Third Circuit Court of Appeals Affirms Punitive Damages Verdict Against Trans Union Credit Reporting Agency for Misreporting Woman as Being on Government’s OFAC List—Finding Its Conduct “Reprehensible”

Court Finds Credit Reporting Agencies Must Treat Government OFAC Data Same as Regular Credit Information

Philadelphia, PA, August 17, 2010

On Friday, August 13, 2010, the United States Court of Appeals for the Third Circuit upheld a punitive damages verdict against the Trans Union credit reporting agency in a fair credit reporting case based upon Trans Union’s misreporting an innocent woman as being on the U.S. Treasury Department’s “OFAC” list. The 91 page precedential decision is the first of its kind in cases brought under the Fair Credit Reporting Act which involve the reporting of such data.

Trans Union, LLC is one of the country’s “Big Three” credit reporting agencies, and has one of its main operations in Crum Lynne, Pennsylvania. Trans Union reported information belonging to a suspected narcotics trafficker named Quintero, who was on the Treasury’s “OFAC List”, on consumer-plaintiff Sandra Cortez’s credit report, and failed to fix the serious error despite several disputes. The jury awarded $50,000 in emotional distress damages, and $750,000 in punitive damages, which the trial court reduced to $100,000.

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) created the OFAC list to identify suspected terrorists and narcotics traffickers, and prevent them from obtaining credit from American businesses and lenders. After September 11, 2001, the Patriot Act issued new rules and obligations regarding lenders’ use of the OFAC list. Lenders face serious penalties and fines if they extend credit to anyone on the OFAC list. In connection with the credit reports they sell, and for an additional fee, credit reporting agencies such as Trans Union sell lenders information regarding whether an applicant is on the OFAC list.

The decision is significant for several reasons. First, it is the first decision by any appellate court to find that the sale of OFAC data is covered by the Fair Credit Reporting Act, and that credit reporting agencies must observe the same duties they are required to follow with ordinary credit data when selling OFAC date. The information must be reported with “maximum possible accuracy”, it must be disclosed to the consumer that it is being reported about, and if the consumer disputes such data, the credit reporting agency must investigate that dispute and remove the information from the consumer’s credit report if inaccurate.

Second, if a credit reporting agency fails to observe these duties as Trans Union did it may be liable for punitive damages. Trans Union’s deliberate failure to comply with these duties led the Third Circuit to find that its conduct was “reprehensible” and willful, and that trial court’s award of $100,000 in punitive damages did not even begin to approach the constitutional limit for cases like this one.

Plaintiff Sandra Cortez was represented by the law firm of Francis & Mailman, P.C. (www.consumerlawfirm.com). Trans Union was represented by the law firm of Kogan, Trichon & Wertheimer, P.C. Both law firms are located in Philadelphia, PA.

The decision of Cortez v. Trans Union, LLC, Civ. No. 08-2465, 08-2466 was authored by Chief Judge Theodore McKee.

Information regarding the case and verdict may be obtained by contacting Jim Francis, Mark Mailman or John Soumilas at the address and telephone number listed above, or by emailing any inquiries to jfrancis@consumerlawfirm.com.

Full text of Cortez v. Trans Union, LLC, 08-2465

FOR THE DISTRICT OF NEW JERSEY

Plaintiff,

v.

LEXISNEXIS RISK & INFORMATION ANALYTICS GROUP, INC., et al.

Defendants. )

)

______________________________________________________________________________

PLAINTIFF’S BRIEF IN OPPOSITION TO DEFENDANTS LEXISNEXIS

RISK & INFORMATION ANALYTICS GROUP, INC. AND SEISINT, INC.’S

MOTION FOR JUDGMENT ON THE PLEADINGS

______________________________________________________________________________

FRANCIS & MAILMAN, P.C.

DONOVAN SEARLES, LLC

Plaintiff respectfully submits this Brief in Response and Opposition to the Motion for Judgment on the Pleadings filed by Defendants LexisNexis Risk & Information Analytics Group, Inc. and Seisint, Inc.

I. INTRODUCTION

Although styled as a Motion for Judgment on the Pleadings (the “Motion”), Defendants’ Motion is in all reality an untimely and thinly-veiled second motion to dismiss.  While Defendants’ Answers deny the allegations of Plaintiff’s Amended Complaint, and discovery is proceeding to ferret out the parties’ stark factual disputes, Defendants instantly request the Court to accept those allegations as true, but find as a matter of law that Plaintiff does not state any claim against them under the FCRA.  As discussed below, it is clear that, while Defendants vigorously disagree with the veracity of Plaintiff’s allegations, Plaintiff has adequately and sufficiently pled a cause of action against each and every Defendant.

Substantively, the Motion is plagued by some extreme and arrogantly incorrect positions.  In asking this Court to hold that Defendants are not consumer reporting agencies, and do not sell consumer reports despite the Amended Complaint’s specific allegations to the contrary, Defendants urge the Court to adopt a reading of the FCRA that no court has ever made, which contradicts the plain reading of the statute, and is entirely devoid of any support other than their counsel’s inventions and Venn diagram.  In challenging the willfulness allegations, Defendants urge this Court to accept their mindreading of what the FTC “viewed” or “believed” in connection with a recent data breach enforcement action brought against Defendant Seisint—but there is no basis for such a position other than Defendants’ conjecture.  Finally, the Defendants seek to apply the U.S. Supreme Court’s recent decisions in Ashcroft v. Iqbal, 129 S. Ct. 1937 (2009) and Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) in a way which would set the pleadings standard so high that it would require a party to prove the merits of their case at the pleadings stage.  Neither decision renders such a holding.

For the reasons set forth more specifically below, Plaintiff respectfully asserts that this Honorable Court should deny the Motion outright.

II. HISTORY OF CASE AND FACTUAL BACKGROUND

A. Procedural History

This case began with the filing of a Complaint on September 18, 2008.  The Complaint alleged violations of the Fair Credit Reporting Act (“FCRA”) by the three Defendants in connection with their sale of a product called an “Accurint” report, which provides substantial and detailed personal and credit information about individual consumers.

Five months later, the Defendants moved to dismiss the Complaint under Rule 12(b)(6).  (Doc. 24).  The sole basis for the motion was that the FCRA purportedly provided no basis for seeking declaratory relief.  Id.

On April 20, 2009, Plaintiff filed an Amended Complaint which omitted the claim for declaratory relief but in all other respects was identical to her Complaint.  (Doc. 36).  Defendants did not move to dismiss the Amended Complaint but rather filed Answers on June 1, 2009.  (Docs. 40, 41 and 42).  Notably, in their Answers, Defendants deny most of the material allegations set forth in the Amended Complaint.  Thereafter, the Court entered a Scheduling Order on July 2, 2009.

On July 14, 2009, Defendants filed a Motion to Transfer Venue of this matter to the Southern District of Florida.  Thereafter, Defendants withdrew the Motion to Transfer and Plaintiff agreed to dismiss her claims against one Defendant, Reed Elsevier, Inc., without prejudice and with the agreed-upon proviso that Plaintiff would be permitted to reinstate those claims against Reed Elsevier.  (Doc. 51).

An Amended Scheduling Order was entered on September 21, 2009, addressing the deadlines for briefing related to Plaintiff’s Motion for Class Certification.   (Doc. 50).  On October 7, 2009, the Court held a telephonic status conference with counsel, following which a further Amended Scheduling Order was entered extending deadlines for pretrial factual discovery, expert reports and class certification briefing.  (Doc. 52).

On November 18, 2009, Defendants Seisint, Inc. and LexisNexis Risk & Information Analytics Group, Inc. filed a Motion for Judgment on the Pleadings pursuant to Rule 12(c).

B. Background Of The Case And Allegations Of The Amended Complaint

1. [Plaintiff’s] situation

Plaintiff is a victim of identity theft whose good name and credit were destroyed.  A person using Plaintiff’s social security number, Plaintiff’s first name, and the last name [Name] is believed to have incurred several debts fraudulently using Plaintiff’s identity.  Although [Plaintiff] repeatedly notified creditors that they opened fraudulent accounts and were reporting to the national credit bureaus fraudulent and false credit information about her, the creditors continued to hold [Plaintiff] responsible for these fraudulent transactions.  The national credit bureaus also refused to correct [Plaintiff]’s records over a period of years.

Then in 2005, one of the alleged creditors, GE Money Bank (“GEMB”), and its collection attorneys, Eichenbaum, Kantrowitz, Leff & Gulko, LLC (now Eichenbaum & Stylianou, LLC), wrongfully sued and obtained a wage garnishment order against [Plaintiff] in state court for one of the fraudulently incurred debts.  Despite Plaintiff’s protests that she was the victim of fraud, GEMB and its collection attorneys ended up unlawfully garnishing [Plaintiff]’s wages from her employer at the time.

[Plaintiff] as such was forced to file several lawsuits against the creditors, debt collectors and national credit bureaus to restore her credit and good name.  During that litigation, [Plaintiff] learned that she was sued by GEMB because of inaccurate information obtained by its collection attorneys from an “Accurint” report sold by Defendants.   Unknown to Plaintiff at the time, Defendants sold one or more Accurint reports to Eichenbaum & Stylianou, LLC, which used the report(s) in connection with the collection of the GEMB credit obligation.  The Accurint report(s) inaccurately identified Plaintiff as the debtor.

When Plaintiff learned about the Accurint report much later, she sought to review whether her Accurint report still associated her name, social security number or credit history with that of the identity thief or the fraudulent transactions.  Although consumer reports such as the Accurint report are supposed to be provided free of charge to consumers by Defendants once every twelve months pursuant to the FCRA, Defendants charged [Plaintiff] $8.00 for a copy of her report when she requested one, although she had not requested or obtained one in the previous twelve months.   The report she received after payment was dated March 13, 2008.

[Plaintiff]’s eight-page Accurint report contained information allegedly about [Plaintiff]’s age, residence, social security number, date of birth, economic profile data regarding the her home and neighboring properties, bankruptcies, judgments, liens, UCC filings, professional licenses, accident history, recreational permits, and general information about [Plaintiff]’s assets and property.  When [Plaintiff] reviewed her Accurint report, she was shocked to learn that the report was riddled with errors.  Among other errors, Plaintiff’s Accruint report identifies the fraudulently incurred GEMB debt as hers, and further identifies Plaintiff as [Name], the name used to commit the fraud.

Defendants assert on the face of the Accurint report that the report has “errors” and that the information in the report is “sometimes entered poorly, processed incorrectly, and is generally not free from defect.”  Nevertheless, Defendants expressly state that they will not accept any dispute by Plaintiff and will not correct any errors in the data reported about Plaintiff on her Accurint report.  Defendants will continue, however, to sell [Plaintiff]’s Accurint reports to debt collectors and others.

2. the Amended Complaint’s detailed allegations

Based upon what happened to her, Plaintiff made detailed and specific allegations against Defendants, both as to their general practice and as to her individually, in her Amended Complaint.  The averments include the following allegations concerning the Defendants’ practices and policies as to consumers in general:

• Defendants, on a nationwide basis, sell a product called an Accurint report to debt collectors, credit insurers and other entities to assist with the collection of delinquent accounts and to provide information on the location of debtors and debtors’ assets.

• Accurint reports contain vast amounts of information concerning American consumers, such as a consumer’s residence, age, social security number, date of birth, economic profile data regarding the consumer’s home and neighboring properties, and public record information such as bankruptcies, liens judgments, UCC filings, professional licenses accident history, recreational permits and general information about consumers’ assets and property.

• Defendants affirmatively represent that Accurint reports are extremely useful for debt collectors to increase their collection recovery rates.

• Some of the data that Defendants sell through Accurint reports derives from data that Defendants have purchased from other consumer reporting agencies and which they then resell through the Accurint reports.

• Despite the fact that Defendants assemble and compile consumer information for sale in the form of Accurint reports to debt collectors, employers and credit insurers on a nationwide basis, Defendants will not provide consumers with a disclosure of all of the information in their files that pertain to them or the sources of the information they report, do not provide consumers with summaries of their rights under the FCRA, do not maintain any toll-free telephone numbers available to consumers for these purposes, do not investigate any consumer disputes, and do not observe any reasonable standard of accuracy regarding the information contained within the Accurint reports.

• In addition, while Defendants will provide certain information to consumers upon written request, Defendants admittedly refuse to provide consumers with all of the information that the FCRA requires, including for example, the identities of persons or entities who procured a report from the Defendants in connection with making an inquiry concerning a consumer.

• Defendants charge consumers for obtaining copies of the Accurint reports.

• Defendants do not provide consumers with the free annual disclosures required by the FCRA.

• Defendants misrepresent to consumers that they do not sell consumer reports to third parties.

Am. Compl., ¶¶ 8-18.

Further, the Amended Complaint sets out detailed and specific allegations about the Defendants’ actions directed toward the Plaintiff:

• Defendants sold a grossly inaccurate Accurint report concerning Plaintiff to a third party debt collector.

• As a result of Defendants’ actions, Plaintiff was unlawfully sued for a debt she did not owe.

• When Plaintiff went online to ascertain how to order a copy of her Accurint report, she was directed to a webpage maintained by Defendant Lexis.

• The webpage instructed her to either use an electronic web form and make a payment of $8.00 via credit card or write to “LexisNexis Consumer Access Program” at the Boca Raton, Florida address of Defendant Seisint and Defendant Lexis, that she should include a check or money order in the amount of $8.00 and a copy of her driver’s license and a utility bill.

• Defendants did not provide Plaintiff with the option to obtain a copy of the Accurint report for free.

• Plaintiff ordered her Accurint report using her credit card as payment.  Defendant Lexis charged Plaintiff’s credit card $8.00 on February 1, 2008.

• One of Defendants’ representatives told Plaintiff that it would take 30-60 days for her to get her report.

• On March 13, 2008, Defendants Lexis and Seisint sent Plaintiff a letter (the “March 13th Letter”), along with a nine page document entitled “Comprehensive Report” that was dated March 12, 2008.

• The letterhead of the March 13th Letter set forth the names of both Defendant Lexis and Defendant Seisint, and was signed by the “LexisNexis Consumer Inquiry Department.”

• Among other things, the March 13th Letter stated the following:

o that it was being sent in response to [Plaintiff]’s request for a copy of her Accurint report;

o that the enclosed Comprehensive Report was a compilation of public record data and non-public information;

o that the Comprehensive Report did not contain all information about [Plaintiff] that the Defendants had in their databases “relating to [her];”

o that Accurint purchases and resells data collected by outside companies; and

o that Defendants do not “examine or verify their data, nor will they correct or change data that is incorrect.”

• The nine page Comprehensive Report included with the March 13th Letter stated that “the public records and commercially available data sources used on [Defendants’ Accurint] reports have errors.”

• The Comprehensive Report contained all sorts of information allegedly pertaining to [Plaintiff], much of which was grossly incorrect, including inaccurate information about credit card debts, liens and judgments that did not pertain to [Plaintiff], as well as names and addresses that [Plaintiff] had never used.

• The Comprehensive Report did not contain or include a list of all persons and/or entities who had obtained or procured a report from Defendants about [Plaintiff].

• Because of Defendants’ policy that they would refuse to accept disputes or to make corrections to their inaccurate reporting, [Plaintiff] was left without a means to have the Defendants cease reporting inaccurate information about her.

Am. Compl., ¶¶ 19-28.

In view of these specific allegations detailing the Defendants’ general practices and policies, as well as the details of what happened when those practices were applied to the Plaintiff, it is difficult to credit any argument that the Amended Complaint does not comply with the rules of pleading under Rule 8(a)(2).

III. ARGUMENT

A. The Applicable Standard: A Well Pled Complaint Need Only Allege Claims That Are Not “Speculative” To Defeat A Motion Seeking To Dismiss A Complaint

Defendants’ Motion, styled as a motion under Rule 12(c), actually seeks dismissal of all of Plaintiff’s claims under the standards of a Rule 12(b) motion.  Under applicable standards, the Amended Complaint is more than sufficient to withstand such a motion.

Universally recognized as a notice pleading standard, Rule 8(a)(2) calls for a plaintiff filing a complaint in the federal courts to simply provide “a short and plain statement of the claim showing that the pleader is entitled to relief.”  See Bell Atlantic Corp. v. Twombly, 550 U.S. 554, 555 (2007) (“A complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations.”).  See also Swierkiewicz v. Sorema  N.A.,  534 U.S. 506, 513 (2002) (calling Rule 8 a “simplified notice pleading standard.”).

When a federal court reviews the sufficiency of a complaint, before the reception of any evidence either by affidavit or admissions, its task is necessarily a limited one. The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims.

Scheuer v. Rhodes, 416 U.S. 232, 236 (1974).

The Third Circuit after Twombly has consistently held that when considering a motion to dismiss pursuant to Rule 12(b)(6), the court shall:

“accept all factual allegations in the complaint as true and view them in the light most favorable to the plaintiff’ and “determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief.”

Umland v. PLANCO Financial Servs., Inc., 542 F.3d 59, 64 (3d Cir. 2008) (quoting Buck v. Hampton Twp. Sch. Dist., 452 F.3d 256, 260 (3d Cir. 2006); and Pinker v. Roche Holdings Ltd., 292 F.3d 361, 374 n.7 (3d Cir. 2002)).  See also Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (finding Pinker “remains an acceptable statement of the standard” and “finding [Twombly] confusing”).  “Rule 12(b)(6) does not countenance  . . .  dismissals based on a judge’s disbelief of a complaint’s factual allegations.”  Twombly, 550 U.S. at 556 (quoting Neitzke v. Williams, 490 U.S. 319, 327 (1989)).  “A well-pleaded complaint may proceed even if it appears ‘that a recovery is very remote and unlikely.’”  Id. (quoting Scheuer v. Rhodes, 416 U.S. at 236).

To the extent Twombly, or more recently Ashcroft v. Iqbal, 129 S. Ct. 937 (2009), impacts the standard of review of a motion seeking dismissal of claims, the opinion merely clarifies that a complaint must “raise a right to relief above the speculative level.”  Twombly, 550 U.S. at 555.  The Third Circuit in Allegheny noted that Twombly “‘simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence’ of the necessary element.” 515 F.3d at 234 (quoting Twombly, 550 U.S. at 556).

B. The Amended Complaint Sufficiently Alleges That Each Defendant Is A Consumer Reporting Agency Engaged In The Sale Of Consumer Reports

1. the FCRA broadly defines consumer reporting agencies and consumer reports to cover a wide range of companies

A “consumer reporting agency” (or a “CRA”), for FCRA purposes, is defined as:

any person  which, for monetary fees, dues or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating … information on consumers  for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports.

15 U.S.C. § 1681a(f).

Thus, an entity can be deemed a CRA if four factors are satisfied: (1) it acts in exchange for compensation of the kind described; (2) it “regularly” “assembles” or “evaluates” information on consumers; (3) its purpose in doing so is to furnish consumer reports; and (4) it utilizes interstate commerce in the preparation or furnishing of a consumer report.  Id.  The requirement that a CRA “assemble or evaluate” the consumer information “implies a function which involves more than receipt and retransmission of information . . . [t]he Act is not directed to those who supply information . . . [to] consumer reporting agencies, nor to those who are remote from those decisionmakers who rely upon consumer reports in making credit and other decisions.”  Smith v. First Nat’l Bank of Atlanta, 837 F.2d 1575 (11th Cir. 1988) (internal citations omitted).

A further requirement which must be satisfied in order to qualify as a CRA under the Act is that the individual or entity must “regularly engage, in whole or in part” in the practice of assembling or evaluating consumer information.  As the FCRA does not define the term “regularly,” at least one court has looked to the Fair Debt Collection Practices Act (“FDCPA”) for guidance.  See Johnson v. Federal Express Corp., 147 F. Supp. 2d 1268, 1275 (D. Ala. 2001).  In Johnson, the court found that since FCRA and FDCPA contain similar language and are both intended to protect consumers, it would be appropriate to look to FDCPA for guidance in interpreting the provisions of FCRA.  Id.  Thus, Johnson relied upon a case in which the Sixth Circuit considered FDCPA’s definition of the term “regularly.”  Id.  Relying on Black’s Law Dictionary, the Sixth Circuit defined the term as “at fixed and certain intervals, regular in point of time.  In accordance with some consistent or periodical rule of practice.  The term regular means usual or customary, normal or general….”  Id.  (citing Schroyer v. Frankel, 197 F.3d 1170, 1174 (6th Cir. 1999)).  Congress was concerned with consumer reporting agencies that played a “vital role in assembling and evaluating … information on consumers.”  15 U.S.C. § 1681a(3). By ensuring that FCRA’s applicability is limited to those who engage in the assembling or evaluation of consumer information “in accordance with some consistent … practice,” the FCRA serves to regulate those parties whose role is “vital.” Id.

The FCRA defines a consumer report as:

any . . . communication of any information by a consumer reporting agency bearing on a consumer’s creditworthiness, 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 in establishing the consumer’s eligibility for . . . (A) [consumer] credit or insurance . . . ; (B) employment purposes; or (C) any other purpose authorized under section 1681b.

15 U.S.C. § 1681a(d)(1)(emphasis added).

Thus, to qualify as a consumer report, the information contained therein must bear on an individual’s “creditworthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living.”  15 U.S.C. § 1681a.  The communication must be (1) made by a consumer reporting agency; (2) regarding one of the specified attributes of the consumer; and (3) used, expected to be used, or collected in whole or in part, for one of the three purposes delineated in the definition.  Id. See also Cheatham v. McCormick, 100 F.3d 956 (6th Cir. 1996).

Contrary to Defendants’ interpretation of the law (discussed more fully below), the FCRA’s broad definitions of “consumer reporting agency” and “consumer report” have led federal courts and the Federal Trade Commission (“FTC”) to find that a wide and disparate group of companies fall within the FCRA’s regulation of CRAs, including Defendant LexisNexis itself.  See, e.g., Williams v. LexisNexis Risk Management Inc., 2007 WL 2439463, *1-2 (E.D. Va. Aug. 23, 2007) (“LexisNexis is a CRA that provides a service called “Securint,” which allows employers and other paying customers to research the criminal backgrounds of consumers”) (emphasis added). See also Henson v. CSC Credit Servs., 29 F.3d 280 (7th Cir. 1994) (company that failed to verify accuracy of civil judgment about consumer that it sold to third party can be liable as CRA under FCRA); Poore v. Sterling Testing Systems, Inc., 410 F. Supp. 2d 557, 570-71 (E.D. Ky. 2006) (Sterling Testing is CRA and “issue of whether the agency failed to follow reasonable procedures will be a jury question in the overwhelming majority of cases”); Lewis v. Ohio Professional Electronic Network LLC, 190 F. Supp. 2d 1049, 1058 (S.D. Ohio 2002) (finding company that regularly sells public arrest records is CRA); 16 C.F.R. pt. 600 app. § 603(d)(5)(C) (broad definition of consumer reports).  See also Sum, FTC Staff Opinion 9-15-99 (law firm that researches criminal records of job applicants for its clients is CRA); Vail, FTC Staff Opinion 4-5-99 (outside organization used by employer to assist in sexual harassment investigations is CRA); Leathers, FTC Staff Opinion 9-9-98 (company that provides information to fast food employers over telephone regarding prospective employees is CRA); LeBlanc, FTC Staff Opinion 6-9-98 (company that gathers criminal records for third parties is CRA); FTC Staff Opinion letter dated June 9, 1998, from W. Haynes to Richard LeBlanc. http://www.ftc.gov/os/statutes/fcra/leblanc.shtm.

