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Happy New Year!

You may recall that in November of 2019, I wrote a blog addressing the concept of the award of damages when a plaintiff has not suffered injury. See here. The short story is that Congress has a history of adopting laws imposing punitive or exemplary damages as a deterrent to violations of statutes and regulations by creditors. While such history helps explain the concept, it does not necessarily comport with American jurisprudence. And, a recent development in class action litigation may reverse the current practice.

The United States Supreme Court has agreed to hear a challenge by TransUnion to a class action award against it in a Fair Credit Reporting Act case, where a “vast majority” of the class members suffered no actual injury or any injury substantially similar to that of the class representative.  

In the class action case of TransUnion, LLC v. Ramirez, the trial court awarded each of the 8,185 class members $984.22 in statutory damages and $6,353.08 in punitive damages. The Ninth Circuit sustained the statutory damages award but lowered the punitive damages award to $3,936.88—based upon the “four times” formula that the U.S. Supreme Court adopted in the Gore v. BMW case that originated with our law firm in Alabama some years ago.

Still, TransUnion challenged that outcome based on the U.S. Constitution’s Article III requirement that there must be an injury-in-fact. TransUnion insists that the award of such damages to class members was not related to any injury suffered by them. Normally, such an argument is based on a premise that the class representative is just not “typically” representative of the class members.

The position of TransUnion really goes beyond the “atypical” argument to the more fundamental argument that there must be actual injury before damages may be imposed at all. This argument is based upon Article III and the Fourteenth Amendment to the Constitution, that restrains a state from depriving a person of property without due process of law.  And, according to TransUnion, Rule 23 of the Federal Rules of Civil Procedure (addressing class actions) interpreted in the fashion that the trial court did, deprived TransUnion of this Constitutional protection.

It will be interesting to see how the Supreme Court deals with this question. The answer will be important to creditors and lawyers alike.

Please note: This is the one hundred fortieth blog in a series of Back to Basics blogs, in which relevant and resourceful information can be easily accessed by clicking here.