SCOTUS Reverses Ninth Circuit & Holds Class Action Plaintiffs Lack Standing To Bring FCRA Claims Against TransUnion

On Friday, June 25, 2021, in a 5-4 decision, the United States Supreme Court reversed the Ninth Circuit and held the majority of the nearly 8,200 members of a certified class seeking claims under the FRCA against TransUnion lacked Article III standing because they had not demonstrated concrete injury. TransUnion, LLC v. Ramirez, No. 20-297, 2021 WL 2599472 (U.S. June 25, 2021).

Plaintiffs, a certified class of 8,185 members, initially filed suit in the Northern District of California, alleging violations of the Fair Credit Reporting Act (FRCA) against TransUnion, a credit reporting agency, for mistakenly labeling plaintiffs as “potential terrorists” in their credit files. The case went to trial, where the jury returned a verdict in favor of plaintiffs, awarding nearly $8 million in statutory damages and $52 million in punitive damages. TransUnion appealed to the Ninth Circuit Court of Appeals, who affirmed the district court’s holding that all of the class members had standing.[1] TransUnion again appealed and the Supreme Court granted certiorari. Several business organizations, including Facebook, Google, and eBay, filed amicus briefs supporting TransUnion’s position and urging the Supreme Court to narrow the types of privacy suits in which Article III standing is established.

In a 5-4 decision authored by Justice Kavanaugh, the Supreme Court held the majority of class members lacked standing for failure to demonstrate a concrete harm as to the “reasonable procedures” claim under the FRCA. In so holding, the Court emphasized that only 1,853 of the class members had their inaccurate reports actually disclosed to a third party. For the remaining 6,332 members, “[t]he internal [TransUnion] files were not provided to third-party businesses during the relevant period.” Id. at *3.

As stated succinctly by the Court: “No concrete harm, no standing.” Id. at *15.

The Court acknowledged its precedent that “risk of future harm can satisfy the concrete-harm requirement,” but noted that the risk must be “sufficiently imminent and substantial.” Id. at *12. As such, the Court concluded that the 6,332 plaintiffs had not demonstrated materialization of the risk of future harm because (1) their reports were not provided to third parties, and (2) they had not demonstrated any damage resulting from future risk, such as emotional harm, especially where it is unclear the majority of the 6,332 plaintiffs ever even knew of the inaccurate designations prior to the lawsuit. As a result, the Court concluded that all but 1,853 of the members lacked standing with regard to the reasonable procedures claim.

Further, with regard to the plaintiffs’ two additional claims regarding formatting defects in the reports, the Court held that none of the class members—except for representative Ramirez—had demonstrated the defects caused them concrete harm. Therefore, the Court held that all members except Ramirez also lacked standing as to those claims. In light of the Court’s holding regarding standing, the Court further noted the Ninth Circuit could consider in the first instance the appropriateness of class certification.

Justice Thomas wrote a scathing dissent, joined by three of the more liberal members of the Court. Thomas concluded his heated rejection of the majority opinion:

Ultimately, the majority seems to pose to the reader a single rhetorical question: Who could possibly think that a person is harmed when he requests and is sent an incomplete credit report, or is sent a suspicious notice informing him that he may be a designated drug trafficker or terrorist, or is not sent anything informing him of how to remove this inaccurate red flag? The answer is, of course, legion: Congress, the President, the jury, the District Court, the Ninth Circuit, and four Members of this Court.

Justice Kagan joined in Thomas’s dissent but also wrote separately, noting one qualification of her view with regard to overriding Congress’s authorization to sue.

The Court’s ruling in TransUnion v. Ramirez presents great implication in the uptick of legal claims alleging violation of privacy and consumer protection laws. For example, a pending Eleventh Circuit case, Hunstein v. Preferred (highlighted by The Rudnicki Firm last month), may be impacted by the Supreme Court’s ruling. There, a Petition for Rehearing is pending with regard to alleged violations of the FDCPA for disclosure of debt information to a third-party vendor only for printing and mailing to the debtor. The Court’s holding in TransUnion presents new considerations for the Eleventh Circuit in determining whether providing information to a third-party vendor only for printing and mailing to the debtor himself constitutes a concrete harm to establish Article III standing. Based upon the Court’s holding in TransUnion, the party petitioning for rehearing in Hunstein, a debt collection agency, can argue that provision of such information to a vendor only for the furtherance of the agency’s own collection efforts does not constitute disclosure giving rise to concrete harm to the plaintiff.

