Ninth Circuit Rules on Article III Class Action Standing in Favor of Plaintiffs in Ramirez v. TransUnion

Mar 9

The Ninth Circuit issued an important decision recently regarding Article III standing and class certification in a Fair Credit Reporting Act case. Ramirez v. TransUnion LLC, No. 17-17244, 2020 WL 946973 (9th Cir. Feb. 27, 2020). Given the issues, I expect the defendant will be filing en banc and cert petitions. While the buzz on the case is on punitive damages, I think the Article III standing issues will be the heart of future disputes.

The first piece of good news is that the facts in the case are very sympathetic for the plaintiffs, which will be helpful going forward. In brief, TransUnion incorrectly placed terrorist alerts on the front page of consumer credit reports for approximately 8000 individuals. In 2005, the company was “slammed” with a substantial verdict in an individual FCRA case challenging the sloppy practice but — guess what — still didn’t fix the problem. In 2011, the plaintiff, Sergio Ramirez, was negotiating to buy a new car but, when the dealership ran a credit report, the salesman told him that he was on a “terrorist list” and that Nissan would not sell him a car. Ramirez then undertook herculean efforts to get the mistaken designation removed. He received multiple confusing notifications, canceled an international vacation, and ultimately hired a lawyer.

The case was certified under Rule 23(b)(3) and went to trial. The jury assessed $60 million in statutory and punitive damages for three willful violations of the statute. There were five issues decided on the appeal.

The court concluded that class members must show injury but only at the final stage of a money damages suit when class members are to be awarded individual monetary damages

1. Must Every Class Member Demonstrate Article III Standing in Order to Receive Money Damages? The defendant argued that only Ramirez had suffered a concrete injury under Spokeo and that every class member needed to individually demonstrate an Article III injury. Calling it an issue of first impression, the panel concluded yes, class members must show injury but only at the final stage of a money damages suit when class members are to be awarded individual monetary damages. Article III standing need not be shown for each class member at the motion to dismiss or class certification stage or in a Rule 23(b)(2) injunctive relief class action at the judgment stage. It is sufficient if the named plaintiff alone satisfies Article III standing in those earlier circumstances.

I think this is an analytically sound ruling and squares with the Teamsters model of proof, which defers individual class member damages until after a class liability finding.

2. Did the Class Members Suffer an Injury in Fact for Article III Standing? The panel called this question the dispositive and most difficult question. The defendant argued that a class member would have standing only if TransUnion disclosed the faulty credit report to a third party. Applying Spokeo, the panel rejected that argument. The nature of the inaccuracy was “severe” and the risk of harm far greater than inaccurate information about age or education. The risk was compounded because TransUnion worked with a third-party vendor (in an ill-conceived effort to offload FCRA liability) and the false information was passed between them. Finally, TransUnion would make the false information available to creditors on a nearly instantaneous basis without notice to the consumer. These facts also established class member standing for the FCRA disclosure and summary-of-rights claims.

3. Was the Conduct Willful? Yes. The earlier verdict, which has been appealed to the Third Circuit, provided the factual predicate.

4. Did Ramirez Satisfy Rule 23(a)(3) Typicality? The court rejected the argument that the particularly well-developed factual record for Ramirez made him atypical for Rule 23 purposes. Citing Ellis v. Costco Wholesale, the court explained that the typicality inquiry focuses on the “nature of the claim” of the class representative and not “the specific facts from which it arose.” Typicality is not defeated if “the personal narrative” of the class representative is “somewhat more colorful.”

5. Were the Damages Excessive? The court upheld the statutory damages of $984 per class member but reduced the per class member punitive damages from a ratio of 6.45 to 1 ($6,353 per class member) to 4 to 1 ($3,936 per class member). Note that TransUnion did not object to the instruction on punitive damages.

Judge McKeown concurred and dissented, concluding that the class members only had standing if their information was disclosed to a third party and that Ramirez was atypical.