In Spokeo, Inc. v. Robins (2016), the Supreme Court held that a named plaintiff must allege a concrete harm to have Article III standing to sue on behalf of a putative class. But district courts have since varied in interpreting Spokeo’s holding that a “risk of real harm” can be sufficiently concrete to satisfy Article III.

All eyes are thus now on the Court’s forthcoming decision in TransUnion LLC v. Ramirez, which may provide guidance on what the Court meant by a “risk of real harm,” and may affect or narrow the types of persons who can participate in class actions. The decision is likely to inform defense strategies at all stages of class action litigation against large companies, including financial institutions.

Background

In 2002, TransUnion developed a product to screen the names of U.S. consumers against those on a list maintained by the U.S. Office of Foreign Asset Controls (OFAC). If a consumer’s first and last names matched those of a person on the list, TransUnion would add an alert to the consumer’s credit report regarding the “potential match.” The named plaintiff, Sergio Ramirez, alleged he suffered actual injury in the form of denied credit and embarrassment after a Nissan dealership refused to sell him a car based on a TransUnion credit report with an OFAC alert. Moreover, upon requesting his credit file from TransUnion, Ramirez received two mailings that allegedly did not clearly apprise him of his rights with respect to the alert. 

Ramirez brought a putative class action against TransUnion under the Fair Credit Reporting Act. Ramirez did not, however, limit his putative class definition to consumers who had suffered purported injuries similar to his own following the disclosure of OFAC alerts to third parties. Instead, he defined the putative class more broadly as all persons who had requested their credit files from TransUnion and been sent similar OFAC mailings. Following discovery, the parties stipulated that over 75% of the proposed class had not in fact had a credit report containing an OFAC alert shared with a third party. The district court nonetheless certified the class as defined by Ramirez, rejecting TransUnion’s objections that the absent class members lacked standing and that Ramirez’s unique injuries made him atypical of the class. 

At trial, Ramirez testified extensively concerning his unique injuries. Virtually no evidence was presented with respect to the absent class members’ injuries. For example, no evidence was presented that any of the 25% of class members whose credit reports containing OFAC alerts had been shared with third parties were denied credit or were even aware of such disclosure. Nor was there evidence that any absent class member had been confused or affected by TransUnion’s mailings. Nonetheless, the jury awarded the class $60 million in statutory and punitive damages. 

A divided Ninth Circuit reduced the punitive damages award but otherwise affirmed. The majority held that a “risk of real harm” existed, sufficient for standing under Spokeo, merely because the class members’ credit files were designed to be disclosed at a “moment’s notice,” and because TransUnion’s mailings were “inherently shocking and confusing” and left class members “completely in the dark” about how to challenge the OFAC alerts. The majority further held that Ramirez satisfied the typicality requirement of Fed. R. Civ. P. 23 because all of the class members’ claims were based on the same conduct and legal theories, even if Ramirez’s injuries were different and/or more complex.

Arguments Before the Supreme Court and Potential Ramifications

The Supreme Court granted certiorari to address “whether either Article III or Rule 23 permits a damages class action where the vast majority of the class suffered no actual injury, let alone an injury anything like what the class representative suffered.” Thus, not only is the Court in a position to clarify Spokeo’s “risk of real harm” standard, it has been asked also to address what it means for standing and class certification when classes are broadly defined to include individuals who suffered significantly different harms or risks than those of the named plaintiff. 

There are many ways in which the Court could provide guidance on these issues, which could affect how future class actions are litigated. 

At oral argument, several Justices appeared to wrestle with the question of whether a class member’s past exposure to a risk of harm should give them standing even if the harm in question never materialized. Some Justices (including Justice Alito, Spokeo’s author) suggested that a mere risk of harm should not support standing absent some knowledge of the risk by class members sufficient to cause emotional distress. If the Court adds a form of knowledge component to Spokeo, it could provide a basis for new defenses and objections by defendants at the pleading and class certification stages.

The typicality issues presented by this case are also significant. The text of Rule 23 does not on its face require a named Plaintiff to have injuries typical of those of his class (it only says “claims or defenses”), so a ruling informing the typicality prerequisite could provide a new basis for defendants to challenge certification.