No Concrete Harm, No Standing- SCOTUS Limits Damages in Federal Class Actions

Topics: Court Decisions

In TransUnion LLC v. Ramirez, 594 U.S. (2021) the United States Supreme Court held that class members who suffered no actual injury could not recover damages because they lacked Article III standing.  Although TransUnion involved a class of individuals who sued TransUnion in federal court under the Fair Credit Reporting Act, the case raises issues for employers to consider when defending employment law class actions in federal court.

Basic Facts and Standing Requirement

In TransUnion, a class of 8,185 individuals claimed that TransUnion, a credit reporting agency, failed to use reasonable procedures to ensure the accuracy of their credit files and complained about formatting defects in certain mailings from TransUnion.

The case arose from a product offered by TransUnion called OFAC Name Screen Alert, which attached a “potential match” alert to the credit report of individuals with names that matched a list of terrorists, drug traffickers and other serious 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 with the OFAC alert to a car dealership, which caused the dealership not to sell him a car because his name was incorrectly placed on a “terrorist list.”

Prior to trial, the parties stipulated that only 1,853 class members had their misleading credit reports provided to third parties.  The internal credit files for the other 6,332 class members were not provided to any third parties during the relevant time period.  The District Court ruled that all class members had Article III standing, and the jury returned a verdict awarding each class member statutory damages of $984.22 and punitive damages of $6,353.08, adding up to a total award of more than $60 million.  A divided panel of the Ninth Circuit affirmed in relevant part, and reduced the punitive damages award, thus reducing the total award to about $40 million.

The Supreme Court, however, held that “only plaintiffs concretely harmed by a defendant’s statutory violation have Article III standing to seek damages against that private defendant in federal court.”  Article III limits the federal judicial power to the resolution of “cases” and “controversies” in which a plaintiff has a “personal stake.”  Thus, to have standing to sue in federal court, a plaintiff must show that he or she suffered a concrete injury in fact.  The Supreme Court held that: “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.”  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 person a statutory right and purports to authorize that person to sue to vindicate that right.

Applying this 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 disseminated, however, lacked standing under Article III because they could not demonstrate that the misleading information in their internal credit files constituted concrete harm.

What Employers Need to Know

Article III standing continues to be an important requirement for employers defending cases in federal court. As we explained in our recent blog post, the Ninth Circuit in Magadia v. Wal-Mart Associates, Inc. held that the named plaintiff lacked standing to maintain a meal period premium PAGA claim when he personally suffered no such violation (departing from the California state court ruling Huff v. Securitas Security Services, USA, Inc., 23 Cal.App.5th 745 (2018) and its progeny, which allowed uninjured PAGA plaintiffs to maintain PAGA claims solely on behalf of other allegedly aggrieved employees).  TransUnion thus solidifies Magadia’s standing requirement and provides additional support to prevent uninjured employees from bringing representative claims against employers in federal court.  In federal cases, employers should consider whether the named plaintiff, or a subset of the putative class/potentially aggrieved employees, did not suffer the alleged injury at issue to attempt to limit the breadth of PAGA claims and defeat class certification (or limit the class size).  TransUnion also serves as a reminder for California employers to assess possible avenues to remove cases to federal courts to take advantage of Article III’s standing limitations.