TransUnion v. Ramirez: What Is It and Why Does It Matter?

Those who were paying close attention during the Barrett nomination (or who read my blog on the subject) might remember her decision in Casillas v. Madison Avenue Associates, Inc. Paula Casillas tried to sure Madison Avenue Associates because it hadn’t told her that attempts to dispute her debt must be in writing. The Court of Appeals for the 7th Circuit, in an opinion written by then-Judge Barrett, decided that Ms. Casillas couldn’t sue because she hadn’t been harmed.

The Supreme Court has embraced this reasoning. In its decision in TransUnion LLC v. Ramirez, although interpreting a different statute and different facts, the Supreme Court thrice quoted Casillas in reaching a very similar conclusion. In doing so, however, the Court did not just make Casillas the law of the land. It reached a far broader conclusion that demonstrates the contradictions of the American legal system.

Just the Facts

The Treasury’s Office of Foreign Assets Control maintains a list of dangerous individuals. Some are terrorists. Others are drug dealers. What they have in common is that doing business with them is unlawful.

TransUnion is one of America’s three biggest credit reporting agencies. As part of its reports, for an additional fee, it would check whether a person was on this list. TransUnion’s search was far from thorough: if a person’s first name and surname were listed together, TransUnion reported the person as a “potential match.” It did not compare, for example, birth dates or middle initials. TransUnion had already been sued over this practice, for which a jury had awarded $800,000 in damages (which the court had reduced to $150,000). Before that first lawsuit, TransUnion had not included the word “potential” and had also reported matches if the names were similar but not the same.

Unsurprisingly, a lot of Americans share a name with someone on the OFAC’s list. The parties to this lawsuit agreed that 8,185 persons had wrongly been identified as being on the list, of whom 1,853 had been wrongly described as such to a prospective creditor. The lead plaintiff, Sergio Ramirez, called TransUnion after learning that he was on the list. In response, TransUnion sent him a copy of his credit file that did not include his potential match to the OFAC’s list. The next day, it sent a letter describing his potential match, but the second letter did not include a summary of his legal rights.

Lawyers for those 8,185 persons argued that TransUnion failed to “follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.” 15 U.S.C. § 1861e(b). They also argued that the letters sent to Mr. Ramirez, and presumably to other plaintiffs, violated two further requirements of the Fair Credit Reporting Act: the first letter failed to disclose “all information” in his file, 15 U.S.C. § 1681g(a)(1); the second letter did not include the summary of rights required “with each written disclosure”. 15 U.S.C. § 1681g(c)(2).

The jury awarded each plaintiff statutory damages of $984.22 and punitive damages of $6,353.08. The total came to over $60 million. The Court of Appeals for the Ninth Circuit reduced it to roughly $40 million.

What Happened at the Court?

The Supreme Court considered just one issue: whether the plaintiffs had standing to sue. Four Justices – Thomas, Breyer, Kagan, and Sotomayor – said of course they did: Congress gave them a right and TransUnion had violated right. (All except Justice Thomas wrote that, under very rare circumstances, someone could violate a statute without conferring standing. These weren’t those circumstances.) The majority of the Court, however, decided otherwise. In an opinion written by Justice Kavanaugh, the Court held that the plaintiffs couldn’t sue because they hadn’t really been harmed.

It wasn’t enough, Justice Kavanaugh wrote, that TransUnion had violated a legal duty to the plaintiffs. Federal courts can only address “cases and controversies.” According to Justice Kavanaugh, this meant that they could only address lawsuits where the plaintiff had, in fact, suffered a concrete injury. Justice Kavanaugh argued that the Court had made this clear in Spokeo, Inc. v. Robbins. (In Spokeo, the Court held that plaintiffs can sue only if they suffered concrete harm but that such harm need not be tangible: a risk of future harm might suffice.) Otherwise, Congress could let anybody sue anybody for anything, and individual citizens – rather than the President – would decide which laws were enforced.

Read strictly, the Court’s decision on the letters was a limited application of this principle: the plaintiffs had all received the correct information, it had just been in separate letters, so no harm was done. It did not necessarily hold (as the Seventh Circuit had in Casillas) that the deprivation of the information would itself have been insufficient to constitute a concrete injury. Many of the Court’s comments, however, suggest a more expansive decision. The Court frequently emphasised that the plaintiffs hadn’t proved that they received and opened the letters or that, if the letters had been formatted differently, they could have more easily removed the false identification from the report. This interpretation seems much closer to Casillas: if one can’t prove that receiving the information would have made a difference, one can’t sue.

More significant is the Court’s decision on contacting potential creditors. Analogising to defamation, the Court held that informing prospective creditors of the “potential match” was a concrete injury-in-fact. Merely being on the list, though, was not. Therefore, 6,332 plaintiffs had no standing to sue.

Justice Thomas opined, as he had in Spokeo, that the important difference was between a duty to the public and to individual citizens. If a defendant owed everyone a duty, then only plaintiffs who had actually been harmed could sue to enforce that duty. If Congress had created a duty to an individual plaintiff, however, Congress had also created grounds for a lawsuit by that plaintiff. He argued that this approach was more consistent with the Court’s past decisions, which had never before held that legal injury alone was inherently insufficient. Citing Spokeo, he found that a 25% risk of being wrongly described to someone as a terrorist or drug dealer was enough to confer standing. He was not clear about the impact of withholding information.

Why Does it Matter?