More information regarding the application of TransUnion will be forthcoming. Check The Rudnicki Firm’s online alerts to monitor the Court’s decision with regard to rehearing and any additional information on this case.

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[1] The Ninth Circuit reversed and remanded the jury’s award of punitive damages, however, finding the ratio to statutory damages to be unconstitutionally excessive.

EEOC Updates COVID-19 Vaccination Guidance for Employers

On Friday, May 28, 2021, the Equal Employment Opportunity Commission (“EEOC”) updated its “What You Should Know” page relating to COVID-19 and the ADA and other related equal employment opportunity laws. The new section K, “Vaccinations,” of this EEOC guidance provides information to employers navigating the interplay between pro-vaccination endeavors and various legal safeguards in the workplace.

I.                Requiring Vaccinations in the Workplace and Reasonable Accommodations

            The EEOC notes that the availability of COVID-19 vaccinations brings to light concerns under the ADA, the Rehabilitation Act, the Genetic Information Nondiscrimination Act (GINA), and Title VII of the Civil Rights Act. The EEOC stated that, generally, employers are not prevented by law from requiring all employees physically present in the workplace to be vaccinated, so long as reasonable accommodations are made in accordance with Title VII and the ADA. In order to determine whether an accommodation must be made, the employer will need to undergo an analysis considering (1) the employee’s reason for abstention from the vaccine (either disability or religion) and (2) any undue burden on the business. This is a fact-intensive inquiry that should be conducted with the assistance of legal counsel.

As a general note, an employer should accept an employee’s claim of religious belief, except in exceptional circumstances. An employee’s pregnancy may require accommodation under Title VII in order to prevent discrimination. If an employer has reason to doubt an employee’s claim for accommodations, the employer should consult with legal counsel before taking additional steps.

The EEOC provided a few examples of accommodations that might be made for those unable to obtain a vaccination due to disability or religious belief: wearing a face mask, social distancing, modified work shifts, periodic testing, telework, or reassignment. Of course, an employer’s vaccine requirement cannot be implemented in such a way that would disproportionately affect a group of employees based on their race, religion, sex, or national origin. As such, considerations such as accessibility to the vaccine by certain communities should be considered.

Under the ADA, it is unlawful for an employer to disclose that an employee is receiving a reasonable accommodation.

II.             Confidentiality

Employers choosing to have vaccines administered to employees by the employer or its agent should ensure they are complying with ADA requirements governing “medical examinations” by employers.

Employee medical information, such as documentation or other confirmation of vaccination is confidential under the ADA and must be stored separately from the employee’s personnel files. However, inquiring as to whether an employee obtained a COVID-19 vaccine from a third-party in the community is permitted by law and is not a “disability-related inquiry” under the ADA.

III.           Encouraging Employees and their Families to Get Vaccinated

Employers can provide incentives, including both rewards and penalties, to employees to get vaccinated, provided those incentives are no coercive.

The EEOC stated that employers may provide education materials regarding the COVID-19 vaccine to employees and their families. An employer may not offer incentives for the vaccination of an employee’s family member, as such incentive would require the disclosure of the family member’s information in violation of GINA.

Educational materials may include information on vaccination sites, reasonable accommodations, alternative ways to book a vaccine appointment (besides internet access), and low-cost transportation to appointments. Notably, as of May 2021, the federal government is providing vaccines at no cost everyone ages 12 years and older.

 The Rudnicki Firm continues to monitor these developments and will be available employers for questions and guidance in complying with EEOC’s new guidance on COVID-19 vaccinations.

Oklahoma Supreme Court Rules on Questions Regarding Accrual of Certain Claims

On Tuesday, May 25, 2021, the Oklahoma Supreme Court answered two questions certified by the U.S. Court of Appeals for the Tenth Circuit, resulting in the following first impression holdings by the Court:

(1)   A bad faith tort action for an injury resulting from an adverse or excess judgment does not accrue until the judgment is final and non-appealable.

(2)   A breach of contract action accrues when the contract is breached, not when damages result. And the discovery rule does not apply to breach of contract claims, except in instances of fraudulent concealment.

