High Court to Probe Massive Class Damages in Credit Report Case

(Image via Courthouse News)

WASHINGTON (CN) — The Supreme Court agreed Wednesday to hear a credit-reporting company’s challenge to a $40 million class action verdict said to wrongly assume that all 8,185 members were harmed by being misidentified as terrorists, drug traffickers or other enemies of state.

In the case at hand, lead plaintiff Sergio Ramirez says that an inaccurate credit report from TransUnion embarrassed him in front of family, hindered his ability to secure credit and led him to cancel a vacation. A car dealership was running his credit, when his name popped up on a government list of terrorists “with whom U.S. businesses may not transact.”

Ramirez’s lawyer, Philadelphia-based attorney James Francis, said in an email Wednesday that he and his client were glad the high court will take the case to address the harm of TransUnion’s credit practices on a class-wide basis.

But the petition for certiorari by TransUnion says most members of the class never suffered any Article III injury, as it is known, let alone anything similar to what Ramirez did.

Representing the credit-reporting giant, Paul Clement of Kirkland Ellis argued that more than 75% of the class Ramirez purports to represent did not discover an inaccurate report about them through a third party, meaning they were spared Ramirez’s humiliation.

Ignoring this paves the way “for one highly atypical plaintiff to recover massive damages on behalf of thousands of uninjured class members,” Clement wrote in September. The agency claims the Ninth Circuit was wrong to affirm statutory damages near the maximum with punitive damages to boot.

“The jury’s verdict,” wrote Clement, “reflected a perfect storm of standing, class certification, and punitive damages problems, combining to give rise to a multimillion dollar damages award in a case with no proven injury to anyone beyond the named plaintiff.”

In the class’s response brief, however, Philadelphia-based attorney James Francis called the verdict justified because the blueprint for Article III harm is not when class members have their inaccurate credit reports disseminated to third parties.

“The relevant harm for standing purposes is not the sale or publication of a credit report containing a terrorist record, it is the risk of significant injury of that inaccurate information being reported,” Francis wrote.

Francis added in his statement Wednesday that all plaintiffs had standing.

“The record in this case showed that TransUnion had wide dissemination of these false OFAC terrorist alerts and mislead consumers and the U.S. government about how they could be corrected — and we believe that federal law permits all such consumers to bring their cases to court,” Francis said, referring to the Office of Foreign Assets Control. “While this case concerns a credit reporting agency falsely branding law-abiding citizens as terrorists on their credit reports, if TransUnion prevails, consumers across the United States will face another hurdle in holding large corporations accountable for violating the law.”

And if TransUnion did not want Ramirez to testify at trial about his personal experiences with being falsely labeled a terrorist on a TransUnion report, he continued in his brief, it should have lodged an objection with the trial court.

“The result in this case was entirely predictable given the particularly egregious credit reporting practices at issue,” Francis wrote, saying TransUnion’s misidentifications led to thousands of “innocent Americans” being marked “as government designated terrorists, drug traffickers, and other threats to national security.”

Francis contends that such misidentifications amounts to negligence because TransUnion ran only their names, “ignoring date of birth information available on government records and in its own database,” contravening a 2010 decision by the Third Circuit that forbade such work.

In its petition, the credit agency held that Ramirez didn’t prove “that any other class member ever read the letter from TransUnion or was even aware that such a letter had been sent, let alone that any other class member suffered injury” from the inaccurate reports. 

Clement said as a result, class members could hypothetically be receiving checks for injuries they themselves didn’t sustain.

“Indeed, it is no exaggeration to say that, for many (if not most) of the 8,184 absent class members, their first indication that they were ‘injured’ will come when they receive a $4,921.10 check (reduced by class counsel’s cut) in the mail,” he wrote.

But Francis maintains the facts of the case justify the punitive damages award, and that the agency should have seen the verdict coming.

“For years, TransUnion was warned — by consumers, by the Third Circuit, and by the very government agency that maintains the terrorist records at issue here — that, in the words of the court of appeals, it was ‘flippant[ly] placing … terrorist alerts on consumer credit reports,’” he said.

Neither Clement nor Francis immediately returned a request for comment Wednesday.

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