The Court’s opinion seems to be a solution in search of a problem. Justice Kavanaugh argued that the injury requirement was necessary because otherwise, for example, Congress could pass a law that someone in Hawaii could sue over pollution in Maine. Frankly, that doesn’t make much sense: if Congress let anybody sue, the right would be owed to the public as a whole; as Justice Thomas argued in dissent, it makes sense to require injury under those circumstances. That would be fundamentally different, however, from a defendant’s violation of a legal duty owed specifically to the plaintiff. Justice Kavanaugh seemed worried that Congress would try to phrase all statutory rights as private rather than public rights but there are surely limits to Congress’ ability to do so – and courts could surely recognise Congressional attempts to evade standing.

More importantly, this hypothetical situation wasn’t before the Court. There was no dispute that some 8,000 Americans had been wrongly identified as (potentially) personae non gratae in their credit reports. Those 8,000-odd Americans were the only ones who were trying to sue over that erroneous identification. Returning to the hypothetical pollution in Maine, the only plaintiffs in this lawsuit were the equivalent of Maine residents. Anti-pollution statutes are a poor analogy, because most of them would be considered public rights, but it is not hard to imagine how this decision would prevent lawsuits by many who lived close to the theoretical contamination.

Equally significant, the Court held that risk of harm alone is not enough to establish standing (at least to seek damages). As Justice Thomas pointed out, it is somewhat odd (and difficult to reconcile with Spokeo) to hold that a 25% risk of serious consequences doesn’t count as harm.

I will leave it to professors to argue how much the Court’s decision changes the law of standing. What is clear is that this opinion will preclude a lot of lawsuits over unlawful activity: that plaintiffs have been wronged doesn’t mean they’ve been concretely harmed. It will also foreclose relief for many who have suffered a concrete injury-in-fact.

Lawsuits are very expensive. In most cases, the recovery from one person’s lawsuit wouldn’t reimburse the legal costs. Frequently, lawsuits by several persons will be insufficient. Public interest organisations will step in where possible, and some lawyers will take pro bono cases when they can, but these can only go so far. This means a lot of the work will be done only if a private firm makes a profit by doing it.

Recognising this, Congress allows a prevailing party to recover fees under some statutes, including the Fair Credit Reporting Act that was the basis of this lawsuit. 15 U.S.C. §§ 1681n(a)(3), 1681o(a)(2). Even so, there is a possibility that any lawsuit will fail, and even if a fee is recovered it will often be much less than would be earned representing wealthier clients. As a result, private law firms will often take on such a case only if there are likely to be large damages, of which the firm will take a cut. If there are fewer plaintiffs, there will be lower damages.

In theory, the plaintiffs will be able to recover punitive damages for truly reprehensible conduct but that may not make up the difference. Punitive damages may be unavailable, the jury may not award them, or the court may deny that award. More relevant here is that these will also be reduced by the Court’s decision. If fewer plaintiffs have standing, fewer plaintiffs can recover punitive damages. Even where punitive damages are not formally tied to the number of plaintiffs, they practically will be, because the Due Process Clause (as interpreted in State Farm v. Campbell) prohibits punitive damages awards that are too much larger than compensatory damages.

The long and the short of it is that, if fewer plaintiffs have standing, less money will be at stake in a given lawsuit. If less money is at stake, fewer legal organisations will take the case. If fewer organisations will take the case, it becomes more likely that plaintiffs who have suffered a concrete injury won’t be able to obtain recompense for that injury.

Plaintiffs’ loss is defendants’ gain. As Justice Thomas pointed out, TransUnion made money by charging customers to identify those on the OFAC’s list. If it did so unlawfully, needlessly harming many in the process, it shouldn’t be able to keep the profits – but the Court’s decision means it will.

What’s the Bigger Picture?

Congress includes penalties in laws for a good reason. Some persons, and many business entities, will disregard laws unless the cost of doing so outweighs the benefit. This cost isn’t limited to legal penalties – for example, a company might lose customers – but those will be a big part of it. Moreover, there is always a chance that the unlawful conduct will not be discovered, which practically decreases the costs when a company is choosing how to proceed. Faced with certain profit and possible loss, the loss will act as a deterrent only if it’s very big or very likely.

If that sounds cynical, it’s borne out by TransUnion’s actions. When TransUnion was first sued, in 2005, it had found matches when someone’s name sounded similar to a name on the list. Rather than fully revamp its practices, as the jury admonished it to do, TransUnion found potential matches only where the first and last names were the same. This might have reduced the risk of lawsuits. It didn’t avoid wrongly tarnishing a lot of reputations.

Congress could avoid the standing issue by providing for criminal penalties instead of (or as well as) civil damages. To Justice Kavanaugh, this has the virtue of leaving whom to sue up to the Executive Branch and so (nominally) up to the President. Realistically, however, the government’s limited capacity means it has to pass up many cases that it should bring. As Justice Robert Jackson wrote in 1940, when federal law was much more restricted than it has since become: “If the department of justice were to make even a pretense of reaching every probable violation of federal law, ten times its present staff would be inadequate.” 

The legal system of the United States assigns a great role to private lawsuits, not only to make whole the plaintiffs but also for punishment and deterrence. The legal system also seeks to ensure that it doesn’t order payment of one cent that is not justified. Balancing fairness to defendants against the prospects of recovery is a difficult task. Perhaps the Court has struck the right balance. Even so, the costs of doing so must be recognised. One such cost is that it is sometimes more profitable to break the law than obey it. The harder it is to bring cases, especially large ones, the more frequently laws will go unenforced.

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