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SCOTUS Rules Against Plaintiffs Branded by Credit Agencies with ‘Scarlet Letter of Our Time’; Thomas Joins Liberals to Dissent


The 9 Supreme Court justices pose for a group picture in 2021

The U.S. Supreme Court ruled 5 to 4 Friday against thousands of plaintiffs whose names were incorrectly identified by credit-reporting agencies as potential criminals. The justices held that the plaintiffs had not suffered sufficiently concrete harms to support Article III standing — in other words, they could not redress their grievances in federal court.

The case is TransUnion v. Ramirez, and it is a class action lawsuit against the credit reporting giant TransUnion over the agency’s misuse of a government list of suspected criminals.  The Treasury Department’s Office of Foreign Assets Control (OFAC) creates a list of  known and suspected terrorists, drug traffickers and other high-profile criminals—all of whom are prohibited from participating in the U.S. financial system.

A group of plaintiffs sued TransUnion claiming that it falsely labeled 8,185 U.S. citizens as terrorists. The lead plaintiff was Sergio Ramirez, who, while attempting to purchase a car from a Nissan dealership, was told in front of his family that his name was on a list of suspected terrorists. TranUnion appealed to the Supreme Court, arguing that he and other plaintiffs lacked the legal right to bring the lawsuit because they had suffered no actual harm.

At oral arguments, Ramirez’s lawyer, Samuel Issacharoff, argued to the justices, “Being labeled a potential OFAC match is not a misreported Zip code, it is the scarlet letter of our time.” Issacharoff argued that the error “banishes individuals from the marketplace,” just as it had done for his client, whose wife had been left no choice but to buy the car in her name.

Although the class proceeded under the Fair Credit Reporting Act (a federal law specifically creating a remedy for victims of false credit reporting), and both the district and appellate courts agreed the plaintiffs had standing, Justice Brett Kavanaugh, writing for the Court’s five-member majority, clearly disagreed.

Kavanaugh’s opinion was joined by Chief Justice John Roberts and Justices Samuel Alito, Neil Gorsuch, and Amy Coney Barrett.  The Court ruled that Ramirez and the other 8000+ plaintiffs had no Article III standing to wage a lawsuit, because the class had not suffered  the physical, monetary, or reputational harm necessary to support a federal lawsuit.

Kavanaugh explained that TransUnion had “simply cross-checked consumers’ first and last names against the OFAC list, then flagged the credit report for anyone whose name was a  ‘potential match.'” Because TransUnion did nothing other than comparing names, many law-abiding citizens suffered the consequences. “Unsurprisingly,” wrote Kavanaugh, “[t]housands of law-abiding Americans happen to share a first and last name with one of the terrorists, drug traffickers, or serious criminals on OFAC’s list of specially designated nationals.” He continued, bluntly writing, “Sergio Ramirez learned the hard way that he is one such individual.”

Kavanaugh went on to explain that the federal judiciary’s authority is limited to deciding cases with live controversies with actual harm. Further, “[v]arious intangible harms can also be concrete,” particularly those “injuries with a close relationship to harms traditionally recognized” by courts such as “reputational harms, disclosure of private information, and intrusion upon seclusion.” While Congress might enact a statute under which an individual can sue, that individual still needs to have suffered “concrete harm” for his case to be properly heard by the court.

Any other rule, argued Kavanaugh, would cause Constitutional chaos. “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,” he warned.

The five-member majority did find that a subset of 1853 class members had suffered concrete injuries when their credit reports were shared with third-party businesses without authorization. Likening their injuries to defamation, the Court found that those victims did indeed have standing to sue.

However, Kavanaugh found that the class members who claimed only to have been harmed by a false name-match with the OFAC list “are a different story.”  Calling TransUnion’s error “the mere existence of inaccurate information in a database,” the Court found that the error was insufficient to confer Article III standing.  The justice elaborated with an analogy:

In cases such as these where allegedly inaccurate or misleading information sits in a company database, the plaintiffs’ harm is roughly the same, legally speaking, as if someone wrote a defamatory letter and then stored it in her desk drawer. A letter that is not sent does not harm anyone, no matter how insulting the letter is. So too here.

