On February 27, the Ninth Circuit affirmed a jury verdict against TransUnion in a class action involving alerts that TransUnion included in certain consumers’ credit files that falsely indicated they might be on a national security watch list. Perhaps most notably, however, the court clarified—in an issue of first impression—that all class members in a certified class action must satisfy Article III standing requirements at the final judgment stage in order to obtain damages.

• Plaintiff brought a putative class action against TransUnion for including in certain consumers’ credit files an alert indicating that they might be on the U.S. Treasury Department’s Office of Foreign Assets Control’s (“OFAC”) list of Specially Designated Nationals (“SDNs”) prohibited from doing business in the United States.
• Plaintiff brought claims under the Fair Credit Reporting Act (“FCRA”), alleging that TransUnion failed to maintain reasonable procedures for assuring maximum possible accuracy when preparing consumer reports and that it failed to disclose credit information and summaries of rights to consumers who inquired about the OFAC alerts in their files.
• TransUnion provided OFAC information to creditors to assist them in avoiding the fines resulting from transacting with an SDN. TransUnion received information about potential OFAC matches from a third-party vendor—which conducted basic first-and-last-name searches that led to thousands of false positives—“despite having the capability to conduct more accurate searches and despite having been put on notice by another circuit court in 2010 that this practice violated the FCRA.” At trial, a jury assessed $60 million in damages after finding three willful violations of the FCRA.
• On appeal, TransUnion argued, among other things, that absent class members lacked Article III standing because they claimed only procedural violations of the FCRA.
  • The Ninth Circuit first agreed with TransUnion that “every member of a class certified under Rule 23 must satisfy the basic requirements of Article III standing at the final stage of a money damages suit when class members are to be awarded individual monetary damages.”
  • The court stated that a contrary holding that only the class representative needs to show standing at the final judgment stage “would directly contravene the Rules Enabling Act, because it would transform the class action—a mere procedural device—into a vehicle for individuals to obtain money judgments in federal court even though they could not show sufficient injury to recover those judgments individually.”
  • The court found, however, that all class members—including those who did not have creditor inquiries on their credit files during the class period—had suffered “a real risk of harm” as a result of including the OFAC alerts in their credit files, as the alerts were “made available” to creditors and employers.
  • Dissenting in part, Judge McKeown stated that only class members whose information was actually disclosed to a third party had standing to assert a “reasonable procedures” claim under the FCRA. According to Judge McKeown, the egregious facts supporting the named plaintiff’s claims could not be imputed to the class as a whole. Because the trial was largely devoid of evidence concerning the absent class members, jurors were left to speculate that absent class members suffered the same injury as the named plaintiff, which should have been insufficient to confer Article III standing.
• While the Ninth Circuit upheld the statutory damages award of $984.22 per class member (which was within the statutory range of $100-$1,000), the court reduced the jury’s punitive damages award, concluding that a punitive-to-compensatory ratio of 4:1 constituted the constitutional maximum. The court reasoned that TransUnion’s conduct “was not so egregious as to justify a punitive award of more than six times an already substantial compensatory award.”
• In addition to grappling with pervasive issues concerning when pure statutory violations constitute Article III harm in the wake of Spokeo, the case is significant because it clarified that absent class members’ claims at trial cannot simply rise or fall with those of the class representative(s). Rather, there must be evidence that all class members have individual standing to sue. Although the dissent disagreed with the majority’s conclusion that the plaintiff’s evidence at trial adequately made this showing, even the majority opinion recognized that “district courts and parties should keep in mind that they will need a mechanism for identifying class members who lack standing at the damages phase.” These aspects of the Ninth Circuit’s ruling should prove helpful to class action defendants in future cases—particularly the rare cases that proceed to trial.

The case is Ramirez v. TransUnion LLC, No. 17-17244 (9th Cir. 2020). Read the Ninth Circuit’s opinion here.