‘No Concrete Harm, No Standing’
The U.S. Supreme Court vacated a $40 million judgment against TransUnion LLC, after deciding that only a quarter of the class members—those whose inaccurate credit reports were actually shared with third parties—had standing to bring their Fair Credit Reporting Act claims.
Read More: Supreme Court Limits Consumer Suits in Win for TransUnion
Andy Pincus, a partner at Mayer Brown, says the court’s decision goes a long way to reducing the uncertainty that followed Spokeo Inc. v. Robins.
“The bottom line is the requirement of real world injury is reaffirmed and here to stay,” Pincus told me. A lot of courts “are going to have to reexamine some of their more expansive readings,” he said.
Jay Edelson of Chicago-based plaintiffs’ firm Edelson PC called the decision “a mixed bag.”
“I think the real practical effect of this decision is that it’s going to be a big boon to defense firms,” he told me.
Real-world Harm
Of the 8,185 class members who were erroneously flagged by the credit reporting agency as potential matches to individuals on a terrorist watch list, only 1,853 had their reports disseminated to third parties, Justice Brett M. Kavanaugh wrote for the majority.
The remaining 6,332 class members suffered no concrete harm because the reputational risk of the false alerts never materialized, the court said.
Although Congress can elevate real-world harms to give them actionable legal status, it can’t “simply enact an injury into existence,” the court said, quoting the Sixth Circuit’s decision in Hagy v. Demers & Adams.
To determine whether there is concrete harm in the context of statutorily created rights and intangible harms, like those recognized under the FCRA, the central inquiry is whether common law has traditionally recognized the harm. Here, defamation was the suitably analogous cause of action. But defamation requires publication of the defamatory facts, the court said.
“A letter that is not sent does not harm anyone, no matter how insulting the letter is,” Kavanaugh wrote."So too here.”
The court rejected Sergio Ramirez’s argument that the class members had standing to seek statutory damages based on a risk of future harm, specifically, that the information would be disseminated to third parties in the future.
The court also found that all class members except for Ramirez lacked standing to bring claims for noncompliant notices related to their credit reports, because they hadn’t alleged any adverse consequences as a result of what the court called a formatting error.
Class Action Implications
According to Pincus, the court’s decision could make it more difficult for plaintiffs to bring class actions, even when they are able to demonstrate injury.
“Plaintiffs can only maintain a damages class action if common issues predominate, if class members must show injuries through individualized proof, that might make it more difficult,” he said.
Read More: Supreme Court’s TransUnion Ruling Curbs Consumer Privacy Claims
Justice Clarence Thomas wrote a dissent, joined by the three liberal justices.
“It was nice to see Thomas understand this, but a lot of people misunderstand the issues,” Edelson said. “It’s not about whether you’re allowed to bring the suit, it’s about where you can bring suit.”
Edelson was referring to a footnote in Thomas’ dissent, describing TransUnion’s victory as perhaps a pyrrhic one.
The court doesn’t “prohibit Congress from creating statutory rights for consumers, it simply holds that federal courts lack jurisdiction to hear some of these cases,” Thomas wrote.
The court’s ruling has “ensured that state courts will exercise exclusive jurisdiction over these sorts of class actions,” Thomas said.
Edelson said he expects to see more splitting between state and federal courts after the decision.
Defendants who are excited about this will probably find themselves “paying their defense lawyers a lot more money,” he said.