2. the allegations of the Amended Complaint more than adequately support each of the FCRA claims Plaintiff has asserted

Here, the allegations of Plaintiff’s Amended Complaint more than sufficiently support each and every claim for willful violation of the FCRA Plaintiff has asserted.

As detailed in section II. B. above, Plaintiff alleges that Defendants: (1) regularly collect, assemble and compile information regarding consumers’ personal characteristics, public record history, and assets and property information; (2) for the purpose of selling this information on a nationwide basis; and (3) to the collection industry for debt collection purposes, to credit insurers for credit insurance situations, and to employers for employment screening.  Am. Compl., ¶¶ 1, 5, 8, 9, 11, and 13.  Some of the data that Defendants sell derives from data that Defendants have purchased through other CRAs and which they resell.  Id. at ¶ 10.  One of the information products Defendants sell is a report termed an Accurint report that Defendants sell to the debt collection industry.  Id. at ¶ 8.  These allegations alone provide a sufficient basis to find that the Defendants sell “consumer reports” (see FCRA section 1681a(d)), are “consumer reporting agencies” (section 1681a(f)),  are “consumer reporting agenc[ies] that compile[s] and maintain[s] files on consumers on a nationwide basis”(section 1681a(p)), and are “resellers” of consumer reports (section 1681a(u)).  Indeed, given these activities, it is not surprising that the Eastern District of Virginia found Defendant LexisNexis to be a CRA, and thus governed by the FCRA.  See Williams, 2007 WL 2439403 at *1.

3. Defendants’ invented reading of the FCRA belies the plain reading of the statute, applicable authority and common sense

At its core, Defendants’ main argument relates to coverage.  Defendants contend that all of Plaintiff’s claims should be dismissed because they are not CRAs and Accurint reports are not covered by the FCRA as consumer reports.  Despite the numerous pages that Defendants spend on developing their argument for why they are not CRAs and do not sell consumer reports, the lynchpin of their coverage argument boils down to several discrete flawed premises which are devoid of any support.

The first flawed premise appears at page 8 of Defendants’ brief.  Obviously anticipating Plaintiffs’ citation to the Williams case in which Defendants’ did not contest their role as a CRA, Defendants argue that Plaintiff must allege facts that Defendants acted as CRAs “with respect to her.”  Def. Br., at 8.  Putting aside the fact that Plaintiff more than adequately does allege that Defendants sold FCRA regulated information about her for a fee (see Am. Compl., ¶¶ 19-28), this remarkable contention is most notable for complete lack of authority and absence of citation.  Nowhere in the section of the brief where they advance this argument do Defendants cite any authority, whether it be caselaw or statutory text.  The reason they do not is because none exists.

As set forth above, if a plaintiff can prove that a defendant operates as a CRA, she can recover if she can prove that company violated one of the sections of the FCRA which impose duties upon CRAs.  There is no basis in the FCRA for requiring that a plaintiff additionally prove that a company otherwise functioning as a CRA, was functioning in that capacity on a particular day or with respect to her at a particular time period.

The second flawed premise appears at pages 9-20 of Defendants’ brief.  In that section, Defendants spend approximately 11 pages developing their novel argument that a CRA’s sale of consumer information which would otherwise constitute a consumer report falls outside of the FCRA’s definition of a consumer report, and thus not covered by the FCRA, when it is sold to debt collectors.  As with its first major flawed premise, this bold contention is again devoid of any citation to caselaw, other than a passing attempt to try to distinguish the only directly applicable circuit authority on the topic, Phillips v. Grendahl, 312 F.3d 357 (8th Cir. 2002).   Defendants’ primary authority is a Venn diagram at page 18 prepared by its counsel which presents an attempted explication of the FCRA that no court or other authority has ever adopted, and which, if accepted, would turn the statute on its head.

Defendants’ argument flies in the face of the FCRA’s plain language.  The FCRA provides that information which is sold will constitute a consumer report if it is “used or expected to be used” or “collected in whole or in part” in connection with “any purpose authorized under section 1681b of [the FCRA]” (i.e. one of the FCRA’s statutorily permitted uses).  15 U.S.C. § 1681a(d)(1)(C).  One of the FCRA’s clear statutory purposes is use by someone who “intends to use the information in connection with a credit transaction involving the consumer…or review or collection of an account of, the consumer”.  15 U.S.C. §1681b(a)(3)(A) (emphasis added). See also Phillips, 312 F.3d at 366 (“One [FCRA-contemplated] purpose in that list is…debt collection”).  Thus, information pertaining to a consumer’s personal information, characteristics, assets or public record history sold by a CRA to debt collectors clearly constitutes a consumer report under the FCRA.

While it is not binding on this Court, the Eighth Circuit’s decision in Phillips is directly on point, and is highly persuasive because its analysis is grounded in the statutory text of the FCRA.  In Phillips, the Eighth Circuit was presented with the question of whether consumer information that is collected for the purpose of sale to a debt collector constitutes a consumer report under the FCRA—the precise question argued in the negative by Defendants here.  In Phillips, the Eighth Circuit found unequivocally that it does.  The particular report at issue in that case, parallel to the Accurint report in the instant case, was termed a “Finder’s Report.”  Phillips, 312 F.3d at 366.  Because the Finder’s Report was “actually intended by the credit reporting agency that prepared it” to be used for “collections professionals,” it was prepared to be used for “a statutory purpose” and squarely fell within the definition of consumer report.  Id.  For the same reason that the Finder’s Report in Phillips constituted a consumer report, Defendants’ Accurint reports are regulated as consumer reports under the FCRA.

Defendants argue that the only information meeting the FCRA’s definition of a consumer report is information that is sold in connection with a consumer’s “eligibility” or “entitlement” to something.  Def. Br. at 15-19.  While there is no question that a credit report sold to a lender in connection with a consumer’s eligibility for a loan or credit card constitutes a consumer report, the FCRA’s definition of consumer report regulates many other specific instances as well that have nothing to do with a consumer’s eligibility or entitlement to something.  See 15 U.S.C. §§ 1681a(d)(1)(C) and 1681b (defining consumer report by whether it is prepared in connection with one of the numerous uses set forth in FCRA section 1681b). See also  Phillips, 312 F.3d at 366.

The essential and critical flaw of Defendants’ novel theory of FCRA construction is it reverses the interplay between the definition of “consumer reporting agency” and “consumer report” in evaluating whether a plaintiff has stated a cause of action.  As set forth above, the FCRA regulates consumer reporting agencies, users of consumer reports and furnishers of consumer reports.  Compare, e.g., sections 1681e(b), 1681g and 1681i (applying to CRAs), with sections 1681m (users of consumer reports) and section 1681s-2(b) (furnishers of credit).  The sections relevant to the case at bar are those that pertain to CRAs and resellers (a type of CRA).

Thus, the first question for each claim is whether Defendants are CRAs.  If so, then the Court examines the remainder of the statutory obligation to see if a violation has been alleged.  As discussed above, Plaintiff has alleged sufficiently that Defendants meet the classic definitions of CRAs based upon their alleged activities.

Perhaps the most obvious demonstration of the flaw underlying Defendants’ inverted logic lies in the fact that some of the very claims Plaintiff has alleged do not require the sale of a consumer report at all.  Among others, Plaintiff has asserted claims for Defendants’ violation of FCRA sections 1681g, 1681i and 1681j.  These sections regulate CRAs’ conduct in terms of how they respond to and interact with consumers who contact them in connection with a file request or dispute.  None of these claims has anything to do with whether a consumer report was published or sold at a particular time period, nor require that a consumer prove that predicate act in order to recover.  15 U.S.C. 1681g, 1681h and 1681i.  See, e.g., Lawrence v. Trans Union, LLC, 296 F. Supp. 2d 582, 590 (E.D. Pa. 2003) (1681i claims turn upon whether CRAs properly performed their investigation duties after being notified of dispute by consumer); Gillespie v. Equifax Info. Servs., LLC, 2008 WL 4316950, *6 (N.D. Ill. Sept. 15, 2008) (1681g claims turn upon whether a CRA, in response to a consumer’s request, provided consumer with all information in its file).  Plaintiff’s section 1681j claim turns upon whether Defendants charged her for a file disclosure which should have been free under the statute.  If Defendants charged her, she prevails; if not, she does not.  Like her section 1681i and 1681g claims, proof of the production or sale of a consumer report is not even arguably an element for such a claim.

If Defendants’ reading of the FCRA were adopted—that a plaintiff needs to prove the sale of a consumer report “as to her” in order for the FCRA to apply at all, it would render sections 1681g, 1681i and 1681j absolutely meaningless, a statutory construction which our Circuit prohibits.

In addition, Defendants’ construction would lead to an absurd result:  Defendants’ position is that if the specific report sold regarding the Plaintiff was not provided for a purpose permitted under 15 U.S.C. § 1681b(a), then it is not a consumer report – there was no use of same for eligibility.  Accordingly, no report sold for an otherwise unlawful purpose would ever be a consumer report, regardless of whether or not a defendant charged as a CRA was using its same collection of data and database to sell reports to other users for an FCRA permitted purpose.  It is necessary to take this point to extreme analogy.  The Court and all parties certainly know of the continuing problem of identity theft, sometimes beginning when a third party fraudster uses the personal information of a consumer to unlawfully request that victim’s credit report.  Under Defendants’ view of the FCRA, an acknowledged CRA such as national credit bureau Equifax could intentionally sell Plaintiff’s credit report to a known identity thief so long as that person promises Equifax that he or she would not use the report for one of the lawful purposes listed at § 1681b(a).  Defendants’ remarkable position is that the unlawful furnishing of the challenged report actually changes its designation from a consumer report to a non-FCRA report.  Nothing else is needed.

The present case proves the strange logic in this position.  As argued above, in Williams, the Defendants were challenged for their noncompliance with disclosure violations under the FCRA in their sale of public records to a prospective employer.  That product – branded “Securint” – did not differ in any material way from the Accurint report Defendants also sell and that is challenged in this case, but for one difference.  Securint reports are used for employment decisions, which even Defendants acknowledged was a purpose listed in § 1681b(a).  Thus Defendants’ position is premised solely on the distinction that one report is used for FCRA purposes and the other for non-FCRA purposes.  This result would render 15 U.S.C. § 1681b(a), as well as related provisions such as § 1681e(a) (requiring a CRA to obtain a lawful purpose certification from end-users) entirely meaningless.

The Court does not need to rely on the obviousness of this position alone – every court known to counsel to have considered such an absurdity has rejected it.  In St. Paul Guardian Ins. Co. v. Johnson, the Fifth Circuit explained:

Under St. Paul’s reasoning, credit reports would be releasable under all circumstances. If used for non-FCRA purposes, a credit report would be releasable because it did not fall with the FCRA definition of a consumer report. If used for FCRA purposes, a credit report would likewise be releasable because it would meet the definition of a consumer report. We simply cannot conclude that Congress intended such an illogical result. Accordingly, we reject St. Paul’s argument that the definition of a “consumer report” under the FCRA depends on the use to which the information contained therein is put and conclude that the purpose for which the information was collected governs whether that report is a “consumer report” under the FCRA.

884 F.2d 881 (5th Cir. 1989).   In Bakker v. McKinnon, the Eighth Circuit also rejected the argument, holding:

We hold that, regardless of appellant’s intended use of the credit reports, these reports are consumer reports within the meaning of the FCRA because the information contained therein was collected for a consumer purpose. Under the FCRA whether a credit report is a consumer report does not depend solely upon the ultimate use to which the information contained therein is put, but instead, it is governed by the purpose for which the information was originally collected in whole or in part by the consumer reporting agency.

152 F.3d 1007 (8th Cir. 1998).  The governance question is not how the specific report sold for the specific Plaintiff was used.  It is why the underlying data was used, expected to be used or collected.  The Amended Complaint has appropriately alleged that the data sold in [Plaintiff]’s Accurint report was expected to be used and/or collected in whole or in part for purposes governed by the FCRA.

4. the March 13, 2008 letter Defendants sent [Plaintiff] completely undermines the credibility of Defendants’ coverage argument

At footnote 11 of their Brief, Defendants reference the March 13, 2008 letter (the “March 13th Letter”) that Defendants LexisNexis and Seisint sent [Plaintiff] in response to her request for her file disclosure, and which is detailed in the Amended Complaint. See Def. Br., at 20.  Defendants assert that the March 13th Letter contradicts Plaintiff’s allegations that Accurint reports are consumer reports.  In fact, the opposite is true: the March 13th Letter completely undermines Defendants’ novel and newfound interpretation of the FCRA.

As set forth above, and again, without any authority whatsoever, Defendants interpret the FCRA in a way which creates a divide between consumer reports prepared in connection with a consumer’s “eligibility” or “entitlement” to something, and those prepared for other purposes (i.e. debt collection, credit insurance, etc.).  See Def. Br., at 18-19.  According to Defendants’ view of the world, use of a consumer report for debt collection (i.e. “collection of an account”) is a permissible and approved statutory purpose and regulated use under the FCRA, but such information does not constitute a consumer report because it is not provided in connection with a consumer’s entitlement to something.

In their admissions contained in the March 13th Letter, Defendants take the completely opposite position.  The March 13th Letter (a form letter sent to thousands of others) states that Accurint reports may NOT be used for FCRA statutory purposes:

Accurint data is not permitted to be used to grant or deny credit, make employment decisions, or make tenant and housing screening decisions, or any other uses regulated by the Fair Credit Reporting Act.

Def. Br., at Ex. A.  Thus, according to the March 13th Letter that Defendants send consumers, Accurint reports are NOT permitted for collection purposes – because that is an approved FCRA regulated purpose according to Defendants’ scheme of the FCRA.  Given Defendants’ admissions that the Accurint reports are used for debt collection purposes, Defendants have admittedly violated the FCRA.

There is simply no straight-faced way to resolve the contradictory positions taken by the Defendants in their March 13th Letter and the instant Motion.  If anything, they reveal that the reason Defendants’ FCRA coverage argument is presented without any supporting citation is because it is an after-the-fact invention to attempt to escape liability.

C. There Is Nothing To Be Inferred From The FTC Consent Decree

Defendants next argue that the Accurint report is not a “consumer report” allegedly because the Federal Trade Commission (“FTC”) sued Seisint, Inc. and Reed Elsevier, Inc. “only” under the FTC Act, and not the FCRA, following a data breach in 2005.  See Def. Br., at 21, 22.   With this argument Defendants are merely reading tea leaves.  There is absolutely no basis to read the FTC’s enforcement action related to a 2005 data breach or the Consent Decree that followed to say anything concerning whether an Accurint report is or is not a consumer report under the FCRA.

First, the FTC enforcement action did not directly address whether an Accurint report is a consumer report, and involved no claims or issues that are even related to the ones in this case.  Thus, even if the government’s actions (or “omissions,” as Defendants put it) in one administrative proceeding can be used as a tool in construing the FCRA by analogy, the FTC’s 2005 data breach case against Seisint and Reed Elsevier simply is not analogous to the case at bar.  Nor do Defendants submit any evidence concerning the FTC’s views or litigation strategy in that data breach case, or about what the FTC truly thinks of Accurint reports.  Defendants are merely speculating.

Second, the FTC’s use of the FTC Act in one type of administrative proceeding is no indication of whether a particular company’s business is or is not governed by a different federal statute in a substantially different civil action.  The FTC uses the FTC Act (and not the FCRA) regularly to combat data or security breaches.  The FTC has brought claims under the FTC Act in data breach cases against mortgage, student loan and credit card companies, among others.   Although there can be no doubt that these business types are commonly “furnishers” of credit data and “users” of credit reports under the FCRA, the consent orders in these cases naturally say no such thing – because the underlying disputes are data breach cases, not traditional FCRA furnisher or user cases.  No inference can rationally be made that mortgage, student loan or credit card companies cannot be governed by the FCRA because in certain data breach actions the FTC brought FTC Act, and not FCRA claims, against these entities.  By the same token, no rational inference can be reached that an Accurint report is not governed by the FCRA as a consumer report because the FTC brought an FTC Act suit against Seisint and Reed Elsevier, and not an FCRA claim, in a similar data breach matter.

Last, but certainly not least, if there is any reason to speculate why the FTC did not include an FCRA claim against Seisint and Reed Elsevier may very well be because the FCRA does not provide an explicit cause of action for a straightforward data breach in and of itself.

In sum, Defendants’ construction of the FTC’s Consent Order and actions stemming from the 2005 data breach case are illogical, speculative and offer neither binding nor persuasive legal guidance regarding the issues relevant to this case.

D. The Amended Complaint Sufficiently Alleges Willful Conduct On The Part Of The Defendants

1.         the legal standard: reckless or conscious disregard

Defendants argue that the Amended Complaint should also be dismissed because Plaintiff “cannot establish that any violation of the FCRA was willful.”  Def. Br., at 26.  But the point, rather, at this stage of the litigation, is whether Plaintiff has plausibly alleged willful conduct; establishing willfulness should await full discovery and dispositive motion briefing or trial.  Ehrheart v. Lifetime Brands, Inc., 2007 WL 2141979, *2 (E.D. Pa., July 20, 2007) (motion to dismiss denied where complaint sufficiently alleged that defendant’s violation of FCRA was either knowing or reckless, “accordingly, … the Complaint plausibly alleges that Defendant’s violation … was willful”).

Defendants argue for the wrong standard.  The standard to allege a “willful” violation under the FCRA is not high.  A plaintiff need not allege a knowing violation, but only that the defendant recklessly committed an act in reckless or conscious disregard of the rights of others.  See Cushman v. Trans Union Corp., 115 F.3d 220, 227 (3d Cir. 1997).  This is a lower standard than the standard for willful violations or punitive damages claims under most common law torts.  Although the terms “willful” or “willfully” are not defined in the FCRA, case law has held that neither malice nor evil motive need be established for a finding of a willful violation.  Id. See also Stevenson v. TRW, Inc., 987 F.2d 288, 294 (5th Cir. 1993) (citing Fischl v. General Motors Acceptance Corp., 708 F.2d 143, 151 (5th Cir. 1983)).

Many courts have noted that willfulness under the FCRA is demonstrated by recklessness and not by a knowing violation of the law.  Stevenson, 987 F.2d at 293 (citing Pinner v. Schmidt, 805 F.2d 1258, 1263 (5th Cir. 1986), cert. denied, 483 U.S. 1022 (1987)); Cushman, 115 F.3d at 227.  See also Reynolds v. Hartford Fin. Servs. Group, 435 F.3d 1081, 1097-99 (9th Cir. 2006), rev’d on other grounds by Safeco Ins. Co. of America v. Burr, 551 U.S. 47 (2007) (discussing meaning of “willfully” under FCRA and relying on Cushman).  Such reckless or conscious disregard may be found when a defendant adopts a policy either knowing it to be in “contravention of the rights possessed by consumers under the FCRA or in reckless disregard for whether the policy contravenes those rights.”  Cushman, 115 F.3d at 227; see also Reynolds, 435 F.3d at 1097-99.

Multiple district court cases within this Circuit, examining the willfulness standard in FCRA investigation cases, have found that plaintiffs may proceed to trial with their willfulness claims where the defendant’s conduct is not merely a result of a negligent act that was promptly cured.  See Sheffer v. Experian Info. Solutions, Inc., 2003 WL 21710573, *3 (E.D. Pa. July 24, 2003) (Schiller, J.) (defendant’s conduct was willful, and not merely an “isolated instance of human error  . . . promptly cure[d]”) (quoting Boris v. Choicepoint Servs., 249 F. Supp. 2d 851, 862 (W.D. Ky. 2003)) (emphasis added). See also Lawrence, 296 F. Supp. 2d at 590 ; Crane v. Trans Union, LLC, 282 F. Supp. 2d 311, 321 (E.D. Pa. 2003); Evantash v. G.E. Capital Mortgage Servs., Inc., 2003 WL 22844198, *8 (E.D. Pa., Nov. 25, 2003).

Chief Judge Bartle of the Eastern District of Pennsylvania also agreed with this interpretation of the willfulness standard under the FCRA when he permitted punitive damages to go to the jury in an FCRA investigation matter.  See Abusaab v. Equifax Info. Servs. LLC, 2006 WL 1214782 (E.D. Pa. May 4, 2006).

2.         Safeco affirmed the reckless disregard standard

The Supreme Court’s 2007 decision in Safeco further undermines Defendants’ argument.  Safeco Insurance Co. of America v. Burr, 551 U.S. 47 (2007).  In Safeco, the Supreme Court was asked to decide which of two conflicting standards governed FCRA willfulness claims, and it adopted the lower and less rigorous “reckless disregard” standard, which courts in this Circuit have followed for years.

Prior to Safeco, there was a circuit split as to what level of scienter should be applied in assessing FCRA willfulness claims.  Several circuits had held that a knowing violation of the law (higher standard) was required for a consumer to prove willfulness under the FCRA, while others, including the Third Circuit and the Ninth Circuit, had held that “reckless disregard” (lower standard) was all that was required.  In Safeco, the Supreme Court endorsed our Circuit’s standard, and held that proof of “reckless disregard” by a defendant (i.e. not a knowing violation of law, as the credit industry argued) is sufficient to establish a willful violation of the FCRA.  Safeco, 551 U.S. at 2208-2210.

“Reckless disregard” is precisely the FCRA willfulness standard that this Court has followed for many years.  See Cushman, 115 F.3d at 227.  In Safeco, the Supreme Court cited the Third Circuit’s decision in Cushman as the correct standard for assessing willfulness claims.  Safeco therefore forever disposed of the argument that a consumer-plaintiff must show that a defendant knowingly violated the FCRA.

Thus, the inquiry now is not the standard for a willfulness claim, but rather when the “reckless disregard” standard is met in an FCRA case brought against a defendant.  Unlike the situation in the circuits which had previously followed the knowing violation standard, this question has been thoroughly investigated and answered by the courts within the Third Circuit, as discussed and cited above.  These cases also demonstrate that the reckless disregard standard is a fact-bound inquiry, a concept that the Third Circuit recently reiterated.  See Whitfield v. Radian Guaranty, Inc., 501 F.3d 262 (3d Cir. 2007).  Indeed, in Whitfield the Third Circuit, in a post-Safeco FCRA decision, reversed a grant for summary judgment on an FCRA willfulness claim and held that the issue of willfulness was for the jury to decide.  Id. at 271.  The Third Circuit stated:

We do not suggest that a factfinder could not or would not determine that [the defendant] did not act willfully.  Instead, we hold that whether it did so is a factual issue, not a question of law, and it therefore cannot be decided either on appeal or by the District Court as a matter of law.

