Statutory Violations Not Enough to Give Rise to a Cause of Action for Class Actions says U.S. Supreme Court

 

The Supreme Court’s recent decision in Trans Union v. Ramirez has narrowed Article III standing by making it more difficult for plaintiffs to initiate class action lawsuits against corporate defendants who violate federal statutes.  Here, the Court found that violation of a federal statute alone does not give rise to the level of a “concrete injury” for a plaintiff’s Article III standing.  The plaintiff must have suffered a “concrete injury” to have Article III standing in order to seek relief in a court of law.  This decision has serious consequences for tort class action lawsuits and corporate activities in general.

 

Details of the case

TransUnion is a credit reporting agency that compiles personal and financial information about individual consumers and creates a consumer report that is sent to third party companies to determine the consumer’s creditworthiness.  TransUnion had an add-on to their product called the OFAC Name Screen Alert that was available for third party businesses to order.  This add-on would compare the name of the consumer against a list maintained by the United States Treasury Department’s Office of Foreign Assets Control (OFAC).¹  This list denotes known terrorists, drug traffickers, and other serious criminals.²  If a consumer’s first and last name appeared on the OFAC list, TransUnion would place an alert on the credit report, stating that the person is a potential match.  Unfortunately, this product generated many false positives, as many consumers shared names with those on the OFAC list.³  Plaintiff Sergio Ramirez was one such consumer, as he discovered at a Nissan Dealership in California.⁴  The dealership refused to sell him the car because the credit report they ran on Ramirez falsely indicated that he was a suspected terrorist.⁵  

 

Ramirez brought suit against TransUnion, alleging that it violated the Fair Credit Reporting Act by failing to follow reasonable procedures to ensure the accuracy of the credit report information.⁶  Ramirez obtained a class action for his suit, with a class of 8,185 people all suffering from same or similar harms by TransUnion’s alleged violation of the statute.  Only 1,853 of the class, including Ramirez, had their false reports containing OFAC alerts provided to the third-party companies.⁷  The other 6,332 did not have their reports sent to the third-party companies.

 

Writing for the majority in a split 5-4 decision, Justice Kavanaugh found that while the 1,853 class members whose reports were sent did suffer a harm, the same was not true for the remaining 6,332.⁸  In his reasoning, Justice Kavanaugh stated that to have a claim for tort damages, a plaintiff must have standing by the standards set in Article III of the Constitution.⁹   The plaintiff must have a “personal stake” in their case.¹⁰  The plaintiff must show a “concrete” harm that was caused by the defendant and can be redressed by judicial relief.¹¹  In defining “concrete harm”, the Court cited its decision in Spokeo v. Robins, 578 U.S. ____ (2016), stating that the harm must have a close relationship to a harm traditionally recognized in American courts.¹²  However, a mere violation of a federal statute does not give a plaintiff a cause of action against a defendant.¹³  The plaintiff must have suffered a concrete harm as well.¹⁴ 

 

Reputational harms, as in this case, bear a close relationship to the traditional tort of defamation.  This was the case for the 1,853 class members whose reports were sent to third-party companies.¹⁵  A misleading statement that deems a consumer a terrorist bears a close relationship to defamation, especially when it is made available to a third-party company.  Statements like these had an adverse effect on these 1,853 class members.¹⁶  However, the remaining 6,332 class members suffered no harm by TransUnion’s violation of the statute, as their false reports were never sent to any third-party company.¹⁷ he inaccuracy of the statements themselves, nor the violation of the statute, were not enough to give these 6,332 class members a cause of action.¹⁸ 

 

Reasoning and Future Implications

Justice Kavanaugh justified his reasoning by highlighting the separation of powers between Congress and the judiciary.  Justice Kavanaugh mused that without Article III’s concrete harm requirement, Congress could hypothetically allow plaintiff to sue a corporate defendant over a statutory violation without that plaintiff having any personal stake in the case.¹⁹ 

 

In reality, this ruling could eliminate a potential check that corporations had against them from corporate malfeasance.  Such a ruling will surely impact future class action suits against corporate defendants, as every individual class member must now have suffered a harm by the defendant’s actions.  This will make attorneys who handle class actions much more careful with who they add into a class when suing in federal court.²⁰  Furthermore, corporations could now have more freedom to violate statutes that do not necessarily harm plaintiffs directly in a “concrete way”, like the FDCPA, or the TCPA.²¹  Rulings like this reflect the U.S. Supreme Court’s continuing conservative shift since former President Trump’s appointment of three conservative justices on the bench during his presidency.  

 

In his dissent, however, Justice Thomas noted that this might be a pyrrhic victory for TransUnion, as state courts are not bound by the limitations set by Article III as stated by Justice Kavanaugh.²²  States like Illinois and New York have more lenient standing requirements than federal courts, and include more liberal judges who are friendlier to “no-injury” class action lawsuits.²³  Furthermore, half of the states have adopted measures that recognize statutory violations as a harm that can give rise to a cause of action.²⁴  This could encourage plaintiff attorneys to go “jurisdiction shopping”, as they can pick out plaintiffs who reside in more liberal states and bring suit there, maybe even in multiple states.  This could provide an incentive to credit reporting agencies like TransUnion to maintain accurate reporting, lest they deal with multiple lawsuits in multiple forums.  However, this would also clog up the courts even more, with multiple lawsuits being filed over the same cause of action.  

Source By : https://sewellnylaw.com/statutory-violations-not-enough-give-rise-cause-action-class-actions-says-u-s-supreme-court/