Scotus Limits Damages In Class Action

In June, the Supreme Court decided a case with major implications for class action lawsuits. After the Court reviewed a Ninth Circuit case, it held that only a plaintiff concretely harmed by a defendant’s violation of the Fair Credit Reporting Act (FCRA) has Article III standing to seek damages against that private defendant in federal court.

Although the case involved a class of individuals who sued one of the nation’s three major credit reporting bureaus, TransUnion, in federal court under the Fair Credit Reporting Act, the case raises issues for those defending class actions in federal court. The case’s 5-4 holding that most of the class members in the class action did not suffer concrete harm necessary for Article III standing redefines standing and class definitions in most class action litigation.

The case, TransUnion LLC v. Ramirez, No. 20-297, 594 U.S. __, 2021 WL 2599472 (June 25, 2021) involved a class of 8,185 individuals who alleged that TransUnion violated the FCRA by failing to utilize reasonable procedures to ensure the accuracy of their credit files. TransUnion offered a product called OFAC Name Screen Alert, which attached a “potential match” alert to the credit report of certain individuals. These were persons whose names matched a list of terrorists, drug traffickers, and other major criminals maintained by the Department of the Treasury’s Office of Assets Control.

The named Plaintiff, Sergio Ramirez, sued TransUnion when it allegedly transmitted his credit report containing the OFAC alert to an automobile dealership. In turn, the dealership chose not to sell him a car because of the presence of his name on the Department of Treasury’s list.

Before the case went to trial, the parties stipulated that TransUnion had only provided credit reports of 1,853 class members that contained this false, misleading information to third parties. The credit reports of the remaining 6,332 members of the class were not provided to any third parties.

Despite not all members of the class suffering actual harm, the District Court ruled that all class members had Article III standing, and the jury rendered a verdict that awarded more than $60 million to the class. Each class member was awarded statutory damages of $984.22 and punitive damages of $6,353.08.  A Ninth Circuit panel affirmed in part and reduced the punitive damages award, thus reducing the total award to approximately $40 million.

Judge Kavanaugh, writing for the majority, stated that plaintiffs are required by the Constitution to have a “personal stake” in the case when suing in federal court. Plaintiffs must therefore show an injury “that the defendant caused and the court can remedy.” This requirement guarantees that a court only addresses “a real controversy with real impact on real persons.” “Central to assessing concreteness is whether the asserted harm has a ‘close relationship’ to a harm ‘traditionally’ recognized as providing a basis for a lawsuit in American courts.

Kavanagh added “in addition to physical and financial injuries constituting the requisite “concrete harm,” intangible injuries, such as an injury to a plaintiff’s reputation or the disclosure of private information, may also qualify.” The Court concluded that Article III standing requires a concrete injury even in the context of a statutory violation. A plaintiff does not automatically satisfy the injury-in-fact requirement whenever a statute grants a statutory right even though the statute may purport to authorize the filing of a lawsuit to vindicate this statutory right.

Applying the Article III standing requirement, the Court held that only the 1,853 class members whose credit reports were shared with third parties suffered harm with a “close relationship” to the harm associated with defamation. The remaining 6,332 class members whose credit files were not distributed to any third parties lacked standing under Article III because they could not demonstrate that the misleading information in their credit files constituted concrete harm.

In related news, a month earlier, the Ninth Circuit in Magadia v. Wal-Mart Associates, Inc., No. 19-16184 D.C. No. 5:17-cv-00062 (May 28, 2021), held that the named plaintiff lacked standing to maintain a meal period premium PAGA claim because he had personally suffered no violation. This overrules a California state court’s ruling in Huff v. Securitas Security Services, USA, Inc., 23 Cal. App.5th 745 (2018) and other relevant California cases which allowed uninjured PAGA plaintiffs to maintain PAGA claims solely on behalf of other allegedly aggrieved employees.

The effect of the TransUnion case is that it will likely further limit class-action lawsuits under consumer-protection laws. Thus, even when Congress has provided a cause of action in federal law, mere violation of the law will not provide a right to sue in federal court. The ruling of TransUnion prevents uninjured employees from bringing representative claims against employers in federal court. California employers will now try to take advantage of removing cases to federal courts to avail themselves of Article III’s standing limitations at every opportunity.

If your employer has violated California labor and employment laws, the experienced employment law attorneys at Moss Bollinger can help you determine if your rights have been violated. If so, we can help make your employer pay for any unlawful conduct. Moss Bollinger is dedicated to protecting and asserting the rights of California employees. Call (310) 982-2291 today for a free consultation or contact us online.