Class Actions Quarterly Update: Supreme Court
Since our last update was published, the United States Supreme Court has addressed a number of appeals involving class actions.
Requirement of Concrete Harm for Class Standing in Fair Credit Reporting Act Claim: TransUnion LLC v. Ramirez, 141 S. Ct. 2190 (2021)
On June 25, 2021, the Supreme Court issued its 5-4 decision in the case of TransUnion LLC v. Ramirez, 141 S. Ct. 2190 (2021), holding that only a small percentage of proposed class members had demonstrated sufficient concrete harm necessary to support Article III standing and to recover the massive damages awarded at trial.
The class of 8,185 individuals alleged that TransUnion, a credit reporting agency that compiles personal and financial information about individual consumers, violated the Fair Credit Reporting Act 15 U.S.C. § 1681 (FCRA) by incorrectly associating class members with names included on a list maintained by the U.S. Treasury Department’s Office of Foreign Asset Controls (OFAC) of terrorists, drug traffickers, and other serious criminals. TransUnion compared only first and last names in determining whether to flag consumers as appearing on the OFAC list.
The Supreme Court analyzed whether the class members had Article III standing to seek damages, which requires a showing of concrete injury in fact. Only 1,853 of the putative class members, including the named plaintiff, had their credit reports, along with the OFAC flag, shared with third parties. The Court held that these class members demonstrated concrete harm. Although the credit reports for the remaining class members contained misleading OFAC alerts, those alerts were not provided to any potential creditors during the designated class period. As such, this sub-class of Plaintiffs cannot demonstrate concrete harm sufficient to support Article III standing.
Plaintiffs argued that standing existed because (1) the misleading information could be disseminated in the future to third parties, and (2) the notice of inclusion on the OFAC list was mailed separately from general credit information making it less likely that consumers would notice and correct the mistake, increasing the chance of future harm. Although the Supreme Court has previously held that a material risk of future harm can satisfy the concrete harm requirement in a case for injunctive relief, the Court held it is inapplicable to the facts of this case where plaintiffs brought suit for damages and the risk of future harm had not materialized.
By reinforcing the strict requirement for concrete harm in the context of a claim for damages, the Court’s decision serves to narrow the availability of class action relief to consumers.
Narrowing the Application of the Telephone Consumer Protection Act: Facebook, Inc. v. Duguid, 141 S. Ct. 1163 (2021)
In Facebook, Inc. v. Duguid, 141 S. Ct. 1163 (2021), the Court addressed the application of the Telephone Consumer Protection Act of 1991 (TCPA) to a Facebook security feature that automatically sends a text to a customer when someone attempts to log in to the user’s account from a new device or browser. Facebook sent such texts to Noah Duguid, alerting him to login activity on a Facebook account linked to his telephone number, but Duguid never created that account (or any account on Facebook). Duguid tried without success to stop the unwanted messages and eventually brought a putative class action against Facebook. He alleged that Facebook violated the TCPA by maintaining a database that stored phone numbers and programming its equipment to send automated text messages. The TCPA proscribes abusive telemarketing practices by, among other things, restricting certain communications made with an “automatic telephone dialing system.” The TCPA defines such “autodialers” as equipment with the capacity both “to store or produce telephone numbers to be called, using a random or sequential number generator.” 47 U.S.C. § 227(a)(1).
Facebook argued that the TCPA does not apply because the technology it used to text Duguid did not use a “random or sequential number generator.” The Ninth Circuit disagreed, holding that § 227(a)(1) applies to a notification system like Facebook’s that has the capacity to dial automatically stored numbers. The Supreme Court reversed the Ninth Circuit and held that to qualify as an “automatic telephone dialing system” under the TCPA, a device must have the capacity either to store a telephone number using a random or sequential number generator or to produce a telephone number using a random or sequential number generator. The Court's decision narrows the application of the TCPA, providing protections to many businesses and making it more difficult for consumers to successfully bring class action claims under the statute.
Arent Fox continues to monitor these and other class actions issues as they develop across the country.