“No Concrete Harm, No Standing” – United States Supreme Court Tightens Standing Requirements in Class Action Lawsuits

In one of its final decisions of the term, the United States Supreme Court issued one of the most significant class-action decisions in recent years. The decision tightened the requirements for showing standing in class action lawsuits and has the potential to significantly affect class action litigation. Building on its 2016 decision in Spokeo, Inc. v. Robins, the Supreme Court held that, to recover damages in a class action, every class member must satisfy the standing requirement of Article III, at least when the requested relief involves recovery of money damages.

The plaintiff in the case, Sergio Ramirez, obtained a credit report from TransUnion in the course of purchasing a car, as countless consumers do each year. Ramirez’s credit report stated that his name was a possible match for a name on the Office of Foreign Assets Control (OFAC) watch list, a list of individuals and companies owned or controlled by, or acting for or on behalf of, targeted countries that typically contains the names of known terrorists, drug traffickers, and other individuals prohibited from conducting business in the U.S. for national security reasons.

Because of this alert on his credit report, the car dealership refused to sell Ramirez a vehicle. When he contacted TransUnion and requested a copy of his credit file, TransUnion first sent him his credit file and the statutorily required summary of rights. This first set of documents omitted any mention of the OFAC alert. TransUnion then sent Ramirez a second mailing, which included the OFAC alert but did not include the required summary of rights.

Based on these events, Ramirez filed suit alleging three violations of the federal Fair Credit Reporting Act (FCRA). First, he alleged that TransUnion did not implement and follow “reasonable procedures” to ensure the accuracy of his credit file. Second, he claimed that TransUnion violated the FCRA by failing to provide him with all the FCRA-required information in his credit file in connection with the first mailing he received which did not mention the OFAC alert. Finally, he alleged that TransUnion failed to provide him with the required summary of his rights “with each written disclosure” because the second mailing he received from TransUnion did not include a summary of his rights. Ramirez filed the case as a class action seeking to represent a class of similarly situated individuals.

After the district court certified the class, the parties stipulated that the class, as defined, consisted of 8,185 individuals. The parties further stipulated that out of the 8,000 plus class members only 1,853, roughly a quarter of the class, actually had their credit reports with mistaken OFAC watch list alerts disseminated to potential creditors. The case went to trial where a jury awarded the class $60 million in statutory and punitive damages. The Ninth Circuit upheld the verdict on appeal though it reduced the damages award to approximately $40 million. Though the Ninth Circuit acknowledged that the majority of class members did not have their credit reports disseminated to third parties, it held that the mere fact that the credit reports were available to potential creditors and employers upon request was sufficient to confer standing on the entire class.

In the majority opinion authored by Justice Kavanaugh, the Supreme Court held that the roughly 75% of class members whose incorrect credit reports were not disseminated to third parties lacked Article III and consequently could not recover for a failure to use reasonable procedures to protect the accuracy of their credit files. Answering a question that had divided federal appellate courts since Spokeo, the Court confirmed that “[e]very class member must have Article III standing in order to recover individual damages.”

Although all class members alleged a statutory violation of the FCRA, the Court rejected the argument that the class members whose credit files had not been disseminated suffered a concrete injury “based on an asserted risk of future harm.” Mere allegations of a statutory violation does not “relieve courts of their responsibility to independently decide whether a plaintiff has suffered a concrete harm under Article III.” While the statutory violation may have constituted an injury in law, the Court explained, “an injury in law is not an injury in fact.” “Only those plaintiffs who have been concretely harmed by a defendant’s statutory violation may sue that private defendant over that violation in federal court,” the Court explained.

The Court found that Ramirez and the other 1,852 class members whose incorrect credit reports had been disseminated to third parties had demonstrated sufficient concrete reputational injuries to confer standing. However, the 6,332 class members who only alleged errors in reports that were never disseminated did not. As the Court explained, “[t]he mere presence of an inaccuracy in an internal credit file, if it is not disclosed to a third party, causes no concrete harm.” The Court also concluded that on a claim that contended that the consumer reporting agency sent mailings that violated the Fair Credit Reporting Act’s formatting requirements, none of the class members other than the named plaintiff had demonstrated the requisite concrete harm.

In the closing paragraph of the majority opinion, Justice Kavanaugh, in a line sure to be frequently quoted in future opinions, distilled centuries of Article III jurisprudence into five words: “No concrete harm, no standing.”

Although the case involved claims under the FCRA, the Court’s analysis is likely to have far-reaching impact on class action litigation. One key issue acknowledged but not decided by the Court is whether every class member must demonstrate standing before a court certifies a class. For those defending against putative class action claims, the principle that “every class member must have Article III standing in order to recover individual damages” should create an important defense to class certification in cases involving classes defined in a way that sweeps in many persons who lack concrete injury. While that full impact of the Court’s decision remains to be seen, litigants and litigators alike should benefit from the bright-line rule laid down that an alleged statutory violation is not enough to confer Article III standing to sue for damages.

The Court’s full opinion is available here.

Our Chicago, Illinois business dispute and class-action law firm handles individual and class action gift card, data breach, privacy rights, deceptive advertising, predatory lending, unfair debt collection, lemon law, and other consumer fraud cases that government agencies and public interest law firms such as the Illinois Attorney General may not pursue. Class action lawsuits our law firm has been involved in or spear-headed have led to substantial awards totaling over a million dollars to organizations including the National Association of Consumer Advocates, the National Consumer Law Center, and local law school consumer programs. The Chicago class action lawyers at Lubin Austermuehle are proud of our achievements in assisting national and local consumer rights organizations to obtain the funds needed to ensure that consumers are protected and informed of their rights. By standing up to consumer fraud and consumer rip-offs, and in the right case filing consumer protection lawsuits and class-actions you too can help ensure that other consumers’ rights are protected from consumer rip-offs and unscrupulous or dishonest practices.

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