Ninth Circuit Addresses FCRA Standing Analysis and Emphasizes Importance of Remedial Measures

The Ninth Circuit recently issued an opinion addressing standing and willfulness under the Fair Credit Reporting Act (FCRA). In Ramirez v. TransUnion,[1] the Ninth Circuit affirmed a jury verdict and punitive damages award, although it reduced those damages by a third. The court held for the first time that “each class member must have standing to recover damages,” but also found that the class members’ standing need not be demonstrated at the class certification stage and that the class members had standing even if their credit reports had not been shared with any third party. In addition, the court looked to a prior court ruling against the defendant involving the same issues in finding the violations were willful and warranted the award of punitive damages.

Case Background

Sergio Ramirez alleged he was unable to buy a car because his credit report indicated he was on an Office of Foreign Assets Control (OFAC) terrorist watch list. TransUnion sent Ramirez a report without this information and with a conflicting letter indicating his name did match a name on the watch list. It turns out he was not on the watch list, but someone else with the same first and last name was on that list.

In 2012, Ramirez filed a lawsuit against TransUnion in the Northern District of California, seeking to represent a nationwide class of consumers whom TransUnion had falsely identified as being on the terrorist watch list, alleging willful failure to use reasonable procedures to prevent false positives and related claims. The court certified a class, and a jury then ruled against TransUnion on all claims, awarding the class approximately $8 million in statutory damages and $52 million in punitive damages. TransUnion appealed to the Ninth Circuit.

Ninth Circuit Decision

Standing

For the first time, the Ninth Circuit announced that “every member of a class certified under Federal Rule of Civil Procedure 23 must satisfy the basic requirements of Article III standing at the final stage of a money damages suit when class members are to be awarded individual monetary damages.”[2] The court found that each of the 8,185 class members had standing regardless of whether a third party accessed their credit reports. Judge McKeown agreed that all members of a damages class should have standing at trial, but she dissented in part because no evidence in the record supported finding a “serious likelihood of disclosure.”

Willful Violation and Punitives

The Ninth Circuit rejected TransUnion’s arguments that its conduct was based on reasonable but mistaken interpretations of the statute. The panel relied heavily on an earlier Third Circuit decision addressing the same product, where that court rejected TransUnion’s argument that the product was not covered by the FCRA and explained how to reduce false matches. As the Ninth Circuit explained, “TransUnion was provided with much of the guidance it needed to interpret its obligations under FCRA with respect to OFAC alerts back in 2010,” but “[d]espite this warning, TransUnion continued to use problematic matching technology and treat OFAC information as separate from other types of information on consumer reports.”[3] The court relied on TransUnion’s failure to implement the Third Circuit’s guidance in finding the FCRA violations were willful.

The Ninth Circuit characterized TransUnion’s delay in making policy changes as “reprehensible”[4] in affirming the award of punitive damages. The court found the amount of the award was constitutionally excessive, though, and reduced it from $52 million to $32 million.

TransUnion’s petition for rehearing en banc was denied on April 8, 2020.[5] On April 15, 2020, the court stayed its mandate for 90 days pending TransUnion’s filing of a petition for writ of certiorari.[6]

Key Takeaways

Standing. The court emphasized that its decision did not change the showing required at class certification It noted that “district courts and parties should keep in mind that they will need a mechanism for identifying class members who lack standing at the damages phase.”[6]  Defendants should consider how this analysis impacts arguments in opposing class certification.

Willful Violations and Punitives. The court’s analysis underscores the importance of staying on top of court rulings, particularly at the appellate level. Although TransUnion had made some changes to its OFAC notifications in accordance with the Third Circuit’s Cortez decision, under the facts of this case, the Ninth Circuit appeared to find its actions to be too little too late. Courts and juries rarely award punitive damages in FCRA suits,[7] but the prior appellate ruling and hot button terrorist watch-list topic appears to have made this case the exception.


­­­­­­­­­­­­­­­[1] Ramirez v. TransUnion LLC, 951 F.3d 1008, 1016 (9th Cir. 2020).

[2] Id. at 1017.

[3] Id. at 1032.

[4] Id. at 1037.

[5] Ramirez v. TransUnion LLC, No. 17-17244, 2020 U.S. App. LEXIS 11100, at *2 (N.D. Cal. Apr. 8, 2020).

[6] Ramirez v. TransUnion LLC, No. 17-17244, 2020 U.S. App. LEXIS 12024, at *1 (N.D. Cal. Apr 25, 2020).

[7] Austin Krist, “Large-Scale Enforcement of the Fair Credit Reporting Act and the Role of the State Attorneys General,” Columbia Law Review, Vol. 115:2311, p. 2322 (characterizing punitive damages awards in FCRA suits as “rare”).