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Thursday, December 7, 2023
Courthouse News Service
Thursday, December 7, 2023 | Back issues
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Government immunity from false credit reporting hits thin ice at Supreme Court 

The high court will decide if the government should face lawsuits when it fails to correct false credit reports.

WASHINGTON (CN) — The Supreme Court seemed unsure on Monday that the government should be able to skirt a lawsuit after incorrect reporting left a Pennsylvanian man with damaged credit. 

Reginald Kirtz sued the government for reporting delinquency on his loans even though he paid off their balance. Kirtz took a credit hit for the error and claimed the government’s mistake violated the Fair Credit Reporting Act. 

The government says its sovereign immunity offers protection from Kirtz’s suit, but it’s not clear whether the Supreme Court agreed. 

“What Congress has done is authorize a suit against natural persons, enterprises and governments,” Justice Elena Kagan said. 

Kagan was referring to language in the Fair Credit Reporting Act that authorizes consumers to sue any “person” who fails to comply with the law. Although the act defines person at one point, Kagan said Congress was likely using shorthand when repeatedly using the term “person” instead of writing out each individual liable under the statute. 

“The definition has a lot of words, right?” the Obama appointee said. “There’s a person, there’s a corporation, there’s an association, there’s an enterprise, et cetera, et cetera. You can see why Congress didn’t want to say that every time.” 

Looking at the text, Justice Clarence Thomas noted that the statute specifically defined a person to include the government and its agencies. 

“Wouldn’t that suggest that it applies to the U.S. government?” the Bush appointee asked. 

Justice Ketanji Brown Jackson picked up on this point, saying lawmakers had amended the statute to make clear who should be liable for reporting errors. 

“Congress amended the statute clearly to expand liability,” the Biden appointee said. 

Trying to understand lawmakers’ motives, Justice Neil Gorsuch said it would not be out of the ordinary that Congress wanted to protect consumers by placing liability on the government for its mistakes. 

“It doesn’t seem to me inconceivable … that a rational Congress might, to protect consumers, in FCRA — which is all about false reporting about consumers’ debts and delinquencies — say that the government should turn square corners too,” Gorsuch said. 

Kirtz argued that protection was warranted. He tried to notify TransUnion that reports from the Department of Agriculture Rural Housing Service were false and that he actually paid off his balance. However, his efforts came up short. 

His suit argued the USDA failed to investigate the disputed information that negatively impacted his credit score. The government moved to dismiss, using the sovereign immunity defense, and was initially successful until the Third Circuit revived the case. 

Kirtz said the Supreme Court should uphold the appeals court ruling because the statute is clear. 

“Congress was not required to state that persons include federal agencies a second time in the cause of action to make its intent clear,” Nandan Joshi, an attorney with Public Citizen Litigation Group representing Kirtz, said. “Congress knew what it was doing when it amended FCRA in 1996.”

Not all of the Supreme Court appeared united behind Kirtz’s arguments. Some justices struggled to grasp what it would mean if the government had to face these lawsuits. 

“This may be a frolic and a detour, but have there been real cases in which the United States has criminally prosecuted itself?” Justice Samuel Alito asked. 

Alito asked if that scenario would result in the government arguing against itself. 

The government told the court that rejecting its sovereign immunity claim would be inconsistent with the doctrine itself. 

“Sovereign immunity is a defense that by definition has effect only when there is a cause of action that would otherwise impose liability,” Benjamin Snyder, assistant to the solicitor general at the Justice Department, said. “So if every cause of action that covers a sovereign also waived that sovereign’s immunity, the defense would never matter.” 

Follow @KelseyReichmann
Categories / Appeals, Consumers, Financial, Government

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