In Morgan v. State Farm Mutual Automobile Insurance Co., 2021 OK 27, No. 118,881 (Okla. 2021), a defendant in an automobile accident case, Morgan, sued his insurer, State Farm, for failure to obtain a release from the workers’ compensation insurer when obtaining a release from the automobile accident plaintiff. Morgan alleged State Farm’s breach of implied duty of good faith and breach of contract resulted in the workers’ compensation insurer obtaining a judgment against Morgan for reimbursement of amounts paid to the auto accident plaintiff. The U.S. District Court for the Western District Court of Oklahoma held, however, that Morgan’s claims had accrued in 2010—when State Farm negotiated the original settlement—and that Morgan’s claims were therefore barred by the applicable two- and five-year statutes of limitations. Morgan appealed and the Tenth Circuit certified these two questions to the state Supreme Court.

Question 1:  In addressing the first question regarding the accrual of a bad faith action in which the alleged injury is an adverse or excess judgment, the Oklahoma Supreme Court noted it was a question of first impression. As such, the Court looked to Oklahoma case law regarding analogous claims, e.g., legal malpractice, and other jurisdictions’ analysis of the accrual of bad faith tort actions arising from a failure to settle. The Court concluded that “the injury upon which Morgan’s bad faith action can proceed is an adverse judgment.” The judgment must be “final and non-appealable” in order for such claims to accrue. In its reasoning, the Court stated: “[a] tort is not complete until there is an injury”, and precedent requires such injuries be “certain and not merely speculative” to be actionable.

Question 2: With regard to the second question on the accrual of a breach of contract claim, the Court held that such a claim accrues at the time of the breach, not at the time the plaintiff incurs damages. In so holding, the Court stated that “unlike a tort claim, a breach of contract is a legal wrong independent of the existence of actual damages.” The Court noted that, under Oklahoma law, a plaintiff need demonstrate only that a contract existed and was breached to maintain an action.  The Court stated: “A plaintiff can maintain a breach of contract action to a successful conclusion without proof of actual damages, because nominal damages are all that is required.”

Further, the Court determined that the “discovery rule” (i.e. the rule in tort that a plaintiff’s claim does not accrue until the plaintiff knew or should have known of her injury), does not apply to a breach of contract claim. As stated by the Court: “The claim accrues when the contract is breached, regardless of whether the plaintiff knows, or in the exercise of reasonable diligence, should have known of the breach.” The only exception to this is where the defendant fraudulently conceals the breach, which will toll the accrual of plaintiff’s breach of contract claim.

Oklahoma Supreme Court Justice Kane authored the opinion. Justices Kauger, Combs, and Gurich concurred in part and dissented in part, though no separate opinion was issued. This opinion has not yet been released for publication and is therefore still subject to revision or withdrawal.

The Oklahoma Supreme Court’s clarification regarding the accrual of these two types of claims—(1) bad faith tort claims in which the alleged injury is an adverse or excess judgment, and (2) breach of contract claims—provides clarification regarding the start of the clock for Oklahoma statutes of limitations. For more information on this ruling, or for questions on how this developing law may affect your company’s claims or potential claims, contact Leah Rudnicki.

Defendant Preferred Collection Petitions for Rehearing in Eleventh Circuit

On Tuesday, May 25, 2021, Preferred Collection and Management Services, Inc. (“Preferred”) filed its Petition for Rehearing and for Rehearing En Banc in the matter Hunstein v. Preferred, No. 19-14494-HH (11th Cir. April 21, 2021) (as corrected May 5, 2021), petition for reh’g filed May 25, 2021.

Plaintiff initially filed suit against Preferred April 24, 2019, alleging violations of the Fair Debt Collections Practices Act (FDCPA) and Florida law with regard to Preferred’s attempts to collect on a debt owed by Plaintiff. Specifically, Plaintiff argued that Preferred’s transmittal of debt collection data to a mail vendor for the sole purpose of preparing and mailing the letter to Plaintiff violated the FDCPA and state law.

Preferred moved to dismiss Plaintiff’s Complaint pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure, which motion the district court granted October 29, 2019. Plaintiff appealed and the Eleventh Circuit Court of Appeals issued an opinion April 21, 2021, reversing the district court and remanding. Preferred filed for rehearing Tuesday, May 25, 2021.

In its Petition for Rehearing, Preferred argues the Circuit Court misinterpreted 11th Circuit and Supreme Court precedent by holding that, despite Plaintiff not suffering any tangible harm or risk, he nonetheless suffered a concrete harm in light of the close relationship between 15 U.S.C § 1692c(b) and the common law tort of public disclosure of private facts. Preferred argued in its Petition for Rehearing that this conclusion by the Court was not in-line with precedent. Preferred further argued that the Court failed to consider whether the injury was “particularized” or “personal” to the Plaintiff. Instead, as Preferred notes in its brief, the Court actually expressed doubt the alleged “harm” occurred or was likely to occur.

