Supreme Court Limits Consumer Suits in Win for TransUnion

(Bloomberg) -- The U.S. Supreme Court put new limits on consumer lawsuits, backing TransUnion in its fight against a $40 million award to thousands of people whom the credit-reporting firm categorized as potential terrorists.

The justices, voting 5-4, said most of the 8,000 people in the class action case lacked the legal right to sue.

Of those class members who were wrongly flagged by the credit reporting agency as potential matches to individuals on a terrorist watch-list, only about a quarter had their reports sent to third parties.

The bulk of the class members suffered no concrete harm because the reputational risk of the false alerts never materialized, Justice Brett Kavanaugh wrote for the court.

“A letter that is not sent does not harm anyone, no matter how insulting the letter is,” Kavanaugh wrote. “So too here.”

The lawsuit was first brought under the Fair Credit Reporting Act, which requires the reporting agencies like TransUnion to ensure “maximum possible accuracy” in their consumer reports.

The credit agency incorrectly flagged people as potential matches, based on their names alone, to individuals listed as national security threats by the Treasury Department’s Office of Foreign Assets Control.

Justice Clarence Thomas, joined by the court’s three liberal justices, said in dissent that even the people whose reports weren’t sent to third parties still suffered harm.

“TransUnion’s misconduct here is exactly the sort of thing that has long merited legal redress,” Thomas said.

In a separate dissent, Justice Elena Kagan said the majority opinion holds “for the first time, that a specific class of plaintiffs whom Congress allowed to bring a lawsuit cannot do so” under the Constitution.

TransUnion was trading up less than 1% at 11:03 a.m. in New York

The case is TransUnion LLC v. Ramirez, 20-297.

©2021 Bloomberg L.P.