Email Receipt is not "Electronically Printed" Under FACTA
Simonoff v. Expedia, Inc., 634 F.3d 1202, 2011 U.S. App. LEXIS 10374 (9th Cir. 2011)
Facts: Defendant Expedia, Inc. emailed Plaintiff a receipt, which included the expiration date of Plaintiff's credit card. Plaintiff alleged that the receipt he received via email violated the Fair and Accurate Credit Transactions Act ("FACTA"), an amendment to the Fair Credit Reporting Act ("FCRA"). The lower court dismissed Plaintiff's claims under Fed. R. Civ. P. 12(b)(6) for failure to state a claim. The 9th Circuit affirmed the dismissal on appeal.
- FACTA. Under § 1681c(g)(1), "no person that accepts credit cards ... for the transaction of business shall print more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction."
- The question considered by the Court was FACTA's interpretation of the words "print" and "electronically printed" in connection with an emailed receipt. Under FACTA, a printed receipt is a receipt that exists in physical form, not one displayed on a computer screen. An electronically printed receipt is simply a receipt printed with an electronic device. The Court concluded that a receipt transmitted to the consumer via email and then digitally displayed on the consumer's screen is not an "electronically printed" receipt and is not regulated by FACTA.
Tenth Circuit Holds no Willful FCRA Violation Given Absence of Reckless Misconduct
Birmingham v. Experian, 633 F. 3d 1006, 2011 U.S. App. LEXIS 2340 (10th Cir. Feb. 7, 2011)
Facts: Plaintiff brought FCRA and Utah state law claims against Experian and Verizon Wireless related to a purported identity theft. Plaintiff claimed that two Verizon accounts were fraudulently opened in his name and that fraudulent charges had appeared on his legitimate Verizon account. He was unable to resolve the issue with Verizon, who closed the accounts and reported the adverse charges to the consumer reporting agencies ("CRAs"). Plaintiff claimed that he made two disputes to Experian, however, neither Plaintiff nor Experian had proof of the first dispute being made. Experian did receive the second dispute, and pursuant to its procedures, requested Plaintiff to verify his identity. Experian had no record of a reply, and Plaintiff could not present proof that he ever responded to the request. Plaintiff subsequently brought suit against Experian for violations of § 1681e(b) and § 1681i of the FCRA. Experian moved for summary judgment, which was granted. On appeal, Plaintiff argued that the district court's grant of summary judgment on the willful violation of the FCRA was improper. The Tenth Circuit held that the district court properly granted summary judgment given the absence of evidence of intentional or reckless misconduct.
- Reinvestigation. Under § 1681i(a)(1), if a consumer notifies a CRA of a dispute concerning the completeness or accuracy of information in the consumer's file, "the CRA shall, free of charge, conduct a reasonable reinvestigation to determine whether the disputed information is inaccurate and record the current status of the disputed information, or delete the item from the file . . . before the end of the 30-day period beginning on the date on which the CRA receives the notice of the dispute from the consumer or reseller."
- Willful Violation. Citing the Supreme Court's Safeco decision, the Tenth Circuit stated that a willful violation is either an intentional violation or a violation committed by an agency in reckless disregard of its duties under the FCRA. "Recklessness" is measured by an objective standard; action entailing an unjustifiably high risk of harm that is either known or so obvious that it should be known. A company subject to the FCRA does not act in reckless disregard of it unless the action is not only a violation under a reasonable reading of the statute's terms, but shows that the company ran a risk of violating the law substantially greater than the risk associated with the reading that was merely careless. Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 69 (2007).
- Willful Violation. Based on the Safeco standard, the Tenth Circuit held that Experian was entitled to summary judgment on the willful misconduct claim, noting that there was no described practice that would be a reckless violation of the FCRA, and there was no evidence that Experian's specific actions with respect to Plaintiff were reckless. The Court further held that even if one believed Plaintiff's vague assertion that he contacted Experian with the first dispute, the most one can reasonably infer from the absence of any record of that contact in Experian's files is that a clerical employee negligently failed to record the complaint. To infer that Experian acted recklessly in response to that dispute would require inappropriate speculation. A reasonable person reviewing the evidence before the district court could not find that Experian committed a willful violation of the FCRA.
