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The Supreme Court Limits Lawsuits By Those Wrongly Flagged As Terrorists

The Supreme Court's opinion in the TransUnion case brought together an unusual coalition of dissenting justices.
The Supreme Court's opinion in the TransUnion case brought together an unusual coalition of dissenting justices.

The U.S. Supreme Court on Friday sided with the TransUnion credit reporting company, ruling that thousands of consumers whose names were improperly flagged as potential terrorists cannot sue the company for damages.

By a 5-to-4 vote, the court ruled that Congress does not have the power under the Constitution to establish statutory rights and the power to enforce those rights with private lawsuits.

At issue in the case was the Fair Credit Reporting Act, which regulates how consumer credit agencies report and disseminate personal information. Specifically, the case centered on the actions of TransUnion, one of the "big three" credit reporting companies in the nation. It compiles information on consumers and sells that information to businesses that want to ascertain creditworthiness. Beginning in 2002, TransUnion placed an alert on those individuals whose first and last names matched the names on the Treasury Department's list of terrorists, drug traffickers, or other serious criminals. The alert told businesses that bought the credit reports that the individuals were a "potential match" for those flagged on the Treasury Department list.

A class of 8,185 individuals with alerts on their credit files sued TransUnion for damages under the Fair Credit Reporting Act, which established a right to bring such lawsuits. But on Friday, the Supreme Court said Congress exceeded its constitutional authority in allowing a broad category of individuals to sue for being labelled as possible terrorists and drug traffickers.

The court said that much of the alleged harm was "too speculative" and that only a fraction of the individuals whose names had been matched and flagged could sue--only those who could prove an actual, concrete injury. In this case, that amounted to only about one-fifth of the class that sued. The court threw out the claims of the rest of the class, those who claimed a risk of injury. The court said that Congress had no right to grant that group standing to sue.

Writing for five-justice majority, Justice Brett Kavanaugh compared inaccurate data that was internally maintained by the company but never shared with a third party to a defamatory letter that someone writes but never sends. "A letter that is not sent does not harm anyone, no matter how insulting the letter is. " Similarly here, he said, the 6,332 class members whose "match alert" information was not transmitted to third-party businesses ... suffered no harm."

Kavanaugh wrote for himself, and four of the court's other conservatives, including Chief Justice John Roberts, and Justices Samuel Alito, Neil Gorsuch, and Amy Coney Barrett.

In dissent was the court's most conservative justice, Clarence Thomas, and the court's three liberals. Thomas said that the court had rendered unto itself and itself alone the power to define which claims have merit.

"In the name of protecting the separation of powers, this court has relieved the legislature of its power to create and define rights," said Thomas.

The majority, he concluded, had posed and itself answered a single question: "Who could possibly think that a person is harmed when he requests and is sent an incomplete credit reports, or is sent a suspicious notice information him that he may be a designated drug trafficker or terrorist, or is not sent anything informing him how to remove this inaccurate red flag?" wrote Thomas. "The answer is, of course, legion: Congress, the President, the jury [that awarded $40 million in damages]" the lower courts, "and four members of this court."

In a separate dissent, Justice Elena Kagan, joined by Thomas and the other dissenters, accused the majority of "transform[ing]" the law of standing that governs who has the right to sue "from a doctrine of judicial modesty into a tool of judicial aggrandizement. The court holds for the first time that a specific class of plaintiffs whom Congress allowed to bring a lawsuit cannot do so," she said.

Kagan went on to mock the majority's "set of curious assumptions"--among them that "people who specifically request a copy of their credit report may not even open the envelope ... or that people who learn their credit files label them potential terrorists would not have tried to correct the error." Rather than accept "those suppositions," said Kagan, "I sign up with Justice Thomas that one "need only tap into common sense to know that receiving a letter identifying you as a potential drug trafficker or terrorist is harmful" and thus a basis for a lawsuit.

Lawyers on both sides of the case see Friday's decision as a big victory for the large corporations. Andrew Pincus who filed a brief in the case on behalf of the U.S. Chamber of Commerce, said the ruling imposes "significant limits" on consumer lawsuits by requiring proof of concrete injury for a suit to go forward.

Scott Nelson, who filed a brief on behalf of Public Citizen, said the decision "really limits Congress' ability to create rights and let people enforce those rights" because, as he put it, "The court will second guess the congressional judgment on when there is a real injury" that justifies a lawsuit.

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