The United States Supreme Court has again granted a petition to examine standing in the context of class actions, specifically whether Article III of the Constitution permits members of a certified class to recover money damages when members of the certified class suffered no actual injury. This issue was presented to the Supreme Court after the Ninth Circuit issued an opinion and order in Ramirez v. TransUnion LLC, 951 F.3d 1008 (9th Cir. 2020), finding absent class members in a class action brought under the Fair Credit Reporting Act (“FCRA”) had Article III standing where it was undisputed that, in the case of the majority of the certified class members, allegedly inaccurate credit information was not disclosed to any third party. The Supreme Court’s consideration of the issues presented in Ramirez will allow the Court to provide more defined boundaries on what type of “intangible” harm suffered by absent class members can constitute a “concrete” injury sufficient to confer Article III standing, an issue largely left open after the Supreme Court’s prior landmark decision in Spokeo, Inc. v. Robins, No. 13-1339 (U.S. 2016).

I. Case Background.

The Ramirez case arose when the named plaintiff, Sergio Ramirez, brought a putative class action against a consumer reporting agency (“CRA”) alleging violations under the FCRA. The credit files of Ramirez and other class members included an alert indicating that they potentially matched the name of a person on the United States government’s list of Specially Designated Nationals (“SDN”), which if true, would prohibit companies from doing business with those individuals. Ramirez alleged that he suffered difficulty in obtaining credit and embarrassment in front of family members when an automobile dealer received a credit report allegedly indicating that it could not do business with Ramirez. Ramirez testified that he was embarrassed, shocked, and scared when he learned of this alert and his potential inclusion on the SDN List. Ramirez requested a copy of his credit report, which once received did not indicate that he was on the SDN List. However, the next day, Ramirez received a separate letter from the CRA (the “OFAC Letter”) making him aware that he was considered a potential match on the SDN List. The OFAC Letter was not accompanied by a summary of rights form.

As a result, Ramirez ultimately initiated a class action alleging three violations of the FCRA, seeking to represent a class that included “all natural persons in the United States and its Territories to whom [the CRA] sent a letter similar in form to the [OFAC Letter] [that the CRA] sent to [Ramirez] … from January 1, 2011-July 26, 2011.” In other words, everyone in the class: (1) was labeled by the CRA as a potential SDN List match; (2) requested a copy of his or her credit file from the CRA; and (3) in response, received a mailing with the SDN List alert redacted and a separate OFAC Letter mailing with no summary of rights form.

The district court rejected the CRA’s arguments that the injury suffered by Ramirez was atypical to that of the class, and certified a class action under Rule 23 of the Federal Rules of Civil Procedure. Notably, the parties stipulated that this class included 8,185 consumers, and that, out of those 8,185 consumers, only 1,853 consumers actually had their credit reports requested by a potential credit grantor during the relevant class period, meaning that the CRA did not furnish credit reports to third parties during the class period for the remaining 6,332 class members. The case went to trial, and the jury heard primarily about the experiences and injury suffered by Ramirez, and awarded every member of the 8,185-member class near the maximum in statutory damages and thousands more in punitive damages, for a total award of over $60 million. Ramirez did not provide evidence that any other class member actually read the OFAC Letter from the CRA or was even aware that such a letter had been sent, and did not prove that any other class member ever suffered injury (or even embarrassment) on account of the claimed deficiencies in how the CRA provided the “potential match” information.

II. Ninth Circuit Analysis.

The CRA appealed the jury verdict to the Ninth Circuit, arguing (1) the verdict could not stand because none of the class members other than Ramirez had standing under Article III of the U.S. Constitution; (2) the class should not have been certified because Ramirez’s claims were not typical of the class’s claims; and (3) additional arguments regarding the statutory and punitive damage awards.

In a 2-1 decision, the Ninth Circuit affirmed the lower court’s rulings regarding Article III and Federal Rule of Civil Procedure 23, and also reduced the punitive damages award. The Ninth Circuit first considered the challenge to the absent class members’ Article III standing. The Ninth Circuit first held that when a class is certified for money damages, each individual class member must establish standing at the final (damages) phase of the litigation. However, the Ninth Circuit went on to conclude that each absent class member had suffered an injury sufficient to satisfy Article III where the CRA had allegedly incorrectly placed SDN List alerts on the front page of consumers’ credit files and later sent the consumers “confusing and incomplete disclosures” in the form of the OFAC Letters about the alerts and how to remove them. The Ninth Circuit determined that the CRA’s alleged violation of the consumers’ notification rights under the FCRA, by itself, constituted a concrete injury even if a class members credit file had not been disclosed to a third party.

