The National Law Review

2021 Year in Review: Financial Privacy Litigation and Developments Post-Ramirez

2021 has been a monumental year in many ways, and consumer financial privacy litigation and enforcement was no exception.  In the executive branch, the Biden Administration focused on strengthening individual privacy protections and limiting the disclosure of sensitive data.  Meanwhile, the Supreme Court’s decision in TransUnion LLC v. Ramirez continues to have a long-lasting impact in the privacy class action sphere.  Read on to hear about some of the biggest changes in financial privacy in 2021, and what it means for individuals, businesses and litigants in the new year.

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TransUnion LLC v. Ramirez Limits Article III Standing in FCRA Class Actions

The Supreme Court dramatically limited the availability of Article III standing for financial privacy litigations in TransUnion LLC v. Ramirez, 141 S. Ct. 2190 (2021).  In Ramirez, a putative class of individuals whose credit reports contained mistaken terrorist designations sued TransUnion under the Fair Credit Reporting Act (“FRCA”).  Out of 8,185 class members, only 1,853 had misleading credit files provided to third-party businesses by TransUnion.  For the remaining 6,332 members, TransUnion maintained erroneous files but did not disseminate them to third parties.  The Supreme Court held that class members whose credit files TransUnion provided to third-party businesses suffered concrete harm akin to the common law tort of defamation, conferring Article III standing.  According to the Court, however, the remaining class members whose files were not released did not suffer concrete harm and thus lacked standing.

In considering what constitutes an “injury in fact” under Article III, the Supreme Court held that “[o]nly plaintiffs concretely harmed by a defendant’s statutory violation have Article III standing to seek damages against the private defendant in federal court.”  The Court found that “Article III standing requires a concrete injury even in the context of a statutory violation.”  It is not the case, the Court clarified, that “a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.” (emphasis supplied).  The Court in Ramirez also held that in a class action for damages, class members must have Article III standing to recover.  The Court further held that a mere risk of future harm is not a concrete harm in a suit for damages.

What Are The Other Effects of Ramirez?

How else has Ramirez impacted financial privacy litigation?

First, some courts suggest that Ramirez’s application is limited earlier in the litigation process.  The court in In re Blackbaud, Inc., Customer Data Breach Litigation, 2021 U.S. Dist. LEXIS 123355 (D.S.C. July 1, 2021), considering a motion to dismiss, noted that Ramirez would be distinguishable for having a jury verdict.   Christian Labor Association v. City of Duluth, 2021 U.S. Dist. LEXIS 124289 (D. Minn. July 2, 2021), also suggested Ramirez’s applicability may be limited at the motion to dismiss stage.  However, numerous courts have applied Ramirez on a motion to dismiss.  This ambiguity in the procedural application of Ramirez is one to watch, especially when it comes to class certification.  Indeed, while the Court clarified that all class members seeking damages must establish standing, it expressly left open the question of whether every class member must demonstrate standing before a court certifies a class – an issue that lower courts have been grappling with in the wake of the Ramirez decision.

Second, the Ramirez decision raised concerns that states courts would be flooded with class actions—a “pyrrhic victory,” as Justice Clarence Thomas noted in his dissent.  So far, several courts have remanded putative financial privacy class actions to state courts.  In Lagrisola v. North American Financial Corp., 2021 U.S. Dist. LEXIS 192140 (S.D. Cal. Oct. 5, 2021), a federal court remanded a putative class action alleging violations of California law, and in Winters v. Douglas Emmett, Inc., 2021 U.S. Dist. LEXIS 124495 (C.D. Cal. July 2, 2021), the federal court remanded a putative FRCA class action.  Keep an eye on federal dockets in 2022 to see if these remands signal a growing trend, particularly in the Ninth Circuit.