Plaintiffs' California State Law Cause of Action not Preempted by the FCRA
Brown v. Mortensen, 51 Cal. 4th 1052 (Cal. June 16, 2011)
Facts: Plaintiffs sued Mortensen, a debt collector, alleging violations of the California Confidentiality of Medical Information Act, related to the debt collector's disclosure of Plaintiffs' and their children's medical information to the CRAs. Mortensen argued that those claims were preempted because the operative complaint stated that Plaintiffs complained to the CRAs that the disclosures were inaccurate and, alternatively, because Plaintiffs' claims rested on the idea that Defendant misled the CRAs by incorrectly implying either that Plaintiffs' children owed a debt or that their medical records were in some way relevant to Plaintiffs' disputed debt. Defendant argued that Plaintiffs' allegations brought the claim within § 1681s-2(a)'s regulation of furnisher accuracy and thus § 1681t(b)(1)(F)'s preemptive scope. The trial court and court of appeals concluded that Plaintiffs' claims were preempted by the FCRA. The California Supreme Court reversed the lower courts and concluded that Plaintiffs' state law claims, as pleaded, were not preempted because they involved issues neither of accuracy nor of credit dispute resolution and, therefore, did not involve the same subject matter as § 1681s-2.
- Preemption. The Court determined that Defendant's argument mistook the nature of a Confidentiality Act claim, both in the abstract and as pleaded. Whether the information disclosed was inaccurate is not an element of a claim; instead it requires only that the disclosure, whether true or not, occurred without authorization. Plaintiffs' causes of action repeatedly alleged that the disclosures occurred, were unauthorized, and injured Plaintiffs. Under such claim, Plaintiffs are not required to show that the disclosures were inaccurate or misleading. Nor did the Complaint establish that any of Defendant's disclosures were made in the course of responding to official notice of a credit information dispute, such that § 1681s-2(b) would apply. Therefore, the Court concluded that Plaintiffs' claims were not preempted.
The FCRA does not Require Perfection, only a Reasonable Response
Beachley v. PNC Bank, N.A., 2011 U.S. Dist. LEXIS 94236 (D. Md. Aug. 22, 2011)
Facts: Plaintiff sued PNC Bank, N.A. ("PNC") alleging defamation, invasion of privacy, violation of the Maryland Fair Credit Reporting Act, that PNC failed in its duty to prevent foreseeable injury, and violation of § 1681s-2(b) of the FCRA. Beachley claimed that PNC reported inaccurate information about her credit history to CRAs, which in turn caused her to be denied credit and charged higher interest rates for credit that was granted. Her claims stemmed from an installment loan she took out with her husband. After they took out the loan, they separated and Beachley filed for Chapter 7 bankruptcy and her responsibility for the installment loan was discharged. The original loan was with Farmers & Mechanics Bank, which later merged into Fredericktown-Mercantile Bankshares, which later merged into PNC. At various times, all three banks were reporting the account to the CRAs. Beachley disputed the account directly with PNC. Later, she disputed the Farmers & Mechanics trade line with Equifax claiming it should be shown as included in her bankruptcy. In the same month, Beachley disputed the Fredericktown-Mercantile Bankshares trade line with Trans Union claiming she was not liable for the account. Both CRAs initiated investigations with PNC, and PNC timely responded. Plaintiff never disputed the PNC account with the CRAs. The Court granted PNC summary judgment on all of Beachley's claims.
- Furnisher Duties. Section 1681s-2(b) states that after receiving a notice pursuant to § 1681i(a)(2), a furnisher has a duty to: (1) investigate with respect to the disputed information; (2) to review all relevant information provided by the CRA; (3) to report the results of its investigation to the CRA; (4) if the investigation shows the disputed information is incomplete or inaccurate, to report those results to all other CRAs to which it furnished the original information; or (5) if the disputed information is incomplete or inaccurate or cannot be verified, either to (a) modify it, (b) delete it, or (c) permanently block reporting of it. All these duties must be completed within 30 days. In regard to Beachley's two disputes, the Court stated that the FCRA does not require perfection, only a reasonable response. It held that PNC's responses to Beachley's two disputes to the CRAs were reasonable based on the information the CRAs gave to PNC.
- Furnisher Duties. Beachley also attempted to show that PNC violated the FCRA in its response to her direct dispute to PNC and by reporting inaccurate information to the CRAs. A furnisher's duties under § 1681s-2(b) do not arise until the consumer lodges a dispute with a CRA. Further, § 1681s-2(b) does not address the situation in which a consumer directly disputes account information with the credit grantor. Because Plaintiff never disputed the PNC account with the CRAs, there was no liability under the FCRA for these two claims.
