Supreme Court: “Concrete Injury” Required for Standing in Federal Court | Proskauer – Class & Collective Actions

On June 25, 2021, the United States Supreme Court ruled that class action plaintiffs who could not find “concrete harm” as a result of alleged violations of the Federal Credit Report Act (“FCRA”) did not have Article III legal remedies to appeal to a federal court. Transunion LLC v Ramirez, No. 20-297 (USA June 25, 2021).

Factual background

The plaintiff alleged that the defendant TransUnion had prepared a credit report on him, which incorrectly identified him as possibly on the terrorist watch list. He found out about the alleged bug after he was denied a car loan.

The plaintiff then requested a copy of his credit file from TransUnion, which responded in two separate mailings. The first mailing contained his credit file and a summary of rights under the FCRA, but made no mention of the terrorist watchlist warning. The second mailing contained the warning, but no separate rights summary.

The plaintiff filed a suit on his behalf and on behalf of an alleged group alleging that TransUnion had violated the FCRA by failing to follow “reasonable procedures” to ensure that its loan records and those of its members were as accurate as possible. He further alleged that TransUnion violated the FCRA’s disclosure requirements for the “full file” by providing copies of the full credit file and the required rights summary in two separate mailings instead of one. The plaintiff argued that this posed a risk for future harm as the group members run the risk of not knowing about the warning and requesting a correction.

After a jury trial, the U.S. District Court for the Northern District of California awarded the Class of $ 60 million in damages and found that anyone with false information was eligible – not just those to whom these reports were presented. The ninth district court upheld this but reduced the compensation to $ 40 million as the district court’s punitive damages were unconstitutional excessive.

The Supreme Court ruling

In a 5-4 decision, the Supreme Court overturned the Ninth District judgment. The Court found that a risk of future harm is not a recognizable harm sufficient to bring an action under Article III that enables a plaintiff to seek monetary damages. In that ruling, the court found that of the 8,185 class action plaintiffs who had a report with an inaccurate warning on the terrorist watch list, only 1,853, including the named plaintiff, actually had their reports leaked to third parties. The court found that in the context of traditional defamation offenses, the mere existence of incorrect information without dissemination could not be challenged and the majority of the group could therefore not claim any specific damage.

This decision reinforces the previous precedent that the legal status under Article III requires “specific damage” even if there is a violation of the law, and that “a violation is not an actual violation”. Ramirez at * 2 (citing Lujan v. Defenders of Wildlife, 504 US 555, 560-561 (US 1992)). It is noteworthy that the court’s decision further applied this concept to the context of class actions by stating that each group member must be able to prove this specific damage that ensures legal status. The court concluded that the 1,853 class plaintiffs whose credit reports had actually been disclosed to third parties had specific damage and were Article III law, while the remaining 6,332 class plaintiffs had no case or controversy.

Effects

The ruling is likely to lead to class actions with no specific harm that are increasingly being brought in state courts, especially in states with more permissive standards of standing.

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