Furthermore, some courts have attempted to contain Ramirez to defamation-adjacent actions.  For example, the court in Mastel v. Miniclip SA, 2021 U.S. Dist. LEXIS 132401 (E.D. Cal. July 15, 2021), found an injury in fact akin to invasion of privacy, not defamation, so Ramirez didn’t apply.  Similarly, the court in Lupia v. Medicredit, Inc., 8 F.4th 1184 (10th Cir. 2021), permitted a FDCPA claim to proceed, finding an injury in fact similar to intrusion upon seclusion.  In contrast, some courts have denied standing in cases where the defendant failed to disseminate private information, analogizing to defamation.  As a result, we may see a trend of plaintiffs arguing that their underlying harm resembles a tort other than defamation to uphold Article III standing.

On a related note, while commentators worried that Ramirez would preclude data breach litigations (including cases involved the alleged disclosure of personal financial information) from being brought in federal courts, such concerns have not yet materialized.  The courts in Blackbaud and Cotter v. Checkers Drive-In Restaurants, Inc., 2021 U.S. Dist. LEXIS 160592 (M.D. Fla. Aug. 25, 2021), distinguished Ramirez on procedural grounds.  Meanwhile, some courts have indicated that an impending injury or substantial risk could suffice for injury in fact in data breach litigation.  The court in Griffey v. Magellan Health Inc., 20210 U.S. Dist. LEXIS 184591 (D. Az. Sep. 27, 2021), found that plaintiffs alleged risks of future harm that were “certainly impending” and thus had standing.  All in all, however, pleading a data incident without something more probably does not survive a motion to dismiss.  That’s what happened in Legg v. Leaders Life Ins. Co., 2021 U.S. Dist. LEXIS 232833 (W.D. Okla. Dec. 6, 2021), where plaintiffs’ allegations of general risks of harm did not suffice.

Eleventh Circuit to Address Article III Standing in Wake of Ramirez After Whiplash in Hunstein v. Preferred Collection and Management Services, Inc.

In April, the Eleventh Circuit held in Hunstein v. Preferred Collection and Management Services, Inc., 994 F.3d 1341 (11th Cir. 2021), that the transmittal of a debtor’s personal information to a third-party mailing service violated section 1692c(b) of the Fair Debt Collection Practices Act (“FDCPA”).  In Hunstein I, Plaintiff incurred a hospital debt resulting from his son’s medical treatment.  The hospital assigned the debt to a debt collector, who hired a commercial mail vendor, transmitting personal information about Plaintiff along the way.  The Eleventh Circuit held that Plaintiff had suffered a concrete statutory injury sufficient for Article III standing, even though he had not suffered a “tangible harm” or even a “risk of real harm.”

In October, following Ramirez, the Eleventh Circuit vacated its opinion in Hunstein I but doubled-down on its original holdings.  The Eleventh Circuit held that the plaintiff suffered an intangible but concrete injury, analogizing the disclosure of his personal information to the common law tort of public disclosure of private facts.  Shortly thereafter in November, the Eleventh Circuit once again vacated Hunstein II and ordered a rehearing en banc, which has yet to occur.

In the meantime, the impact of Hunstein remains unclear.  Hunstein only binds courts within the Eleventh Circuit—but that doesn’t mean that other courts don’t take note of how the Eleventh Circuit subsequently rules.

For example, in Keller v. Northstar Locations Services, 2021 U.S. Dist. LEXIS 157820 (N.D. Ill. Aug. 20, 2021), and Thomas v. Unifin, Inc., 2021 U.S. Dist. LEXIS 157814 (N.D. Ill. Aug. 20, 2021), the Northern District of Illinois denied motions to remand individual FDCPA actions, arguing that disclosing information about debt to unauthorized third parties resembles invasion of privacy torts.  However, the Eastern District of New York dismissed six mailing vendor class actions in In re FDCPA Vendor Cases, 2021 U.S. Dist. LEXIS 139848 (E.D.N.Y. July 23, 2021), rejecting Hunstein and finding no injury in fact.