Kavanaugh was similarly dismissive of the plaintiffs’ argument that their standing could be based on the prevention of future harm:

Consider an example. Suppose that a woman drives home from work a quarter mile ahead of a reckless driver who is dangerously swerving across lanes. The reckless driver has exposed the woman to a risk of future harm, but the risk does not materialize and the woman makes it home safely. As counsel for TransUnion stated, that would ordinarily be cause for celebration, not a lawsuit.

In an unusual lineup of dissenters, Justice Clarence Thomas wrote for the four-member minority including Justices Stephen Breyer, Sonia Sotomayor, and Elena Kagan. Justice Thomas began with a far different take on the plaintiffs’ right to sue.

“TransUnion violated several provisions of the Fair Credit Reporting Act (FCRA) that entitle consumers to accuracy in credit-reporting procedures,” he wrote. “Yet despite Congress’ judgment that such misdeeds deserve redress, the majority decides that TransUnion’s actions are so insignificant that the Constitution prohibits consumers from vindicating their rights in federal court. The Constitution does no such thing.”

Thomas continued, providing a rather unfavorable account of TransUnion’s practices. Right after the September 11th terrorist attacks, the agency began profiting from selling credit reports that listed “unseemly types” such as suspected terrorists and drug traffickers. TransUnion, however, did nothing more than comparing first and last names, without checking any other background data.  Even when the agency lost lawsuits over the practice, it failed to improve its behavior.

Arguing that the majority opted to “take the road less traveled,” Thomas accused it of using an approach that “is remarkable in both its novelty and effects.”

“Never before has this Court declared that legal injury is inherently insufficient to support standing,” remarked Thomas.

Turning from the theoretical to the pragmatic, he continued:

Even assuming that this Court should be in the business of second-guessing private rights, this is a rather odd case to say that Congress went too far. TransUnion’s misconduct here is exactly the sort of thing that has long merited legal redress.

The dissent framed the harm suffered by Ramirez and others as a matter with obvious impact. “[O]ne need only tap into common sense to know that receiving a letter identifying you as a potential drug trafficker or terrorist is harmful,” Thomas wrote. The entire purpose of a credit report, he explained, “is to demonstrate that a person can be trusted.” Furthermore, he asked, would the majority continue to doubt the existence of harm if the incorrect information had falsely identified Ramirez as a potential child molester? “What about falsely labeling a person a racist?” he posed.

In a rather dramatic conclusion to the dissenting opinion, Thomas called out those who allowed injustice to occur without providing a remedy at law:

Ultimately, the majority seems to pose to the reader a single rhetorical question: Who could possibly think that a person is harmed when he requests and is sent an incomplete credit report, or is sent a suspicious notice informing him that he may be a designated drug trafficker or terrorist, or is not sent anything informing him of how to remove this inaccurate red flag? The answer is, of course, legion: Congress, the President, the jury, the District Court, the Ninth Circuit, and four Members of this Court.

The trio of left-leaning justices also issued their own dissent, penned by Justice Kagan. Beginning by declaring that the “story” of standing as a vehicle of judicial restraint “needs a rewrite.” “The Court here transforms standing law from a doctrine of judicial modesty into a tool of judicial aggrandizement,” Kagan reprimanded.

Departing from Thomas’ dissent only in that she would have given more deference to Congress’ intent in matters of standing, Kagan wrote:

And as today’s decision definitively proves, Congress is better suited than courts to determine when something causes a harm or risk of harm in the real world. For that reason, courts should give deference to those congressional judgments.

Several legal types were swift to criticize the decision — but it is the law of the land.

Colin Kalmbacher contributed to this report.

[image via Erin Schaff/POOL/AFP via Getty Images]di

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Elura is a columnist and trial analyst for Law & Crime. Elura is also a former civil prosecutor for NYC's Administration for Children's Services, the CEO of Lawyer Up, and the author of How To Talk To Your Lawyer and the Legalese-to-English series. Follow Elura on Twitter @elurananos