By Gerald L. Maatman, Jr., Pamela Q. Devata, and John Drury

Seyfarth Synopsis:  On June 25, 2021, the U.S. Supreme Court reversed the Court of Appeals for the Ninth Circuit in TransUnion LLC v. Ramirez, No. 20-297 (U.S. June 25, 2021).  The Supreme Court held that the vast majority of class members did not suffer any “concrete harm” from TransUnion’s alleged violations of the federal Fair Credit Reporting Act (“FCRA”), and therefore did not have Article III standing.  While the decision is helpful to employers 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

Defendant TransUnion prepared a credit report on Plaintiff.  An alert on the report inaccurately indicated that Plaintiff was on the terrorist watch list.  Plaintiff then requested a copy of his credit file from TransUnion, which responded in two separate mailings.  The first mailing included his credit file and summary of rights under the FCRA, but it did not mention the alert on his report.  The second mailing included the alert, but did not include a separate summary of rights.

Ramirez asserted multiple claims in a class action he filed against TransUnion under the FCRA.  First, he alleged that TransUnion violated 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 the “full file” disclosure requirements of the FCRA by not providing class members with copies of their complete credit files and not providing the required summary of rights.

The district court certified a class of 8,185 and awarded over $60 million in damages.  Only 1,853 class members actually had their reports sent to a third party.  The Ninth Circuit subsequently affirmed in relevant part, holding that all class members had standing, but reducing the total award to about $40 million.

The Supreme Court’s Decision

The U.S. Supreme Court reversed the Ninth Circuit.  In a 5-4 decision, it 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, the majority opinion stated  “[n]o concrete harm, no standing.” Id. at 1.

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.” Id. at 11. Applying the “concrete harm” requirement to the facts on appeal, the Supreme Court held 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 also addressed standing with respect to the “reasonable procedures” claim.  The Supreme Court indicated that it 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.  Id. at 17. However, it was a “different story” for the remaining 6,332 class members, whose credit files were never sent to a third party. Id. at 18. 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. Id. at 19.  The Supreme Court also rejected the argument that the “risk of future harm” was enough to satisfy Article III’s concrete harm requirement for the remaining 6,332 class members.  Id. at 20-23.

Finally, the Supreme Court addressed standing with respect to the “full file” claims. Id. at 24-27. Applying the “concrete harm” standard, the Supreme Court held that no one in the class (except Ramirez) had standing to recover for what it concluded was a “formatting” violation. Id. In so holding, 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.” Id. at 26.

Implications for Employers

This Ramirez decision has the potential to significantly limit “no-harm” class actions in federal court.  In the last several years, employers have faced a significant increase in class actions under the FCRA, with many claims directed at technical statutory violations that arguably cause no harm to anyone, much less a “concrete harm.”  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, the Supreme Court’s 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, Illinois, and New York.  There already had been a steady increase in class actions filed in state courts with concurrent jurisdiction over federal statutes such as the FCRA.  As a result, employers should expect Ramirez to result in more class actions being filed in state court.