Rule of Law

Supreme Court rules no right to sue for some wrongly labeled as terrorists by credit agency

The Supreme Court on Friday put new limits on who can sue a credit reporting agency for falsely labeling them a potential terrorist, ruling that only those whose reports were sent to a business have standing to sue in federal court.

“No concrete harm, no standing,” the court said in a 5-4 decision written by Justice Brett M. Kavanaugh.

The ruling represents a victory for businesses and others who seek to limit class-action lawsuits. Chief Justice John G. Roberts Jr. and Justices Samuel A. Alito Jr., Neil M. Gorsuch and Amy Coney Barrett formed the majority.

Justice Clarence Thomas wrote a strong dissent, joined by the court’s liberal justices, arguing Congress gave consumers a legal right to sue over false credit reports.

The decision overturns most of a $40-million judgment against TransUnion for a bungled scheme to add “alerts” to names that matched those of terrorists, drug traffickers or others who appeared on the Treasury Department’s watch list.

The company did not tell consumers their names were on the list. And as Kavanaugh said, “Thousands of law-abiding Americans happen to share a first and last name with one of the terrorists, drug traffickers, or serious criminals on” the government’s watch list.

The flawed list came to light in 2011 when Sergio Ramirez went to a Nissan dealership in Dublin, Calif., and was told he could not buy on credit because his name was on the government’s “terrorist list.” His name was similar, though not identical, to another person’s on the list.

The revelation led to a class-action lawsuit on behalf of 8,185 people who had such false information in their credit files in violation of their Fair Credit Reporting Act.

It led to a jury trial featuring Ramirez, and $60-million verdict against the company. The 9th Circuit Court in San Francisco upheld the verdict but reduced the damages to $40 million.

But in TransUnion vs. Ramirez, the Supreme Court overturned that award and said only “the 1,853 class members whose credit reports were provided to third-party businesses suffered a concrete harm and thus have standing.”

“One need only tap into common sense to know that receiving a letter identifying you as a potential drug trafficker or terrorist is harmful,” Thomas said. “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 insisted nothing in the Constitution prevents the affected parties from having their cases heard in court.

“In the name of protecting the separation of powers, this court has relieved the legislature of its power to create and define rights,” Thomas wrote. “Even assuming that this court should be in the business of second-guessing private rights, this is a rather odd case to say that Congress went too far. TransUnion’s misconduct here is exactly the sort of thing that has long merited legal redress.”

In recent years, the court has repeatedly limited lawsuits by enforcing strict rules on standing.

Los Angeles lawyer Stephen Newman, who represented TransUnion before the 9th Circuit, welcomed the ruling. It “will have broad implications for class certification practice nationwide. It also will improve American businesses’ ability to serve their customers and workers efficiently, with reduced litigation burden,” he said.

But Elizabeth Wydra, president of the progressive Constitutional Accountability Center, said the “case is yet another reminder that bending the law to favor corporations is one of the long-term trends of the Roberts Court.”

She also cited Wednesday’s ruling striking down a California labor rule that allowed union organizers to go on private farm land to speak to workers. “A consistent theme emerges: a conservative majority bending over backward to find ways for corporations to prevail, and for working people and consumers to lose,” she said.

It is rare for Thomas to join the court’s liberals on any issue. Friday saw another unexpected split when Justice Barrett joined Justices Elena Kagan and Sonia Sotomayor in dissent when the court split 6-3. The issue was whether small oil refineries may seek an “extension” that exempts them from the renewable fuel standard, even if they had complied with the standard for a time.

They may do so, the all-male majority said in Hollyfrontier Cheyenne Refining vs. Renewable Fuels Assn. because the law says they may seek an extension “at any time.”

Barrett disagreed and said the word “extension” is naturally read to mean it continues, without a lapse of years in between.

The court is expected to issue its final rulings for this term early next week. They include a closely voting rights case from Arizona.

According to SCOTUSblog, an independent website dedicated to analysis of the U.S. Supreme Court, Friday’s decision marks the 12th time this term that the court has reversed California’s 9th Circuit Court of Appeals. The justices have affirmed the lower court only once.