Supreme Court limits claims from some wrongly labeled as terrorists by credit agencies

The Supreme Court on Friday put new limits on who can sue a credit reporting agency for falsely labeling them as a terrorist, ruling that only those whose reports were sent to a business have standing to sue.

“No concrete harm, no standing,” the court said in a 5-4 decision written by Justice Brett M. Kavanaugh.

The ruling overturns most of a $40-million jury verdict against TransUnion for a bungled scheme to add “alerts” to names that matched those of terrorists, drug traffickers or others who appeared on the Treasury Department’s watch list.

The company did not tell consumers they were on the watch list. And as Kavanaugh said, “Thousands of law-abiding Americans happen to share a first and last name with one of the terrorists, drug traffickers, or serious criminals on” the government’s watch list.

The flawed list came to light in 2011 when Sergio Ramirez went to a Nissan dealership in Dublin, Calif., and was told he could not buy on credit because his name was on the government’s “terrorist list.” His name was similar, though not identical, to another person‘s on the list.

The revelation led to a class-action lawsuit on behalf of 8,185 people who had such false information in their credit files in violation of their Fair Credit Reporting Act.

It led to a jury trial featuring Ramirez and the $40-million judgment against the company.

But in TransUnion vs. Ramirez, the Supreme Court overturned that award and said only “the 1,853 class members whose credit reports were provided to third-party businesses suffered a concrete harm and thus have standing.”

The ruling represents victory for businesses and others who seek to limit class-action lawsuits. Chief Justice John G. Roberts Jr. and Justices Samuel A. Alito Jr., Neil M. Gorsuch and Amy Coney Barrett formed the majority.

Justice Clarence Thomas wrote a strong dissent, joined by the court’s liberal justices.

“One need only tap into common sense to know that receiving a letter identifying you as a potential drug trafficker or terrorist is harmful,” Thomas said. “All the more so when the information comes in the context of a credit report, the entire purpose of which is to demonstrate that a person can be trusted.”

He argued that Congress had given consumers a legal right to sue over false credit reports, and nothing in the Constitution prevents such claims from being heard in court.

“In the name of protecting the separation of powers, this court has relieved the legislature of its power to create and define rights,” Thomas wrote. “Even assuming that this court should be in the business of second-guessing private rights, this is a rather odd case to say that Congress went too far. TransUnion’s misconduct here is exactly the sort of thing that has long merited legal redress.”