On September 11, 2024, the 4th Circuit held that a named plaintiff in a putative class action failed to establish a concrete injury that could satisfy the injury-in-fact requirement for Article III standing against consumer reporting agency, RentGrow, Inc. Plaintiff alleged that Defendant inaccurately reported on rental applications that Plaintiffs were on the Office of Foreign Assets Control’s (OFAC) list of individuals who threaten America’s national security. However, the 4th Circuit held that Plaintiff had no Article III standing when the undisputed evidence suggested that the inaccurate OFAC reports were never reviewed by a third party, and therefore, no concrete injury could be established.
Background
In 2018, Marco Fernandez returned from a deployment with the U.S. Navy and applied to rent an apartment in Maryland. In connection with each rental application, the company that owned the apartment complex, Dorsey Ridge, relied on tenant screening reports created by RentGrow, a consumer reporting agency. Those reports compiled personal and financial information about each applicant, including their credit history, rental history, and criminal background.
At issue in the case was a list at the top of each report containing “Items to Review.” This list would state, among other things, whether an individual was a “possible match” to a person on the OFAC list of specially designated nationals who threaten America’s national security. Fernandez’s report recommended that Dorsey Ridge reject his application because his “criminal history does not meet property requirements.” Among the “Items to Review,” the report listed: “premium national criminal records found” and “1 possible match in OFAC name search.” Dorsey Ridge initially denied Fernandez’s application. But two days later, after Fernandez explained that the criminal records did not belong to him, Dorsey Ridge approved his application.
Fernandez subsequently sued RentGrow for violating the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq. Fernandez brought an individual and class claim seeking statutory and punitive damages alleging that RentGrow willfully failed to “follow reasonable procedures to assure maximum possible accuracy” of OFAC information included in tenant screening reports. 15 U.S.C. § 1681e(b).
During the discovery phase, the senior property manager for Dorsey Ridge, however, testified that the application required further review because of the criminal record information on Fernandez’s report, and not the possible OFAC match information. They further testified that they could not recall whether they ever reviewed the OFAC information.
RentGrow then challenged Fernandez’ standing at the District Court level, which held that Fernandez had demonstrated a concrete injury because his inaccurate OFAC alert was provided to a third party, which caused a reputational harm analogous to defamation. In the court’s view, Fernandez did not need to show that anyone at Dorsey Ridge actually read and understood the OFAC alert to demonstrate a concrete injury; dissemination of the misleading report was enough.
The 4th Circuit’s Decision
RentGrow appealed to the 4th Circuit. In conducting its analysis, the court looked to the recent Supreme Court decision, TransUnion LLC v. Ramirez, 594 U.S. 413 (2021). There, the Supreme Court held that “publication to a third party of a credit report bearing a misleading OFAC alert” concretely injures the subject of the report, bearing a close relationship to “the reputational harm associated with the tort of defamation” Id. at 433. Important to the 4th Circuit, however, was the Supreme Court’s emphasis that the presence of the same misleading OFAC alert in an internal credit file causes no concrete harm if “it is not disclosed to a third party.” Id. at 434
Fernandez, with the District Court in agreement, argued that evidence that the property manager did not review or consider the OFAC information was irrelevant. Fernandez argued that dissemination of an inaccurate tenant screening report to a third party is always sufficient to establish a concrete injury for Article III standing, whether or not the third party read or understood the misleading accusation in the report.
Leaning on the longstanding words of Justice Cardozo, however, the court disagreed: “A defamatory writing is not published if it is read by no one but the one defamed” Ostrowe v. Lee, 256 N.Y. 36, 175 N.E. 505, 505 (1931). In TransUnion, the court insisted on “evidence” that the information at issue was “actually read and not merely processed.” TransUnion, 594 U.S. at 434 n. 6. Accordingly, the court held that Fernandez failed to demonstrate that the misleading OFAC information in his screening report was read and understood, or otherwise considered, by any third party, as would be necessary to support the kind of “reputational harm associated with the tort of defamation.” Id. at 433.
The Potential Impact
The decision will impact future FCRA litigation and potentially the borrower’s ability to prove a concrete injury in certain types of FCRA claims. Servicers and other credit institutions may want to be mindful of these standing issues when approaching discovery and potential class claims.