Id.  (emphasis added); vacated as moot, 2008 WL 2329934 (U.S. June 9, 2008).

Here Plaintiff has certainly alleged that Defendants acted with reckless disregard.  She alleges that, and as confirmed by the admissions in their March 13th Letter, Defendants know that their Accurint reports are inaccurate, but have a policy of not accepting disputes from consumers and will not correct those errors as a conscious practice.  Am. Compl., ¶¶ 24(f), 25 and 28.  Thus, she pleads that Defendants are knowingly reporting incorrect consumer data but refuse to correct their errors.  Certainly, such allegations could lead a jury to find that Defendants act in reckless disregard of the FCRA’s accuracy and dispute requirements.

E. Defendants Have Waived All Further Objections Regarding The Specificity Of The Pleadings

Defendants’ objections regarding the specificity of the pleadings (See Def. Br., at Arguments IV, V, & VI) as contemplated by Twombly and Iqbal have been waived at this juncture.  Rule 12(g)(2) makes it clear that “a party that makes a motion under this rule must not make another motion under this rule raising a defense or objection that was available to the party but omitted from its earlier motion.”  The section applies with full force to motions pursuant to Rule 12(c).  See BAICKER-MCKEE, JANSESEN, CORR, FEDERAL CIVIL RULES HANDBOOK, 449 (2010) (“A motion for judgment on the pleadings cannot assert defenses and objections that a party has waived by failing to timely assert in a preliminary Rule 12(b) motion”).

Defendants have already filed a preliminary motion pursuant to Rule 12(b)(6) with respect to Plaintiff’s original Complaint in which they could have and should have raised these arguments regarding the specificity of particular paragraphs or as to pleadings related to the individual Defendants.   Defendants, however, consciously chose not to do so.  “The purpose behind [Rule 12(g)(2)] is obvious: it allows the Court to flush out all Rule 12 defenses at one time to avoid needless delay.”  Pruco Life Ins. Co. v. Wilmington Trust Co., 616 F. Supp. 2d 210, 214 (D.R.I. 2009).  Moreover, the fact that Plaintiff filed an Amended Complaint “does not automatically revive all of the defenses and objections that a defendant has waived in response to the original complaint.”  See Gilmore v. Shearson/American Exp. Inc., 811 F.2d 108, 112 (2d Cir. 1987).  Accordingly, Defendants’ motion in this regard should be denied out of hand.

1. plaintiff has nonetheless asserted a plausible claim relating to Defendants’ violation of the FCRA as a whole and as a reseller of consumer reports

Notwithstanding the procedural deficiencies with Defendants’ arguments, Plaintiff’s basis for the averments in paragraphs 39(c) and (d) are well founded.  Defendants notably represent on their website that “The information provided by Accurint does not constitute a “Consumer Report” as defined in the federal Fair Credit Reporting Act.”  See http://www. accurint.com.  Taking Defendants on their word, Defendants make no effort whatsoever to comply with the FCRA, making violations of each and every section of the FCRA abundantly plausible.  Additionally, Plaintiff’s Amended Complaint details specific factual examples of Defendants’ conduct which unambiguously violates the FCRA.  See Section II, supra.  Plaintiff also is entitled to discover whether Defendants’ conduct constitutes additional violations of the FCRA.

Furthermore, Defendants’ generalized dissatisfaction with the quantum of facts that Plaintiff has pled with respect to paragraph 39(d) does not advance their arguments for dismissal.  A well-pled complaint in the federal court is not meant to unearth every single fact or piece of information in existence in connection with a claim.  See al-Kidd v. Ashcroft, 580 F.3d 949, 977 (9th Cir. 2009) (“Twombly and Iqbal do not require that the complaint include all facts necessary to carry the plaintiff’s burden.”); Fowler v. UPMC Shadyside, 578 F.3d 203, 211-12 (3d Cir. 2009) (“Although [plaintiff]’s complaint is not as rich with detail as some might prefer, it need only set forth sufficient facts to support plausible claims.”).  Defendants merely point out that they have a countervailing point of view in connection with the circumstances giving rise to these claims and numerous discovery questions that they would like answered, which is not grounds for dismissal.

2. Plaintiff has also asserted plausible claims as to all Defendants

Defendants claim the Amended Complaint “makes no distinction in [the] allegations as to which defendant acted as alleged.”  See Def. Br., Argument V, at 31.  This argument falsely suggests that Defendants are somehow separate business entities operating at arms’ length from one another which played different roles in the sale of Plaintiff’s information.  Through a series of corporate purchases and acquisitions, Defendants are actually a single division of Reed Elsevier, Inc. which is operated under the tradename of LexisNexis.

“[U]nsupported protestations regarding the corporate structure are insufficient to support a Rule 12(b)(6) motion in the face of a complaint that taken as true, as we must in the present procedural posture, pleads sufficient facts to establish successor corporation liability.”

Procentury Ins. Co. v. Harbor House Club Condominium Ass’n, Inc., 652 F. Supp. 2d 552, 562 (D.N.J. 2009).  Plaintiff here has specifically pled how Seisint has come to be owned and operated by LexisNexis.  (Am. Compl. at ¶¶ 5-7).  Moreover, Defendants do not contest that Plaintiff has somehow misrepresented the current status of these business entities which would certainly be a prerequisite to raising an argument of this kind.

Nowhere has Twombly or Iqbal been interpreted to require a plaintiff to sort out the internal operations of affiliated business entities at the pleading stage.  See id.  (“Whether that allegation is eventually proven or legally sufficient will be left to discovery and future motion practice.”).  See also Premier Pork L.L.C. v. Westin, Inc., 2008 WL 724352, *4 (D.N.J. Mar. 17, 2008) (applying Twombly and recognizing plaintiff’s claim of successorship liability in pleadings based on general allegations of successorship); Knechtel v. ChoicePoint, Inc., 2009 WL 4123275 *2, N.3 (D.N.J. Nov. 23, 2009) and Carlton v. ChoicePoint, Inc., 2009 WL 4127546, *2 N.3 (D.N.J. Nov. 23, 2009) (finding that general pleadings as to individual defendants alleged to be acting in concert with one another is not grounds for dismissal).  Indeed, such a requirement would be impossible for a plaintiff to comply with since it would require Plaintiff to obtain information that only Defendants possess.  Discovery on LexisNexis’ and Seisint’s current business structure would certainly be appropriate in the context of this litigation and may warrant amendment of named parties in the pleading at some later point consistent with discovery, but for the moment Plaintiff’s pleadings satisfactorily give Defendants notice of the plausible claims asserted against them.

3. Plaintiff adequately alleges Defendants violated the FCRA as resellers of consumer report data

Last, Defendants argue that Plaintiff’s allegations that they violated the FCRA as procurers for resale (termed “resellers” in the credit industry) are insufficient to state a claim.  Def. Br. at 33.  This argument can be quickly disposed of by reference to the Amended Complaint and Defendants’ own admissions.

Plaintiff alleges that some of the data that Defendants sell through their Accurint reports is derived from data that they have purchased from other CRAs.  Am. Compl., ¶ 10.  Defendants claim that this is insufficient to find that they act as resellers of consumer report data.  But what Defendants either misapprehend or purposely ignore is that Plaintiff’s reseller allegations are based at least in part upon their own admissions.  As referenced in her Amended Complaint at paragraph 24(e), the March 13th Letter that Defendants sent Plaintiff states that “Accurint purchases and resells data collected by outside companies, which cover public records…”.  Def. Br. at Ex. A (emphasis added).  The statute provides that companies which sell public records data nationwide are CRAs.  15 U.S.C. §1681a(p).  Certainly, these allegations and Defendants’ own admissions state a claim that they act as resellers of consumer report data.

IV. CONCLUSION

For all the foregoing reasons, Plaintiff respectfully requests that the Defendants’ Motion for Judgment on the Pleadings be denied.

Respectfully Submitted,

FRANCIS & MAILMAN, P.C.

DONOVAN SEARLES, LLC

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

)

Plaintiff,

vs. )

)        

EXPERIAN INFO. SOLUTIONS, INC., et al. )

)

Defendants. )

)

PLAINTIFF’S MEMORANDUM OF LAW

IN SUPPORT OF HER RESPONSE IN OPPOSITION TO DEFENDANT

TRANS UNION, LLC’S AND DEFENDANT ASSOCIATED CREDIT AND

COLLECTION BUREAU, INC.’S MOTIONS FOR SUMMARY JUDGMENT

Plaintiff hereby respectfully responds in opposition to the motions for summary judgment filed by two of the Defendants in this matter — Trans Union, LLC (“TU”) (Docket No. 41), a national consumer credit reporting agency or “CRA,” and Associated Credit and Collection Bureau, Inc. (“ACCB”) (Docket No. 38), a national debt collector and furnisher of credit information (collectively, “Defendants”).

These Defendants damaged Plaintiff’s good name and credit by repeatedly confirming and allegedly “verifying” for years that Plaintiff owed $690 to an old landlord in the form of an alleged collection account.  That information was inaccurate and false.  Defendants could have easily corrected their records.  They were unwilling to do so until after Plaintiff sued.   Defendants could have just as easily complied with the law by blocking or deleting this false collection account if they did not feel like doing an honest investigation that got to the truth.  Again, they were unwilling to do so until after Plaintiff sued.

Now they argue that Plaintiff purportedly has no claim against them despite their statutory and common law duties to report only accurate and true information in the first place and to promptly correct any inaccuracies upon notice.   Because the record in this case shows that Plaintiff brought valid claims and that genuine issues of material fact exist for the jury, and also because TU and ACCB are not entitled to judgment as a matter of law, Defendants’ motions should be denied.

I. BACKGROUND

The factual record relevant to the instant motions is set forth not in Defendants’ factual statements, but in Plaintiffs’ Counter-Statements of Facts, which was filed separately at the same time as this memorandum, and which is incorporated by reference herein.

In summary fashion, the record in this case shows that Plaintiff owes no money to her old landlord, Awbury Park Apartments.  (PCSF at ¶ C1).  Plaintiff was sued by Awbury Park Apartments in 2004 for $1,163 supposedly for certain unpaid charges and penalties or for alleged damage to an apartment that she rented. (PCSF at ¶ C2).    Nevertheless, Plaintiff defended the underlying lawsuit and in October 2004 settled all claims with the landlord for $530.  (PCSF at ¶ C3).  The settlement was memorialized by counsel in that case in letters, Plaintiff paid by money order in the amount of $531, which cleared, and Plaintiff believed that the unfortunate landlord dispute was behind her.  (PCSF at ¶ C3-C7).

But the landlord’s rent collector and property management company, Defendant Chancellor Properties, Inc. (“Chancellor”), nevertheless placed the alleged “debt” for collections with ACCB, for no appropriate reason and in violation of its own operating rules.   (PCSF at ¶ C8).  ACCB attempted to re-collect the already paid debt and also reported it to the CRAs on Plaintiff’s credit reports as a highly derogatory unpaid “collection” with a “$690 balance.” (PCSF at ¶ C9).  Plaintiff discovered the obvious error and disputed it in early 2005.  (PCSF at ¶ C10).

The record in this case shows that in 2005, 2006, 2007, 2008 and 2009 Plaintiff disputed and re-disputed this collection account repeatedly with ACCB, TU, other CRAs, Chancellor and even with the Better Business Bureau.  (PCSF at ¶ C11).  None would help her to correct the obvious and harmful error, which continued to report against her until shortly after Plaintiff brought this lawsuit.  (PCSF at ¶ C53).

The Defendants filing the present motions received notice of this dispute a total of nineteen (19) times.  According to Defendants’ own records, notice was received four (4) times by TU (on or about 5/8/07, 12/12/07, 5/23/08, and 7/28/08) and fifteen (15) times by ACCB (on or about 2/28/05, 3/21/05, 3/31/05, 4/18/05, 5/16/05, 5/24/05, 5/31/05, 8/22/06, 5/14/07, 5/21/07, 11/8/07, 1/8/08, 1/10/08, 6/23/08 and 4/7/09).  (PCSF at ¶ C32, and preceding summary of disputes).

Plaintiff even had her former attorney contact an ACCB debt collector, who responded that “the letter from your attorney means nothing to me.”  (PCSF at ¶¶ C33 & C35).  ACCB and TU repeatedly “verified” the collections account as accurate, with Plaintiff allegedly still owing “$690.”  (PCSF at ¶ C36).  Defendants did nothing to correct the problem until May 2009 despite their statutory duties to report only “accurate” information, to carefully “investigate” consumer disputes, and to promptly delete any debt that cannot be “verified” by them as true and accurate.  (PCSF at ¶ C53).

Defendants admit that they simply parroted the inaccurate records that led to the error in the first place.  (PCSF at ¶ C37).  Neither TU nor ACCB contacted Plaintiff or her husband for any information; neither contacted the attorneys involved in the underlying landlord dispute or any third party, such as the court; and neither searched for the money order or any record of payment.  (PCSF at ¶ C38).  Indeed, Defendants “investigated” the repeated credit disputes by not interviewing or speaking with a single person, and by not unearthing or even searching for a single document.  (PCSF at ¶¶ C38-C51).  Even when Plaintiff provided proof of the payment to them and relevant contact information for all parties and counsel involved in the landlord dispute, these Defendants ignored it.   (PCSF at ¶ C52).  Defense records show that they intended to continue to report this highly derogatory collection item for seven (7) years.  (PCSF at ¶ C54).

For the two years prior to filing this lawsuit (the statute of limitations period for most claims), Plaintiff’s credit had only one “adverse” or “derogatory” account — the collection item that is the subject of this lawsuit.  (PCSF at ¶ C55).  The account was sometimes double-reporting as both a Chancellor account and an ACCB collection account.  (PCSF at ¶ C56).  The ACCB account always reported in derogatory status and with a balance of $690.   (PCSF at ¶ C57).

When Plaintiff needed credit, she was denied, delayed or offered exceedingly high interest rates.  (PCSF at ¶ C58).  For the two years prior to filing this lawsuit, Plaintiff has presented evidence that she was denied a personal loan to replace her leaky windows through Wells Fargo on 11/24/08; was offer only an unaffordable 12.9% interest rate from FCC Financing for the same transaction on 12/1/08; was denied credit by Capital One on 11/20/08; had to accept a 23% interest loan through CitiFinancial on 8/14/07; and was charged a .5% higher interest rate on her present mortgage by Gateway Funding in the early part of 2009 due to this single supposedly unpaid blemish on her credit record.  (PCSF at ¶ C59).  All of these adverse credit actions were taken because of TU credit reports sold to the various potential creditors (including Wells Fargo, CitiFinancial, FCC Financing, Capital One, and Gateway Funding), with the ACCB account reporting as the only derogatory credit item in Plaintiff’s credit report.  (PCSF at ¶ C60).

The Gateway Funding branch manager who personally processed Plaintiff’s loan testified that Plaintiff’s poor credit score disqualified her from competitive “conventional” mortgages, and even though he was able to offer Plaintiff an FHA home loan, that loan was .5% more expensive than it otherwise would have been because the ACCB collection account reflected an unpaid balance of $690.   (PCSF at ¶ C61).

Plaintiff has further offered an unrebutted expert report that her credit losses were caused by this inaccurate collection item, that the inaccurate collection item prevented Plaintiff from obtaining a mortgage loan that could have been .75% to .9% lower than the loan Gateway Funding was able to give her, and further that Plaintiff’s financial losses as to the mortgage alone are in the range of $46,700 to $58,500.  (PCSF at ¶ C62); (See also Norton Expert Report, attached hereto as Exhibit 49).

Plaintiff also offers detailed evidence and seeks damages for the other lost credit opportunities (such as with Wells Fargo, FFC Financial, Capital One,  and Citibank) and for the untold frustration, embarrassment, and related emotional distress that she suffered at the hands of these Defendants for a prolonged period of time.  (PCSF at ¶ C63).  Further, as she wrote in some of her dispute letters through the years, this false reporting has negatively affected her “credibility and character” and has been “truly embarrassing and unfair.”  (PCSF at ¶ C65).  Plaintiff also offers evidence of frustration, embarrassment, and other emotional distress.   (PCSF at ¶ C58, C65-C67).  After she repeatedly hit a “brick wall” (PCSF at ¶ C68), Plaintiff brought this lawsuit, in which she seeks statutory, actual, treble, and punitive damages, as well as her attorney’s fees and costs.

TU and ACCB have now removed any traces of this supposed unpaid “collection” item.  Nevertheless, they move for summary judgment, arguing that they were reasonable in their actions all along.  They contend that Plaintiff cannot prove any of her common law or statutory consumer protection claims.  As will be set forth below, Defendants distort the factual record in this case and misapply the legal standards.  If anyone is entitled to judgment as a matter of law in this case, it is Plaintiff.   Defendants’ motions for summary judgment should be denied.

II. STANDARD

Pursuant to Federal Rule of Civil Procedure 56(c)(2), a motion for summary judgment will only be granted if:

The pleadings, the discovery and disclosure material on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to a judgment as a matter of law.

Fed. R. Civ. P. 56(c)(2) (revised as of Dec. 1, 2009).  The Third Circuit has said that summary judgment may only be granted if the movant shows, by admissible evidence, that there exists no genuine issue of material fact that would permit a reasonable jury to find for the nonmoving party.  Wetzel v. Tucker, 139 F.3d 380, 383 n.2 (3d Cir. 1998); Miller v. Indiana Hosp., 843 F.2d 139, 143 (3d Cir. 1988), cert. denied, 488 U.S. 870 (1988).

A court may not, at the summary judgment stage, weigh evidence or make credibility decisions.  These tasks are left to the fact-finder.  Petruzzi’s IGA Supermarkets, Inc. v. Darling-Delaware Co., Inc., 998 F.2d 1224, 1230 (3d Cir. 1993), cert. denied, 510 U.S. 994 (1993).  To raise a genuine issue of material fact, the respondent need not match, item-for-item each piece of evidence proffered by the movant.  As the Third Circuit has explained:

In practical terms, if the opponent has exceeded the “mere scintilla” threshold and has offered a genuine issue of material fact, then the court cannot credit the movant’s version of events against the opponent, even if the quality of the movant’s evidence far outweighs that of its opponent.  It thus remains the province of the factfinder to ascertain the believability and weight of the evidence.

In re Unisys Savings Plan Litigation, 74 F.3d 420, 433 n. 10 (3d Cir. 1996).  If there are gaps in the pertinent materials submitted by the movant, without explanation, that justifies denial of the motion.  O’Donnell v. United States, 891 F.2d 1079, 1082 (3d Cir. 1989).

In the case at bar, there exist genuine issues of material fact and Defendants are not entitled to judgment as a matter of law.  Summary judgment, therefore, is inappropriate.

III. ARGUMENT

Plaintiff explains below why the defense arguments in support of TU and ACCB’s motions for summary judgment fail, beginning with TU’s arguments.

A. TU’s Motion For Partial Summary Judgment Fails

It should first be noted that TU moves for partial summary judgment.  TU never cites, discusses or addresses at all in its motion Plaintiff’s claims that: (1) TU failed to reasonably reinvestigate her disputes (under FCRA section 1681i); and (2) TU willful violated the FCRA (under FCRA section 1681n).  Plaintiff pled these FCRA claims at paragraph 34 of her Amended Complaint.  (Docket No. 21).  TU knows these FCRA claims well, as they are brought regularly against it, and has on other occasions moved for summary judgment on those very same claims, without success.  In this case, TU does not move on those claims.

TU also does not move for summary judgment on Plaintiff’s common law negligence claim.  In the heading of section II.E of its brief, TU says that Plaintiff’s defamation, invasion of privacy and common law negligence claims are “meritless,” but nowhere in that section or in any other part of its brief does TU make any argument or cite any authority whatsoever for why Plaintiff cannot proceed to the jury with her common law negligence claim.  Because TU fails to move or brief the negligence claim, or discuss it in any meaningful way, that claim is also not a part of TU’s partial motion for summary judgment.  See Local Civ. R. 7.1(c) (requiring statement of legal contentions and authorities).

Thus, TU’s motion is one for partial summary judgment, and Plaintiff’s FCRA section 1681i and 1681n claims, as well as her common law negligence claim, remain uncontested and must proceed to the jury.

1. TU’s Challenges Of Plaintiff’s FCRA Section 1681e(b) Claim Fail Because Plaintiff Has Come Forward With Evidence To Show A Genuine Issue Of Material Fact On The Subjects Of Causation And Damages

The one FCRA claim that TU actually briefs in its motion is Plaintiff’s FCRA section 1681e(b) claim, which requires CRAs, such as TU, to prepare consumer (or credit) reports following procedures that assure “maximum possible accuracy.”  See 15 U.S.C. § 1681e(b).  TU argues that Plaintiff cannot establish a section 1681e(b) claim allegedly because she cannot show that any action by TU “caused her harm,” either in the form of emotional distress or in the form of credit denials or lost credit opportunities.  (TU Mem. at 3-9).  These are arguments that TU has tried and tried again in this Circuit, never with success.  Again, these arguments must be rejected in this case.

The Third Circuit has held that for an FCRA section 1681e(b) negligence claim (although not a willfulness claim) a consumer must make a prima facie showing that the credit reporting inaccuracy caused actual damages.  Philbin v. Trans Union Corp., 101 F.3d 957, 963 (3d Cir. 1996).  Here, Plaintiff has alleged that TU violated FCRA section 1681e(b) negligently and/or willfully.  (See Amed. Comp. at ¶¶ 30-35, esp. ¶ 34) (Docket No. 21).  Since Plaintiff will show in this case that TU’s FCRA violations were willful (a claim that TU’s motion has not even challenged), she does not have the burden of showing any actual damages at summary judgment or at trial.  However, since under either a negligence or willfulness theory Plaintiff may recover, and in this case will seek, actual damages, she has come forward with more than sufficient evidence of the type of harm which constitutes “actual damages” under the FCRA.

Notably, emotional and mental distress, anxiety, frustration, anger, humiliation, and embarrassment as well as damage to credit reputation are all recognized as “actual damages” under the FCRA.  See Philbin v. Trans Union Corp., 101 F.3d 957, 963 & n.3 (3d Cir. 1996); see also Guimond v. Trans Union Credit Information Co., 45 F.3d 1329, 1333 (9th Cir. 1995); Stevenson v. TRW Inc., 987 F.2d 288, 296 (5th Cir. 1993); Millstone v. O’Hanlon Reports, Inc., 528 F.2d 829, 834-35 (8th Cir. 1976); see generally Cushman v. Trans Union Corp., 115 F. 3d 220 (3d Cir. 1997); Lukens v. Dunphy Nissan, Inc., Civ. No. 03-767, 2004 WL 1661220 at * 5 (E.D. Pa. Jul. 26, 2004) (FCRA plaintiff may recover for having to place fraud alert on his credit report and for time in dealing with and attempting to clear up credit inaccuracies); Lawrence v. Trans Union, LLC, 296 F. Supp. 2d. at 588-89; Evantash v. G.E. Capital Mortgage Servs., Inc., E.D. Pa. Civ. No. 02-1188, 2003 WL 22844198 * 5; Crane v. Trans Union, LLC 282 F. Supp. 2d at 319-321; Sheffer v. Experian Info. Solutions, Inc., E.D. Pa. Civ. No. 02-7407, 2003 WL 21710573 at * 3-4.  Indeed, most of the above decisions were against TU itself in FCRA cases. These cases also demonstrate that a consumer-plaintiff may recover such damages without the need for medical testimony.  Id.