In doing so, the Ninth Circuit interpreted the U.S. Supreme Court’s 2016 ruling in Spokeo, Inc. v. Robins, No. 13-1339 (U.S. 2016) (“Spokeo II”) and applied a “risk-of-harm” theory in analyzing whether absent class members suffered concrete harm sufficient to confer Article III standing even if their credit reports were not furnished to third parties. The Ninth Circuit relied upon language in Spokeo II that states that concrete harm sufficient to confer Article III standing can be intangible, and there is sufficient injury in fact when a defendant’s statutory violation creates a “risk of real harm” to a plaintiff’s concrete interest. The Ninth Circuit reasoned that the fact that the CRA would have provided a class member’s report to numerous potential creditors and employers if they had requested it was sufficient to show a material risk of harm to the concrete interests of all class members.

The Ninth Circuit also rejected the CRA’s challenge under Federal Rule of Civil Procedure 23 that, even if the absent class members had Article III standing, they could not be properly represented by an atypical named plaintiff who suffered far greater and different injuries. The Ninth Circuit reasoned that all class members’ claims arose from the same event or practice and were based upon the same legal theory.

Judge M. Margaret McKeown penned a dissent concluding that only the 1,853 consumers whose credit reports were requested by a potential credit grantor had Article III standing to assert a claim. Judge McKeown argued that the majority’s conclusion that every class member suffered Article III injury-in-fact simply because the CRA’s credit files contained allegedly inaccurate information about them could not be reconciled with prior Supreme Court precedent such as Spokeo II. She also pointed to several decisions from other U.S. Courts of Appeals that found no Article III standing where there was a mere existence of inaccurate information in a credit file without dissemination to any third party. Judge McKeown observed that Congress’s main concern in enacting the FCRA was the “dissemination of inaccurate information, not its mere existence in the . . . database.” See, e.g., Owner-Operator Independent Drivers Ass’n, Inc., et al., v. United States Department of Transportation et al., 879 F.3d 339, 345 (D.C. Cir. 2018).

III. U.S. Supreme Court Grants Petition, Possible Repercussions.

The U.S. Supreme Court granted the CRA’s petition for certiorari in order to review whether either Article III of the Constitution or Federal Rule of Civil Procedure 23 permits class members to recover money damages when members of the certified class suffered no actual injury, let alone an injury similar to what the class representative suffered.

The Supreme Court has long held that Article III standing requires a plaintiff to establish that she suffered an “injury in fact” that is “concrete and particularized” and “actual or imminent.” See, e.g., Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992). Spokeo II explains that mere statutory violations on their own are insufficient to confer Article III standing absent sufficient concrete injury. Spokeo II, 136 S. Ct. at 1547–49. Importantly, the Court in Spokeo II explicitly recognized that a violation of one of the FCRA’s procedural requirements may result in no harm, while also instructing that an alleged procedural violation can by itself manifest concrete injury where Congress conferred the procedural right to protect a plaintiff’s concrete interests and where the procedural violation presents a risk of real harm to that concrete interest. Id. at 1550.

The Supreme Court’s decision will resolve an apparent Circuit split created by the decision in Ramirez, and recognized by the dissent. The D.C. Circuit and other circuits have held that individuals who never had their information disseminated to third parties cannot claim Article III injury in an FCRA claim based on the bare fact that inaccurate information sat inchoate in a database. See, e.g., Owner-Operator Indep. Drivers Ass’n, Inc. v. U.S. Dep’t of Transp., 879 F.3d 339 (D.C. Cir. 2018). Nor do other circuits allow individuals to claim injury in-fact merely because they were sent a purportedly incomplete disclosure that they may not have read, let alone found confusing. See, e.g., Flecha v. Medicredit, Inc., 946 F.3d 762, 768 (5th Cir. 2020).

The Supreme Court’s ruling is sure to affect future class action litigation and issues of standing, especially for claims under the FCRA.  Will we have another Spokeo II on our hands, raising the bar further on Article III standing for absent class members?  Will the reasoning of the Ninth Circuit majority’s position or Judge McKeown’s dissent win the day?  We’ll be sure to let you know.