Supreme Court Asked to Reject $40 Million Verdict Against TransUnion

The United States Supreme Court in Washington on May 27, 2014. (Chip Somodevilla/Getty Images)

A $40 million class-action verdict against a national credit reporting company for falsely reporting that plaintiffs’ names appeared on a government list of individuals prohibited from conducting business in the United States should be thrown out, the Supreme Court heard March 30.

The case is TransUnion LLC v. Ramirez, court file 20-297. Sixty minutes were allotted for the telephonic oral arguments, but they ran 90 minutes.

Business-related and conservative groups hope the Supreme Court scales back federal laws such as the Fair Credit Reporting Act, which allows consumers to recover damages without demonstrating they suffered actual harm. The U.S. Chamber of Commerce, National Federation of Independent Business, National Association of Manufacturers, American Tort Reform Association, Washington Legal Foundation, eBay Inc., Facebook Inc., Google LLC, The Home Depot Inc., and UnitedHealth Group all filed friend-of-the-court briefs supporting TransUnion.

Lead plaintiff Sergio L. Ramirez is the representative for a class-action lawsuit against the credit reporting firm TransUnion. He alleged the company deliberately violated the Fair Credit Reporting Act by reporting that his name appeared in the database operated by the Department of the Treasury’s Office of Foreign Assets Control (OFAC).

According to the government, OFAC “administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign countries and regimes, terrorists, international narcotics traffickers, those engaged in activities related to the proliferation of weapons of mass destruction, and other threats to the national security, foreign policy or economy of the United​ States.”

Its database contains the names of “individuals and companies owned or controlled by, or acting for or on behalf of, targeted countries. It also lists individuals, groups, and entities, such as terrorists and narcotics traffickers designated under programs that are not country-specific.”

Ramirez claimed the inaccurate report hindered his effort to secure credit, caused him embarrassment in front of family, and forced him to cancel a vacation. He discovered his OFAC listing when he tried to purchase a car at a Nissan dealership in California.

Court documents state he filed a class-action lawsuit that included 8,184 other class members whom “TransUnion sent a letter similar in form to the March 1, 2011, letter TransUnion sent to [Ramirez] regarding” the OFAC database.

TransUnion countered that the class action was improper because there was no proof that anyone other than Ramirez had suffered injuries. Most of the class members’ OFAC listings were never disclosed to third parties.

But a U.S. district court jury awarded more than $60 million in damages to the class members. TransUnion appealed to the U.S. Court of Appeals for the 9th Circuit, which affirmed the judgment but reduced the damages to $40 million.

TransUnion appealed to the Supreme Court, arguing in its petition that the jury’s verdict “reflected a perfect storm of standing, class certification, and punitive damages problems, combining to give rise to a multi-million dollar damages award in a case with no proven injury to anyone beyond the named plaintiff.”

In oral arguments before the Supreme Court, TransUnion lawyer Paul D. Clement urged the justices to decertify the class because there was no proof that class members actually suffered harm.

“The class certified here suffers from two fatal defects: the absence of class member standing and typicality. Each and every member of this class stands to collect thousands of dollars in damages, but the first inkling that many of them will have that they were injured will be receiving a check in the mail.”

But the Biden administration asked the court to rule for the class members.

Nicole F. Reaves, attorney for the U.S. Department of Justice, said the class members have legal standing.

“By placing OFAC alerts on all class members’ consumer reports, [TransUnion] recreated a real risk of harm that they would be denied credit, employment opportunities, or other benefits because they were wrongly labeled as potential matches to a terrorist list.”

“That is precisely the type of harm that Congress sought to prevent.”

“Congress also gave consumers rights to receive certain disclosures and summaries of their rights, and under this court’s informational standing cases, all class members have standing to bring claims for violations of those rights.”

Samuel Issacharoff, attorney for Ramirez, said TransUnion was liable for misconduct.

“The heart of this case is the concrete harm established at trial. Being labeled a potential OFAC match is not a misreported ZIP code. It is the scarlet letter of our time. It banishes individuals from the marketplace. It is thus staggering that since 2002, petitioner [i.e. TransUnion] could not identify a single correct OFAC match despite issuing thousands of OFAC alerts a year.”

Justice Brett Kavanaugh questioned whether the lawsuit should include the approximately 6,300 people whose OFAC listings never went to a third party.

Under existing legal precedent, “I hadn’t thought risk of harm would get you ... standing for damages claims,” he said. As one judge “analogized it: If inaccurate information falls into a database, does it make a sound?”