The Third Circuit has explained that in an FCRA case a plaintiff need not come forward with a mountain of evidence in order to proceed to the jury with his or her damages claim.  In Philbin, the Third Circuit found the following interrogatory response to be sufficient for the plaintiff to survive summary judgment:

Plaintiff cannot with specificity outline the actual damages sustained. However, he sustained damages over the past (4) four to (5) five years as a result of the persistent and continual rejections from credit agencies as a result of the false information contained in his credit report. Plus the humiliation and embarrassment following the rejection with the particular vendor whom [sic] he sought credit.

Philbin, 101 F.3d at 963 n. 3; see also Crane v. Trans Union, LLC 282 F. Supp. 2d at 319 (summary judgment denied on similar evidence).

“The loss of credit opportunities [also] constitutes compensable harm under the FCRA.”  Lawrence v. Trans Union, LLC, 296 F. Supp. 2d. at 588-89 (citing Philbin, 101 F.3d at 957); Guimond, 45 F.3d at 1333; Bach v. First Union Nat’l Bank, 149 Fed. Appx. 354, 2005 WL 2009272, *7 (6th Cir. Aug. 22, 2005) (FCRA plaintiff offered testimony of lost credit opportunities in the form of second mortgage and credit card); see also Rothery v. Trans Union, Civ. No. 04-312-ST, 2006 WL 1720498 (D. Or. Apr. 6, 2006) (denying TU motion for summary judgment as to lack of damages where consumer-plaintiff has offered her subjective account and declaration from her mother as to loss of credit opportunities); O’Brien v. Equifax, 382 F. Supp. 2d 733, 734-35 (E.D. Pa. 2005) (lost opportunity to refinance mortgage basis of FCRA claim).

The standard to prove credit damages or lost credit opportunities is not high for consumer-plaintiffs.  A seminal case on credit harm causation comes from our Circuit, Philbin v. Trans Union, which held it is a jury issue whether a credit reporting inaccuracy was a “substantial factor” in a lost credit opportunity and that a consumer-plaintiff is minimally required to present some evidence of a credit inaccuracy and then some evidence of applying for and not obtaining credit.  See 101 F.3d 957, 966-70.   In Philbin, the consumer sometimes offered “no reason for the denial of credit.”  Id. at 968 (as to Household).  Nevertheless, the Third Circuit found that it was for the trier of fact to decide whether the denial was caused by TU’s inaccurate credit reports by necessary implication, not a legal determination that could be made at summary judgment.  Id.  The consumer in Philbin was even allowed to present evidence that he was turned down for credit for reasons other than the inaccurate tax lien on his credit report — such as “insufficient credit file,” “sufficient pay history not established,” “limited credit experience” and “high utilization on bankcard credit lines” (as set forth in adverse action letters that he received from lenders)  – because, as the Third Circuit found, “a trier of fact could reasonably infer that the inaccurate adverse information included on the inaccurate credit report was an additional, unstated reason for the credit denials.”  Id. at 969 (emphasis added).

Other Circuit Courts have also held that credit harm stemming from inaccurate credit reporting may be established without anything close to pinpoint causal precision.  In Bach v. First Union National Bank, for example, the Sixth Circuit upheld $400,000 in actual damages for a consumer based upon the consumer’s own testimony and documents that she was denied a mortgage loan and a credit card due to inaccurate credit reporting of a fraudulently-opened credit card account.  See 149 Fed. Appx. 354, 360, 2005 WL 2009272, *6 (6th Cir. 2005).   The defendant in Bach argued that the consumer’s own testimony that she was denied a second mortgage application was insufficient especially in light of evidence that the consumer had “low income,” that the mortgage application was only subject to a “condition” that she own her own condominium as collateral, and that the consumer was simply denied outright, but only denied the loan “on the terms she sought.”  Id.  The Sixth Circuit rejected all of these arguments and held that the consumer had come forward with sufficient evidence of a mortgage loan denial to support her damages.  Id.  With respect to the credit card denial, the defendant argued that the inaccurate credit information had already been “deleted” when the consumer was denied the credit card, and the consumer simply produced an adverse action letter stating that she was denied a credit card from Bank One “due to ‘credit accounts now delinquent[,] number of accounts ever delinquent[, and] total available revolving credit.’”  Id.  Again, the Sixth Circuit held that, viewed in the light most favorable to the plaintiff, the general reasons stated in the Bank One adverse action letter were “sufficient evidence” to show a “causal link” to the actual damages verdict.  Id.

In the case at bar Plaintiff has come forward with more than enough evidence of FCRA actual damages caused by TU, both in the form of emotional distress and in the form or credit denials or lost credit opportunities.  Accordingly TU’s arguments at section II.B, C & D of its brief should be rejected.

As set forth above, due to TU’s conduct Plaintiff: had her otherwise very good credit damaged (PCSF at ¶¶ A6, C54, C57-C61); had her good name, character and reputation harmed by essentially being labeled as a deadbeat on her credit reports (PCSF at ¶¶ A15, C63-C66); felt frustrated, embarrassed and stressed over the fact that TU repeatedly refused to correct the collection account error for years (PCSF at ¶¶ C36, C53-C54); had headaches (PCSF at ¶ A15); found Defendant’s refusal to help her “truly embarrassing and unfair” and “frustrating and degrading.”  (PCSF at ¶¶ C64 & C65).

On the credit damage front, Plaintiff: was unable to obtain a loan from Wells Fargo to fix her leaky windows (PCSF at ¶ C59); was offered only an unaffordable 12.9% APR loan from FCC Financing (PCSF at ¶ C59); was denied a loan by Capital One (PCSF at ¶ C59); received only an elevated interest rate of 23% from CitiFinancial (PCSF at ¶ C59); was unable to obtain the best interest rate when she sought to refinance her mortgage and was charged an extra .5% interest rate by Gateway Funding specifically because of the inaccurate $690 collection account (PCSF at ¶ C61); could have saved even more money on her mortgage refinance, as much as .75% or .9% according to banking expert Thomas J. Norton, stemming to a financial loss in the range of $46,700 - $58,500 (PCSF at ¶ C62).   All of these emotional distress and credit losses stemmed from TU credit reports prepared and published in the two years prior to this lawsuit.

TU is further mistaken in arguing that Plaintiff here should have some higher undefined burden of proving credit harm because she has “accurate, derogatory credit.”  (See TU Mem. at 6).  That is simply not true.  Although Plaintiff did have some high credit card balances, TU’s own credit reports show that the ACCB $690 collection is the only account that TU itself identified on the credit report as an “Adverse Account”; all of Plaintiff’s other accounts, including the credit cards, are listed under the heading “Satisfactory Accounts.” (PCSF at ¶ C55).  TU’s Rule 30(b)(6) witness also agreed that for the two years prior to this lawsuits the ACCB account was the only derogatory account on Plaintiff’s credit report, and TU’s records show that it sold Plaintiff’s report to multiple creditors and potential creditors.  (PCSF at ¶ C55).  The Gateway Funding mortgage lender, Jarred Nelson, also agrees that the collection account at issue in this lawsuit is the only derogatory credit item.  (PCSF at ¶ C55).

Given the clear case law regarding the recovery of non-economic damages under the FCRA, as well as the causal standard for credit harm and lost credit opportunities, Plaintiff’s evidence of actual damages is more than sufficient.  TU’s Motion must therefore be denied.

2. TU Fails To Make Any Proper Argument Against Plaintiff’s Defamation And Invasion Of Privacy Claims

TU next challenges Plaintiff’s common law claims of defamation and invasion of privacy.  (TU Mem. at 9).  As discussed above, TU ignores and does not move on Plaintiff’s common law negligence claim, although it does include the word negligence in the heading of section II.E.  TU’s argument fails.

First, TU says that Plaintiff cannot proceed with her common law defamation claim allegedly because she cannot show “special harm,” such as monetary damages or actual loss,  under 42 Pa. C.S. § 8343.   (TU Mem. at 9).  As discussed above under the FCRA section 1681e(b) claim, Plaintiff here has come forward with detailed testimony and supporting documents that, because of TU credit reports, she was denied credit or was offered only adverse rates and terms by Wells Fargo, CitiFinancial, FCC Financing, Capital One and Gateway Funding.  Her unrebutted expert report calculates her monetary losses in the range of $46,700-$58,500.  She can clearly establish the element of special harm.  To the extent that TU disagrees with that evidence, that disagreement only creates a genuine issue of material fact that cannot be decided at summary judgment and that must instead go to the jury.

Next, TU challenges Plaintiff’s common law invasion of privacy claim on the theory that “publication” of the false collection account information to “two potential creditors is not a publication to the public at large as to give rise to a cause of action for invasion of privacy/false light.”  (TU Mem. at 10).  TU is factually mistaken.  First, the record shows that Plaintiff can show credit harm stemming from at least 5 publications by TU — to Wells Fargo, CitiFinancial, FCC Financing, Capital One and Gateway Funding.   Moreover, TU’s own documents show that TU published Plaintiff’s credit information to many more of her existing and potential creditors, casting her in a false light regardless of whether Plaintiff can show that those additional publications also led to credit or economic harm, as opposed to only reputational harm.

For example, Plaintiff’s TU credit report dated January 16, 2009 — which still reflected the inaccurate $690 ACCB collection account — shows that TU sold Plaintiff’s credit information for “promotional purposes” over 30 times (to companies that may have wanted to make a credit offer to Plaintiff) and also permitted another 33 “account review inquiries.”  (See 1/26/09 TU Credit Report at pp. 4-8); (PCSF at ¶ C64).  Again, this is a situation where the parties seemingly cannot agree on the facts, which makes summary judgment inappropriate.

For these reasons, TU’s motion for summary judgment as to Plaintiff’s common law defamation and invasion of privacy claims should also be denied.

3. Plaintiff Withdraws Her Pennsylvania CPL Claim

Plaintiff does not contest TU’s motion with respect to the Pennsylvania Unfair Trade Practices and Consumer Protection Law claim, 73 Pa. C.S. §§ 201-1 to 201-9.3 (commonly referred to as the “CPL” in consumer cases).    Plaintiff proposed a stipulation to TU’s counsel to dismiss and/or withdraw that claim, but TU’s counsel did not answer affirmatively or negatively whether it agreed to such a dismissal.

B. ACCB’s Motion For Summary Judgment Fails

1. Plaintiff Has Brought Timely Claims Against ACCB

Plaintiff first addresses ACCB’s contentions (at sections III.A & B of ACCB’s memorandum) that Plaintiff’s statutory claims are barred by the applicable statutes of limitations.   (ACCB Mem. at 9-10).   Plaintiff filed this suit on February 16, 2009.  (See Docket No. 1).  Although ACCB had violated Plaintiff’s rights for years, it continued to engage in separate and additional violations of the FDCPA and FCEUA in 2008 and into 2009, well within the applicable limitation periods.  These violations relate to ACCB’s false credit reporting and supposed credit “verifications” of the debt.  Credit reporting is a form of debt collection, as both the president of ACCB and the courts acknowledge.  (See Exhibit 5, Dreher Dep. at 76:15-79:18).  See Sullivan v. Equifax, Inc., 2002 WL 799856, *4 (E.D. Pa. Apr. 19, 2002) (credit reporting is debt collection activity).   Thus, Plaintiff’s claims as to ACCB, which relate to more recent and ongoing credit reporting violations of the debt collection laws in 2008 and 2009, are timely.

ACCB contends that Plaintiff’s claims under the FDCPA are time-barred allegedly because the “Defendant’s last communication with Plaintiff occurred on or about May 16, 2005,” outside of the FDCPA’s one-year statute of limitations.  (ACCB Mem. at 9-10); See 15 U.S.C. § 1692k(d) (an “action to enforce liability” may be brought “within one year from the date on which the violation occurs.”).  (emphasis added).   The claims that Plaintiff actually brings under the FDCPA sections 1692e and 1692f, however, all occurred within one year of the filing date of this action.  Moreover, none of these claims are predicated upon any direct communication between Plaintiff and Defendant.

For example, ACCB, violated FDCPA sections 1692e and 1692f  on June 23, 2008 when it continued to report and “verify” to TU the purported accuracy of the alleged landlord debt.  (PCSF at ¶ C36).  ACCB also continued to report the $690 collection into 2009.  (PCSF at ¶¶ C53 & C57).   The ACCB account was not deleted from Plaintiff’s TU credit report until May 11, 2009, almost three months after she filed this lawsuit.   ACCB also continued to report the $690 collection account to Experian into 2009.  (PCSF at ¶ C53) (processing dispute from Experian on April 7, 2009, since account was still reporting through that time).

These ongoing “violations” could not have occurred in 2005 and they are valid even with no direct “communication” between Plaintiff and Defendant, which is not an element of these violations.  It makes no sense, therefore, for Defendant to argue that the statute of limitations expired in May 2006, when the “violations” at issue did not even occur until 2008 and 2009.

The same rationale applies to Plaintiff’s claims under the Pennsylvania debt collection statute, the FCEUA, which has a two-year statute of limitations.  See 73 P.S. § 2270.5(b) (an “action to enforce liability” may be brought “within two years from the date on which the violation occurs.”). (emphasis added).  Because the “violations” covered by the FCEUA occurred within two years of the February 16, 2009 filing of this lawsuit, those claims are timely.  In addition to the 2008 and 2009 violations indentified under the FDCPA, supra, the record shows additional false credit “verifications” of the disputed collection account on May 14, 2007 and January 8, 2008 to TU, as well as on January 10, 2008 to Experian, which are within two years of the FCEUA statute of limitations.  (PCSF at ¶¶ C21, C25, C27).

The fact that ACCB may have also violated Plaintiff’s FDCPA and the FCEUA rights in 2005 does not give it a right to separately violate Plaintiff’s rights in 2007, 2008 and 2009 with impunity.  A debt collector does not get a free pass for all future violations of the law if it happens not be sued by a consumer within one year (two years in Pennsylvania) of when it first violated that consumer’s rights.  Several federal courts have held that when the unfair debt collection violation is one related to inaccurate or false credit reporting, the statute of limitations begins to run anew from the date of each new report or violation.  See Purnell v. Arrow Fin. Servs., LLC, 303 Fed. Appx. 297, 2008 WL 5235827, *5 (6th Cir. 2008) (where credit reporting FDCPA violations occurred within one year of suit filing, those claims are timely, even though additional similar claims that occurred more than one year prior to the filing are barred by the statute of limitations); Sullivan v. Equifax, Inc., 2002 WL 799856, *4 (E.D. Pa. Apr. 19, 2002) (where credit reporting violation continued to occur, FDCPA statute of limitations does not expire even when false reporting started well more than one year prior to suit).

Finally, this Court should note that the FDCPA and FCEUA are consumer protection statutes to be liberally construed in favor of the consumer, not debt collectors.  Construing the statute of limitations provision in a manner that ACCB suggests would leave consumers without recourse in cases of continuing violations, like this one.  It could also allow debt collectors to violate the FDCPA and FCEUA at will where consumers simply did not sue within one year (or two years in Pennsylvania) of the first violation, even where the credit reporting “investigations” and ongoing credit reporting violations did not actually occur until much later.  Nothing on the face of the FDCPA, the FCEUA, the case law, or public policy supports ACCB’s proposed construction of the statute of limitations.

Accordingly, ACCB’s statute of limitations argument must be rejected.

2. Plaintiff Has Come Forward With Evidence Of Multiple FDCPA Sections 1692e and 1692f Violations, And Those Claims, As Well As The Related FCEUA Claims, Must Go To The Jury

Now that Plaintiff has shown that she has brought several timely debt collection statutory claims under the FDCPA and FCEUA, she addresses ACCB’s arguments that these claims fail as a matter of law.  This part of ACCB’s motion (section VII) also lacks merit.  (See ACCB Mem. at 18-21).

The FDCPA was created to prohibit the use of abusive, deceptive and unfair debt collection practices by persons engaged in the debt collection industry.  Wilson v. Quadramed Corp., 225 F.3d 350, 2000 WL 1222164, *3 (3d Cir. 2000); Crossley v. Lieberman, 868 F.2d 566 (3d Cir. 1989).  Congress enacted the FDCPA upon the finding that there was abundant evidence of abusive, deceptive and unfair practices by many debt collectors.  Wilson, supra, citing Miller v. Payco-General American Credits, Inc., 943 F.2d 482, 483-84 (4th Cir. 1991) (quoting 15 U.S.C. §§ 1692a and 1692e).

Consistent with several other titles of the federal Consumer Credit Protection Act (“CCPA”), the FDCPA establishes a system of enforcement primarily by private attorney’s general.  See 15 U.S.C. § 1692k; Russey v. Rankin, 837 F. Supp. 1103, 1105 (D.N.M. 1993); Whatley v. Universal Collection Bureau, Inc., 525 F. Supp. 1204, 1206 (N.D. Ga. 1981).  The FDCPA is also similar to other titles of the CCPA in that it is a strict liability statute to be liberally construed, requiring no proof of any particular state of mind or actual damages to obtain its statutory remedies.  See Federal Home Loan Mortg. Corp. v. Lamar, 503 F.3d 504, 513 (6th Cir. 2007) (“Courts have characterized the FDCPA as a strict liability statute”); Romano v. Williams & Fudge, Inc., 644 F. Supp. 2d 653, 557 (W.D. Pa. 2008) (“FDCPA is a strict liability statute and is remedial in nature”); see also Miller v. Wolpoff & Abramson, L.L.P., 321 F.3d 292, 307 (2d Cir. 2003) (same); see also Bentley v. Great Lakes Collection Bureau, Inc., 6 F.3d 60, 63 (2d Cir. 1993); Baker v. G.C. Servs. Corp., 677 F.2d 775, 780 (9th Cir. 1982); Woolfolk v. Van Ru Credit Corp., 783 F. Supp. 724, 725 (D. Conn. 1990).

The FDCPA specifically prohibits a long list of false, unfair and deceptive debt collection conduct, including the following, which Plaintiff alleges in this case against ACCB:

• The “false representation or implication” of the “character, amount or legal status of any debt,” in violation of FDCPA section 1692e(2)(A);

• “Communicating or threatening to communicate” to any person “credit information which is known or which should be known to be false,” in violation of FDCPA section 1692e(8);

• Using “false representations or deceptive means to collect or attempt to collection a debt,” in violation of FDCPA section 1692e(10); and

• Using any “unfair or unconscionable means to collect or attempt to collect any debt,” in violation of FDCPA section 1692f.

As Defendant notes, Plaintiff’s claims under the FCEUA mirror those under the FDCPA.  (ACCB Mem. at 18).  Indeed, the FCEUA expressly provides that “[i]t shall constitute an unfair or deceptive debt collection practice under this act if a debt collector violates any of the provisions of the Fair Debt Collection Practices Act.”  73 P.S. § 2270.4(a).  The only difference is that the FCEUA has a two-year statute of limitations, one year longer than the FDCPA.  See 73 P.S. § 2270.5(b).

ACCB argues that it did not violate any of these provisions, under either federal or state law, purportedly because of two basic reasons: (1) it allegedly never communicated information to the CRAs that it “knew or showed have known” to be false (ACCB Mem. at 19); and (2) it allegedly has a “bona fide error” defense (ACCB Mem. at 19-20).  Both of these arguments fail.

a. Plaintiff Can Establish Her FDCPA And FCEUA Claims Notwithstanding ACCB’s State Of Mind, Which Was, In Any Event, That Of A Defendant That Minimally “Should Have Known” That It Was Violating The Law

First, what ACCB knew or should have known is immaterial to all of Plaintiff’s debt collection statutory claims, with the exception of her section 1692e(8) claim which expressly uses the phrase “known or which should be known.”   FDCPA sections 1692e(2)(A), 1693e(10) and 1692f do not say that the defendant must know, or should know, that it is acting in a false, deceptive, unfair or unconscionable way.  The FDCPA is generally construed as a strict liability statue.  See Romano v. Williams & Fudge, Inc., 644 F. Supp. 2d 653, 557 (W.D. Pa. 2008) (“FDCPA is a strict liability statute and is remedial in nature”); see also Federal Home Loan Mortg. Corp. v. Lamar, 503 F.3d 504, 513 (6th Cir. 2007) (“Courts have characterized the FDCPA as a strict liability statute”); Brown v. Card Serv. Ctr., 464 F.3d 450 (3d Cir. 2006) (language of FDCPA is construed broadly so as to effectuate its remedial purpose); Russell v. Equifax, A.R.S., 74 F.3d 30, 33 (2d Cir. 1996) (the FDCPA imposes strict liability).  Thus the defendant’s state of mind is usually immaterial.  A collection practice can be false, unfair, deceptive or unconscionable regardless of whether the debt collector intended it to be so.

There could be no doubt in this case that it was “false” for ACCB to report that Plaintiff owed an “amount” of $690 to her old landlord.  A reasonable jury could also find this conduct to be “unfair,” “deceptive” or “unconscionable,” especially in light of the lengthy dispute history here.  ACCB’s conduct need not have been intentional or knowing (or even careless) for Plaintiff to proceed to the jury with her claims under FDCPA sections 1692e(2)(A), 1693e(10) and 1692f, as well as with her mirror claims under the FCEUA.

Moreover, in this case there exists a genuine issue of fact as to what ACCB “knew” or “should have known” about the debt.  The record shows that ACCB was repeatedly put on “notice” of the inaccuracy by Plaintiff, her husband, Plaintiff’s former attorney, and all three of the CRAs.  ACCB acknowledges receiving notice of an error concerning the collection account 15 times.  (PCSF at ¶ C32).  ACCB was advised that it could also check with the landlord or the landlord’s attorney to determine that the debt was paid, and was provided with all of the appropriate contact information.  (PCSF at ¶¶ C16-C17).  Even though ACCB had the burden and the duty of “verifying” whether it was reporting “accurate” information about Plaintiff, it did nothing other than parrot the false data that was provided to it by Chancellor in the first place.  (PCSF at ¶¶ C47-C52).  It did not even demand Chancellor’s records which included a letter from the landlord’s lawyer including Plaintiff’s payment.  Minimally, a reasonable jury could conclude that ACCB “should have known” that the information that it was reporting about Plaintiff was false, and thus violated the FDCPA and FCEUA with respect to all of the claims that Plaintiff brings in this action.

