Alexandra Zimmer | U.S. Department of Agriculture Rural Development Rural Housing Service v. Kirtz

INTRODUCTION

The United States Department of Agriculture Rural Development Rural Housing Service (“Rural Housing Service”) appeals the Third Circuit Court of Appeal’s reversal of the Eastern District of Pennsylvania’s dismissal of Kirtz’s complaint. Kirtz alleged Rural Housing Service and other defendants, including Trans Union LLC and Pennsylvania Higher Education Assistance Agency, violated the Fair Credit Reporting Act by not making a good-faith effort to investigate and correct discrepancies in the loan status that appeared on his credit report. The Fair Credit Reporting Act sets forth certain obligations for persons who provide consumer reporting agencies with credit information.

The district court’s grant of dismissal was based on the United States’ sovereign immunity. Quoting Lane v. Pena, 518 U.S. 187, 192 (1996), the district court reasoned the government’s immunity waiver “must be unequivocally expressed in statutory text.” Further, the courts have held that the scope of that immunity “must be strictly construed in favor of the government, settling any ambiguity in favor of immunity.” United States v. Williams, 514 U.S. 527, 531 (1995). The district court declined to find that the Fair Credit Reporting Act granted such explicit waiver of the United States’ sovereign immunity and therefore dismissed Kirtz’s claim.

On appeal, the Third Circuit joined the Seventh and D.C. Circuits, splitting from the Fourth and Ninth Circuit in finding the FCRA waives sovereign immunity based on the statute's plain language. The Fair Credit Reporting Act defines “person” as “any individual, partnership, corporation, trust, estate, cooperative, association, government or government subdivision or agency, or other entity.” 15 U.S.C. § 1681(a). Further, the Fair Credit Reporting Act provides that “any person” who is noncompliant with the Fair Credit Reporting Act can be civilly liable for harm arising from the person’s willful or negligent noncompliance. 15 U.S.C. §§ 1681n, 1681o. The Third Circuit, taking the statutory definition of “person” to include the United States government and its enforcement powers, found Rural Housing Service could be civilly liable under the statute. Kirtz v. Trans Union LLC, 46 F.4th 159, 167-171 (3d Cir. 2022).   The Third Circuit further noted there was no “express[] preserv[ation] of the United States’ sovereign immunity” in the Fair Credit Reporting Act. Id. at 167.

With the U.S. Supreme Court granting certiorari, Rural Housing Service challenges the Third Circuit’s reversal on the grounds that the Federal Credit Reporting Act does not unequivocally and unambiguously waive the United States’ immunity.

ISSUE PRESENTED

Whether the civil-liability provisions of the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq., unequivocally and unambiguously waive the sovereign immunity of the United States.

THE ARGUMENTS

Rural Housing Service argues that the Fair Credit Report Act does not unequivocally and unambiguously waive the United States’ sovereign immunity. There is no express statement of the waiver, and Rural Housing Service argues that it is unnecessary to infer such a waiver for the statute to be read properly. Rural Housing Service notes that the United States Supreme Court has only twice found an unambiguous waiver of sovereign immunity. Both instances relied on an express waiver of immunity or authorization of suits against sovereigns. By Rural Housing Service’s analysis, the Fair Credit Reporting Act does neither.  Rural Housing Service also notes that interpreting the language of the Fair Credit Reporting Act to mean a waiver of state sovereign immunity would violate the Eleventh Amendment, which Congress cannot do.

Kirtz takes the side of the DC, Seventh, and now Third Circuits in arguing that the Fair Credit Reporting Act does waive sovereign immunity by including the government in the definition of “person[s]” who may be sued for violating the statute. There is no presumption that the term “person” does not include the sovereign (a determination made in Return Mail, Inc. v. U.S. Postal Service, 139 S. Ct. 1853 (2019), a decision Kirtz notes was not available when the Fourth and Ninth Circuit split). Therefore, by the statute's plain language, the Fair Credit Reporting Act unequivocally and unambiguously waives sovereign immunity.

LOOKING FORWARD

The main implications of this case are the impact it will have on statutory waivers of sovereign immunity. It is indisputable that the language of the Fair Credit Reporting Act, which Kirtz asserts is a waiver, is not as “explicit” as the waivers the Supreme Court has previously upheld. If the Supreme Court sides with the Rural Housing Service, then the federal government will continue to enjoy broad protections of sovereign immunity where suits are brought under statutes lacking explicit waivers of that immunity.

However, in the event the Supreme Court decides that the Fair Credit Reporting Act’s inclusion of the government as a “person” who can be liable for violations of the Act is sufficient to waive sovereign immunity, it presents the possibility for even more statutes to be read as waiving immunity even without explicit waiver. The generality and ambiguity of some statutes that have been a relatively consistent bar against litigation may well be done away with, and the federal government may experience more private litigation against them unless and until Congress amends the language of those statutes. Looking forward, Congress may revise how it drafts certain statutes to include an explicit denial of a waiver of sovereign immunity to preserve it.