Background

A putative class of consumers sued TransUnion, a credit reporting agency, for violations of the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq.  In their first claim, plaintiffs alleged that TransUnion had failed to take reasonable steps to ensure the accuracy of credit reports indicating that a consumer was potentially listed as a terrorist, drug trafficker, or other serious criminal by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC).  Of the 8,185 members of the class, however, plaintiffs stipulated that only 1,853 (less than 23%) had their credit report (with the misleading OFAC alert) sent to third-party businesses during the class period. The credit reports of the other 77% of the class were never provided to third-party businesses.  

In two additional statutory claims, plaintiffs complained that certain mailings sent to them by TransUnion failed to include all information required under the Fair Credit Reporting Act.

The District Court ruled that all class members had Article III standing on each of the three statutory claims. The case went to trial, and the jury returned a verdict for plaintiffs, awarding class members statutory and punitive damages. The Ninth Circuit affirmed. 

The Supreme Court Decision

Following the Supreme Court’s 2016 decision in Spokeo, Inc. v. Robins, the Court emphasized that to have standing, Plaintiffs must show more than the violation of a statutory right. They must show that they have suffered a concrete injury that has a “‘close relationship’ to a harm ‘traditionally’ recognized as providing a basis for a lawsuit in American Courts,” including physical harms, monetary harms, reputational harms, and disclosure of private information. 

The Supreme Court then held that “[e]very class member must have Article III standing in order to recover individual damages.” The Court emphasized that “standing is not dispensed in gross” and that “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).” 

Turning to the claims in this case, the Court held:

• The 1,853 class members who had their credit reports (with the misleading OFAC alert) sent to third-party businesses have Article III standing, because the reputational harm they suffered has a “close relationship” to harm associated with the tort of defamation.

• The remaining 6,332 class members do not have standing, because they did not suffer such reputational harm: Their credit reports were never published.  “The mere existence of inaccurate information in a database is insufficient to confer Article III standing.”

• The Court further reasoned that the remaining 6,332 class members could not show standing based on a future “risk of harm”—that their misleading reports might one day be sent out—because that harm had not materialized.  Nor had these class members shown harm from being exposed to a risk of harm, such as emotional injury. The dissenting Justices observed that the majority’s reasoning “all but eliminates” risk of harm as a viable basis for standing in damages cases.  

• The Court rejected the argument that the remaining 6,332 class members could show standing because they all requested copies of their credit reports, and consumers typically do not request copies of their credit reports unless they are contemplating a transaction that would trigger a disclosure.  This inference was “too weak” to show that any particular number of these class members were harmed.

• The Court stated that Article III standing must be shown separately for damages claims and injunctive relief claims, explaining that “a plaintiff must demonstrate standing separately for each form of relief” sought.

• The Court found that no unnamed class member had standing for the second two claims, concluding that the mailing defect was a formatting issue that did not cause a concrete injury. 

Implications for Class Actions

The Court’s decision in TransUnion is likely to have a substantial impact on class action litigation. Two holdings are particularly significant. 

First, the Court’s holding that Plaintiffs must introduce evidence of a concrete and particularized Article III injury as to each plaintiff and unnamed class member may limit exposure in class actions seeking damages under Fed. R. Civ. P. 23(b)(3).  Concreteness and particularization “are separate requirements.” The Court emphasized that an “inference” of injury is not sufficient to satisfy Article III’s standing requirement, and instead suggested that plaintiffs’ attorneys must collect individual evidence for each plaintiff. In this case, for example, the Court faulted the Plaintiffs for failing to contact all 6,332 remaining class members and putting on proof at trial that each of them engaged in transactions requiring a credit check.  This burden may be difficult to meet in some cases, particularly where the class includes thousands or even millions of class members. 

The Court’s emphasis on individualized evidence of standing may also impact current common litigation practices, such as the use of aggregate evidence to show injury, when such evidence is not individual to class members. Further, although the Supreme Court stated in footnote 4 of TransUnion that its opinion addressed proof of injury at trial, and not the “distinct question whether every class member must demonstrate standing before a court certifies a class,” it is also relevant to class certification: If plaintiffs cannot demonstrate Article III injury for each class member at trial, that is an individual issue that may overwhelm common issues. The Supreme Court stated in TransUnion that “plaintiffs had the burden to prove” at trial that individual plaintiffs “were actually” injured, and that plaintiffs could have met that burden by seeking “the names and addresses” of individual plaintiffs and “contact[ing] them” to collect evidence of injury. If that kind of individualized inquiry into Article III standing is required, it may pose a significant obstacle to class certification where there is no common evidence of injury. 

Second, the Court’s limitation on the “risk of harm” theory for establishing standing to assert a damages claim will impact cases where no “concrete injury” has yet occurred. For example, plaintiffs in data breach cases who have not yet experienced identity theft or other concrete injury likely cannot demonstrate Article III standing for monetary relief. 

Hogan Lovells’ class action group will monitor how the Supreme Court’s decision is implemented in lower court decisions. If you have questions about how the decision may impact ongoing or future litigation, please reach out to a member of your Hogan Lovells team.

Authored by Craig Hoover, Cate Stetson, Katie Wellington, and W. David Maxwell