Other Financial Privacy Litigation Trends

More broadly, the number of consumer financial privacy cases filed in 2021 continued a year-over-year increase.  For example, according to Lex Machina and LexisNexis statistics, the number of FCRA litigations nearly tripled over the last decade with the number of filings continuing to rise compared to 2020.  Litigation under the Telephone Consumer Protection Act (“TCPA”) also remained at a high level (for more on this, be sure to check out TCPAWorld.com).

One trend in FCRA litigation is a rising number of claims brought against employers in the background check context.  As shown by some recent cases, many prospective employers are not aware of potential FCRA litigation risk concerning background check disclosure issues because template disclosures and notices are frequently provided by third parties.

Noteworthy Executive and Agency Action in the Financial Privacy Space

The Biden Administration engaged in a number of executive actions in 2021 that impacted the financial privacy sphere.  One of these notable executive actions was President Biden’s July 9, 2021, Executive Order entitled “Promoting Competition in the American Economy.” Lurking behind the seemingly economic-based title are a number of privacy-centric regulations.

For instance, the Order instructs the Federal Trade Commission (“FTC”) to use its rulemaking authority to promulgate additional regulations addressing “unfair data collection and surveillance practices that may damage competition, consumer autonomy, and consumer privacy.”  This potentially years-long rulemaking process will focus, in part, on safeguarding the acquisition and transfer of consumer data in mergers and transactions.  Interestingly, the Order simultaneously directs the Consumer Financial Protection Bureau (“CFPB”) to issue rules allowing for data portability of consumers’ banking data to make it easier for consumers to switch financial institutions.

While executive orders set a roadmap for future areas of agency action, agencies like the FTC were already busy enacting and enforcing new privacy policies.  For its part, the FTC issued a new enforcement policy statement warning companies that it is ramping up enforcement in response to a rising number of complaints about the financial harms caused by deceptive signup tactics, unauthorized charges, and ongoing charges that are especially burdensome to cancel.  In particular, the enforcement policy condemned negative option offers which are, in other words, when a company interprets a consumer’s silence as acceptance or continuing acceptance of an offer.  This new FTC enforcement policy might affect, for example, those companies that utilize automatic renewals or free-to-play offer structures.

In contrast, in 2021 the CFPB slowed down the pace of its public enforcement actions. Hearkening back to 2015, the CFPB was busy, bringing a total of 57 public enforcement actions.  That number declined for the next few years, with only 42 actions in 2016, 38 actions in 2017, and 11 actions in 2018, but experienced a slight uptick in 2019 (22 enforcement actions) and 2020 (48 enforcement actions).  In sharp contrast to the soft ebb and flow seen in the last few years, the number of CFPB public enforcement actions more than halved in 2021 to a mere 18 enforcement actions, the second-lowest number in over half a decade.  However, this number may be set for an uptick in 2022 now that Rohit Chopra has been confirmed as CFPB Director and as financial privacy remains a federal priority.

Conclusion

2021 proved to be a year full of consequential developments to the financial privacy space.  Before the first half of 2021 was over, the Supreme Court had issued its monumental Ramirez decision.  That opinion will change the way that litigants, especially class action litigants, approach financial privacy cases involving statutory violations.  Courts, too, continue to grapple with the effects of Ramirez, with some federal courts, like the Eleventh Circuit, reevaluating pending cases, while other federal courts attempt to distinguish Ramirez or limit its application.

Meanwhile, state courts brace for a potential wave of privacy cases in 2022.  The executive branch also demonstrated a keen interest in shaping privacy policy, as the Biden Administration promulgated several key executive orders, while agencies on the ground ramped up enforcement to address potential privacy violations.  While it is hard to know exactly what 2022 holds in store for privacy practitioners, companies, and litigations, the important shifts in privacy law and policy in 2021 are sure to shape the privacy landscape in 2022 and, likely, for years to come.  Not to worry, CPW will be there to keep you in the loop.

Brianna Soltys & Margaret Booz also contributed to this article.