA amounts to material harm.
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I don’t think the Supreme Court agreed to take the case in order to clarify that point. Remember, the 2016 decision in which the justices held that mere statutory violations are not sufficient to establish Article III standing, Spokeo v. Robins, was an FCRA case. And as lower courts have sputtered along, trying to figure out when statutory violations constitute a concrete injury under the justices’ reasoning in Spokeo, the Supreme Court has declined to take cases – including Spokeo, on a second trip to the court – asking the justices to clear up uncertainty about Article III standing in class actions involving statutory violations.
I’m guessing instead that the Supreme Court granted review in Transunion to take up the issue of “no-injury” classes. I want to emphasize that plaintiffs in the Transunion case vehemently dispute that description as I’ll explain. But Transunion and its amicus from the U.S. Chamber of Commerce pitched the case as an opportunity for the Supreme Court to stop plaintiffs' lawyers from using the leverage of a class action to squeeze defendants for big damages on behalf of plaintiffs who might not even have suffered a recognizable injury. The justices skirted that issue in their 2015 decision in Tyson v. Bouaphakeo and opted not to hear it in 2016, when they declined to grant review to resolve a split in the appellate courts on whether plaintiffs' lawyers must offer a means of ascertaining class membership to win class certification. Justices Brett Kavanaugh and Amy Coney Barrett have joined the court since then. Plaintiffs' lawyers ought to be worrying that the new Supreme Court is champing to curtail class actions.
The named plaintiff in the Transunion case is unquestionably sympathetic. Sergio Ramirez wanted to buy a car in 2011. He, his wife and his father-in-law went to a Nissan dealership and picked out a car. But when the dealer ran a Transunion credit check on Ramirez, the report indicated that his name matched two names on a “terrorist list” maintained by the U.S. Office of Foreign Asset Control (OFAC). Neither of the names on the OFAC list was actually Ramirez, who had a different birthdate and middle initial. But the dealer asked Ramirez’s wife to make the purchase in just her name. For Ramirez, the experience was humiliating. (This account is drawn from Transunion’s Supreme Court petition.)
The next day, Ramirez contacted Transunion. The representative said there was no OFAC flag on his credit report. He asked for a copy of the report to be mailed to him. The report he first received did not contain an OFAC alert – but a few days later, he received a separate letter from Transunion advising him that his name “is considered a potential match to information listed on the (OFAC) database.” Ramirez eventually persuaded the credit rating service to remove the alert, but not before canceling a vacation for fear the “terror list” flag on his credit report would pop up.
Ramirez 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. The class action asserted that Transunion violated the FCRA both by placing the false OFAC alerts on class members’ credit reports and by sending them misleading and incomplete disclosures about the alerts. (Ramirez alleged that the FCRA required Transunion to disclose the terror list in a single credit report, not in a separate and subsequent mailing.)
All of the 8,185 people in the class received the allegedly misleading Transunion mailing about the terror list alert. But only about a quarter of the class – 1,853 people – shared Ramirez’s experience of having their credit report requested by a potential lender. And according to Transunion, Ramirez was apparently the only person in the class who was turned down for a loan because of the errant terror list flag.
Ramirez was the star witness when the case went to trial. The jury awarded the class nearly $1,000 apiece in statutory damages and about $6,300 apiece in punitive damages.
Transunion appealed, arguing that absent class members had not suffered a concrete injury sufficient to establish their Article III standing. Lenders never accessed the credit reports of three-quarters of the members of the class, Transunion said, and there was no evidence at trial that anyone other than Ramirez was turned down for a loan. There wasn’t even evidence that anyone other than Ramirez so much as noticed the Transunion notification about the terror list alert, according to Transunion. Moreover, the company said, Ramirez – who had been humiliated when he was turned down for the car loan and then canceled a vacation because of the false flag on his credit report -- was not a typical plaintiff. Rule 23 of the Federal Rules of Civil Procedure requires that class action lead plaintiffs must present claims that typify the class allegations. Ramirez, Transunion said, could not satisfy that Rule 23 requirement.
In a split decision in February, the 9th Circuit cut the jury’s punitive damages award in half but otherwise rejected Transunion’s arguments. The appellate majority said class members had constitutional standing because Transunion’s failure to follow reasonable procedures to assure the accuracy of its credit reports represented a risk to their privacy and reputational interests. It did not matter, according to the majority, that lenders didn’t see the credit reports of most of the people in the class. The sheer fact that the misleading reports were available to lenders – and the “highly sensitive and distressing nature of the OFAC alerts” – was enough to show “a material risk of harm,” the majority said.
And even if Ramirez’s injuries were “slightly more severe” than those of some other class members, the 9th Circuit said, his claims arose from the same Transunion actions and policies at the root of classwide claims. “Ramirez’s injuries were not so unique, unusual, or severe to make him an atypical representative of the class,” the majority held. “A class representative satisfies typicality when his ‘personal narrative is somewhat more colorful’ than other class members’ experiences, as long as his claim ‘falls within the common contours of’ the class-wide theory of liability.”
Obviously, Transunion has persuaded at least four Supreme Court justices that the 9th Circuit’s conclusions warrant their attention. As Ramirez and Transunion turn to briefing on the merits, it’s going to be interesting to see whether Transunion’s counsel, Paul Clement of Kirkland & Ellis, tries to persuade the court that this case should be a vehicle for tightening class action procedures that, at least according to defendants, have become too loose and plaintiff-friendly. (Clement declined to comment.)
Ramirez counsel James Francis of Francis Mailman Soumilas said via email that this case is simply not a no-injury class action, no matter how Transunion portrays it. He said he hopes the Supreme Court looks instead at “the serious and widespread injuries consumers face when credit reporting agencies violate federal law.”
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