ACCB argues it could simply rely on Chancellor’s word that the debt was “due and owing by Plaintiff.”  (ACCB Mem. at 19-20).  But such blind reliance provides no defense in this case.  ACCB did not have to report this debt to the CRAs and through the CRAs to all of Plaintiff’s existing and prospective creditors.  When it did that, it took it upon itself to “verify” that the data that it was disseminating to the lending and credit world was “accurate.”   It kept on verifying and re-verifying on its own false and harmful information despite some 15 total disputes and clear factual support that the debt was paid via settlement.  ACCB has its own statutory duties that it cannot pass off to its client.

b. ACCB Has No Bona Fide Error Defense In This Case, And Cannot Obtain Summary Judgment Even If It Had Such A Defense

Finally, this is not a “bona fide error” case.  Although the Third Circuit has not specifically addressed the issue, “a majority of circuit courts have held that this defense is only available for clerical and factual errors”  Piper v. Portnoff Law Associates, 274 F. Supp. 2d 681, 688 (E.D. Pa. 2003), aff’d, 396 F.3d 227 (3d Cir. 2005); see also  Picht v. Jon R. Hawks, Ltd., 236 F.3d 446, 451-52 (8th Cir. 2001); Pipiles v. Credit Bureau of Lockport, Inc., 886 F.2d 22, 27 (2nd Cir. 1989); Baker v. G.C. Servs. Corp., 677 F.2d 775, 779 (9th Cir. 1982).   This is not a case of a clerical or factual error.  There was no computer malfunction and nobody copied or transcribed an incorrect date or code.

Importantly, ACCB’s president and Rule 30(b)(6) witness testified that there was no error here at all, bona fide or not:

2     Q     Okay.  So this was handled according to

3     established policy at ACCB.  This account here for

4     [PLAINTIFF] was not a deviation.  Correct?

5     Sometime somebody drops the ball or somebody –

6     sometimes a computer error is made.  That’s not this

7     case.  This was handled according to policy.  Is that

8     your testimony?

9          A     I believe it is, yes.

(See Exhibit 5, Dreher Dep. at 218) (See Id. at 144) (ACCB is always in complete compliance with the law and there was “no violation” in Plaintiff’s case).

Given that ACCB believes that it handled Plaintiff’s case properly according to its standard policy and that it was in complete compliance with its legal obligations, it seems logically impossible that the “violations,” which it denies ever occurred, “resulted from a bona fide error, notwithstanding the maintenance of procedure reasonably adapted to avoid such an error.”  See 15 U.S.C.  § 1692k(c) (emphasis added).

In fact, the opposite is true.  The procedures that ACCB followed were not “reasonably adapted to avoid such an error” and, precisely because they were not “reasonable,” they resulted in the error.  In order for ACCB to meet its burden for a bona fide error defense, it will need to show that its reasonable procedures would have led to a different result.  See Reichert v. Nat’l Credit Sys., Inc., 531 F.3d 1002, 1006 (9th Cir. 2008) (“bona fide error” defense is an affirmative defense, on which the debt collector bears the burden of proof).  Yet ACCB’s witnesses testified that no one deviated or made an error in implementing its procedures here.  (See Exhibit 5, Dreher Dep. at 109, 142-44, 192, 196, 218).  (See PCSF at ¶ C34).  Thus the error here happened because of the procedures, not because of a clerical error where someone failed to follow the procedures.

Finally, because a bona fide error defense turns upon factual findings concerning the “reasonableness” of Defendant’s procedures, it is not an issue that can be addressed at summary judgment in any event, and must be left for the jury.   See Romano v. Williams & Fudge, Inc., 644 F. Supp. 2d 653, 658 (W.D. Pa. 2008) (“genuine disputes of material fact must be submitted to a jury to determine whether defendant can prove by a preponderance of the evidence that its error was a bona fide error and whether the violation was not intentional within the meaning of Section 1692k(c)”); see also Adams v. Law Offices of Stuckert & Yates, 926 F. Supp. 521, 529 (E.D. Pa. 1996) (even in computer malfunction case, finding that bona fide error defense not appropriate, and granting summary judgment to plaintiff-consumer as to FDCPA section 1692e(11) claim).

In sum, Plaintiff may proceed to the jury with all of her FDCPA and FCEUA claims.

3. Plaintiff Has Withdrawn Her Claim Under FCRA Section 1681q

Plaintiff stipulated with ACCB’s counsel to dismiss her FCRA section 1681q claim, which stipulation was filed at Docket No. 43.

4. ACCB Failed To Conduct Reasonable Investigations Into Plaintiff’s Repeated Disputes, In Violation Of FCRA Section 1681s-2(b)

It is well settled that FCRA section 1681s-2(b) “provide[s] a private right of action for a consumer against furnishers of information who have willfully or negligently failed to perform their duties upon notice of a dispute.”  DiMezza v. First USA Bank, Inc., 103 F. Supp. 2d 1296, 1300 (D.N.M. 2000).   In this case, ACCB repeatedly failed in its duty to investigate and correct disputed consumer credit data.  15 U.S.C. § 1681s-2(b).

FCRA section 1681s-2(b) provides in pertinent part:

(b) Duties of furnishers of information upon notice of dispute

(1) In general

After receiving notice pursuant to section 1681i (a)(2) of this title of a dispute with regard to the completeness or accuracy of any information provided by a person to a consumer reporting agency, the person shall—

(A) conduct an investigation with respect to the disputed information;

(B) review all relevant information provided by the consumer reporting agency pursuant to section 1681i (a)(2) of this title;

(C) report the results of the investigation to the consumer reporting agency;

(D) if the investigation finds that the information is incomplete or inaccurate, report those results to all other consumer reporting agencies to which the person furnished the information and that compile and maintain files on consumers on a nationwide basis; and

(E) if an item of information disputed by a consumer is found to be inaccurate or incomplete or cannot be verified after any reinvestigation under paragraph (1), for purposes of reporting to a consumer reporting agency only, as appropriate, based on the results of the reinvestigation promptly—

(i) modify that item of information;

(ii) delete that item of information; or

(iii) permanently block the reporting of that item of information.

15 U.S.C. § 1681s-2(b) (emphasis added).

a. Plain Text Reading Of FCRA Section 1681s-2(b)

The text of this statutory provision is clear.  See U.S. v. Ron Pair Enterprises, Inc., 489 U.S. 235 (1989) (where the statute’s language is plain, the court’s function is to enforce it according to its terms); U.S. v. Cheryl Schneider, 14 F.3d 876, 879 (3d Cir. 1994) (“The best evidence of Congress’ intent is the text of the statute.”).  Contrary to ACCB’s suggestion, there is no requirement for any consumer to provide a “proof of payment” or any particular money order or other document or evidence in order to invoke a proper dispute.  FCRA section 1681s-2(b) merely requires “notice” of a dispute pursuant to “section 1681i(a)(2),” and then shifts the burden to the credit furnisher to take several specific steps in conducting an investigation.  FCRA section 1681i(a)(2), in turn,  provides:

(2) Prompt notice of dispute to furnisher of information

(A) In general

Before the expiration of the 5-business-day period beginning on the date on which a consumer reporting agency receives notice of a dispute from any consumer or a reseller in accordance with paragraph (1), the agency shall provide notification of the dispute to any person who provided any item of information in dispute, at the address and in the manner established with the person. The notice shall include all relevant information regarding the dispute that the agency has received from the consumer or reseller.

15 U.S.C. § 1681i(a)(2).  There is absolutely no requirement or duty for the consumer to provide proof of payment or any other evidence in any part of the statute implicated here.

b. Case Law Interpreting FCRA Section 1681s-2(b)

Nor has any court found such a requirement in an FCRA section 1681s-2(b) case.   Federal courts have construed FCRA section 1681s-2(b) to require furnishers of credit data, such as ACCB, not only to conduct an investigation into credit bureau disputes, but also to be qualitatively reasonable in their investigations as the circumstances warrant.  Johnson v. MBNA America Bank, NA, 357 F.3d 426, 431 (4th Cir. 2004); see also Bruce v. First U.S.A. Bank, Nat. Ass’n., 103 F. Supp. 2d 1135, 1143 (E.D. Mo. 2000).  As the Fourth Circuit observed in affirming a denial of a credit finisher’s motion for summary judgment in an FCRA case, a jury may find that a credit furnisher’s investigation was unreasonable if the evidence establishes (such as in this case) that the credit furnisher did not look beyond the information contained in its own computer system and did not consult any underlying documents, such as the original account application.  Johnson v. MBNA America Bank, NA, 357 F.3d 426, 431 (4th Cir. 2004).

Moreover, questions of the reasonableness of a company’s investigation under the FCRA are usually left for the jury.  See Cushman, 115 F. 3d 220, 225-27; Henson v. CSC Credit Servs., 29 F.3d 280 (7th Cir. 1994); see also Johnson v. MBNA, supra; Richardson v. Fleet Bank of Mass., 190 F. Supp.2d 81, 88 (D. Mass. 2001) (noting reasonableness of FCRA investigation is usually a question for a jury); Agosta v. Inovision, Inc., 2003 WL 22999213  (E.D. Pa. Dec. 16, 2003) (denying summary judgment in an FCRA case and allowing reasonableness of credit furnisher’s investigation to be determined by jury); Evantash v. G.E. Capital Mortg. Servs., Inc., 2003 WL 22844198  (E.D. Pa. Nov. 25, 2003) (same); Sheffer v. Experian Info. Solutions, Inc., Civ. No. 02-7407, 2003 WL 21710573 (E.D. Pa. July 24, 2003) (same).

c. Application To Facts

Under the applicable standard, the facts of record here and reasonable inferences therefrom can lead a reasonable jury to find for the Plaintiff and against ACCB on the issue of the reasonableness of ACCB’s alleged “investigations” into Plaintiff’s credit disputes.

First, a reasonable jury could find that ACCB never investigated the disputes, at least five of which fall within the two years prior to the filing of this lawsuit.  (PCSF at ¶¶ C32, C47-C52).  The records in this case show that ACCB entered the credit bureau disputes into its system and responded to them in the same minute.  (PCSF at ¶ C51).  There was simply no time for anything resembling an “investigation.”  ACCB’s president and Rule 30(b)(6) witness agreed that ACCB did nothing to investigate:

10    Q     Okay.  There’s absolutely no record that ACCB

11     did anything to investigate this dispute.  Correct?

12          A     Yes.

13          Q     All right.  But it did verify to Experian

14     that the account was reported as accurate with a money

15     owing.  Correct?

16          A     As reported, yes.

17          Q     Okay.  And at least as far as this line is

18     concerned this doesn’t say anything about it being

19     disputed.  It just says verified as reported.  Correct?

20          A     Yes, not adequate report — notations.

(See Exhibit 5, Dreher Dep. at 196).  (PCSF at ¶ C49).  Later, Mr. Dreher confirmed that the only record — the “work card” — that ACCB possesses about its alleged “investigations” into Plaintiff’s multiple credit bureau disputes shows that ACCB did not truly investigate any credit bureau dispute made by Plaintiff:

13    Q     Sir, isn’t it true that with respect to the

14     credit bureau disputes there is not any information or

15     any notation in any of your records that anybody at your

16     company spoke to a single person or looked at a single

17     document in conducting an investigation?

18          A     There’s nothing notated on the work card.

(See Exhibit 5, Dreher Dep. at 214) (PCSF at ¶ C51).  Thus, a reasonable jury could find that ACCB never truly “investigated” at all per FCRA section 1681s-2(b).

A reasonable jury can also find that ACCB’s actions, if they amount to an “investigation,” were not a reasonable investigation, thus in violation of FCRA section 1681s-2(b)(1)(A).  For example, a reasonable jury could conclude that under the circumstances of this case ACCB should have contacted the landlord, the landlord’s attorney, Plaintiff’s landlord-tenant attorney Mr. Lipman, or the court to find out whether it could verify that the account was paid.  ACCB could have asked for further information from Plaintiff or Chancellor if it needed it.  Indeed, Chancellor had proof of payment in its file for that apartment.  ACCB took none of those actions.  (PCSF at ¶ C52).

Now ACCB argues that it could have used more information from Plaintiff.  But if that were the case, it never asked for it from Plaintiff or anybody during the years of credit bureau disputes.  (PCSF at ¶ C49).  Thus, a reasonable jury could find that ACCB was not reasonable in investigating under the circumstances of this case.

A reasonable jury could further find that ACCB violated FCRA section 1681s-2(b)(1)(D) on or about May 21, 2007, when it deleted the collection account from the Equifax CRA but failed at the same time to also delete it from TU and Experian despite the fact that ACCB, according to its president, had a duty to report those results to all the CRAs at the same time.  (PCSF at ¶¶ B28 & C23).  ACCB continued to report the $690 collection account to TU and Experian well into 2009.

A reasonable jury could also find that if ACCB believed that it could not come to a conclusive result, or could not “verify” the fact that Plaintiff owed $690 to her old landlord, it should have deleted or blocked the future reporting of the account, as the FCRA provides at section 1681s-2(b)(1)(E).  This would have been an easy solution for ACCB.  FCRA section 1681s-2(b)(1)(3) provides that if a furnisher truly cannot get to the bottom of a dispute, or if its investigation is “incomplete” or “inaccurate,” it should err on the side of caution and simply block or delete the disputed account.  ACCB, however, even refused to do that.

In sum, as virtually every other FCRA summary judgment decision in this Circuit has found, these types of considerations present genuine issues of material fact as to the “reasonableness” of a company’s conduct in “investigating.”  These issues are inappropriate for disposition at summary judgment and must go to the jury.

5. ACCB’s Conduct Here May Be Deemed By A Reasonable Jury To Constitute One Or More Willful Violations Of The FCRA

ACCB alternatively argues that, even if it violated the FCRA, none of its violations could have been willful.  (ACCB Mem. at 17-18).   Under the facts of this case, a reasonable jury may find not only that ACCB violated the FCRA, but that it did so willfully.  A willful violation allows a jury to award punitive damages.   See 15 U.S.C. § 1681o(a)(3).

a. The Legal Standard: Reckless Or Conscious Disregard

The standard to show a “willful” violation under the FCRA is not high.  A plaintiff need not show malice, but only that the defendant recklessly committed an act in reckless or conscious disregard of the rights of others.  See Cushman, 115 F. 3d 220, 227.  This is a lower standard than the standard for willful violations or punitive damages claims under most common law torts.  Although the terms “willful” or “willfully” are not defined in the FCRA, case law has held that neither malice nor evil motive need be established for a finding of a willful violation.  Id.; see also Stevenson v. TRW, Inc., 987 F.2d 288, 294 (5th Cir. 1993) (citing Fischl v. General Motors Acceptance Corp., 708 F.2d 143, 151 (5th Cir. 1983)).

Many courts have noted that willfulness under the FCRA is demonstrated by recklessness and not by a knowing violation of the law.  See id. at 293 (citing Pinner v. Schmidt, 805 F.2d 1258, 1263 (5th Cir. 1986), cert. denied, 483 U.S. 1022 (1987)); Cushman, 115 F. 3d at 227; see also Reynolds v. Hartford Fin. Servs. Group, 435 F.3d 1081, 1097-99 (9th Cir. 2006) (discussing meaning of “willfully” with CRA and relying on Cushman).  Such reckless or conscious disregard may be found when a defendant adopts a policy either knowing it to be in “contravention of the rights possessed by consumers under the FCRA or in reckless disregard for whether the policy contravenes those rights.”  Cushman, 115 F. 3d at 227; see also Reynolds v. Hartford Fin. Servs. Group, 435 F.3d 1081, 1097-99 (9th Cir. 2006).

Multiple cases within this District, examining the willfulness standard in FCRA investigation cases, have found that plaintiffs may proceed to trial with their willfulness claims where the defendant’s conduct is not merely a result of a negligent act that was promptly cured.  See Sheffer v. Experian Info. Solutions, Inc., Civ. No. 02-7407, 2003 WL 21710573 at *3 (E.D. Pa. July 24, 2003) (Schiller, J.) (defendant’s conduct was willful, and not merely an “isolated instance of human error  . . . promptly cure[d]”) (quoting Boris v. Choicepoint Servs., 249 F. Supp. 2d 851, 862 (W.D. Ky. 2003)) (emphasis added); see also Lawrence v. Trans Union, LLC, Civ., 296 F. Supp. 2d. 582, at. 590; Crane v. Trans Union, LLC, 282 F. Supp. 2d 311, at 321; Evantash v. G.E. Capital Mortgage Servs., Inc., E.D. Pa. Civ. No. 02-1188, 2003 WL 22844198, at *8.

Chief Judge Bartle also agreed with this interpretation of the willfulness standard under the FCRA when he permitted punitive damages to go to the jury in an FCRA investigation matter with facts less egregious than the case at bar.  See Abusaab v. Equifax Information Services LLC, Civ. No. 05-5094, 2006 WL 1214782 (E.D. Pa. May 4, 2006).

FCRA cases involving investigations by credit furnishers such as ACCB are no different.  See DiPrinzio v. MBNA America Bank, NA, Civ. No. 04-872, 2004 WL 2039175 (E.D. Pa. Aug. 24, 2005) (Smith, J.).  The DiPrinzio court, for example, denied summary judgment and permitted the plaintiff to proceed to trial with her willful, punitive damages claim because the credit furnisher failed to conduct a reasonable investigation and to clearly disclose that the disputed account had charges that were incurred by the plaintiff’s former husband after separation.  Id.; see also Sheffer v. Experian Info. Solutions, Inc., Civ. No. 02-7407, 2003 WL 21710573 at *3 (E.D. Pa. July 24, 2003) (Schiller, J.) (punitive damages permitted to go to jury against CRAs and credit funisher after multiple failed FCRA investigations).

b. Safeco Affirmed The Reckless Disregard Standard

The U.S. Supreme Court’s 2007 decision in Safeco further undermines ACCB’s argument.  See Safeco Insurance Co. of America v. Burr, 127 S. Ct. 2201 (2007).  In Safeco, the U.S. Supreme Court was asked to decide which of two conflicting standards governed FCRA willfulness claims, and it adopted the lower and least rigorous “reckless disregard” standard, which this Court has followed for years.

Prior to Safeco, there was a circuit split as to what level of scienter should be applied in assessing FCRA willfulness claims.  Several circuits had held that a knowing violation of the law (higher standard) was required for a consumer to prove willfulness under the FCRA, while others, including the Third Circuit and the Ninth Circuit, had held that “reckless disregard” (lower standard) was all that was required.  In Safeco, the U.S. Supreme Court endorsed our Circuit’s standard, and held that proof of “reckless disregard” by a defendant (i.e. not a knowing violation of law, as the credit industry argued) is sufficient to establish a willful violation of the FCRA.  Safeco, 127 S. Ct. at 2208-2210.

“Reckless disregard” is precisely the FCRA willfulness standard that this Court has followed for many years.  See Cushman v. Trans Union Corp., 115 F. 3d 220, 227 (3d. Cir. 1997).  In Safeco, the U.S. Supreme Court cited our Circuit’s decision in Cushman as the correct standard for assessing willfulness claims.  Safeco therefore forever disposed of the argument that a consumer-plaintiff must show that a defendant knowingly violated the FCRA.

Thus, the inquiry now is not the standard for a willfulness claim, but rather when the “reckless disregard” standard is met in an FCRA case brought against a defendant.   Unlike the situation in the Circuits which had previously followed the knowing violation standard, this question has been thoroughly investigated and answered by the courts within this Circuit, as discussed and cited above.   These cases also demonstrate that the reckless disregard standard is a fact-bound inquiry, a concept that our Circuit just recently reiterated.  See Whitfield v. Radian Guaranty, Inc., 501 F.3d 262 (3d Cir. 2007).   Indeed, in Whitfield the Third Circuit, in a post-Safeco FCRA decision, reversed a grant for summary judgment on an FCRA willfulness claim and held that the issue of willfulness was for the jury to decide.  Id. at 271.    The Third Circuit stated:

We do not suggest that a factfinder could not or would not determine that [the defendant] did not act willfully.  Instead, we hold that whether it did so is a factual issue, not a question of law, and it therefore cannot be decided either on appeal or by the District Court as a matter of law.

Id. at 271) (emphasis added) (vacated on mootness grounds, 2008 WL 2329934 (U.S. 2008)).

c. Plaintiff Has Come Forward With A Factual Record That Would Easily Permit A Reasonable Jury To Find That ACCB’s Violations Of The FCRA In This Case Were Willful

Here, the factual record that Plaintiff has amassed is more than sufficient evidence to present a genuine issue of material fact as to whether ACCB willfully violated the FCRA.   The question of willfulness, therefore, must be left for the jury.

The jury can, for example, reasonably determine that ACCB’s conduct was in reckless or conscious disregard for Plaintiff’s rights because ACCB repeatedly and systemically failed to get to the bottom of Plaintiff’s disputes.  (PCSF at ¶¶ C34-42, C47-53).  The jury can reasonably find that ACCB’s practice of never going beyond the limited information provided by Chancellor, and blindly accepting Chancellor’s word, shows a reckless disregard in the context of this case.  This practice of simply copying another company’s word or records, in lieu of conducting a true investigation, is known as “parroting” and has already been deemed by several courts within our Circuit to constitute a basis for FCRA willfulness claims to go to the jury in similar contexts.   Lawrence v. Trans Union, LLC, 296 F. Supp. 2d 582, at 590 (“merely parroting information without verifying its accuracy, could be found by a reasonable jury to be knowing or reckless violations of the FCRA”); Crane v. Trans Union, LLC, 282 F. Supp. 2d 311, at 321; Sheffer v. Experian Info. Solutions, Inc. and Trans Union, Civ. No. 02-7407, 2003 WL 21710573 at * 3 (Schiller, J.).

Other facts may also support a “reckless disregard” finding by the jury: the fact, for example, that ACCB’s records show that it spent no more than one minute on each of the credit bureau “investigations” (PCSF at ¶ C51); the fact that ACCB failed so many times to properly address Plaintiff’s problem, despite acknowledging that its records reflect notice of the dispute at least 15 times (PCSF at ¶ C32); the fact that ACCB admits that it handled Plaintiff’s credit disputes according to “policy” and, at the same time, also admits that its credit bureau “investigators” did not speak with a single person and did not review a single document (PCSF at ¶ C49); and the list goes on.

In sum, the record here provides more than sufficient evidence on which a jury may reasonably make a reckless or conscious disregard finding.  Accordingly, ACCB’s motion should be denied.

6. Because ACCB’s Conduct Was Willful, Plaintiff’s Common Law Claims Are Not “Preempted” By FCRA Section 1681h(e)

ACCB contends that Plaintiff should not be permitted to proceed to trial with her common law claims of defamation, negligence and invasion of privacy/false light.  (See ACCB Mem. at 8-9).  The entire and exclusive basis for ACCB’s “preemption” argument is that it did not “willfully” violate the FCRA.   For the same reasons that Plaintiff may show willfulness and thus proceed to trial with her FCRA claim, discussed above, ACCB’s preemption argument fails.  See DiPrinzio v. MBNA America Bank, N.A., Civ. No. 04-872, 2005 WL 2039175 at *3-5 (E.D. Pa. Aug. 24, 2005) (negligence claim, including relief for punitive damages, not preempted where jury could find that FCRA section 1681s-2(b) violation was willful).

