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Businesses Win Fight Against Spurious Class-Action Lawsuits in Landmark Supreme Court Ruling

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OPINION: This article contains commentary which reflects the author's opinion


In a ruling on Friday, the U.S. Supreme Court ruled in favor of TransUnion in its fight against a $40 million award to thousands of people whom the credit reporting agency categorized as potential terrorists after their names were flagged for matching those on a government list of suspected terrorists and drug traffickers.

Ruling 5-4, the justices said most of the 8,000 people involved in a class action lawsuit against the company lacked the legal right to sue. The court stopped short of throwing out the jury verdict but found that there was insufficient evidence to show all the plaintiffs had been harmed by TransUnion.

Businesses have long sought to limit class action lawsuits, which often lead to massive payoffs to plaintiffs and their lawyers. The ruling limits future class action lawsuits to preclude people who cannot prove that they suffered “concrete injury” by the defendant.

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The lawsuit was first brought under the Fair Credit Reporting Act, requiring credit reporting firms like TransUnion to ensure “maximum possible accuracy” in its consumer reports. The agency incorrectly flagged people as potential matches based on their names alone, and not other criteria, to individuals listed as national security threats by the Treasury Department.

According to Bloomberg, around a quarter of those class members who were wrongly flagged by the credit reporting agency as potentials to individuals on a terrorist watch-list had their reports sent to third parties. The majority of the class members did not suffer any concrete harm because the reputational risk of false alerts never materialized.

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In a ruling by Justice Brett Kavanaugh, the court said that most of the plaintiffs did not suffer a “concrete injury” as required when filing the lawsuit.

“No concrete harm, no standing,” Kavanaugh wrote. “A letter that is not sent does not harm anyone, no matter how insulting the letter is. So too here.”

Reuters reports that there were 8,185 class members involved in the lawsuit whose names matched names on a government list. During the trial, it was established only that TransUnion revealed that information publicly on 1,853 of them. The others did not have standing, Kavanaugh said.

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The court found that on two other claims in the lawsuit, none of the plaintiffs apart from the lead plaintiff, Sergio Ramirez, could show they suffered harm.

Credit reporting companies provide details about an individual’s borrowing and bill-paying history to lenders and other businesses. TransUnion argued that the lawsuit should have never been certified as a class action.

The dissenting votes included the three liberal justices, who were joined by Justice Clarence Thomas, who wrote that “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.”

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Justice Elena Kagan argued in her dissension that “The Court here transforms standing law from a doctrine of judicial modesty into a tool of judicial aggrandizement.”

“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,” Kagan wrote. “For that reason, courts should give deference to those congressional judgments. Overriding an authorization to sue is appropriate when but only when Congress could not reasonably have thought that a suit will contribute to compensating or preventing the harm at issue.”

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