Seyfarth Synopsis:  On June 25, 2021, the United States Supreme Court reversed the Ninth Circuit Court of Appeals in TransUnion LLC v. Ramirez, holding that the vast majority of class members did not suffer a “concrete harm” from TransUnion’s violations of the federal Fair Credit Reporting Act (“FCRA”).  In its decision, the Supreme Court reinforced that each class member must demonstrate a “concrete harm” to have Article III standing and be entitled to damages in federal court.  While the decision is helpful to employers and consumer reporting agencies in that it restricts “no-harm” class actions in federal court, the practical impact may be an increase in similar claims filed in state courts with less demanding standing requirements.

Case Background

In February 2011, TransUnion prepared a credit report on Plaintiff Sergio Ramirez in connection with his attempt to purchase a car.  The credit report inaccurately indicated that Ramirez was on the terrorist watch list maintained by the Office of Foreign Assets Control (“OFAC”).  TransUnion’s practice was to include on credit reports an alert of “potential match” to a name on the OFAC list when an individual’s first and last name matched a name on the list.  The Complaint alleged that because of the credit report, Ramirez was unable to purchase the car in his own name.  Ramirez then requested a copy of his credit file from TransUnion, which as part of its practice responded in two separate mailings.  The first mailing included his credit file and a statutorily required summary of rights under the FCRA, but it did not mention the OFAC alert in his file.  The second mailing included the OFAC alert, but did not include a separate summary of rights.

Ramirez filed suit against TransUnion, asserting multiple class claims under the FCRA.  First, he alleged that TransUnion violated Section 1681e(b) of the FCRA by failing to follow reasonable procedures to assure maximum possible accuracy of the class members’ credit files.  Second, he alleged that TransUnion violated two subsections of Section 1681g of the FCRA by failing to provide class members with copies of their complete credit files and failing to provide the required summary of rights from the Consumer Financial Protection Bureau.

The district court granted class certification on each of the FCRA claims.  Before trial, the parties stipulated that the class contained 8,185 members, but that only 1,853 class members actually had their credit reports disseminated by TransUnion to a third party company.  The remaining class members also had the OFAC alert on their credit files, but TransUnion never sent a credit report or any other communication about them to a third party.  At trial, the jury awarded each class member over $7,000 in statutory and punitive damages, for a total award of more than $60 million. 

The Ninth Circuit Court of Appeals affirmed in relevant part.  On appeal, the threshold question was whether class members had Article III standing to pursue their claims in federal court.  The Ninth Circuit held that all class members had standing, but reduced the punitive damages award, making the total award about $40 million.

The Supreme Court’s Decision

In December 2020, the Supreme Court granted certiorari to consider whether federal courts can certify class actions where the “vast majority” of class members have not alleged the type of “concrete harm” necessary to establish Article III standing, even if the class representative has suffered such an injury. 

In an opinion authored by Justice Kavanaugh, the Supreme Court reversed the Ninth Circuit.  In a 5-4 decision, the Supreme Court held that “only plaintiffs concretely harmed by a defendant’s statutory violation have Article III standing to seek damages against a private defendant in federal court.”  In short, “[n]o concrete harm, no standing.”

In its opinion, the Supreme Court reinforced prior precedent that Article III standing requires a “concrete harm” even when there is a statutory violation and that “an injury in law is not an injury in fact.”  Rather, only plaintiffs who have been “concretely harmed by a defendant’s statutory violation may sue that private defendant over that violation in federal court.”  An individual merely seeking to ensure a defendant’s compliance with a statute does not have Article III standing.    

Applying the “concrete harm” requirement to the facts on appeal, the Supreme Court then provided further guidance on what constitutes “concrete harm,” both under the FCRA and in the context of class actions.  The Supreme Court first recognized that every class member must have Article III standing in order to recover individual damages, and that every class member bears the burden of establishing Article III standing with respect to each claim asserted.

The Supreme Court next addressed standing with respect to the Section 1681e(b) claim: that TransUnion failed to follow reasonable procedures to assure maximum possible accuracy of the class members’ credit files.  The Supreme Court had “no trouble” concluding that the 1,853 class members whose credit reports actually were disseminated to third parties showed a concrete harm and had Article III standing.

It was a “different story,” however, for the remaining 6,332 class members, whose credit files were never sent to a third party.  The Supreme Court recognized that “the mere existence of inaccurate information, absent dissemination, traditionally has not provided the basis for a lawsuit in American courts.”  Thus, the Supreme Court held that the “mere presence of an inaccuracy in an internal credit file, if it is not disclosed to a third party, causes no concrete harm” and fails to confer Article III standing. 

The Supreme Court also dispensed with the Plaintiff’s argument that the “risk of future harm” was enough to satisfy Article III’s concrete harm requirement for the remaining 6,332 class members.  The Supreme Court found TransUnion’s argument “persuasive” that, “in a suit for damages, the mere risk of future harm, standing alone, cannot qualify as a concrete harm—at least unless the exposure to the risk of future harm itself causes a separate concrete harm.”  In other words, if the mere risk of harm does not materialize into an actual harm, then there is no “concrete harm” for Article III purposes.  Accordingly, the Supreme Court held that the mere risk that the plaintiffs’ credit reports could be disseminated at some future date to a third party was insufficient to confer Article III standing. 

Finally, the Supreme Court addressed standing with respect to the Section 1681g claims: that TransUnion failed to provide class members with copies of their complete credit files and failed to provide the FTC’s Summary of Rights.   

Applying the “concrete harm” standard, the Supreme Court held that no one in the class (except Ramirez) had standing to recover under Section 1681g for what it concluded was a “formatting” violation.  The Supreme Court noted that there was no evidence that anyone suffered “any harm at all from the formatting violations” (such as impacting their ability to dispute the information in their files), and again reiterated that the risk of future harm by itself does not support Article III standing.  Importantly, the Supreme Court also rejected the argument that an actionable “informational injury” existed because the “plaintiffs did not allege that they failed to receive any required information,” but instead “argued only that they received it in the wrong format.” 

Implications for Employers and Consumer Reporting Agencies

This decision has the potential to significantly limit “no-harm” class actions in federal court.  In the last several years, employers and consumer reporting agencies have faced a significant increase in class actions under the FCRA, with many claims directed at technical statutory violations that arguably cause no harm, much less a “concrete harm,” to named plaintiffs and putative class members.  One example are claims alleging violations of the FCRA stand-alone disclosure requirement under 15 U.S.C. § 1681b.  Beyond the FCRA or the specific claims at issue in Ramirez, many other consumer protection statutes involve, at most, allegations of intangible “informational” or “privacy” injuries that may now fail to confer Article III standing. 

That being said, this opinion is not a panacea against “no-harm” class actions based on statutory violations.  Ramirez only addressed federal court standing under Article III.  Many state courts have more lenient standing requirements – in particular, California.  After the Supreme Court’s last FCRA standing decision, Spokeo, Inc. v. Robins, 578 U.S. 330 (2016), there has been a steady increase in class actions filed in state courts with concurrent jurisdiction over federal statutes such as the FCRA.  Employers and consumer reporting agencies should expect Ramirez to result in more class actions being filed and pursued in state court.