Further, the limitations to common law liability set forth at FCRA section 1681h(e), on which ACCB relies, impose a “willfulness” threshold only for actions stemming from disclosures to the consumer, but not all FCRA actions.  As one court recently explained:

Section 1681h(e) suggests not that Congress has limited actions brought in all areas regulated by the FCRA but that defendants will have qualified immunity from actions based on information disclosed pursuant to certain provisions of the FCRA. Webb v. Bob Smith Chevrolet, Inc., 2005 WL 2065237 at *5 (W.D.Ky. Aug. 24, 2005). In McAnly v. Middleton & Reutlinger, P.S.C., 77 F.Supp.2d 810, 814-15 (W.D.Ky.1999), the district court explained that, ‘section 1681h(e) is not actually a preemption provision. Rather, it is a quid pro quo grant of protection for statutorily required disclosures. Since various parts of the federal statute require consumer reporting agencies and information users to disclose information to consumers under certain circumstances, this section guarantees that the agencies or users cannot be sued for those required disclosures [under FCRA sections 1681g, 1681h and 1681m] under state tort law.  It makes sense that acts required to be done by the FCRA are immunized from state tort liability.’

Poore v. Sterling Testing Sys., Inc., 410 F. Supp. 2d 557, 573 (E.D. Ky. 2006).

Here, Plaintiff’s common law claims are based upon false information provided or furnished by ACCB to TU and the other nations CRAs, and for ACCB’s failure to properly handle Plaintiff’s repeated disputes.  They are not based upon the disclosures to consumers required under sections 1681g, 1681h and 1681m.  Nor are they based upon information disclosed by a user of a consumer report.  Accordingly, Plaintiff’s state law claims are not prohibited or limited under section 1681h(e) as to ACCB in the case at bar.

IV. CONCLUSION

For all of the reasons set forth above, Defendant TU and Defendant ACCB’s motions for summary judgment should be denied.

FRANCIS & MAILMAN, P.C.

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

Plaintiff,

v.

LEXISNEXIS RISK & INFORMATION ANALYTICS GROUP, INC., and REED ELSEVIER, INC.

Defendants.

)

PLAINTIFF’S MEMORANDUM OF LAW IN OPPOSITION TO

DEFENDANTS LEXISNEXIS RISK & INFORMATION ANALYTICS GROUP, INC. AND REED ELSEVIER, INC.’S MOTION FOR SUMMARY JUDGMENT

Plaintiff hereby respectfully responds in opposition to the motion for summary judgment (“Motion,” at Docket No. 71) filed by Defendants LexisNexis Risk & Information Analytics Group, Inc. (“LNRIAG”) and Reed Elsevier, Inc. (“Reed”) (collectively “Defendants” or “LexisNexis”).  For the reasons discussed below, the Motion should be denied.

I. PRELIMINARY STATEMENT

In a remarkable about-face, Defendants completely abandon their motion to dismiss defenses (where they argued that they are not regulated by the FCRA), and now seek summary judgment in their favor on the basis of FCRA “accuracy.”   Of course, Defendants did not have much of a choice in abandoning their original defenses since discovery proved all of the allegations that Plaintiff made in his Amended Complaint in support of his claim that Defendants are FCRA-regulated businesses.   Defendants now claim that even as actors regulated under the FCRA, they have no liability, allegedly because they sold only “accurate” credit information in this case.  This new defense also fails for several straightforward reasons.

First, even if Defendants can make out an FCRA accuracy defense (which they cannot), there is no accuracy defense to some of FCRA Plaintiff’s claims.  For example, Plaintiff claims that Defendants violated FCRA section 1681g because they did not provide him with access to his credit file.  Amend. Compl. at ¶ 47(d).  Consumers have a right to obtain and review whatever credit information is sold about them under FCRA section 1681g, regardless of whether that information is accurate or inaccurate.  Defendants’ Motion does not challenge or even mention Plaintiff’s FCRA section 1681g claim.  Thus Plaintiff’s FCRA section 1681g claim proceeds to the jury regardless of Defendants’ “accuracy” defense.

Second, Plaintiff here vehemently denies that the $14,317 civil judgment reported against him on his credit reports was accurate.  That judgment was not obtained against Plaintiff and was not his responsibility.  That was the basis of Plaintiff’s repeated and documented disputes, and is further supported and explained by Plaintiff’s deposition testimony.  Additionally, the actual court records concerning the $14,317 judgment and even some of Defendants’ internal records, and the records of co-defendant Experian, also support Plaintiff’s position that the judgment was not accurately reported against Plaintiff and did not belong on his credit report.  Thus the issue of factual “accuracy” is contested and cannot be the subject of summary judgment.  It is instead a genuine issue of material fact for the jury.

Third, Defendants’ legal understanding of “accuracy” is severely flawed, turning the FCRA on its head.  It suggests that so long as Defendants make certain true “statements” about the judgment at issue in this case — such as the true judgment amount, or whether a judgment is actually vacated or satisfied — that is the end of the matter.  But, of course, civil judgments are always reported about judgment-debtors, whether persons or businesses.  Defendants collect, distill, sell, report and are supposed to investigate names and addresses, and sometimes social security numbers and dates of birth, concerning these judgments, as their own records establish.  FCRA “accuracy” turns on whether the information on a report “concern[s] the individual about whom the report relates.”  15 U.S.C. § 1681e(b).  The Third Circuit has found, in a case involving a public record of a tax lien on the wrong consumer’s report, that FCRA accuracy must assure that an innocent consumer does not have another person’s credit liabilities on his or her credit records.  Philbin v. Trans Union Corp., 101 F.3d 957, 960 (3d Cir. 1996).  Moreover, the investigation duties of companies like LexisNexis require them to review all relevant information and to “delete” or otherwise correct any inaccurate information.  See 15 U.S.C. § 1681i(a) and § 1681s-2(b)(1)(E)(ii). These authorities make it clear that Defendants are misconstruing the law of FCRA accuracy, and thus are not entitled to judgment as a matter of law.

Finally, Defendants have tried to suggest through a clandestinely-obtained declaration of Experian’s Kathleen M. Centanni that their reading of “accuracy” is supported by Experian.  It is not.  A close reading of what the Centanni declaration says, and what is intentionally omits, shows that Defendants are really stretching the truth.  To the extent that this Court, however, is inclined to rely upon the Centanni declaration for any ruling in Defendants’ favor, Plaintiff requests that further discovery on the Centanni declaration be permitted, and thus Plaintiff also submits herewith a Fed. R. Civ. P.  57(f) Declaration of Counsel in support of his response to Defendants’ Motion.

II.       FACTS

A. The Inaccurate $14,317 Civil Judgment On Plaintiff’s Credit Report

In or about 2007, Plaintiff learned that his Experian credit report showed that he had a $14,317 unpaid civil judgment lodged against him.  (See Ex. 1, P.’s Experian credit report dated 1/9/07 at p. 2 of 8).  [Plaintiff] has never had a judgment taken against him and he has never lived in [State], or even visited [State].  (See Ex. 2, P.’s Dep. at 14:15-15:12; 15:21-16:4; 17:20-18:6).  Plaintiff never had any business with the judgment-creditor for the $14,317 judgment.  (Id.).  The judgment related to another [name] who lives in [State].

The actual public record of the Final Judgment entered on the docket plainly identified:  (1) the judgment-debtor’s name (which did not include any middle initial, which Plaintiff uses); (2) the judgment-debtor’s address (where Plaintiff has never lived); and (3) the last four digits –[xxxx] – of the judgment-debtor’s social security number (which are entirely different from the last four digits of Plaintiff’s social security number).   (See Ex. 3; Final Judgment in [Caption])

In his attempt to rectify the inaccurate reporting, Plaintiff disputed the inaccurate information with Experian, as his credit report indicated he had a right to do.  (See Ex. 2, P.’s Dep. at 11:5-12:2; 14:15-16:7; 31:21-32:12; 35:12-37:7); (See Ex. 1 at p. 1 of 8).  Because LexisNexis is thought to be the original supplier of this judgment, at least three of Plaintiff’s  disputes were forward by Experian to LexisNexis and processed by LexisNexis: (1) in January 2007 (Ex. 4, 1/4/07 Experian CDV)  and (see also Ex. 5, Lexis CDV LNRIAG-NAME 0001); (2) in September 2007 (Ex. 6, 9/25/07 Experian CDV) and (see also Ex. 7, Lexis CDV LNRIAG-NAME 0002); and (3) January 2009 (see Ex. 8, Lexis CDV LNRIAG-NAME 0003).

Despite [Plaintiff]’s best efforts, however, LexisNexis “verified” the inaccurate, derogatory reporting as accurate and failed to take any action to investigate or to remove the inaccurate data from Plaintiff’s credit report until after [Plaintiff] brought this lawsuit.  (See Exs. 5, 7 and ($14,317 judgment “verified”).  Thus, the inaccurate $14,317 judgment reported against Plaintiff for over two years.

B.                 Defendants’ Role In The Credit Reporting Business

At the time that Plaintiff was disputing the accuracy of the $14,317 judgment, he had no idea how the judgment made its way onto his credit report and why it remained there, despite his disputes.  And that’s how Defendants like it.  Although they have in recent years cornered the market in the reporting of public records (bankruptcies, judgment and tax liens), they operate completely behind the scenes.  By design, their names and trademarks appear nowhere upon records that consumers see.  Thus they deliberately attempt to shield themselves from the credit reporting errors that they create and they perpetuate, by failing to correct them.

Discovery in this matter, however, has revealed the following:  Defendant Reid Elsevier, Inc. (“REI”) is the American arm of an Anglo-Dutch company that has several overseas corporate entities trading under the name “Reed Elsevier.” (See Ex. 9, Reed Elsevier corporate structure, http://www.reed-elsevier.com/investorcentre/corporatestructure/Pages/Home.aspx); (See also Ex. 10, Simonton Dep. at 19:4-20:23).   Within the U.S., REI has a “division” called “LexisNexis.”  (See Ex. 12, http://www.lexisnexis.com) (“LexisNexis, a division of Reed Elsevier Inc.”). REI corporate representative Renee Simonton called LexisNexis an “unincorporated division” of REI.  (Ex. 10, Simonton Dep. at 28:6-28:15).

Several businesses operate within REI’s LexisNexis “unincorporated division.”  (Ex. 10, Simonton Dep. at 47:3-49:15).   This business includes, Defendant LNRIAG (sometimes referred to simply “RIAG” in Ms. Simonton’s deposition), ChoicePoint Inc., and other entities in the business of selling public records and credit reports in the U.S.  (Ex. 10, Simonton Dep. at 41:23-47:9).  LNRIAG’s corporate representative and Rule 30(b)(6) witness, Mark Johnson, also agreed with this assessment. (See Ex. 13, Johnson Dep. at 60:13-61:11; see also id. at 63:22-71:74) (several of the operations within the LexisNexis public records business sell consumer reports, commonly called credit reports, both to REI sister companies and to outside companies, such as Experian).  Ms. Simonton and Mr. Johnson also referred to the public records part of the business as the “risk” business.  (Ex. 10, Simonton Dep. at 44:3); (Ex. 13, Johnson Dep. at 61:1- 61:11).

In its annual reports, REI describes its public records or risk solutions businesses.  (See Ex. 14, http://www.reed-elsevier.com/investorcentre/reports%202007/Pages/Home.aspx). For example, REI 2009 Interim Report touts that its “risk solutions” business, including “LexisNexis” and “ChoicePoint” saw revenues grow by 206%.  (See Ex. 15, http://www.reed-elsevier.com/investorcentre/reports%202007/Pages/2009Interim_restricted.aspx at p. 9).  The 2009 Interim Report presents a combined financial statement, that includes “LexisNexis” and North America.  (Id. at pp. 17, 25).

Ms. Simonton and Mr. Johnson’s testimonies indicate that LNRIAG and the other LexisNexis public records businesses do not keep their own balance sheets, do not have separate accounting or legal services, and generally have the same executives on their boards as REI.  (See generally Ex. 10, Simonton Dep. at 67:10- 69:3; 74:17-78:6); (Ex. 13, Johnson Dep. at 29:7 -29:10).  Ms. Simonton also testified that the LexisNexis entities report to an REI executive in New York named Andrew Prozes.   (See Ex. 10, Simonton Dep. at 32:11-33:12); see also http://www.lexisnexis.com/about-us/global-leadership.aspx (describing Andrew Prozes as “Chief Executive Officer for Reed Elsevier’s LexisNexis Group”).  Similarly, LNRIAG’s Mark Johnson testified that his part of the business reports to REI in New York.  (See Ex. 13, Johnson Dep. at  18:5-28:19).  In fact, Ms. Simonton testified that the only corporate formality that is different between REI and the LexisNexis public records businesses is that various internal businesses hold its own board meetings.  (See Ex. 10, Simonton Dep. at 79:19-81:6).

Through the years, REI has taken over many businesses in the U.S. which sell credit data, including:  Hogan Information Services, Hollingsworth, ChoicePoint, and others.  (See Ex. 13, Johnson Dep. at 19:23-20:1; 103:16-103:20; 149:6-149:16).  Indeed, REI has taken over so many public records businesses that in 2008 the FTC required it to divest some of its holdings, so that it can comply with anti-trust laws, before approving the ChoicePoint acquisition.  (See http://www.ftc.gov/opa/2008/09/choicepoint.shtm) (“To Preserve Competition, Order Requires Divestiture of Assets”); (see also http://www.law.com/jsp/article.jsp?id=1202424585937) (“FTC Approves ChoicePoint Acquisition, Requires Reed Elsevier Divestment”).

Importantly, the FTC has also promulgated regulations that specifically prohibit businesses such as Defendants from attempting to avoid FCRA liability through “creative” corporate structures.    Specifically, the FTC provides:

(a) A consumer reporting agency shall not circumvent or evade

treatment as a “consumer reporting agency that compiles and maintains

files on consumers on a nationwide basis” as defined under section

603(p) of the Fair Credit Reporting Act, 15 U.S.C. 1681a(p), by any

means, including, but not limited to:

(1) Corporate organization, reorganization, structure, or

restructuring, including merger, acquisition, dissolution, divestiture,

or asset sale of a consumer reporting agency; or

(2) Maintaining or merging public record and credit account

information in a manner that is substantially equivalent to that

described in paragraphs (1) and (2) of section 603(p) of the Fair Credit

Reporting Act, 15 U.S.C. 1681a(p)., the FRC provides:

16. C.F.R. § 611.2.   Thus, the notion that REI is simply the “ultimate corporate parent” with no liability in this matter is also hollow.  At any rate, Defendants do not move to dismiss REI.

C.         Defendants Failed To Correct The Inaccurate $14,317 Judgment, Which     They Supplied In The First Place

Discovery in this case also revealed that Defendant LNRIAG, as part of the LexisNexis division of REI, has records of first communicating the $14,317 judgment to Experian in January 2007.  (Ex. 13, Johnson Dep. at 200:17-200:23).  It is possible that the $14,317 judgment was supplied by LNRIAG to Experian earlier, but that could not be confirmed.  Mr. Johnson testified that he believes that the $14,317 judgment was most likely originally supplied to Experian by “Hollingsworth,” a public records company that LexisNexis acquired in 2004.  (Id. at 148:1-151:1).  Since the $14,317 judgment was not entered upon the court’s docket until September 7, 2005 (see Ex. 3), Hollingsworth would have been under LexisNexis’ control even at the time of the original sale of the judgment data.

There is no doubt, however, that LexisNexis has three (3) communications with Experian about the $14,317 judgment in connection with disputes that Plaintiff lodged, alleging that the judgment was not his and did not belong on his credit report.  (Ex. 13, Johnson Dep. at 165:12-166:6).  The disputes were “processed” in (1) January 2007 (see Exs. 4 and 5); (2) September 2007 (see Ex. 6 & 7); and (3) January 2009 (see Ex. 8).

These records show that each time LexisNexis “verified” the judgment; that the judgment records were clearly associated with a debtor’s name and address; that LexisNexis never provided to Experian or indicated on any of these records the last four digits of the true judgment -debtor’s social security number — which were entirely different from Plaintiff’s.

Mr. Johnson admitted that LexisNexis received and processed “disputes” from Plaintiff.  (Ex. 13, Johnson Dep. at 165:12-166:6).  Mr. Johnson, however, also admitted that LexisNexis never “investigated” any of the disputes.  (Id. at 136:24-137:22; see also 147:3-147:25; 163:12-166:13).  Indeed, Mr. Johnson admits that LexisNexis never gets to the bottom of whether a public records that is disputed by a consumer as not belonging to him or her actually belongs to the disputing consumer (or to somebody else), and never investigated or determined whether the Plaintiff in this case actually owes the $14,317 judgment or ever had that judgment entreated against him.  (Id. at 180:13-181:16).   Mr. Johnson believes that LexisNexis does not need to comply with the FCRA, either as a CRA or as a furnisher, and confirmed that LexisNexis, in fact, does not comply or even seek to comply with the FCRA in any way.  (Id. at 39:11-41:16).

D. Plaintiff Suffered Several Forms Of FCRA-Cognizable Damages As A Result Of Defendants’ Conduct

In this Motion, Defendants do not challenge that Plaintiff suffered FCRA damages, and thus Plaintiff will not set out here a damages record in detail.  He will simply note that, during a period of more than two years he was continuously rebuffed in his attempts build up his credit because of the inaccurate $14,317 judgment.  (See generally Ex. 2, P.’s Dep. at 12:15-14:14; 18:12-18:20; 22:9-23:5; 26:18-29:4; 38:14-41:12; 44:2-46:23; 75:18-83:16; 84:5-88:3; 108:18-109:4; 146:3-154:6; 156:1-156:6). For example, Plaintiff produced records from third party lenders which specifically declined his applications for credit because there was a “judgment” on his credit report.   (See, e.g., Discover credit denial, dated September 30, 2008 and Chase Bank credit denial dated October 1, 2008, which are collectively attached hereto as Ex. 16).  Plaintiff also claims that he lost other credit opportunities with Sovereign Bank and FIA Card Services in 2007, and First USA in 2008.  Credit inquiries from those companies, none of which extended credit to Plaintiff, are reflected on his credit report.  (See Ex. 17, Experian credit report dated 1/6/09) (listing inquiries on p. 3 of 8).

Further, Plaintiff testified in detail about his non-economic damages in the form of emotional distress and mental anguish and embarrassment as a result of being unable to obtain the above credit.  Plaintiff does not have a single major credit card to his name.  He determined that at least one such card was necessary, at least for emergency reasons, as many simple transactions today require credit.  Plaintiff cannot book an airplane flight or a hotel without a credit card, and cannot make certain purchases, such as Internet purchases.  His attempts to establish credit, however, were rejected by Chase and Discovery, and others, because of the inaccurate judgment.  (See generally Ex. 2, P.’s Dep. at at 12:15-14:14; 18:12-18:20; 22:9-23:5; 26:18-29:4; 38:14-41:12; 44:2-46:23; 75:18-83:16; 84:5-88:3; 108:18-109:4; 146:3-154:6; 156:1-156:6).  Plaintiff also alleges that the inability to build credit also hurt his contractor/landscaping business.  Plaintiff also felt defamed by being labeled as a credit deadbeat who skips out on his obligations.  (Id.).

III. STANDARD

Pursuant to Federal Rule of Civil Procedure 56(c)(2), a motion for summary judgment will only be granted if:

The pleadings, the discovery and disclosure material on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to a judgment as a matter of law.

Fed. R. Civ. P. 56(c)(2) (revised as of Dec. 1, 2009).  The Third Circuit has said that summary judgment may only be granted if the movant shows, by admissible evidence, that there exists no genuine issue of material fact that would permit a reasonable jury to find for the nonmoving party.  Wetzel v. Tucker, 139 F.3d 380, 383 n.2 (3d Cir. 1998); Miller v. Indiana Hosp., 843 F.2d 139, 143 (3d Cir. 1988), cert. denied, 488 U.S. 870 (1988).

A court may not, at the summary judgment stage, weigh evidence or make credibility decisions.  These tasks are left to the fact-finder.  Petruzzi’s IGA Supermarkets, Inc. v. Darling-Delaware Co., Inc., 998 F.2d 1224, 1230 (3d Cir. 1993), cert. denied, 510 U.S. 994 (1993).  To raise a genuine issue of material fact, the respondent need not match, item-for-item each piece of evidence proffered by the movant.  As the Third Circuit has explained:

In practical terms, if the opponent has exceeded the “mere scintilla” threshold and has offered a genuine issue of material fact, then the court cannot credit the movant’s version of events against the opponent, even if the quality of the movant’s evidence far outweighs that of its opponent.  It thus remains the province of the factfinder to ascertain the believability and weight of the evidence.

In re Unisys Savings Plan Litigation, 74 F.3d 420, 433 n. 10 (3d Cir. 1996).  If there are gaps in the pertinent materials submitted by the movant, without explanation, that justifies denial of the motion.  O’Donnell v. United States, 891 F.2d 1079, 1082 (3d Cir. 1989).

In the case at bar, there exist genuine issues of material fact and Defendants are not entitled to judgment as a matter of law.  Summary judgment, therefore, is inappropriate.

IV. ARGUMENT

A. Accuracy Is Not A Defense To Plaintiff’s FCRA Section 1681g Claim

As will be discussed in detail below, Defendants sold anything but “accurate” information in this case.  But some of Plaintiff’s FCRA claims are not predicated upon, and do not require, any finding that Defendants sold inaccurate information about Plaintiff.  At paragraph 47(d) of his Amended Complaint, Plaintiff brought an FCRA section 1681g claim against LexisNexis.  (See Amended Complaint, Docket No. 38, ¶ 47(d));  (See also Id. at  ¶¶ 24-25).   This section of the FCRA requires consumer reporting agencies (“CRAs”) to provide to consumers all of the information in their files and certain disclosures of consumer rights.  See 15 U.S.C. § 1681g.  These duties exist regardless of whether the information is accurate or inaccurate.  Id.

Defendants do not challenge or even mention Plaintiff’s FCRA section 1681g claim in their Motion.    Defendants do not argue in this Motion that they are not CRAs, and in fact lost that very argument when this Court denied their motion to dismiss on that basis.  (See Docket No. 66).  Nor is there any dispute that Defendants refuse to provide to consumers, and did not provide to Plaintiff or even make available to him, any copy of information about him and the disputed judgment from their computer files and databases.   Accordingly, Plaintiff’s FCRA section 1681g claim is unaffected by Defendants’ Motion and must proceed to the jury.

B. The $14,317 Civil Judgment On Plaintiff’s Credit Report Was Not “Accurate,” And Thus Plaintiff’s FCRA Section 1681e(b), 1681i, and 1681s-2(b) Claims Must Also Proceed To Trial

Plaintiff also brings claims under FCRA sections 1681e(b), 1681i and 1681s-2(b).  (See Amended Complaint, Docket No. 38, ¶¶ 47(a)–(c)).  FCRA section 1681e(b) requires companies such as LexisNexis to “follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.”  15 U.S.C. § 1681e(b) (emphasis added).  FCRA sections 1681i and 1681s-2(b) require CRAs and furnishers respectively to investigate consumer disputes of alleged inaccuracies.   15 U.S.C. §§ 1681i and 1681s-2(b).  Unlike their motion to dismiss, Defendants do not argue that these FCRA sections do not regulate them or apply to them.  Rather they now say that “[for] purposes of this motion

. . . even were the FCRA to apply to them” they are still entitled to judgment in their favor, allegedly because the “statements” they made about Plaintiff were “entirely accurate.”   (Def.  Mem. at 2 & n.1) (emphasis in original).