- Defamation. Section 1681h(e) states that to the extent a cause of action for common-law defamation is asserted, that cause of action is preempted by the FCRA except in cases where the false information is furnished with malice or willful intent to injure a consumer. Maryland has adopted the Supreme Court's definition of malice in the context of defamation. In New York Times v. Sullivan, the Supreme Court held that malice can be established by evidence showing the defendants made a false statement "with knowledge that it was false or with reckless disregard of whether it was false or not." In order to establish a willful intent to injure, Beachley was required to show that PNC knowingly and intentionally committed an act in conscious disregard for Beachley's rights. The Court held that at most, Beachley's evidence showed that PNC made errors in supplying the CRAs with incomplete and inaccurate information about the account. However, Beachley failed to meet the standard to establish a claim for defamation.
Background Check Company's Investigative Efforts on Potential Job Candidate did not Violate the FCRA
Smith v. Waverly Partners, LLC, 2011 U.S. Dist. LEXIS 46399 (W.D.N.C. Apr. 29, 2011); Smith v. Waverly Partners, 2011 U.S. Dist. LEXIS 90135 (W.D. N.C. Aug. 12, 2011)
Facts: Plaintiff was contacted by Harrison Turnbull ("Turnbull"), a principal of Defendant Waverly Partners, LLC ("Waverly") to discuss her interest in a general counsel position with a company outside of North Carolina. Over the next two weeks, Plaintiff faxed her resume and a list of references to Waverly, had several in-depth telephone conversations about the position, and had an in-person interview with Turnbull. Soon thereafter, Turnbull sent various forms to Plaintiff, including an FCRA consent form. Plaintiff signed and returned the form, which permitted verification of Plaintiff's former employment. Significantly, the consent form did not permit Waverly to contact Plaintiff's current employer, Cato. Turnbull told Plaintiff that no references would be contacted unless she was the final candidate for the job and then only the specific individuals listed as personal references would be contacted. Waverly hired Defendant AlliedBarton Security Services, LLC ("AlliedBarton") to conduct a background check on Plaintiff. AlliedBarton faxed a copy of the consent form to Cato, which resulted in her firing days later. Subsequently, Waverly informed Plaintiff that she was no longer being considered for the general counsel position. AlliedBarton moved to dismiss Plaintiff's claims for invasion of privacy, violation of the FCRA, and unfair and deceptive trade practices. The Court granted the motion to dismiss. Plaintiff subsequently filed his Motion to Reconsider as to Plaintiff's § 1681d(d) and § 1681b claims. The Court denied Plaintiff's Motion.
- Investigative Consumer Reports. Under § 1681a(e), an "investigative consumer report" is a consumer report in which information about a consumer is "obtained through personal interviews with neighbors, friends, or associates of the consumer reported on or with others with whom he is acquainted or who may have knowledge concerning any such items of information. In support of its ruling denying Plaintiff's Motion to Reconsider, the Court found that AlliedBarton did not prepare an investigative consumer report on Plaintiff because it did not conduct any personal interviews of Plaintiff's neighbors, friends, or associates. AlliedBarton merely attempted to confirm Plaintiff's employment status with Cato which did not include conducting any personal interviews. Note: The Court also held that AlliedBarton did not violate Section 1681d(d) because Waverly obtained the requisite consent to inform Plaintiff and then provided it to AlliedBarton. The consent form that Plaintiff signed and which Waverly provided to AlliedBarton specifically states "[s]everal consumer reports may be obtained on you ... . The reports may be investigative consumer reports ... ."
- Permissible Purpose. Plaintiff argued that AlliedBarton did not have a permissible purpose under §§ 1681b(a), 1681b(b)(1), and 1681b(b)(2) when it faxed Plaintiff's consent form to Cato. None of these provisions, however, prohibit a CRA from communicating with a consumer's employer, which was the basis of Plaintiff's contention under this claim.
- Consumer Report. A consumer report is defined in § 1681a(d) as a communication of any information by a CRA bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor for establishing the consumer's eligibility for -- (A) credit or insurance to be used for personal, family or household purposes; (B) employment purposes; or (C) any other purpose authorized under § 1681b. Note: The Court found that AlliedBarton merely provided Plaintiff's name, Social Security number, prior addresses, date of birth, and driver's license information to Cato. Such minimal information does not bear on any of the seven enumerated factors in § 1681a(d), and therefore was not a consumer report.
- Indemnification and Contribution. In its motion to dismiss Waverly's cross-claim, AlliedBarton argued that the FCRA does not create rights of indemnification and contribution. The Court noted: 1) that the FCRA does not contain any express language providing for indemnification or contribution; 2) nor does it implicitly create rights of indemnification or contribution. Given Congress's careful drafting of the comprehensive statutory scheme, omitting any right of indemnification and contribution, it is clear that the FCRA structure negates any inference that contribution or indemnification are permitted. Accordingly, the Court held that the FCRA neither expressly nor impliedly creates a right to indemnification or contribution.
