U.S. Supreme Court dramatically limits "no injury" class action lawsuits in federal court

U.S. Supreme Court dramatically limits "no injury" class action lawsuits in federal court

In a ruling that may have a significant impact on certain “no injury” class action cases in federal court, the U.S. Supreme Court recently issued a 5-4 decision that dramatically limits the “standing” – a plaintiff’s right to bring suit in federal court – necessary to recover damages.

The case is TransUnion LLC v. Ramirez. There, a class of 8,185 individuals sued TransUnion under the Fair Credit Reporting Act (“FCRA”), claiming that TransUnion failed to use reasonable procedures to ensure that their credit files were accurate, and also to provide consumers with their complete credit file upon request. For 1,853 of the individuals – including the class representative Ramirez – TransUnion provided third-party businesses with misleading credit reports that wrongly identified the individuals as a “potential match” for names on a government watch list of terrorists, drug dealers, and other serious criminals. The question before the Court was whether all or some of those statutory violations were sufficient for plaintiffs to bring claims in federal court.

Writing for the majority, Justice Brett Kavanaugh held that the Court had “no trouble” finding standing to sue on behalf of the 1,853 individuals for whom TransUnion provided inaccurate credit reports to third-party businesses because TransUnion’s actions resulted in the kind of reputational harm associated with defamation, a traditionally recognized basis for a lawsuit in American courts.

The Court came to the opposite conclusion for the class members whose credit reports were not provided to any third party. Ramirez argued that that group was at an increased risk of reputational and other harm because TransUnion did not ensure that their credit reports were accurate, and TransUnion argued that the mere risk of harm, without more, could not qualify as a concrete injury and therefore did not support standing to sue for damages. The Court agreed with TransUnion, finding that the plaintiffs for whom TransUnion did not send inaccurate credit reports lacked standing because those individuals did not suffer any reputational injury. As the Court explained TransUnion's argument:

 

[I]f an individual is exposed to a risk of future harm, time will eventually reveal whether the risk materializes in the form of actual harm. If the risk of future harm materializes and the individual suffers a concrete harm, then the harm itself, and not the preexisting risk, will constitute a basis for the person’s injury and for damages. If the risk of future harm does not materialize, then the individual cannot establish a concrete harm sufficient for standing.

 

Thus, the Court concluded, the 6,332 individuals whose credit reports were not shared with third parties were unable to bring claims for damages against TransUnion in federal court.

TransUnion should have a far-reaching and immediate impact on “no injury” class action suits. The ruling clarifies that the Court’s earlier decision in Spokeo, Inc. v. Robins, which held that the imminent risk of future harm can satisfy the injury-in-fact requirement for Article III standing, applies only to requests for prospective injunctive relief, not retrospective damages. This clarification would mean that a plaintiff or putative class member whose standing is grounded only in the alleged imminent risk of future harm, as opposed to the existence of some actual injury, would lack standing to seek damages from the defendant. That, in turn, may be a strong deterrent for plaintiffs to file such cases in federal court.

TransUnion also extends the well-established rule that a plaintiff must have standing to pursue every form of relief requested to unnamed class members. Although the Court expressly declined to address the question of whether this showing must be made before a class is certified, the requirement that every class member have standing could have significant implications on class certification. For instance, it could impact the commonality and/or predominance aspects of the analysis inasmuch as every potential class member may be required to independently demonstrate his or her standing to join the class. And it may breathe new life into the debate over whether “ascertainability” should be a required showing at the certification stage given that it may not be known or knowable who among a class has suffered a sufficient injury for standing purposes.

Many important questions remain unresolved following TransUnion. These issues will be hotly contested for years to come, and only time will tell when and how they will be decided.

Please contact McDonald Hopkins with any questions or comments about the impact or implications of TransUnion. Our experienced class action defense attorneys are ready to help.

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