The Supreme Court has made its opinion clear: “No concrete harm, no standing.”  On June 25, 2021, in an opinion that is sure to influence litigation in the credit reporting and debt collection spheres, the Supreme Court held that a plaintiff who cannot show a statutory violation harmed them lacks standing to bring a lawsuit under Article III of the U.S. Constitution.

What is Article III Standing?

To establish standing to bring a suit in federal court, a plaintiff must show (i) that he suffered an injury-in-fact that is concrete, particularized, and actual or imminent; (ii) that the defendant likely caused the injury; and (iii) that the injury would likely be redressed by judicial relief.  Put another way, Under Article III, federal courts do not adjudicate hypothetical or abstract disputes.


The Facts:

In 2011, Sergio Ramirez, accompanied by his wife and father-in-law, sought to buy a car. When he was ready to complete his purchase, the dealership ran his credit report. The report produced by TransUnion contained this alert “OFAC ADVISOR ALERT- INPUT NAME MATCHES NAME ON THE OFAC DATABASE.” The dealership then told Mr. Ramirez that it would not sell him the car because his name was on a “terrorist list”; Mr. Ramirez’s wife then purchased the car in her name.

The next day Mr. Ramirez called TransUnion and requested a copy of his credit file.  The same day TransUnion sent him a mailing that included his credit file and the statutorily required summary of rights prepared by the CFPB. This mailing did not mention the OFAC alert in Mr. Ramirez’s file. The next day, TransUnion send Mr. Ramirez a second mailing which alerted him that his name was considered a potential match to names on the OFAC list but did not include an additional copy of the summary of rights. Concerned about these mailings, Mr. Ramirez contacted a lawyer and ultimately canceled a planned trip to Mexico.  TransUnion eventually removed the alert from Mr. Ramirez’s file.

The Case Background:

In 2012, Mr. Ramirez sued TransUnion for alleged violations of the Fair Credit Reporting Act (FCRA). Specifically, he alleged that (a) TransUnion failed to follow reasonable procedures to ensure the accuracy of the information in his credit file; (b) failed to provide him with all the information in his credit file upon his request; and (c) violated its obligation to provide him with a summary of his rights with each written disclosure. Mr. Ramirez also sought to certify a class of all people in the U.S. to whom TransUnion sent a mailing from January 1, 2011 to July 26, 2011 that was similar to the second mailing Mr. Ramirez received.

TransUnion opposed certification, but before the trial stipulated that the class contained 8,185 members, however of those, only 1,853 class members had their credit reports sent to a third party during that period. The District Court ruled that all 8,185 class members had Article III standing. After a trial, the jury returned a verdict for Mr. Ramirez, which also awarded each class member statutory and punitive damages. TransUnion appealed, and the 9th Circuit Court of Appeals affirmed the District Court’s decision.

The Supreme Court’s Ruling:

In a 5-4 decision, in an opinion written by Justice Kavanaugh, the Supreme Court of the United States succinctly held, “No concrete harm, no standing.” In reaching this decision, the court relied heavily on Spokeo v. Robins, 578 U.S. 330 (2016), which indicated that to determine if a plaintiff has Article III standing, courts should assess whether the alleged injury to the plaintiff has a close relationship to a harm traditionally recognized as providing a basis for a lawsuit in American Courts. Per the court, although Spokeo does not require an exact duplicate in American history and tradition, “it is not an open-ended invitation for federal courts to loosen Article III based on contemporary, evolving beliefs about what kinds of suits should be heard in federal court.” 

As it analyzed the standing issue, the court noted that there is an important difference between the plaintiff’s statutory cause of action to sue a defendant over a violation of federal law and a plaintiff’s suffering a concrete harm because of a violation of federal law. Per the court, “under Article III, an injury in law is not an injury-in-fact.” The court theorized,

“If the law of Article III did not require plaintiffs to demonstrate a concrete harm Congress could authorize virtually any citizen to bring a statutory damages suit against virtually any defendant violated virtually any federal law.”

In light of these legal principles, according to the Court, only the 1,853 members who had their credit reports submitted to third parties suffered concrete harm that qualifies as an injury-in-fact sufficient to have standing. Specifically, the court reasoned that those class members suffered a harm with a close relationship to the tort of defamation, which requires publication (i.e., distributing the report to a third party).

The court noted there is a difference between the credit files a consumer reporting agency maintains internally and those distributed to third parties. Thus, since publication is an essential part of a historically recognized action for defamation, the other 6,332 potential class members lacked standing since TransUnion did not distribute their credit reports to third parties. Comparing these facts to a situation where someone wrote a defamatory letter and stored it in a desk drawer, the court found that “the mere existence of inaccurate information in a database is insufficient to confer Article III standing.”

The 6,332 members argued that the existence of the misleading information was a concrete injury because it exposed them to a material risk that the information would be disseminated in the future. The court noted there was no evidence that any of the 6,332 knew there were OFAC alerts in their credit files and held, “the mere risk of future harm, standing alone, cannot qualify as a concrete harm.” Further, since none of the 6,332 class members demonstrated that alleged formatting errors in the mailings sent by TransUnion, the court found they lacked standing for that issue as well. Specifically, the Court stated that “[w]ithout any evidence of harm caused by the format of the mailings, they are bare procedural violations divorced from any concrete harm.”

Four Justices dissented in an opinion authored by Justice Thomas. The dissent disagreed with the majority, opining that the majority’s analysis actually ignores the Spokeo holding since every violation of a right granted by the law causes some damage. Further, the dissent pointed out that TransUnion had been sued for the same issue with the OFAC reports in 2005 and failed to fix the problem. Thus, in the dissenting Justices’ opinion, since the FCRA imposes a duty to use reasonable procedures to assure maximum accuracy in credit reports, and TransUnion knew since at least 2005 its procedures were lacking, all 8,135 class members had standing.

The case has now been remanded back to the 9th Circuit Court of Appeals.

insideARM Perspective:

Although this case certainly clarified that a plaintiff needs to show an actual harm and not just the potential for harm, it's important to note that this opinion applies to standing in federal court. While this opinion has the potential to make waves in the accounts receivable industry, it may not decrease the overall volume of cases filed by consumer attorneys. Suits formerly filed in the federal court may make their way to state courts instead.

That said, entities on the receiving end of FCRA and Fair Debt Collection Practices Act (FDCPA) suits often question whether the consumer has actually suffered an injury. It remains to be seen whether this case will serve as a basis for a flurry of motions to dismiss in pending FCRA and FDCPA actions and how this may shake out in state courts. Accounts receivable entities should watch how this space develops, but like with everything in the accounts receivable sphere, whether an opinion is ‘good’ or ‘bad’ often depends on the passage of time and the cases which follow.

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