Preferred further emphasizes that the Circuit Panel failed to examine whether Plaintiff’s claims were of the type that bore any relationship to a harm protected at common law—which Preferred argues they are not. In support, Preferred noted the difference in the electronic transmission of information to private server of an agent of Preferred and the common law tort of public disclosure because such transmission is not “public.” Preferred maintains that such a transmission would not be highly offensive to a reasonable person and that “invasion of privacy” is not one of the enumerated purposes of the FDCPA.

Finally, Preferred asserted in its Petition for Rehearing that the Court’s conclusion that the use of third-party vendor violated the FDCPA was unsupported by (1) the text of the FDCPA, which references telegrams, thereby recognizing the ministerial use of third-parties in order to facilitate non-abusive communications with a consumer; (2) prior similar case law in other jurisdictions; and (3) the Consumer Finance Protection Bureau’s recognition of the use of this type of letter vendor in its forthcoming amendments.

More information on this matter will be forthcoming. Check The Rudnicki Firm’s online alerts to monitor the Court’s decision with regard to rehearing and any additional information on this case.

Oklahoma Supreme Court Rules on Waiver of Arbitration Provision

In an opinion issued Tuesday, May 19, 2021, the Oklahoma Supreme Court overturned the decision of the Oklahoma Court of Civil Appeals and held that the defendant did not waive its right to arbitrate pursuant to a term in its contract with the plaintiff.

In Howell’s Well Service v. Focus Group Advisors, 2021 OK 25, No. 117804 (Okla. 2021), the Oklahoma Supreme Court addressed the issue of whether a defendant waived its right to compel arbitration by not including it as an affirmative defense in its responsive pleading. Alternatively, the Court also considered whether the defendant had waived its right to arbitrate according to the equitable balancing test as outline in Oklahoma Supreme Court precedent.

The Plaintiffs in Howell Well Servicers were investors at the Defendant investment firm. The agreement between Plaintiffs and Defendant contained an arbitration provision. The Plaintiff filed suit in May 2013—the specifics of which claims were not included in the appellate opinion—but did not serve Defendant until nearly one and a half years later. Defendant answered in February 2015, but did not raise the arbitration provision in its answer.

The case fell mostly silent for another seventeen months, at which time Defendant filed a motion to compel arbitration. A status conference was set regarding the motion, but was stricken in favor of mediation. Mediation ultimately failed, however, and the case date dormant for another two years until Plaintiffs against requested the setting of a status conference on Defendant’s motion to compel arbitration.

After a hearing on Defendant’s motion, the trial court held: 1) Defendants waived the right to arbitration by not raising in their Answer, and (2) the late assertion of the right would be prejudicial to the Plaintiffs. The Court of Civil Appeals affirmed the trial court and the Supreme Court granted Certiorari.

In reviewing on appeal, the Supreme Court firstly considered whether the Oklahoma pleading statutes required a defendant to plead the right to arbitrate as an affirmative defense in its responsive pleading. The Court looked to Oklahoma’s strong public policy in favor of arbitration, as well as Tenth Circuit case law applicable to the federal counterpart of the Oklahoma Uniform Arbitration Act. The Supreme Court further noted prior opinions from the same division of the Court of Civil Appeals which the Supreme Court read as running contrary to the Court of Civil Appeal’s holding in this case. All these considered, the Supreme Court held that Oklahoma law did not require Defendant to plead the arbitration provision in order to avoid waiver.

The Supreme Court secondly considered whether the Defendant waived its right to compel arbitration according to the equitable factors put forth by the Court of Civil Appeals in Northland Ins. Co. v. Kellogg, 1995 OK CIV APP 84, ¶ 8, 897 P.2d 1161, 1162. After applying the fact-intensive, six-factored balancing test to the facts at hand, the Court concluded that the Northland factors weighed against a finding of waiver by the Defendants. In so holding, the Supreme Court noted such things as the Defendant’s inactive role in the litigation, lack of discovery, lack of trial dates or scheduling order, and the Plaintiff’s own lengthy delays.

