Supreme Court Holds That the Violation of a Statutory Right Is Insufficient to Establish Article III Standing in a Damages Action

To bring suit in federal court, a plaintiff must have “Article III standing.” That is to say, the plaintiff must have a personal stake in the suit’s outcome. This is true whether a plaintiff is suing individually or as a member of a class.

Earlier this week, in TransUnion v. Ramirez, the Supreme Court held that even if a federal statute creates a private right of action authorizing individuals to sue violators for actual or statutory damages, a plaintiff may not bring such an action in federal court unless they allege—and ultimately prove—that they suffered actual harm from a statutory violation. That a violation creates a risk of future harm is, the Court held, insufficient to confer Article III standing on a plaintiff and thus insufficient to establish federal jurisdiction over a plaintiff’s claim.

Although decided under the Fair Credit Reporting Act (FCRA), the TransUnion decision could have far-reaching implications. By preventing plaintiffs without actual damages from seeking statutory damages in federal court, the decision will likely reduce the number of federal suits—particularly class actions—that seek statutory damages under a variety of statutes. But, because the decision does not prevent such plaintiffs from seeking such damages in state court, the decision might simply divert suits from federal to state courts.

In TransUnion, over eight-thousand plaintiffs brought a class action alleging that the defendant credit reporting agency had violated the FCRA when it created credit reports misleadingly identifying each plaintiff as a “potential match” to someone on a government-maintained list of terrorists, drug traffickers, and other serious criminals. According to the plaintiffs, the defendant breached the FCRA by failing to use reasonable procedures when identifying the plaintiffs as potential matches to persons on the list, by failing to provide upon request complete copies of the plaintiffs’ respective credit reports, and by failing to supply mandated information in the mandated form when responding to the plaintiffs’ requests for their credit reports.

Citing its 2016 Spokeo decision, the Court held that class members whose misleading credit reports had been disseminated by the defendant to third parties had standing to seek statutory damages for the defendant’s violation of the FCRA’s reasonable-procedures requirement because these plaintiffs could establish a “concrete injury” analogous to one recognized at common law, namely, defamation. Conversely, the Court held that class members whose misleading credit reports had not been disseminated did not have standing, even if the defendant had failed to use reasonable procedures when preparing their credit reports, because these plaintiffs were unable to show such an injury.

In concluding that plaintiffs in the second category were unable to establish a concrete injury and thus unable to establish standing, the Court acknowledged that the defendant’s statutory violation placed the plaintiffs at risk of future harm but rejected the contention that the risk of such harm is sufficient to confer standing. While Spokeo recognized that “the risk of real harm” could constitute a concrete harm for purposes of standing, the TransUnion Court distinguished between claims for statutory damages and claims for injunctive relief, holding that a risk of future harm could establish Article III standing, and thus federal jurisdiction, over claims for injunctive relief but not over claims for statutory damages.

In what the four dissenting justices viewed as an irony, the Court invoked the separation-of-powers doctrine to justify its conclusion that an individual cannot sue for statutory damages absent actual injury even if Congress creates a private right of action authorizing such actions. According to the majority, requiring plaintiffs to demonstrate “concrete injury” to establish standing to sue ensures that “[f]ederal courts do not exercise general legal oversight of the Legislative and Executive branches, or of private entities.” Allowing private plaintiffs to sue for statutory violations absent concrete, particularized injury would, said the Court, undermine the executive agencies’ regulatory and prosecutorial discretion.. And while Congress can create causes of action for “concrete, de facto injuries” for which there previously was no remedy, it may not, said the Court, “simply enact an injury into existence, using its lawmaking power to transform something that is not remotely harmful into something that is.”

The majority’s reasoning provoked an originalist dissent from Justice Thomas, who in an unusual alignment was joined by the Court’s three liberal members. According to the dissent, Article III standing was always a matter of whether a plaintiff pressed his or her own private rights and was a barrier only to citizen-suits pressing rights held by the public at large. The dissent accused the majority of inventing the idea that a violation of a statutory right might not be an injury in fact sufficient to support standing, using as an example copyright law, which creates new rights and permits plaintiffs to sue in federal court for injuries that exist only in law.

The dissent also noted an important limit to the Court’s decision, which affects only federal court jurisdiction under Article III. It does not bind state courts, and some states have rejected various aspects of federal standing jurisprudence. It is not clear how the Supreme Court’s statement about Congress’s inability to enact an injury into existence for purposes of Article III will affect a state court’s concurrent jurisdiction to hear cases arising under federal law. The dissent argued that the Court may have ensured that state courts will have exclusive jurisdiction over this sort of class actions. Although litigants cannot confer federal subject-matter jurisdiction where it does not exist and federal courts are required to examine sua sponte whether they possess subject-matter jurisdiction, arguing that a plaintiff lacks Article III standing in a borderline case could force the defendant to litigate in state court. Defendants considering seeking dismissal based on TransUnion should review whether applicable state law would permit the case to be heard in state court.