The Supreme Court has trimmed a $40 million verdict against TransUnion, ruling that some consumers the credit reporting company erroneously labeled as potential terrorists were not actually harmed.
In a 5-4 ruling, the court upheld the damages that TransUnion owes to 1,853 people whose misleading information was shared with third parties, such as banks and landlords, but it rejected a claim that 6,332 other individuals are also entitled to damages.
The justices found that consumers in the latter category did not suffer concrete harm because their faulty credit files were not sent to third-party businesses between January and July 2011. In gauging the possibility of subsequent harm, Justice Brett Kavanaugh wrote that those individuals had the burden to prove their credit reports were shared in order to establish the standing necessary to sue.
“No concrete harm, no standing,” he wrote.
The class-action lawsuit centered on Sergio Ramirez, who learned when trying to buy a car with his wife that his name matched someone on a Treasury Department list of terrorists, drug traffickers or other serious criminals. That information popped up on a TransUnion credit report, prompting the salesman to refuse to sell him the car and instead sell it under his wife’s name.
Ramirez sued TransUnion in 2012, alleging that the company violated the Fair Credit Reporting Act, which requires credit reporting companies to take reasonable steps to ensure their information is accurate. A jury had found that Ramirez and 8,184 others were owed $60 million in damages, an amount that a federal appeals court later reduced to $40 million.
The Supreme Court’s decision reversed the appeals court ruling and sent the case back to a lower court for further proceedings.
“TransUnion appreciates the Court’s decision in this important case. We look forward to resolving this matter,” the company said in a statement.
The decision was not a complete victory for TransUnion. The justices’ ruling that 1,853 plaintiffs suffered “concrete harm” was a rejection of the company’s argument that those individuals did not suffer because their credit reports were not technically false. On their credit reports, the people were labeled as a “potential match” to someone on the Treasury list.
“The harm from being labeled a ‘potential terrorist’ bears a close relationship to the harm from being labeled a ‘terrorist,’ ” Kavanaugh wrote.
The individuals whose credit reports were not shared with third-party companies did request a copy of those reports from TransUnion. TransUnion sent them credit reports that did not include alerts about the Treasury list, but later sent them follow-up letters that did alert them to a potential match.
In a dissenting opinion, Justice Clarence Thomas wrote 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.”
“All the more so when the information comes in the context of a credit report, the entire purpose of which is to demonstrate that a person can be trusted,” Thomas wrote.
Thomas also noted that TransUnion lost a similar lawsuit that was filed in 2005 by a woman whose name was similar to that of someone on the Treasury list. TransUnion made few changes to its practices after that lawsuit, Thomas wrote, noting that the company began requiring exact matches and “hedged its language saying a consumer was a ‘potential match.’ ” He suggested that TransUnion should have started comparing birth dates, middle initials or citizenship in order to generate more accurate results.
“Unsurprisingly, these reports kept flagging law-abiding Americans as potential terrorists and drug traffickers. And equally unsurprising, someone else sued,” Thomas wrote.
The court’s three more liberal justices — Stephen Breyer, Sonia Sotomayor and Elena Kagan — signed on to Thomas’s dissenting opinion.
