Supreme Court Snubs Thousands of Plaintiffs Falsely Tagged as Terrorists

Consumers suffered a major blow on June 25 when the U.S. Supreme Court ruled in TransUnion v. Ramirez against thousands of plaintiffs who were falsely labeled potential terrorists by the credit union.

The 5-4 majority opinion, written by Justice Brett Kavanaugh, stated that only those plaintiffs who have already been harmed by TransUnion’s defamatory practices have the standing to sue.

“The 1,853 members of the class whose credit reports were actually sent to businesses had suffered the kind of concrete harm that would give them a right to sue,” Kavanaugh wrote. However, the other 6,332 class members had not suffered such harm, the Justice concluded.

At issue was the case of California resident Sergio Ramirez, one of the thousands of consumers who had a false terrorist alert placed in their credit files by TransUnion, one of three credit reporting agencies in the U.S.

Ramirez went to a Nissan showroom to buy a car. After the dealership ran a credit check and found that his TransUnion credit report matched a Treasury Department watch list of terrorists, drug traffickers, and other criminals, he was denied credit to buy the vehicle.

His wife bought the car for him.

The Fair Credit Reporting Act

Ramirez and a class of 8,185 individuals sued under the Fair Credit Reporting Act. They cited three statutory violations:

• Failure to ensure accuracy in credit-reporting procedures.
• Failure to provide consumers with information in their credit files.
• Failure to provide a summary of their rights.

Beginning in 2002, TransUnion placed an alert on individuals whose first and last names matched the names on the Treasury Department’s list of terrorists, drug traffickers, or other criminals.

The erroneous matching system—based on first and last names only—was never corrected. Kavanaugh stated that:

“Critical to assessing concreteness is whether the alleged harm has a “close relationship to a harm traditionally recognized as providing a basis for a lawsuit in American courts—such as physical harm, monetary harm, or reputational harm,” Kavanaugh wrote. “No concrete harm, no damages.” Future damages that might or might be suffered “are too speculative to consider,” Kavanaugh stated.

“A letter that is not sent does not harm anyone, no matter how insulting the letter is. ”

Therefore, he said, “the 6,332 class members whose terrorist alert notation was not transmitted to third-party businesses … suffered no harm.” Kavanaugh was joined by Chief Justice John Roberts, and Justices Samuel Alito, Neil Gorsuch, and Amy Coney Barrett.

Clarence Thomas Sides with Consumers

Justice Clarence Thomas wrote the dissent on consumers’ behalf in a most unusual move, joined by Justices Stephen Breyer, Sonia Sotomayor, and Elena Kagan.

Thomas wrote that “ultimately, the majority seems to pose a 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?”

Kirkland & Ellis’ partner Paul Clement argued on behalf of TransUnion. Samuel Issacharoff of New York University School of Law represented Ramirez.

The ruling slashes a $40 million verdict against TransUnion decided by the Ninth Circuit Court of Appeals in San Francisco. The original jury awarded the plaintiffs $60 million. Kagan called the majority’s limitations on lawsuits a “set of curious assumptions.

“People who specifically request a copy of their credit report may not even open the envelope … or people who learn their credit files label them potential terrorists would not have tried to correct the error.” Justice Thomas said that one “need only tap into common sense to know that receiving a letter identifying you as a potential drug trafficker or terrorist is harmful” and thus a basis for a lawsuit.”

Even after an earlier suit over a similar incident, Justice Thomas wrote, the company did not fix its erroneous matching system.

“It did not begin comparing birth dates,” Thomas wrote. “Or middle initials. Or citizenship. In fact, TransUnion did not compare any new piece of information. Instead, it hedged its language saying a consumer was a ‘potential match’ rather than saying the person was a ‘match.’”

In a second dissent, Justice Kagan said the majority was mistaken in saying that the risk that the reports concerning the larger group of plaintiffs would be disseminated was “too speculative.”

“Why is it so speculative,” she asked, “that a company in the business of selling credit reports to third parties will, in fact, sell a credit report to a third party?”

A Win for Business

The verdict is a win for businesses that can strangle consumers’ ability to bring lawsuits against companies that may harm their credit card standing or defame them with impunity.

Kavanaugh sent the case back to a lower court for new proceedings.

He stated the lower court may consider whether it is appropriate for the case to go forward as a class action “in light of our conclusion about standing.”