1.       FCRA Accuracy Defined

It is true that FCRA section 1681e(b) claims have an element of “accuracy.”  See 15 U.S.C. §§ 1681e(b); Philbin v. Trans Union Corp., 101 F.3d 957, 963 (3d Cir. 1996) (a consumer plaintiff must show that “inaccurate information was included in a consumer’s credit report”).   For purposes of the investigation duties under FCRA section 1681i and 1681s-2(b), a consumer must merely dispute the information that he believes or alleges to be inaccurate.  See 15 U.S.C. §§ 1681i, 1681s-2(b); Cushman v. Trans Union Corp., 115 F.3d 220, 223 (3d Cir. 1997) (FCRA section 1681i investigation standard); Saunders v. Branch Banking & Trust Co., 526 F.3d 142 (4th Cir. 2008) (FCRA section 1681s-2(b) investigation standard).

Importantly, FCRA accuracy requires that the credit information on a consumer’s report actually belong to that consumer, and not somebody else.  The face of the act provides that “maximum possible accuracy” under the FCRA requires procedures that assure that the information on a report “concern[s] the individual about whom the report relates.”  15 U.S.C. § 1681e(b).  The reason is obvious: it may be accurate that somebody owes $10,000,000 to a given bank, but if Plaintiff does not owe that money then the information should not be on his report.  Similarly, it may be accurate that somebody filed for bankruptcy 60 days ago, but if that was not Plaintiff, then it is not accurate for that bankruptcy to be on his report.

The Third Circuit agrees that this is the only reasonable reading of FCRA accuracy.  In Philbin, the Third Circuit reversed summary judgment for a CRA and found that a consumer-plaintiff named James R. Philbin, Jr. may proceed to the jury with his FCRA section 1681i and 1681e(b) claims, the same claims that Plaintiff brings here.  In that case, the consumer-plaintiff claimed he had a $9,500 public record tax lien appear on his report that belonged to James R. Philbin, Sr., his father.  Philbin, 101 F.3d at 960.  The Third Circuit did not consider that tax lien to be accurate as to Philbin, Jr.

In Cushman, the Third Circuit found that a consumer-plaintiff may proceed with her FCRA section 1681i and 1681e(b) claims where she alleged that three credit cards appearing on her credit report were not hers, and “suggested that a third party had fraudulently applied for and obtained the cards.”  Cushman, 115 F.3d at 222.  The amount of the credit card balances or the account numbers and other data may have been accurate — but none of that information was accurately reported as to the consumer-plaintiff Cushman.

Other courts have noted that even if a credit item is “technically accurate,” a furnisher or CRA still violated the FCRA if the way in which they report that item is “misleading or materially incomplete.”  See Evantash v. G.E. Capital Mortg. Servs., Inc., 2003 WL 22844198, at *1, 4 (E.D. Pa. Nov. 25, 2003) (denying summary judgment and permitting consumer-plaintiff to proceed to jury trial with FCRA claims against CRAs and furnisher who reported on her report that she had a joint mortgage loan “included in bankruptcy,” when only her husband had filed for bankruptcy, but she had not); Koropoulos v. Credit Bureau, Inc., 734 F.2d 37, 42 (D.C. Cir. 1984) (technical accuracy not a valid FCRA defense); Saunders v. Branch Banking & Trust Co., 526 F.3d 142 (4th Cir. 2008) (same).

A credit item may be considered inaccurate or incomplete for purposes of the FCRA if the way in which a CRA or furnisher reported it is misleading to potential creditors.  Agosta v. Inovision, Inc., 2003 WL 22999213, at *5 (E.D. Pa. Dec. 16, 2003); see Curtis v. Trans Union, Nos. 02-C-207, 02-C-208, 2002 WL 31748838, at *4 (N.D. Ill. Dec. 9, 2002) (finding that even factually correct information may be “inaccurate” for FCRA purposes where such information may be misleading to a party reviewing the consumer’s credit report); see also DiPrinzio v. MBNA America Bank, N.A., Civ. No. 04-872, 2005 WL 2039175 at *3-4 (E.D. Pa. Aug. 24, 2005) (materially incomplete reporting of a true credit account is not accurate for FCRA purposes where creditor omitted that consumer had a disputed joint account and had separated from her husband who had actually incurred the debt after separation).

One court within this Circuit put it this way:

the FCRA uses the word “accuracy” more “objectively” than [Defendant] would prefer. An objective understanding of accuracy requires congruence between the legal status of a consumer’s account and the status a CRA reports.  Put another way, a consumer report cannot be “accura[te]” under either section 1681e(b) or section 1681i if it contains information that is legally incorrect.

Crane v. Trans Union, LLC, 282 F. Supp. 2d 311, 318 (E.D. Pa. 2003) (citing Cushman v. Trans Union Corp., 115 F.3d 220 (3d Cir. 1997)) (emphasis added) (footnote omitted).

2.     FCRA Accuracy Applied To The Facts Of This Case Clearly Shows That The    $14,317 Judgment Was Not Accurately Reported As To Plaintiff

Inaccuracy is precisely Plaintiff’s claim in this case.  He claims that he is not legally responsible for the $14,317 civil judgment that appears on his report.  He claims that it is inaccurate and misleading for that judgment to remain on his report, despite multiple investigations by LexisNexis, even though he is clearly not the judgment-debtor.   Plaintiff’s deposition testimony, the records of Plaintiff’s disputes, Experian’s records, and even the court records make it abundantly clear that the $14,317 civil judgment belonged to an unrelated person named [Name], and not Plaintiff.  The disputed credit information at issue therefore is simply not accurate, and thus Defendants have no accuracy defense.

Contrary to Defendants’ suggestion, Plaintiff here is not making an academic claim about court record accuracy in general.  Nor is he commenting about the judgment records of the court; or whether another person named [Name] truly owes a judgment in the amount of $14,317 to a creditor called [Creditor], and never satisfied the judgment.  Plaintiff brought this lawsuit under the FCRA because a $14,317 judgment wrongly appeared on his credit report for over two years, causing him to be denied credit repeatedly, and because Defendants failed to correct the error despite Plaintiff’s repeated and clear disputes.  Thus “accuracy” is not an abstract question here or an inquiry into the court records of the court.  “Accuracy” must be measured as to the Plaintiff and his credit report:  Was it accurate for the $14,317 judgment about another person named [Name] report and remain upon Plaintiff’s credit report?  The only reasonable answer is no.

3. There Is No “Accuracy” Defense Under The FCRA Where An FCRA-Regulated Business Allegedly Made Some Partially True “Statements” In Certain Records About A Credit Item

Under the FCRA claims that Plaintiff brings here, a CRA must “follow reasonable procedures to assure maximum possible accuracy.”  15 U.S.C. § 1681e(b).  An entity that has investigation duties (under either FCRA section 1681i or 16181s-2(b)) must conduct a qualitatively “reasonable investigation” into the dispute.  Cushman, 115 F.3d 220; Saunders, 526 F.3d 142.  Both of these statutory investigation provisions state that the investigating entity (regardless of whether it is wearing a CRA hat or a furnisher hat) has a duty on its own to take action to “delete” the inaccurate item if it cannot be “verified” as accurate.  15 U.S.C. § 1681i(a); 15 U.S.C. § 1681s-2(b)(1)(E)(ii).

None of these FCRA investigation standards concern “statements” made by one FCRA actor to another.  None even remotely suggests that a partially true “statement” about a credit item can ever amount to an “accuracy” defense.  Defendants cite no authority at all for this alleged defense.

Instead, Defendants take the incredible position that when they reported the $14,317 judgment at issue in this case, they made “no representation” that the judgment “relates to any specific individual.”  (Def. Mem. at 2) (emphasis added).  They also say that they “did not associate” the public record judgment with “any sort of identifier to indicate to which specific consumer that record relates.”  (Id.)  Further, they say that they do not “make or reflect any linkage between public record information relating to different court or tax lien proceedings to indicate that the same person was the debtor or the defendant in each proceeding.”  (Id.)  These statements are false.

First, contrary to Defendants’ contentions, it is simply impossible to report public records such as judgments without “any sort of identifier,” “any linkage,” or any “association” or “relation” to “any specific individual.”  Judgments are about specific individuals — or in the commercial arena, about specific businesses.  There is no way in the credit reporting business to report or furnish any information about a judgment without also providing information about who owes the judgment.  Indeed, that is the whole point of putting judgments on the credit reports of individual consumers, to indicate that they had a judgment entered against them and that they owe money to a creditor for that judgment.  That is exactly why the $14,317 judgment at issue in this case was placed on a specific individual’s credit report, namely Plaintiff’s report.

Second, Defendants’ own records, which memorialize their communications with Experian about this judgment, plainly show on their face that this judgment is “associated” with and “relates” to a “specific individual.”   This is not a case where Defendants are merely communicating information only about a judgment amount, or only about the correct civil action number, or only about whether the subject judgment was satisfied.

Specifically, Exhibit A to Mark Johnson’s Declaration (which is attached to Defendants’ Motion) shows the January 3, 2007 and (on the second page of Exhibit A) the September 23, 2007 communications between LexisNexis and Experian concerning two of Plaintiff’s disputes about the $14,317 judgment.  (See also Ex. 5, 7, and 8, hereto).  In relation to the $14,317 judgment, these records provide a “Defendant’s name,” a “Verified Defendant Address,” and field for the “SSN” or social security number of the debtor.  These records plainly show under “Claims Code” that the Plaintiff in this case is disputing that the judgment is not his and is erroneously appearing on his credit report.  Plaintiff provides his full name, his phone number (and requests that he be contacted at that phone number), his actual address, and even his social security number (redacted on the forms).  Defendants’ notion therefore that they do no not “relate” the disputed $14,317 civil judgment in this lawsuit to “any specific consumer” is nonsense.

As noted above, both section FCRA sections 1681i and 1681s-2(b) require entities charged with investigating disputes to “delete” or otherwise correct inaccurate credit information or information that cannot be verified as accurate.  15 U.S.C. § 1681i(a) & § 1681s-2(b)(1)(E)(ii).  Again, in this Motion, Defendants do not challenge that they had one or both of these investigation responsibilities.  Yet their own records show that, instead of “deleting” the inaccurate judgment on Plaintiff’s report, they “verified” it as accurate.  (See Exhibit A to M. Johnson declaration, and also Exs. 5, 7 and 8 hereto).  Defendants cannot so woefully fail in their duties and now argue that they have a defense based on the purported “accuracy” of the information they sold in this case.

4. Both LexisNexis and Experian Are Liable

Defendants also suggest that since Experian controls its own “matching criteria,” only it can be liable in this type of case.  This suggestion flatly contradicts the FCRA and 40 years of FCRA jurisprudence.  The FCRA provides for separate liability for every CRA (see 15 U.S.C. §§ 1681e(b), 1681g(a), 1681i(a)), every reseller (see 15 U.S.C. § 1681e(e)), every furnisher of credit information (see 15 U.S.C. § 1681s-2(b)), and every user of credit information (see 15 U.S.C. § 1681m).  There are scores of published decisions interpreting the FCRA that find more than one covered entity liable in the same case for their own actions or omissions related to the same inaccurate credit-reporting transaction.  See, e.g.,  Evantash v. G.E. Capital Mortgage Servs., Inc. and Trans Union, Civ. No. 02-1188, 2003 WL 22844198  (E.D. Pa. Nov. 25, 2003) (motions for summary judgment denied as to multiple CRAs and as to furnisher for their individual responsibilities in misreporting inaccurate information and failing to correct it following plaintiff’s disputes); Sheffer v. Experian Info. Solutions, Inc. and Trans Union, Civ., No. 02-7407, 2003 WL 21710573 at *3-4 (E.D. Pa. July 24, 2003); Sheffer v. Experian Information Solutions, Inc., 249 F. Supp 2d. 560, 561 (E.D. Pa. 2003) (same); White v. TransUnion, LLC, 462 F. Supp. 2d 1079 (C.D. Cal. 2006) (same).

Thus, nothing in the FCRA prevents more than one entity (whether a consumer reporting agency, reseller, credit furnisher or credit user) from being liable under the act simply because other entities can also be liable for the same credit reporting transactions.  Further, the U.S. Supreme Court has held that in cases alleging a violation of a federal statute there exists no right to off-set unless the statute itself or federal common law so provides.  See Texas Industries, Inc. v. Radcliff Materials, Inc., 451 U.S. 630, 638 (1981).  Each defendant, if covered by the federal statute, can have its own liability.  Id.  There is no right to off-set on the face of the FCRA and, to Plaintiff’s knowledge, no federal common law has ever recognized such a right.  See generally Betts v. Equifax Credit Information Servs., 245 F. Supp. 2d 1130, 1136 (W.D. Wash. 2003);  Cintron v. Savit Enterprises, et al., 2009 WL 971406, *2-4 (D.N.J. Apr. 9, 2009).

5. Defendants’ Construction Of Accuracy Would Allow Erroneous And Fraudulent Information To Be Reported On The Credit Reports Of Innocent Consumers

Finally, it should be noted that the construction of “accuracy” that Defendants are advocating would turn the FCRA on its head, and would have disastrous consequences for consumers.  Defendants’ position suggests that so long as any information reported concerning a public record judgment is accurate (such as the amount, or whether the amount has been satisfied), then it does not matter whether information identifying the debtor is accurate.  Under Defendants’ reading, their roles as CRAs and furnishers (which they do not, and cannot, deny being) impose no responsibilities upon them at all in (1) assuring that a judgment is reported as to the correct judgment-debtor or (2) taking action to delete a judgment from appearing on the wrong person’s credit report.

If Defendants are correct, then consumers would have no recourse in cases of fraud or mistaken identity.  According to Defendants’ theory, consumer-plaintiffs such as the ones in Philbin and Cushman, supra, would be out of luck.  So long as a tax lien account was reported in the correct amount, it would not matter that it remained on the wrong person’s report.  So long as fraudulently opened turned derogatory credit accounts were reported with the correct balances, then the victim would have to live with those accounts on his or her credit report.

The FCRA is a remedial, consumer protection statute, to be liberally construed in favor of consumers, not the credit reporting industry.  See 15 U.S.C. § 1681; Cushman, 115 F.3d at 222.   To Plaintiff’s knowledge, no court has ever agreed with Defendants’ hyper-technical reading of accuracy, and this Court should not be the first.  Both CRAs and finishers have duties under the FCRA to assure accuracy and to delete errors.  Defendants do not contest that they are covered by these duties.  They must, therefore, accept their level of responsibility — and liability — for communicating inaccurate information about Plaintiff and for failing to delete it from his credit report.

C. Plaintiff Has Agreed To Withdraw His Common Law Claims

Now that Defendants have abandoned their argument that they are not regulated by the FCRA, Plaintiff is willing to withdraw his remaining common law claims of negligence and defamation, which would not provide him with any additional relief.  Plaintiff proposed to Defendants to enter into a stipulation to that effect, in the exact same form of a stipulation that counsel for the parties here entered into recently in a similar case, but to date Defendants have not responded.  Plaintiff would expect that these claims will be disposed by stipulation or voluntary withdrawal, and thus does not brief the common law negligence and defamation claims here.

D. Plaintiff Requires Further Discovery Concerning The Declaration Of Experian’s Kathleen M. Centanni

To the extent that this Court is inclined to rely upon the Centanni declaration for any ruling in Defendants’ favor, Plaintiff requests that further discovery on the Centanni declaration be permitted.

In support of their Motion, Defendants attach only two declarations.  One declaration is of their corporate representative, Mark Johnson, and the other is of Kathleen M. Centanni, a compliance manager of Experian.  Co-Defendant Experian settled this matter with Plaintiff in November 2009.  Ms. Centanni was never identified by LexisNexis as a person with information about this matter.  Nor was she indentified by Experian.  Indeed, the only Experian witness indentified in this matter was in Experian’s Initial Disclosures, and that representative was a different Experian employee named Kimberly Hughes.

Defendant LNRIAG supplemented its Initial Disclosures on December 15, 2009 — one day before the close of discovery.  (See Docket No. 48, Scheduling Order).  For the first time, Defendant LNRIAG stated that it would reply on an Experian “corporate representative” concerning “Experian’s creation of consumer reports . . .” and “Experian’s efforts to investigate Plaintiff’s contentions  . . . .”   Defendants did not identify Kathleen M. Centanni or any Experian “corporate representative” by name.   Plaintiff believes that literally dozens, if not hundreds, of Experian employees could fit that description.  Indeed, all of Experian’s operation is in the business of creating consumer reports, commonly called credit reports, and hundreds of employees at Experian participate in the area of consumer disputes.

Plaintiff believes that he must minimally have Ms. Centanni’s deposition in order to respond to Defendant’s arguments as to what they allege and infer about Experian’s understanding of the transactions involving Plaintiff.  Plaintiff requested a status conference to discuss this issue with this Court by letter dated January 28, 2010, the day after Defendants filed their Motion.  This Court issued an Order dated February 1, 2010, denying Plaintiff’s request for additional discovery.  (Docket No. 72).

Therefore, Plaintiff now attaches and makes part of this response to Defendants’ Motion the Declaration of Plaintiff’s Counsel (Ex. 18), which sets forth the pertinent facts concerning the disclosure of Ms. Centanni, and requests pursuant to Fed. R. Civ. P. 57(f) that this Court permit additional discovery concerning the Centanni Declaration or deny Defendants’ Motion.

V.    CONCLUSION

For the foregoing reasons, Plaintiff respectfully requests that this Court deny Defendants LexisNexis Risk & Information Analytics Group, Inc. and Reed Elsevier, Inc.’s Motion for Summary Judgment in its entirety.

Respectfully Submitted,

FRANCIS & MAILMAN, P.C.

EDWIN A.

Plaintiff,

v.

EXPERIAN INFORMATION SOLUTIONS, INC., LEXISNEXIS RISK & INFORMATION ANALYTICS GROUP, INC., and REED ELSEVIER, INC.

Defendants.

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Civil Action No.

PLAINTIFF’S MEMORANDUM OF LAW IN OPPOSITION TO

DEFENDANTS LEXISNEXIS RISK & INFORMATION ANALYTICS

GROUP, INC. AND REED ELSEVIER, INC.’S MOTION

TO DISMISS PLAINTIFF’S AMENDED COMPLAINT

I. PRELIMINARY STATEMENT

Plaintiff Edwin A. filed this lawsuit against LexisNexis Risk & Information Analytics Group, Inc. (“LNRIAG”) and Reed Elsevier, Inc. (“Reed”) (collectively “Moving Defendants” or “LexisNexis”) alleging claims for violation under the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. §§ 1681 et seq., negligence, defamation and invasion of privacy because Moving Defendants falsely reported to other consumer reporting agencies (“CRAs”) that a civil judgment had been taken out against Plaintiff, and then failed to correct the error after Plaintiff disputed the inaccuracy.  As detailed below, and contrary to Moving Defendants’ contentions, Plaintiff has pled sufficient facts and allegations to support each of his claims for relief.  Accordingly, Moving Defendants’ Motion to Dismiss pursuant to Rule 12(b)(6) (the “Motion”) should be denied.

Though styled as a motion to dismiss based upon an alleged failure to plead with sufficient specificity, the Motion is largely a preemptive strike on Plaintiff’s theory of liability that Moving Defendants may be sued as CRAs under the FCRA (and not just as furnishers of consumer report data).   Arguing that they are not a “peer” of Experian, and referring to a “forty-year history of the FCRA,” LexisNexis attempts to paint Plaintiff’s CRA theory as novel, unprecedented and unsupportable.  See Def. Mem., at 2.  It is unclear what history Moving Defendants are looking at, for it is the FCRA’s recent seven-year history that wholly undercuts Moving Defendants’ argument.  Though Moving Defendants fail to disclose it, the plain and simple truth is that over the last seven years multiple courts have in fact examined whether Moving Defendants functioned as CRAs, and every single one (to Plaintiff’s knowledge) has found that they are.

Regarding the sufficiency of Plaintiff’s allegations, the Motion is premised upon two misguided assumptions: first, that a complaint’s allegations must include every possible fact known to Plaintiff, and second, that a plaintiff must prove his or her case in the pleadings.  Both of these erroneous assumptions are explicitly contradicted by the Supreme Court’s opinions in Bell Atlantic Corp. v. Twombly, 550 U.S. 554, 555 (2007) and more recently Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009).  Both Twombly and Iqbal confirm that Plaintiff only needs to plead a sufficient amount of facts to give Defendants notice that a plausible claim exists.

Notably, the Honorable in the matter of XX v. Experian Information Solutions, Inc., et al., granted in part and denied in part a largely identical motion to dismiss in a similar consumer protection action filed against the same Defendants and/or their corporate successors.  The XX decision, which is attached hereto, reviewed the same facts and allegations under the FCRA as those pled in this case and specifically found that the plaintiff’s complaint “alleges sufficient facts under Twombly and Iqbal to survive a motion to dismiss on its FCRA claims.”  The same result should be reached in this case.

Applying the proper standard for pleading, even a cursory review of the Amended Complaint reveals that the allegations plausibly state claims for relief consistent with the literally thousands of cases that have been brought through the years against all types of actors who deal in credit information for violations the FCRA.  Despite the forty year FCRA history that Moving Defendants taut, they do not cite one case which was dismissed under Rule 12(b)(6) based upon allegations similar to those in the instant case.

Moving Defendants’ arguments also contain contradictions that undercut their credibility in arguing for a dismissal on the pleadings.  For example, Moving Defendants argue that Plaintiff has not sufficiently pled his CRA claims, but they do not challenge his allegations that Moving Defendants violated the FCRA as credit furnishers.  In doing so, Moving Defendants either misapprehend or ignore the fact that Plaintiff is specifically permitted under Rule 8 to plead claims in the alternative.   Moving Defendants’ piecemeal and compartmentalized challenges confirm that Moving Defendants are in reality simply targeting claims that they dislike as opposed to raising a legitimate objection to the sufficiency of the pleadings.

The tone of the Motion suggests that at least part of it was designed to garner sympathy from the Court by painting Moving Defendants as the unfortunate target of aggressive and maverick FCRA claims.  Yet, as set forth above, Moving Defendants’ effort is nullified by the spate of recent decisions that Moving Defendants fail to disclose to this Court in which other courts have held that Moving Defendants may be sued as CRAs.   In addition, Moving Defendants also conveniently fail to disclose that many different types of companies (not just Equifax, Experian and Trans Union), including companies that traffic in public records data, have been found to be covered as CRAs under the FCRA.

