U.S. Supreme Court Cites Restatement of Torts
Justice Kavanaugh cited the Restatement First of Torts §§ 559 and 577 in a majority opinion of the U.S. Supreme Court. Justice Thomas, dissenting, cited the Restatement First of Torts § 569.
In TransUnion LLC v. Ramirez, No. 20-297 (June 25, 2021), a class of 8,185 consumers sued a credit reporting agency, alleging, among other things, that the credit reporting agency violated the Fair Credit Reporting Act by failing to use “reasonable procedures” to ensure the accuracy of credit files it maintained for consumers. Specifically, the consumers alleged that the credit reporting agency used third-party software to compare each consumer’s first and last name to the first and last names on a list of “specially designated nationals” maintained by the U.S. Treasury Department’s Office of Foreign Assets Control, which included terrorists, drug traffickers, and other serious criminals who threatened the country’s national security and with whom it was generally unlawful to transact business; if the software identified a match, the credit reporting agency then placed an alert on the credit report indicating that the consumer’s name was a “potential match” to a name on the list. The consumers claimed that the software generated many false positives because the credit reporting agency did not compare any data other than first and last names, such as birth dates, middle initials, social security numbers, or other any available identifiers routinely used to collect and verify credit-report data.
The U.S. District Court for the Northern District of California entered judgment on a jury verdict awarding plaintiffs statutory and punitive damages. The U.S. Court of Appeals for the Ninth Circuit affirmed in relevant part, concluding that all of the class members had Article III standing to recover, even though the parties stipulated that the credit reporting agency had only disseminated the credit reports of 1,853 class members to potential creditors during the relevant time period.
The U.S. Supreme Court affirmed in part as to the 1,853 class members whose inaccurate credit reports were disseminated to third parties, but reversed as to the remaining 6,332 class members, and remanded. Associate Justice Brett Kavanaugh, writing for the majority, explained that the 1,853 class members for whom the credit reporting agency provided alerts to businesses that labeled them as potential terrorists, drug traffickers, or serious criminals suffered a concrete reputational harm that qualified as an injury in fact giving rise to Article III standing to sue for failure to follow reasonable procedures in violation of the Fair Credit Reporting Act, because those class members suffered a harm with a close relationship to the harm associated with the tort of defamation described in the Restatement First of Torts § 559.
However, the court concluded that the remaining 6,332 class members had not demonstrated concrete harm and lacked Article III standing to sue on a reasonable-procedures claim under the Fair Credit Reporting Act, because, while their internal credit files maintained by the credit reporting agency contained inaccurate information, that information was not provided to third parties during the relevant time period. Justice Kavanaugh reasoned that, under the Restatement First of Torts § 577, publication was “essential to liability” in a suit for defamation. The court rejected the consumers’ argument that the credit reporting agency “published” their information internally, citing § 559 in explaining that courts traditionally did not recognize intra-company disclosures as actionable publications for purposes of the tort of defamation, which generally required evidence that the defendant actually “brought an idea to the perception of another.”
Associate Justice Clarence Thomas filed a dissenting opinion in which he argued that all of the class members had a sufficient injury and thus had standing to sue in federal court, because it was undisputed that the credit reporting agency breached its duty owed to all of the class members under the Fair Credit Reporting Act to follow reasonable procedures to assure maximum possible accuracy of the information concerning them in their credit reports. Justice Thomas pointed out that the majority rightly decided that having one’s identity falsely and publicly associated with terrorism and drug trafficking was itself a concrete harm under the Restatement First of Torts § 569, which provided that one who falsely, and without a privilege to do so, published matter defamatory to another in such a manner as to make the publication a libel was liable to the other, even though “no special harm or loss of reputation result[ed] therefrom.”