This decision by the Oklahoma Supreme Court on the first impression issue of the inclusion of a right to arbitrate within a responsive pleading indicates a refusal by the Court to read an additional requirement into the Oklahoma pleading statutes. Further, the application of the Northland factors indicates the Court’s approval of this equitable analysis in determining whether a party waived its right to arbitrate and confirms Oklahoma’s strong favor of arbitration.

Texas Supreme Court Rules on Issue of Control by Independent Contractor

In an opinion issued Friday, May 7, 2021, the Texas Supreme Court upheld the trial court’s grant of summary judgment in favor of the defendant on the issue of control over an independent contractor.

In JLB Builders, LLC v. Hernandez, No. 20-0368, 2021 WL 1822947 (Tex. 2021), the employee of a subcontractor for a high-rise construction project was injured on the job. The injured person filed claims of negligence against the general contractor, who had an independent contractor relationship with the plaintiff’s employer. The defendant/general contractor filed a motion for summary judgment, asserting that it did not owe a duty to plaintiff because it did not have actual or contractual control over the plaintiff. The trial court agreed and granted defendant’s motion. An intermediate court of appeals reversed. The Supreme Court of Texas granted certiorari.

In reversing the court of appeals and upholding the trial court’s grant of summary judgment in favor of defendant, the Court ruled that, based upon the facts in the case, the defendant did not have actual control over the plaintiff. In so concluding, the Court noted that in order to give rise to a duty, a contractor’s control “must extend to the timing and sequence of the particular independent contractor’s work,” and that “the general right to order work started and stopped and direct when and where the work is done does not give rise to a duty of care.” Further, the Court held that the defendant’s requirement that plaintiff wear a safety harness did not increase the risk or severity of injury, so that the requirement did not amount to control giving rise to a duty to the plaintiff.

The Court also ruled that the defendant did not have contractual control over the plaintiff. The contract delegated supervisory duties to the subcontractor and withheld from the defendant the authority to direct and control the “means, manner or method” of the work. The Court noted that the “general supervisory authority with respect to subcontractor scheduling” does not give rise to a duty of care by an independent contractor. As such, the Court determined that there was similarly no controverted issue of fact regarding the defendant’s contractual control over the plaintiff.

This ruling from the Texas Supreme Court indicates the continued existence of a high bar for plaintiffs seeking to establish a duty of care owed by independent contractor defendants. The opinion also demonstrates, however, that the relevant legal analysis is fact-intensive and dependent upon the unique circumstances of each case.

U.S. Supreme Court Adopts Narrow Construction of TCPA in Unanimous Decision

In a 9-0 opinion issued on April 1, 2021, the United States Supreme Court held that the Telephone Consumer Protection Act of 1991 (TCPA) defined “automatic telephone dialing system” (ATDS) to include only those devices which have the capacity to store or produce a telephone number using a random or sequential number generator.

 This ruling in Facebook, Inc. v. Duguid, one of the most influential rulings on the TCPA to date, resolves a Circuit split regarding the definition of ATDS. The Supreme Court’s opinion ultimately aligned with Facebook, the federal government, and more than a dozen amici curiae’s stance that the 9th Circuit’s ruling below—construing broadly the TCPA’s prohibition on robocalls to outlaw notifications such as Facebook’s security verification texts—should be overruled. Facebook’s arguments on appeal, and the Supreme Court’s decision, hinged largely upon a narrow construction of the statutory text.

 The decision presents welcomed clarity regarding the growing inconsistency amongst the Circuit courts regarding the application of the TCPA’s regulation of ATDS. The ruling is expected to curb the growing number of putative class actions seeking to establish liability of corporate actors for similar electronic notifications under this decades-old statute.

Texas Chief Justice Gives State of Judiciary Address

At noon today, the Chief Justice of the Texas Supreme Court, the Honorable Nathan L. Hecht, gave the annual State of the Judiciary Address. While the Justice did not provide specifics, his comments indicate where the Texas judiciary sees itself going over the next year. Most notably, he revealed that the Texas judiciary plans to keep using remote platforms for proceedings, including all jury trials except for “complex civil matters” and felony cases. Under the Texas Supreme Court’s Emergency Order No. 36, courts may require, without the parties’ consent, that proceedings take place remotely. This authority extends to jury trials as well, save for felony cases. According to Justice Hecht, Texas district court judge, the Honorable Emily Miskel, conducted the nation’s first virtual jury trial last year; overall, thirty-five virtual trials have been conducted in Texas. The full State of the Judiciary Address can be accessed using this link: https://www.txcourts.gov/SOJ .