- Indemnification and Contribution. The Court addressed the issue of whether there exists a federal common law right to indemnification or contribution under the FCRA. Because the FCRA neither implicates a uniquely federal interest or delegates powers to the courts to create rules of law, the Court held that federal common law does not create rights of indemnification or contribution in the FCRA context.
Court Approves Class Action Settlement and Award of Attorney's Fees and Costs
Chakejian v. Equifax Info. Servs. LLC, 2011 Dist. LEXIS 63455 (E.D. Pa., June 14, 2011)
Facts: Plaintiff brought a §1681i claim related to Equifax's standard reinvestigation procedures letter related to a reinvestigation of public record information appearing on his Equifax credit file. Equifax employed an independent records vendor to go to the original source of information, review the information, and report the results to Equifax. Equifax then responded directly back to Plaintiff that "it contacted each source directly," and indicated it reviewed Plaintiff's "bankruptcy information" and "verified" that the bankruptcy item belonged to him. Plaintiff claimed that Equifax's reinvestigation letter misrepresented the source of Equifax's public records information and misstated the result of its reinvestigation. After some discovery, Plaintiff sought and was granted certification to move forward on a class action claim. In the litigation that followed, the parties engaged in significant discovery and the case was eventually consolidated with two similar class actions pending in New Jersey and Virginia. In August 2010, the parties agreed to basic terms of settlement and submitted the settlement for the Court's review. The settlement included the following terms: an agreement that Equifax would cease the practice giving rise to the suit; each class member would receive eighteen months of credit monitoring services free of charge; class members who did not opt out would be bound by the terms of the settlement with regard to statutory damages under the FCRA, retaining their rights to bring individual suits against Equifax for any actual damages sustained; Equifax making payment to class counsel in the amount of $1,075,000, subject to court approval. After review, the Court: certified the class; found the settlement to be fair, reasonable, and adequate; approved the awards to the attorneys and named Plaintiffs; and entered a final judgment dismissing the case pursuant to the terms of the parties' agreement.
- Class Certification. The Court found that the class, which consisted of all persons in New Jersey, Pennsylvania and Virginia who were sent a letter similar to the one identified in Plaintiff's Complaint, for time periods specific to each state, met the requirement for class certification under Federal Rules of Civil Procedure 23(a) and 23(b). Specifically the class met the requirements of numerosity, commonality, typicality, and adequacy outlined by 23(a) and the predominance and superiority requirements of 23(b).
- Settlement Approval. The Court, as required by the Federal Rules, also examined the proposed settlement and determined that it was fair, reasonable and adequate. In the Third Circuit the determination is assessed according to the factors listed in Girsh v. Jepson, 521 F.2d 153, 157 (3d Cir. 1975) and relevant factors outlined in In re Prudential Ins. Co. Am. Sales Practice Litig., 148 F.3d 283, 309 (3d Cir. 1998). Here, the Court considered the following in approving the settlement: 1) the complexity, expense, and likely duration of the litigation; 2) the reaction of the class to settlement; 3) the stage of the proceedings and the amount of discovery completed; 4) the risks of establishing liability; 5) the risks of establishing damages; 6) the risks of maintaining the class action through the trial; 7) the ability of the defendants to withstand a greater judgment; 8) the range of reasonableness of the settlement fund in light of the best possible recovery and all the attendant risks of litigation; and 9) the Prudential considerations.
- Attorney's Fees and Costs. Because the FCRA includes a mechanism for attorneys' fees, the Court employed the lodestar method in approving the attorneys' fees requested by the attorneys for the class and then cross-checked that with the percentage-of-recovery method which is generally favored in cases involving a common fund. The lodestar award is calculated by multiplying the number of hours reasonably worked on a client's case by a reasonable hourly billing rate for such services based on the given geographical area, the nature of the services provided, and the experience of the attorneys.
- Award to Class Representatives. The Court also approved the $15,000 individual settlement award for each representative plaintiff. The Court found that the representative Plaintiffs merited incentive awards because: 1) they played a role in enforcement of the FCRA; 2) they brought substantial benefit to a large group of people; 3) they participated substantially and crucially in the litigation; 4) gave up their right to bring suit for actual damages; and 4) the $15,000 sum is within the range of incentive awards recently accepted by other courts.
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