U.S. Supreme Court Confirms that Every Class Member Must Have Article III Standing to Recover Damages, Creating Additional Obstacles to Class Certification

U.S. Supreme Court Confirms that Every Class Member Must Have Article III Standing to Recover Damages, Creating Additional Obstacles to Class Certification

June 29, 2021, Covington Alert

The Supreme Court’s decision in TransUnion LLC v. Ramirez, 2021 WL 2599472 (U.S. June 25, 2021), is one of the most significant class-action decisions from the Supreme Court in recent years. It expands the scope of the Court’s earlier Article III standing decision in Spokeo, Inc. v. Robins, 578 U.S. 330 (2016) confirming that, to recover damages in a class action, every class member must satisfy the standing requirement of Article III. The Court’s decision will inevitably make it more difficult for plaintiffs to certify a class asserting claims based on “bare violations” of statutes that do not cause concrete harm to putative class members.

The Court’s Opinion

In TransUnion LLC v. Ramirez, the plaintiffs alleged that a consumer reporting agency had violated the Fair Credit Reporting Act. By the time the case reached the Supreme Court, a class had been certified, and the parties agreed that only 1,853 of the 8,185 class members (including the named plaintiff) had credit reports containing potentially inaccurate information shared with third parties.

In a 5-4 decision authored by Justice Kavanaugh, the Supreme Court held that most of the class lacked Article III standing and therefore could not recover damages. Answering a question that had divided federal appellate courts for several years, the Supreme Court confirmed that “[e]very class member must have Article III standing in order to recover individual damages.”

Turning to the class claims before it, the Supreme Court reaffirmed its five-year-old conclusion in Spokeo, Inc. v. Robins, 578 U.S. 330 (2016), that not every violation of federal law will create a basis for Article III standing. Instead, “Article III standing requires a concrete injury even in the context of a statutory violation,” and an “injury in law is not an injury in fact.” The 1,853 class members whose credit reports had been shared with third parties met this test. But the remaining 6,332 class members whose information had not been shared did not, and the Court held that “the mere risk of future harm, without more, cannot qualify as a concrete harm in a suit for damages.” The Court also concluded that on a claim that contended that the consumer reporting agency sent mailings that violated the Fair Credit Reporting Act’s formatting requirements, none of the class members other than the named plaintiff had demonstrated the requisite concrete harm.

In granting certiorari, the Court had asked the parties to address also whether the named plaintiff had satisfied the typicality requirement of Rule 23. The Court did not address this issue. Instead, it asked the Ninth Circuit to “consider in the first instance whether class certification is appropriate in light of our conclusion about standing.”

The lead dissent, written by Justice Thomas, endorsed a broader view of Congress’s ability to confer standing by legislation. In Justice Thomas’s view, Congress has the power to “create and define rights,” and an Article III case or controversy is present wherever an individual’s “private rights”—such as those created by statute—have been violated and a cause of action exists. Justice Kagan joined the lead dissent, but with a qualification: she would still require a “concrete harm” to establish standing, but “courts should give deference” to congressional judgments about whether a harm is sufficiently concrete to meet that test.

Analysis

Although Ramirez involved claims under the Fair Credit Reporting Act, the Court’s analysis will have a broader impact on the analysis for both Article III standing and class certification. In clarifying the nature of the “concrete harm” required to confer Article III standing, the Court emphasized that the judiciary plays an important role in determining whether violations of private rights created by Congress constitute the “concrete harm” necessary to create Article III standing. The Court’s opinion also clarifies that a mere risk of harm is often not sufficient to generate Article III standing for damages claims, casting doubt on the viability of recent appellate decisions that have reached a contrary conclusion in the context of data breaches.

The principle that “every class member must have Article III standing in order to recover individual damages” should create an important defense to class certification in situations in which a class is defined in a way that sweeps in many persons who lack concrete injury. How far that principle will be taken remains to be seen, however. The Court was careful to limit its holding to suits for damages, and it stated in a footnote that it was not addressing “whether every class member must demonstrate standing before a court certifies a class.” Still, logic suggests that defendants can advance the argument left unanswered by Ramirez: even if the named representative has Article III standing, the fact that other putative class members do not have standing means the named representative’s claims are atypical of the class. Moreover, the need to determine whether every putative class member has suffered the requisite “concrete harm” necessary to demonstrate Article III standing will often create an individualized issue that predominates over common issues. Ramirez thus offers a basis for powerful class certification defenses for defendants, especially when facing statutory claims based on conduct that has had limited, if any, actual impact on putative class members.

If you have any questions concerning the material discussed in this client alert, please contact the members of our Class Action Litigation practice.