Supreme Court Limits Suit on False Terrorism Ties on Credit Reports

WASHINGTON — The Supreme Court on Friday limited the scope of a class-action lawsuit against TransUnion, the credit reporting company, for errors in identifying consumers who might be on terrorism watch lists. In a 5-to-4 decision, the majority said some of the members of the class whose credit reports falsely tied them to wrongdoing had not suffered concrete injuries giving them standing to sue, notwithstanding a federal law authorizing such lawsuits.

Justice Clarence Thomas, breaking with his usual allies, wrote a spirited dissent that was joined by the court’s three liberal members.

The case started when Sergio Ramirez visited a Nissan showroom in California to buy a car. After he negotiated the price, the dealership ran a credit check and found that his TransUnion credit report said his name matched one on a Treasury Department watch list of terrorists, drug traffickers and other criminals.

It is generally unlawful to do business with people on the list, and the dealership refused to sell the car to Mr. Ramirez. His wife bought it in her name.

Mr. Ramirez filed a class action, saying the credit agency had violated the Fair Credit Reporting Act, which authorizes lawsuits when agencies fail to “follow reasonable procedures to assure maximum possible accuracy” in their reports.

TransUnion had done no more than to match first and last names, meaning that people with common names were often falsely associated with criminal conduct. Even after an earlier suit over a similar incident, Justice Thomas wrote, the company did not take obvious steps to ensure the accuracy of its reports.

“It did not begin comparing birth dates,” he wrote. “Or middle initials. Or citizenship. In fact, TransUnion did not compare any new piece of information. Instead, it hedged its language saying a consumer was a ‘potential match’ rather than saying the person was a ‘match.’”

Mr. Ramirez represented a class of 8,185 people whose credit reports included misleading information. A jury awarded the class more than $60 million, a sum reduced to $40 million by a federal appeals court.

Justice Brett M. Kavanaugh, writing for the majority on Friday, said that only the 1,853 class members whose credit reports were actually provided to businesses were entitled to sue. The others, he wrote, had not suffered the required “concrete harm.”

The smaller group, Justice Kavanaugh wrote, had suffered an injury akin to defamation.

“Under longstanding American law, a person is injured when a defamatory statement ‘that would subject him to hatred, contempt or ridicule’ is published to a third party,” he wrote quoting a 1990 libel decision. “We have no trouble concluding that the 1,853 class members suffered a concrete harm.”

But, he wrote, the other 6,332 had not been injured.

“The mere presence of an inaccuracy in an internal credit file, if it is not disclosed to a third party, causes no concrete harm,” Justice Kavanaugh wrote. “In cases such as these where allegedly inaccurate or misleading information sits in a company database, the plaintiffs’ harm is roughly the same, legally speaking, as if someone wrote a defamatory letter and then stored it in her desk drawer. A letter that is not sent does not harm anyone, no matter how insulting the letter is. So too here.”

He also rejected the plaintiffs’ argument that the larger group of class members had suffered a risk of future harm. There was no evidence, he wrote, that these plaintiffs even knew there was false information in their credit files.

“If those plaintiffs prevailed in this case, many of them would first learn that they were ‘injured’ when they received a check compensating them for their supposed ‘injury,’” Justice Kavanaugh wrote. “It is difficult to see how a risk of future harm could supply the basis for a plaintiff’s standing when the plaintiff did not even know that there was a risk of future harm.”

Chief Justice John G. Roberts Jr. and Justices Samuel A. Alito Jr., Neil M. Gorsuch and Amy Coney Barrett joined the majority opinion in the case, TransUnion v. Ramirez, No. 20-297.

In dissent, Justice Thomas wrote that the majority had parted ways with common sense.

“TransUnion generated credit reports that erroneously flagged many law-abiding people as potential terrorists and drug traffickers,” Justice Thomas wrote.

“Yet despite Congress’s judgment that such misdeeds deserve redress,” he wrote, “the majority decides that TransUnion’s actions are so insignificant that the Constitution prohibits consumers from vindicating their rights in federal court. The Constitution does no such thing.”

Justices Stephen G. Breyer, Sonia Sotomayor and Elena Kagan joined Justice Thomas’s dissent.

In a second dissent, Justice Kagan said the majority was mistaken in saying that the risk that the reports concerning the larger group of plaintiffs would be disseminated was “too speculative.”

“Why is it so speculative,” she asked, “that a company in the business of selling credit reports to third parties will in fact sell a credit report to a third party?”