At oral argument in TransUnion, LLC v. Ramirez, TransUnion’s counsel told the U.S. Supreme Court that a lack of harm is a reason “to break out the champagne, not to break out a lawsuit.” The Court has now decided TransUnion, and its decision may make it harder for class-action plaintiffs to sue for non-traditional harms. As a result, class-action defendants may be inclined to pop a cork or two. The full implications of the decision remain to be seen, however, so the best course for now may be to keep the refreshments on ice.
TransUnion was a class action brought under a federal statute called the Fair Credit Reporting Act. That statute requires, among other things, that credit reporting agencies use reasonable procedures when they prepare consumers’ credit reports. When a credit reporting agency willfully violates that requirement, the statute allows consumers to sue the agency for statutory and punitive damages.
A class of more than 8,000 consumers used that statutory cause of action to sue TransUnion. The class asserted several claims. This post focuses on one of those claims: that TransUnion willfully violated the statute when, based on the class members’ first and last names alone, TransUnion flagged them as “potential matches” for a government list of terrorists, drug traffickers, and other serious criminals. A jury sided with the class and awarded each class member thousands of dollars in damages.
In a 5-4 decision, the Supreme Court held that some class members could recover those damages, and some could not. The Court’s opinion, written by Justice Kavanaugh, reached that result based on the law of Article III standing. The opinion establishes three important points about standing in class actions.
First, to recover damages in federal court, every class member must have Article III standing. This point is significant in cases, like TransUnion, involving statutory damages. Unlike actual damages, statutory damages need not reflect actual harm to the plaintiff. So a class could, in theory, win statutory damages without showing harm to each of its members. The Court clarified that Article III prevents that result by requiring all class members who receive damages to have standing—one component of which is an injury in fact.
Second, to satisfy Article III, a class member’s injury must be closely related to an injury that could traditionally support a lawsuit in American courts. For example, if an injury could give rise to a common-law suit, that injury satisfies Article III. But if an injury has no historical analogue, that injury cannot be remedied in federal court. This limitation applies even when Congress creates a statutory cause of action. Congress cannot, in other words, give federal courts the power to remedy wholly non-traditional injuries.
Third, for purposes of a damages claim, a risk of injury does not satisfy Article III. Although a risk of injury can support a claim for injunctive relief, class members seeking damages must show that they were actually injured.
Applying these points in TransUnion, the Supreme Court drew a line between class members whose credit reports were sent to third parties and class members whose credit reports were not. Class members whose reports were sent to third parties had Article III standing because they suffered reputational injury—an injury analogous to the injury from common-law defamation. In contrast, class members whose reports were not sent to third parties lacked Article III standing because they did not actually suffer reputational injury. Although the latter class members faced a risk of injury—their reputations could have been injured if TransUnion had sent their reports to third parties—that risk could not satisfy Article III. In the end, therefore, only the class members whose reports were sent to third parties could recover damages.
On its face, TransUnion is a win for class-action defendants. Because the decision requires class members seeking damages to show that they actually suffered a traditional injury, defendants will see TransUnion as a tool for opposing class actions under modern statutes that award damages for non-traditional harms.
In practice, however, TransUnion’s benefits for class-action defendants may be more muted. For example, although the Court required class members to analogize their injuries to traditional harms, it did not require those analogies to be perfect fits. Indeed, the Court acknowledged that the analogy to defamation in TransUnion was imperfect because TransUnion’s statements about the class members—calling them “potential matches” for terrorists—were technically true. But the Court concluded that TransUnion’s statements were at least misleading, and that the harm from a misleading statement is close enough to the harm from a false statement to satisfy Article III. Depending on how broadly courts construe that “close enough” reasoning in future cases, TransUnion might be less of a victory for class-action defendants than it initially appears.
As Justice Thomas observed in his dissenting opinion, TransUnion might also turn out to be a disappointment for class-action defendants in another important respect. Federal courts are bound by Article III, but state courts are not. The North Carolina Supreme Court, for instance, recently held that plaintiffs need not show an injury in fact when a statute gives them a right to sue. See Comm. to Elect Dan Forest v. Emps. Pol. Action Comm., 853 S.E.2d 698 (N.C. 2021). Rather than shutting down statutory suits for non-traditional harms, therefore, TransUnion may shift those suits from federal court to state court. Given that some state courts are friendlier to class actions than their federal counterparts are, that may ultimately make TransUnion a win for class-action plaintiffs—giving them a reason both to break out the champagne and to break out a lawsuit.
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