Supreme Court: “Unharmed” Class Members Are Not Entitled to Damages; $40M TransUnion Judgment Reversed

On June 25, the U.S. Supreme Court issued its highly anticipated decision in TransUnion v. Ramirez, a case addressing Article III standing in the context of a class action. The Ninth Circuit Court of Appeals, in a split decision, had approved a $40 million award to a class of 8,185 individuals alleging violations of the Fair Credit Reporting Act, despite serious questions regarding whether a large percentage of class members had suffered any real injury. The class consisted of persons who TransUnion had identified in credit reports as being on a list of “terrorists, drug traffickers, or other serious criminals” compiled by the federal Office of Foreign Assets Control. Only 1,853 of the class members, however, had their credit reports disseminated to third parties.

In a 5-4 decision, the majority held that the 1,853 class members whose reports were disseminated to third parties did suffer “a concrete injury in fact under Article III,” but “[t]he remaining 6,332 class members [were] a different story.” The majority held that these 6,332 class members, representing 77% of the certified class, lacked any concrete injury and did not have standing to assert a claim for damages. Accordingly, the court reversed the $40 million judgment. In the course of its decision, the majority explained:

• “A regime where Congress could freely authorize unharmed plaintiffs to sue defendants who violate federal law not only would violate Article III but also would infringe on the Executive Branch’s Article II authority.”
• “As the party invoking federal juris­diction, the plaintiffs bear the burden of demonstrating that they have standing. Every class member must have Arti­cle III standing in order to recover individual damages. ‘Article III does not give federal courts the power to order relief to any uninjured plaintiff, class action or not.’”
• “We do not here address the distinct question whether every class member must demonstrate standing before a court certifies a class.”
• “[I]n a case like this that proceeds to trial, the specific facts set forth by the plaintiff to support standing ‘must be supported adequately by the evidence adduced at trial.’ And standing is not dispensed in gross; rather, plaintiffs must demonstrate standing for each claim that they press and for each form of relief that they seek (for example, injunctive relief and dam­ages).”
• “[A] plaintiff must ‘demonstrate standing separately for each form of relief sought.’ Therefore, a plaintiff’s standing to seek injunctive relief does not necessarily mean that the plaintiff has standing to seek retrospective damages.”
• The court clarified that its decision in Spokeo, Inc. v. Robins “did not hold that the mere risk of future harm, without more, suffices to demonstrate Article III standing in a suit for damages.” Accordingly, “the 6,332 plaintiffs’ argument for standing for their damages claims based on an asserted risk of future harm is unavailing,” and “the risk of future harm that the 6,332 plaintiffs identified — the risk of dissemination to third parties — was too speculative to support Article III standing.” (“[T]he 6,332 class members whose internal TransUnion credit files were not disseminated to third-party businesses did not suffer a concrete harm.”)

The Supreme Court reversed the judgment of the Ninth Circuit and remanded for further proceedings consistent with the majority’s opinion. The court instructed further that the Ninth Circuit “may consider in the first instance whether class certification is appropriate in light of our conclusion about standing.”

The TransUnion decision will provide defendants with significant additional ammunition to defend against improperly defined and overbroad classes that include multiple persons who cannot establish actual injury.