By John K. Higgins
March 31, 2021, 5:00 p.m. PT
Large information technology providers who opposed the expansion of class action lawsuits related to consumer protection have taken their case to the US Supreme Court.
The companies hope the court will make a lower court ruling that will make it easier for consumers to bring class action lawsuits. Tech companies may not have to wait too long for a decision. The Supreme Court heard the TransUnion LLC v Ramirez case on Tuesday and is expected to reach a decision in late June.
It is the legal standard that regulates how members of a consumer class can prove to a court that they have suffered “harm” in the management of their personal data.
The IT companies are essentially arguing that a ruling by the U.S. Ninth Circle Court of Appeals falsely allows members of a class to claim damages that go well beyond current standards for defining injuries. The companies claim the Ninth Circuit ruling would expose companies to unjustified class action lawsuits.
According to an Amicus letter submitted jointly to the Supreme Court by eBay, Facebook, Google and several technology industry associations, there was no legal reason to allege actual or tangible harm to the consumer class mentioned in the case.
The companies claim the Ninth Circle’s decision will have implications far beyond the law that applies to the case.
If that is left intact, the court’s opinion would “degrade” legal standards and “open the floodgates for abusive litigation that does not eliminate injuries and does not benefit any consumer,” the companies said. The Ninth Circuit ruling could include e-commerce laws such as the Recorded Communications Act, the Video Privacy Protection Act, the Telephone Consumer Protection Act, and the Telephone wiretapping Act, as amended by the Electronic Communications Privacy Act affect.
The case before the Supreme Court was initiated by the major credit reporting agency TransUnion, which is seeking to overturn the Ninth Circle decision in the Ramirez v. TransUnion LLC case. The company asked the court to determine whether the US Constitution and related proceedings “permit a damages action in which the vast majority of the class did not actually suffer harm, let alone the harm suffered by the class representative “.
Litigation triggered by personal information
The case arose from allegations that data references used by TransUnion contained inaccurate and potentially harmful “matches” of names in consumer credit warnings.
According to the US Department of Justice, TransUnion’s matching process during the reporting period consisted “entirely of a” name-only “comparison of consumers’ first and last names” and the names on the US Treasury Department’s Foreign Assets Control List (OFAC) by terrorists, drug traffickers, and others who are prohibited from doing business in the United States for national security reasons.
While trying to buy a car, Sergio L. Ramirez learned in February 2011 that TransUnion had added an inaccurate OFAC warning to its consumer report. Upon receiving the warning, the dealership refused to sell the car to Ramirez, who later claimed he was “embarrassed, shocked and scared” to learn that his name had been linked to the OFAC list, as revealed by the Summary of the DOJ stating.
Ramirez was concerned about his experience, including inquiries to TransUnion that he alleged created further confusion about the warning, and filed a lawsuit alleging that TransUnion’s practices violated various fair credit protections Reporting Act (FCRA).
At the US District Court level, the jury ruled in favor of Ramirez and accused TransUnion of failing to comply with the FCRA requirements. The district court granted class action lawsuit status to the 8,000 people allegedly affected by the inaccurate information. The damage was set at $ 60 million and was later reduced to $ 40 million by the Ninth Circuit.
Legal proceedings revealed that TransUnion’s reliance on the OPAC data system resulted in a “matching” process in which matches were not definitively checked against specific people, only against similar names, which could lead to misleading identifications.
In Ramirez’s case, his date of birth revealed that he was not properly classified. Ramirez’s distress resulted from relaying the inaccurate report to a third party – the car dealer – under the Ninth Circuit decision. A key element in this case depends on third party disclosure.
According to an analysis by the law firm Akin Gump, “the Ninth Circle found that the credit reports were available to potential creditors and employers, although the majority of class members had not disclosed their credit reports to third parties upon request, it was sufficient to represent a” material risk of harm “for to show the specific interests of all class members. “
Thus, class actions could be carried out under the judgment. The Justice Department’s analysis found that the Ninth Circuit characterized the nature of such inaccurate warnings as “serious” and disclosed reports to third parties “on short notice”. The department only submitted an amicus letter to support the need to clarify the applicable law and decisions.
TransUnion Claims Decision “Eviscerates” standards
In its petition to the Supreme Court, TransUnion challenged the notion that the mere existence of the database references caused damage. The company found that the US District of Columbia Court of Appeals “ruled that plaintiffs are not entitled to seek damages under FCRA because their credit records contain information that has never been disclosed to a third party.” The Ninth Circle judgment “escapes” both constitutional and procedural standards, TransUnion said.
The company emphasized that the name references in the database are not individually definitive and merely represent “potential” matches. TransUnion said it “made crystal clear” that the appearance of a name in its alert system should “be the beginning, not the end” of an OFAC investigation.
In a 2018 financial report relating to the jury’s decision, TransUnion said, “We continue to believe that we did not intentionally break any law.” In a statement to the E-Commerce Times through spokesman David Blumberg, TransUnion said, “We are not commenting on any pending litigation.”
The US Chamber of Commerce noted in a brief endorsement of TransUnion that, for an overwhelmingly large segment of the class, no reports ever reached a third party. The Ninth Circle’s decision was “flimsy” and based on allegations that were too speculative and abstract for legal purposes, the board said.
Database risk passes breach test
In claiming the Ninth Circle’s judgment was correct, attorneys representing Ramirez said the relevant harm in gaining class action status was “not the sale or publication of a credit report containing a terrorist record, but the risk a significant breach of this inaccurate information. ” reported. “
The risk of real harm that TransUnion inflicted on all class members “stemmed from both gravity and the likelihood of spreading false OFAC warnings,” according to a brief filed by the law firm Francis Mailman Soumilas.
“The US Constitution allows people to sue in federal court if they are at significant risk of harm even if they have not yet suffered harm,” Adam Schwartz, senior attorney for the Electronic Frontier Foundation, told the E-Commerce Times . EFF submitted an amicus letter in support of Ramirez.
“This principle is especially important during the advancing technological revolution, when private companies collect, store, share and use huge amounts of our highly sensitive personal information. This data processing carries an extraordinary risk of harm,” he said.
Consumers shouldn’t be prevented from going to federal court until there is a personal data breach like identity theft or denial of credit, he added. “Rather, we should be able to go to federal court if companies process our data in ways that pose a significant risk of this and other harms. Especially where, like this, Congress has asked credit bureaus to ensure their Credit information is correct. ” and has authorized individuals subject to inaccurate credit information to sue such agencies, “noted Schwartz.
According to analysis by Akin Gump and the Justice Department, the Supreme Court decision may be limited in its application to different stages of the judicial process. For tech companies and corporations in general, the Supreme Court’s handling of “harm” will be a significant legal development affecting class action litigation.