The Supreme Court held today that all members of a certified class must have Article III standing to sue for damages in federal court, but punted on deciding whether a class including members with and without standing satisfied the “typicality” requirement of the class action rule, Fed. R. Civ. P. 23(a)(3). TransUnion LLC v. Ramirez , no. 20-297. Justice Kavanaugh’s 5-4 opinion for the Court remanded the case to the Ninth Circuit for determinations whether the class should continue to be certified and whether the $40 million jury verdict, which included per-class-member awards of statutory and punitive damages under the federal Fair Credit Reporting Act, can be partially salvaged. “In light of our conclusion about Article III standing, we need not decide whether Ramirez’s claims were typical of the claims of the class under Rule 23. On remand, the Ninth Circuit may consider in the first instance whether class certification is appropriate in light of our conclusion about standing.” Slip op. at 27. In a footnote, the Court also stated “We do not here address the distinct question whether every class member must demonstrate standing before a court certifies a class.” Slip op. n. 4.
Ramirez, the named class representative, suffered difficulty in obtaining credit and embarrassment in front of family members when an automobile dealer received a TransUnion credit report indicating that Ramirez’s name matched a name on the US Treasury’s Office of Foreign Assets Control (OFAC)’s list of persons who threaten national security. He asserted claims under the Fair Credit Reporting Act and sought to represent a class.
But he sought to represent a class of consumers that included those who never had their credit reports disseminated to any third party during the class period and instead simply received the information themselves as part of a statutory process that allows consumers to request a copy of their credit reports. The district court nevertheless allowed the class action to proceed as a Rule 23(b)(3) damages class, with the jury hearing at trial only about Ramirez and his atypical injury and experiences. As the dissenting judge in the Ninth Circuit explained, “the trial … opened with class counsel telling jurors that they would learn ‘the story of Mr. Ramirez’” and closed with a dramatic narration of Ramirez’s unique experience at the car dealership. Indeed, “the hallmark of the trial was the absence of evidence about absent class members.” (McKeown, J., concurring in part and dissenting in part).
Ramirez stipulated that only 1,852 of the 8,814 absent class members had a report disseminated to a third party during the class period—and even as to those 1,852, he provided no evidence about the nature or impact of the dissemination.
Having heard only of Ramirez’s highly atypical experience, the jury found for the class on all claims and awarded every class member $984.22 in statutory damages—just shy of the $1,000 statutory maximum under §1681n(a). The jury awarded an additional $6,353.08 per class member in punitive damages, bringing the total verdict for the class to more than $60 million. The Ninth Circuit reduced the punitive damages award so that the total award was approximately $40 million, but otherwise the affirmed, over Judge McKeown’s dissent.
The Court granted certiorari on the following question: “whether either Article III or Rule 23 permits a damages class action where the vast majority of the class suffered no actual injury, let alone an injury anything like what the class representative suffered.”
The Court unanimously agreed that the 1,853 class members whose TransUnion credit reports had been disseminated to third parties had sustained a concrete reputational injury sufficient to confer standing. But the majority concluded that the other 6,332 class members had not demonstrated standing. The mere existence of a misleading OFAC alert in a class member’s internal TransUnion credit file was not an injury concrete enough to confer standing. The risk of possible future dissemination was insufficient as well. That might confer standing in an action for injunctive relief, but not in an action for damages. Exposure to the risk itself was not alleged to have caused independent harm, the Court noted. Nor was there anything in the record demonstrating that there was, in fact, a serious likelihood of disclosure.
The class also claimed that the notice of OFAC-listing that they did receive did not include a summary of their rights as required, even though such a summary was included with the credit report that each separately received. But the Court held that the plaintiffs, other than Ramirez himself, had failed to show any harm resulting from this formatting problem. The United States argued that the plaintiffs had suffered “informational injury” (a frequent contention in failure-to-disclose cases of many types), but the Court firmly reject that argument. Not only were the public disclosure cases on which they government relied distinguishable, but also the plaintiffs conceded that they received the information, just not in the right format. And any violation was not alleged to have “downstream consequences.” Slip Op. at 26.
Dissenting, Justice Thomas argued broadly that violation of a right created by Congress could confer standing. This was a bit too far for Justices Kagan, Breyer and Sotomayor, who, in a separate dissent, nonetheless concurred with Thomas that TransUnion’s alleged conduct merited legal redress. The four dissenters, in a footnote, also would have found no abuse of discretion in the typicality finding. Slip op. n. 1.
Justice Thomas also observed that the ruling may ultimately be a pyrrhic victory for TransUnion, resulting in relegating the rejected claims to the exclusive domain of the state courts, with no removal available. Indeed, the case may make federal courts less accessible to a wide range of defendants in data breach and other sorts of intangible injury cases.
The Court missed an opportunity to invigorate the typicality requirement. Class action practitioners know that the typicality requirement is routinely overlooked in determining whether a class be certified. Courts too often breeze by the requirement on their way to a discussion of other, more contentious issues, such as the predominance of common issues over individual issues. The most familiar line of typicality cases holds that a class representative’s claims are typical so long as the class representative faces no “unique defenses” that would put the class at a disadvantage. The text of the rule, however, suggests that the analysis should work both ways, and also ask whether the class representative’s claim is atypically strong, putting the defendant at a disadvantage—as was the case in Ramirez. Rule 23 (a)(3) states that the “claims or defenses of the representative parties [must be] typical of the claims or defenses of the class.”
Ramirez argued that Trans Union had waived the typicality argument by not asserting it during the trial, but this argument only highlights the predicament faced by the defendant at trial when an atypical claim of a would-be class representative is certified. The premise for class adjudication is that the class representative’s claim is the same as those of class members; in theory, no individualized proof should be required at a class trial. Why then should the defendant be required to object to class treatment during the trial, having unsuccessfully opposed class certification? How is the defendant to gather evidence on the varying injuries and heterogeneous experiences of class of unnamed class members? These answers must await another case.
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