A recent Supreme Court decision significantly limited the rights of some people to file a class action lawsuit. What was rare about the decision was that Clarence Thomas joined the Court's three liberals in dissent. This was a highly unusual coalition. At issue was a lawsuit that was filed against the credit reporting bureau TransUnion for falsely classifying some people as terrorists. A lower court had awarded the plaintiffs over $40 million for the mistakes, giving money to everyone who was designated as a terrorist. The Supreme Court partially dismissed the lawsuit in a decision that may have reverberations in future class action lawsuits.

Congress had passed a law that required credit bureaus to use "reasonable procedures" to maintain accurate data on consumers. The Fair Credit Reporting Act gave consumers the right to sue when the credit bureaus failed at this task. They could seek monetary damages from the credit bureaus. Here, the mistake that TransUnion made was that it noted that over 8,000 consumers were potential terrorists. This information appeared on their credit reports, potentially causing them harm. The emphasis here is on the word "potential."

The Court Held That Not All the Plaintiffs Suffered Actual Harm

Of the 8,000 consumers, just over 1,000 of them suffered some actual harm. They had tried to access credit, and they were denied because of their designation as a terrorist. There is no dispute that they were harmed by TransUnion's mistake. The law very clearly entitles them to damages. The issue in this lawsuit is that all the consumers who were designated as terrorists joined together in one class to sue TransUnion. When the court awarded damages, it did so to all the consumers, regardless of whether they had experienced any real-world consequences of TransUnion's mistake.

TransUnion's appeal raised important issues about standing. Usually, in order to establish standing, a plaintiff would have to show that it suffered a concrete harm from the defendant's action. This is an actual harm, and it cannot be one that is contrived or speculated. This is where the Supreme Court took a different path than the lower court. By a 5-4 majority, the Court dismissed the part of the case brought by the plaintiffs who had not actually suffered. All they had was a designation of terrorist, but they were not actually denied credit. The designation was solely maintained in TransUnion's files, but for those plaintiffs, it was never disseminated to lenders. Accordingly, since not all the plaintiffs suffered the same harm, the lower court should have never certified the class action lawsuit in the first place.

The Court held that Congress could not pass a law that changed the traditional rules of standing, insofar that it allowed people who did not suffer an "actual concrete harm" to file a lawsuit. The prerequisite for compensation should have been a denial of credit. According to Justice Kavanaugh, who wrote the majority decision, there was no case or controversy without actual harm to the plaintiffs. Therefore, the nearly 2,000 people who suffered harm could qualify for compensation in their own lawsuit, while the rest of the plaintiffs could not. Thus, there was no common harm for a class action lawsuit.

According to Justice Thomas, the mere designation of a consumer as a terrorist would be injury enough to file a lawsuit. Justice Thomas argued that Congress had the right to define the misdeed that made someone eligible for compensation, and what TransUnion did fell squarely into that. The embarrassment and hardship of being designated a terrorist should have been enough to make TransUnion liable for damages. However, the majority saw the case differently, arguing that someone was not harmed until they were denied a loan or had creditors see the information.

This Could Impact Future Class Action Cases

This case could have wide implications in future class action cases. It significantly pares back some class action rights, and it will leave open to question the point at which the plaintiffs suffer actual harm. In the future, you can fully expect defendants to use the "no harm no foul" defense in the event of corporate wrongdoing. This decision is just the latest attack on class action rights by a judiciary that is intent on cutting them back as much as possible. Class action plaintiffs clearly have no friend in this Supreme Court, as practically every major decision in the last three decades has cut into their rights.