II.      BACKGROUND

A. Plaintiff’s Allegations Parallel Those Found In Most Other Lawsuits Against Consumer Reporting Agencies And Furnishers Of Credit Information For Reporting Inaccurate Information About A Consumer Despite Dispute By The Consumer.

The inaccuracies that end up appearing on consumer credit reports are commonly the result of wrongdoing by multiple actors that include both credit reporting agencies, debt collectors, resellers and furnishers of credit information.  See, e.g., Sheffer v. Experian Information Solutions, Inc., 249 F. Supp 2d. 560, 561 (E.D. Pa. 2003); White v. TransUnion, LLC, 462 F. Supp 2d 1079 (C.D. Cal. 2006).  In this case, Plaintiff was harmed by a series of transgressions committed by Experian and LexisNexis in the selling and reselling of a civil judgment that does not belong to Plaintiff.  (Am. Compl. ¶¶ 12-13).

B. LexisNexis’ Invisible Public Records Reporting Operation.

Contrary to Moving Defendants’ contentions, Plaintiff does not rely upon bald, boilerplate and conclusory allegations; rather, the allegations detail the roles that Moving Defendants play in the sale of public records and other consumer report data.  Plaintiff alleges the following:

LexisNexis sells and/or publishes consumer reports containing public record information (bankruptcies, judgments and tax liens) about consumers to other CRAs (such as Trans Union, Equifax and Experian) for a fee.  (Am. Compl. ¶¶ 15-18).  LexisNexis was the original supplier of the erroneous public record in this case.  (Am. Compl. ¶ 15).  LexisNexis knows that public record information reported to the other CRAs is used in connection with determining a consumer’s eligibility for credit and goes on credit reports.  (Am. Compl. ¶ 19).

In contrast to Experian, Equifax and Trans Union, LexisNexis conceals its role in selling consumer reports containing public record information.  (Am. Compl. ¶ 23).  LexisNexis does not identify itself on the public record reports it sells and does not list any telephone number, website, street address or any other means available to consumers in order to dispute inaccurate public records information that LexisNexis sells about consumers.  (Am. Compl. ¶ 24).  The only mechanism available to Plaintiff and other consumers to put LexisNexis on notice of such errors is through the procedures established by Equifax, Experian and Trans Union.  (Am. Compl. ¶ 25).

Moreover, even when Plaintiff and other consumers receive responses from Equifax, Experian and Trans Union to their dispute, Plaintiff was not advised that LexisNexis was the entity that reported and investigated the inaccurate information.  (Am. Compl. ¶ 23).  Consumers such as Plaintiff are thus shielded from learning about LexisNexis, which only makes resolving the credit reporting error more difficult.

C. LexisNexis Received Notice Of The Public Record Error, Purportedly Investigated, But Failed To Correct The Error.

Plaintiff used every mechanism available to him to try to correct the public record error appearing on his credit reports.  (Am. Compl. ¶ 25).  Plaintiff disputed the error, and LexisNexis received notice of Plaintiff’s disputes through Experian.  (Am. Compl. ¶¶ 21-22).  LexisNexis believed that it had a duty to investigate the error, purportedly “investigated,” but failed to correct the erroneous public record that it had originally supplied.  (Am. Compl. ¶ 26).

III.     LEGAL STANDARD

A. A Well Pled Complaint Need Only Allege Claims That Are Not “Speculative” To         Defeat A Motion To Dismiss.

Universally recognized as a notice pleading standard, Rule 8(a)(2) of the Federal Rules of Civil Procedure calls for a plaintiff filing a complaint in the federal courts to simply provide “a short and plain statement of the claim showing that the pleader is entitled to relief.”  See Bell Atlantic Corp. v. Twombly, 550 U.S. 554, 555 (2007) (“A complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations.”) See also Swierkiewicz v. Sorema N. A., 534 U.S. 506, 513 (2002) (calling Rule 8 a “simplified notice pleading standard”):

When a federal court reviews the sufficiency of a complaint, before the reception of any evidence either by affidavit or admissions, its task is necessarily a limited one. The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims.

Scheuer v. Rhodes, 416 U.S. 232, 236 (1974).  “[T]he threshold level to be met by a plaintiff to withstand a motion to dismiss is very low.”  Smith v. Weeks, 2002 WL 31750203, at *5 (E.D. Pa. Dec. 9, 2002).

The Third Circuit after Twombly has consistently held that in considering a motion to dismiss pursuant to Rule 12(b)(6) the Court shall:

“accept all factual allegations in the complaint as true and view them in the light most favorable to the plaintiff” and  “determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief.”

Umland v. PLANCO Financial Services, Inc., 542 F.3d 59, 64 (3d Cir. 2008) (quoting Buck v. Hampton Twp. Sch. Dist., 452 F.3d 256, 260 (3d Cir. 2006) and Pinker v. Roche Holdings Ltd., 292 F.3d 361, 374 n.7 (3d Cir. 2002)).  See also Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (finding Pinker “remains an acceptable statement of the standard”).  “Rule 12(b)(6) does not countenance … dismissals based on a judge’s disbelief of a complaint’s factual allegations.” Twombly, 550 U.S. at 556 (quoting Neitzke v. Williams, 490 U.S. 319, 327 (1989)). “A well-pleaded complaint may proceed even if it appears ‘that a recovery is very remote and unlikely.’” Id. (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).

To the extent Twombly or more recently Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009), impacts the standard of review of a Rule 12(b)(6) motion, the opinion merely clarifies  that a complaint must “raise a right to relief above the speculative level.”   Id. at 555.  The Third Circuit in Phillips noted that Twombly “‘simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence’ of the necessary element.” 515 F.3d 224, 234 (3d Cir. 2008) (quoting Twombly, 550 U.S. at 556).

B. Rule 8 Permits Pleading Claims In The Alternative Or Hypothetical Even If Those

Claims Are Inconsistent.

Rule 8(d)(2) and (3) also permits a plaintiff to:

set out two or more statements of a claim . . . alternatively or hypothetically, either in a single count . . . or in separate ones. If a party makes alternative statements, the pleading is sufficient if any one of them is sufficient. . . . A party may state as many separate claims or defenses as it has, regardless of consistency.

(emphasis added).   See Showalter v. Brubaker, 283 Fed. Appx. 33, 36 (3d Cir. 2008) (“litigants are free to make alternative arguments in support of their positions” citing Rule 8(d)(2)); J & J Sports Productions, Inc. v. 4326 Kurz, Ltd., 2008 WL 4630508, at *3 (E.D. Pa. Oct. 17, 2008) (“plaintiff is entitled to plead alternative theories of liability for purposes of discovery” even where such theories are mutually exclusive and cannot both be sustained).

IV. ARGUMENT

A. PLAINTIFF HAS APPROPRIATELY ALLEGED CLAIMS AGAINST ALL MOVING DEFENDANTS.

Moving Defendants claim the Amended Complaint “makes no distinction in [the] allegations as to which defendant acted as alleged.”  See Def. Br., Argument III, at 8-9.  This argument falsely suggests that Moving Defendants are somehow separate business entities operating at arms’ length from one another which played different roles in the sale of Plaintiff’s public record data.  LNRIAG, however, is wholly owned by Reed.   “Unsupported protestations regarding the corporate structure are insufficient to support a Rule 12(b)(6) motion in the face of a complaint that taken as true, as we must in the present procedural posture, pleads sufficient facts to establish successor corporation liability.” Procentury Ins. Co. v. Harbor House Club Condominium Ass’n, Inc., ___ F. Supp. 2d ___,  2009 WL 2580356, *9 (D.N.J., Aug. 19, 2009).  Plaintiff here has specifically pled LNRIAG’s affiliation with Reed. (Am. Compl., at ¶¶ 6-11).  Moreover, Moving Defendants do not contest that Plaintiff has somehow misrepresented the current status of these business entities which would certainly be a prerequisite to raising an argument of this kind.

Nowhere has Twombly or Iqbal been interpreted to require a plaintiff to sort out the internal operations of affiliated business entities at the pleading stage. See id. (“Whether that allegation is eventually proven or legally sufficient will be left to discovery and future motion practice.”).   See also Premier Pork L.L.C. v. Westin, Inc., 2008 WL 724352, *4 (D.N.J. Mar. 17, 2008) (applying Twombly and recognizing plaintiff’s claim of successorship liability in pleadings based on general allegations of successorship).  Indeed, such a requirement would be impossible for a plaintiff to comply with since it would require Plaintiff to obtain information that only Moving Defendants possess.  Discovery on LNRIAG’s and Reed’s current business structure would certainly be appropriate in the context of this litigation and may warrant amendment of named parties in the pleading as some later point consistent with discovery, but for the moment Plaintiff’s pleadings satisfactorily give Moving Defendants notice of the plausible claims asserted against them.

B. PLAINTIFF HAS PLED A SUFFICIENT AMOUNT OF FACTS TO ESTABLISH THAT PLAUSIBLE CLAIMS EXIST AGAINST MOVING DEFENDANTS.

Moving Defendants also surgically dissect the factual allegations in Plaintiff’s Amended Complaint, pointing out areas where they believe Plaintiff could have pled the allegations with more specificity.  See Def. Br., Argument II, at 11-13.  Moving Defendants’ generalized dissatisfaction with the quantum of facts that Plaintiff has pled, however, does not advance their arguments for dismissal.  A well pled complaint in the federal courts is not meant to unearth every single fact or piece of information in existence in connection with a claim. The District Court in J & J Sports Productions, Inc. succinctly summarizes Moving Defendants’ misunderstanding:

defendants note that the Amended Complaint does not allege whether there was a cover charge to enter the bar on the night of the fight, the number of people present at the bar during the fight, and the number of television sets exhibiting the fight. Defendants contend that plaintiff probably had this information prior to filing the lawsuit and should have included these allegations in the Amended Complaint. It is not clear whether plaintiff had this information, but for purposes of a motion to dismiss, it is not relevant because the Rule 8 pleading “standard does not require ‘detailed factual allegations.’ ”

2008 WL 4630508, *4 (E.D.Pa., Oct. 18, 2008) (J. Yohn).

Even though Moving Defendants spend numerous pages in their brief scrutinizing the holdings in Twombly and Iqbal, they appear to have lost site of the two most basic tenets of these opinions: (1) a plaintiff may not plead a cause of action that is devoid of any factual support, and (2) a plaintiff may not substitute legal conclusions for facts.  See Twombly, 550 U.S. at 555; Iqbal 129 S.Ct. at 1949-51.  Neither Twombly nor Iqbal stand for the proposition that a plaintiff is required to plead every single fact that he or she may possess.  See al-Kidd v. Ashcroft, __ F.3d ___, 2009 WL 2836448, *24 (9th Cir. Sept. 4, 2009) (“Twombly and Iqbal do not require that the complaint include all facts necessary to carry the plaintiff’s burden.”); Fowler v. UPMC Shadyside, __ F.3d __, 2009 WL 2501662 (3d Cir. Aug. 18, 2009) (“Although plaintiff’s complaint is not as rich with detail as some might prefer, it need only set forth sufficient facts to support plausible claims.”)

Moving Defendants here do not argue that Plaintiff has left out supporting facts for his claims, nor do they argue Plaintiff is supplanting legal conclusions for factual allegations.   Moving Defendants notably do not even argue that the Plaintiff’s facts are implausible.  Moving Defendants merely point out that they have a countervailing point of view in connection with the circumstances giving rise to these claims and numerous discovery questions that they would like answered.  Nonetheless, even though Moving Defendants may be dissatisfied that they are being sued and obviously have discovery questions that they may wish to pursue to validate their defenses, filing a motion to dismiss on claims that clearly have not been pled in a “speculative” manner only to block Plaintiff from taking discovery on the claims is plainly an abuse of Rule 12(b)(6).

C. PLAINTIFF HAS ADEQUATELY PLED PLAUSIBLE CLAIMS AGAINST MOVING DEFENDANTS FOR VIOLATIONS OF THE FCRA.

1. The “Willfulness” Of Moving Defendants’ Conduct Is A Jury Question.

Moving Defendants similarly have lost site of the fact that the holdings in Twombly and Iqbal regarding the sufficiency of averments in a complaint was not a call to make a plaintiff prove his or her case at the pleadings stage.  See Twombly, 550 U.S. at 545, (“Asking for plausible grounds does not impose a probability requirement at the pleading stage”).  Despite specific admonitions in Twombly and Iqbal against doing so, Moving Defendants erroneously argue that they are entitled to a dismissal of Plaintiff’s FCRA claims because Plaintiff has not proven “willful” conduct by Moving Defendants even though Plaintiff has sufficiently pled that Moving Defendants’ conduct was “willful.” (Am. Compl. ¶¶ 23, 28, 47).   The “willfulness” of a defendant’s conduct in the context of FCRA litigation, however, is classically a jury question.  See Edwards v. Toys “R” Us, 527 F. Supp. 2d 1197, 1210 (C.D. Cal. 2007) (“Willfulness under the FCRA is generally a question of fact for the jury.”); Guimond v. Trans Union Credit Information Co., 45 F.3d 1329, 1333 (9th Cir. 1995) (“The reasonableness of the procedures and whether the [defendant] followed them will be jury questions in the overwhelming majority of cases”).

Furthermore, “willful” conduct is not required in connection with a valid claim of violations of the FCRA.  See 15 U.S.C. §1681n, §1681o (providing relief for consumer resulting from either willful or negligent conduct).  The “willfulness” of Moving Defendants’ conduct as such speaks only to the degree of damages which Plaintiff is entitled to recover, but does nothing to dispose of the underlying claim itself.  See id.  Accordingly, engaging in an analysis as to whether Moving Defendants’ conduct is “willful” at the pleadings stage when Moving Defendants remarkably appear to have already admitted that their conduct was minimally negligent is unwarranted.  In an unrelated case, the Northern District of Illinois provided a succinct account of the same error that Moving Defendants make here:

[Defendant] argues that [plaintiff] does not allege sufficient facts to indicate a willful violation of FACTA. There is, however, no requirement that a plaintiff provide such specificity. As indicated above, at this juncture, a plaintiff need only provide sufficient allegations to show that a claim is “plausible on its face.” . . . The willfulness issue cannot always be resolved at the motion to dismiss stage since it may involve facts beyond the pleadings. . . . [plaintiff] has stated a valid FACTA claim and it is premature based on the complaint before us to resolve the willfulness issue.

Romano v. Active Network Inc., 2009 WL 2916838, *3 (N.D. Ill. Sept. 3, 2009) (citations omitted).

2. мека мебелPlaintiff Has Adequately Pled In The Alternative FCRA Claims Against Moving Defendants As A “Consumer Reporting Agency” And As A “Furnisher.”

Plaintiff appropriately pled in the alternative that LexisNexis operates as a “consumer reporting agency” (giving rise to claims pursuant to § 1681e(b), § 1681i and other CRA claims) and/or as a “furnisher” of credit information (giving rise to claims pursuant to § 1681s-2(b)) as both terms are defined by the FCRA because Moving Defendants have held themselves out as both types of entities.  (Am. Compl. ¶¶ 6-11, 15-28).  Moving Defendants’ motion notably only disputes the sufficiency of Plaintiff’s pleadings with respect to the claims alleging that it is a “consumer reporting agency” but not the sufficiency of Plaintiff’s claim that it is a “furnisher.”  Considering this posture, Moving Defendants’ argument is legally flawed because a defendant is not entitled to dismissal of only a portion of claims that have been pled in the alternative pursuant to Rule 8(d) regardless of how many facts have been pled.

As a threshold matter, Plaintiff has pled with specific facts that Moving Defendants operate as a CRA.  Plaintiff’s Amended Complaint avers that Moving Defendants regularly assemble and sell reports for a fee to third parties which contain information about public records that bear upon Plaintiff’s credit worthiness and which are used, and expected to be used, in ordinary consumer transactions involving credit, employment and insurance.  (Am. Compl. ¶¶ 5-22, 29, 32).  If one were to look at the FCRA’s definition of a CRA, that factual description fits the bill perfectly.  15 U.S.C. §§ 1681a(f) and a(d).  Thus, the CRA claims (at ¶¶ 47(a), 47(b) and 47(d)) cannot be dismissed on the theory that Plaintiff has not pled that LexisNexis operates as a CRA.

Moreover, Moving Defendants have completely ignored the plain language of Rule 8(d)(2) which states that “[i]f a party makes alternative statements, the pleading is sufficient if any one of them is sufficient.”  Since Moving Defendants do not dispute the sufficiency of Plaintiff’s claims against it as a “furnisher,” it makes no difference whether Plaintiff’s allegations that Moving Defendants operate as a CRA are supported in the Amended Complaint by an encyclopedia of facts or are purely hypothetical.  Plaintiff is thus entitled take discovery on whether Moving Defendants are in fact operating as a CRA or as a furnisher.

The claims in Plaintiff’s Amended Complaint are hardly “speculative” in nature anyway.  Moving Defendants have omitted from their papers that they have already been found to be a CRA in a class action lawsuit that settled for more than $20 million.  See fns. 3 & 6, supra.  Moreover, Moving Defendants have been found to be a CRA by a number of courts as well as the FTC, the governing body charged with enforcing the FCRA.  See id.  These cases alone supply a reasonable basis to allege claims holding Moving Defendants responsible as a CRA.  Moreover, in another case involving Moving Defendants’ public record business an expert has opined in a report that is publicly available on PACER that ChoicePoint, LexisNexis’ predecessor, has “historically readily admitted their role as a consumer reporting agency.”  See Pires v. ChoicePoint Srvcs. Inc., N.D. Ga., C.A. 07-3112, PACER Entry No. 70.

Moving Defendants offer no legal support to corroborate their argument that it cannot be held responsible as a CRA.  Instead, Moving Defendants dubiously claim that they need a more detailed factual pleading to afford it sufficient “notice” of the claims.  One can only imagine how Moving Defendants could possibly need more facts about their own operations in the credit reporting industry.  Furthermore, Moving Defendants remarkably make this demand on Plaintiff when no discovery whatsoever has been taken on this issue to date.

Invoking the classic “sky is falling” fallacy, Moving Defendants further suggest that if Plaintiff’s Amended Complaint is allowed to stand, even the “Clerk of the Court” or “PACER” would be a ‘consumer reporting agency.’”  See Def. Mem., at 18.  This is not so.  Unlike Moving Defendants, the Clerk of the Court and PACER do not, for a profit, sell personal financial and credit history data about individuals to third parties with the specific knowledge that such information will specifically be used for credit eligibility decisions.  The Clerk of the Court and PACER also do not ensure the accuracy of that data, and investigate consumer disputes about the data when there is an error. These are the hallmark functions of a CRA which Moving Defendants desperately seek to divorce.  Moving Defendants obviously envision a world where only Equifax, Experian and Trans Union can be sued as CRAs, but there is no basis in the law for Moving Defendants’ utopia.  The fact remains that Moving Defendants cannot dispute that they too functioned as a CRA when they gathered public records data, sold the erroneous public record about Plaintiff to third parties, “investigated” Plaintiff’s dispute, and knew that the inaccurate derogatory public record would be used for credit eligibility decisions relating to Plaintiff.

Plaintiff has complied with all requirements for pleading in his Amended Complaint, and is entitled to the opportunity to proceed with his case and conduct discovery on the relevant CRA claims.

3.

Plaintiff Sufficiently Disputed The Inaccuracies On His Credit Report To Moving Defendants In Order To Trigger A Claim Pursuant To FCRA Section 1681i.

Alternatively, Moving Defendants argue that even if they are a CRA, Plaintiff should not be able to pursue a claim for relief under one FCRA section covering CRA dispute investigations – FCRA section 1681i.  See Def. Mem., at 18.  Moving Defendants are erroneously relying on an ultra-technicality in the language of § 1681i by claiming that they were not given adequate notice of Plaintiff’s dispute because they did not receive a dispute from Plaintiff “directly.”  See 15 U.S.C § 1681i(a)(1)(A).  Moving Defendants, however, have conveniently omitted the fact that it was impossible for Plaintiff to log a dispute with the company directly because they conceal their role in selling the relevant consumer reports.  Moving Defendants do not have any telephone number, website, street address or any other means available to consumers in order to dispute inaccurate public records information that Moving Defendants sell about consumers, and Moving Defendants’ current names appear nowhere on reports in connection with the erroneous public record.

The FCRA, however, places stringent requirements on CRAs to provide consumers with a means to dispute inaccurate information appearing on their credit reports.  For example, section 1681g states that a CRA is required to provide a consumer with the following information:

(i) the right of a consumer to obtain a copy of a consumer report under subsection (a) of this section from each consumer reporting agency;

(ii) the frequency and circumstances under which a consumer is entitled to receive a consumer report without charge under section 1681j of this title;

(iii) the right of a consumer to dispute information in the file of the consumer under section 1681i of this title;

(iv) the right of a consumer to obtain a credit score from a consumer reporting agency, and a description of how to obtain a credit score;

(v) the method by which a consumer can contact, and obtain a consumer report from, a consumer reporting agency without charge, as provided in the regulations of the Commission prescribed under section 211(c) of the Fair and Accurate Credit Transactions Act of 2003; and

(vi) the method by which a consumer can contact, and obtain a consumer report from, a consumer reporting agency described in section 1681a(w) of this title, as provided in the regulations of the Commission prescribed under section 1681j(a)(1)(C) of this title.

15 U.S.C. § 1681g(c).  Moving Defendants do not provide any of this information when they sell reports about consumers despite these requirements.

It is clear from the above that section 1681i cannot reasonably be read to permit a CRA to avoid the FCRA’s investigation duties by concealing its identity and location from consumers, and then arguing that consumers never disputed with it “directly.”  It is also important to note that liability under section 1681i can attach against a CRA where, as here, a dispute is made with another CRA (often called resellers), and such dispute is indirectly relayed to a defendant CRA. 15 U.S.C. §1681i(a)(1)(A).  The fact is that Plaintiff disputed the inaccurate public record at issue in this case according to the method communicated to him.  Moving Defendants’ arguments are fundamentally flawed in the respect that they ignore section 1681g, and the general framework of the FCRA as a whole, which gives consumers the right to inspect and correct credit information sold about them.

The implications of Moving Defendants’ interpretation would also have harmful consequences for consumers.  CRAs such as Experian, Equifax and Trans Union would have every incentive to halt their dispute protocols so as to make it impossible for a consumer to dispute inaccuracies “directly” and thereby eliminate liability under section 1681i.  Indeed, such a practice would turn the FCRA on its head, undermining the very purpose of a consumer protection statute that is to be liberally construed.

Moving Defendants’ argument about not being directly contacted by Plaintiff is another classic example of form over substance because Moving Defendants did in fact receive notice of Plaintiff’s dispute, and did investigate Plaintiff’s dispute (albeit in a manner which was inadequate and violated the FCRA) when the dispute was forwarded along by the other CRAs.  Moving Defendants also hastily dismiss the possibility that Plaintiff’s actions did comply with the letter of the statute permitting “indirect” disputes.  See 15 U.S.C § 1681i(a)(1)(A).  Although “indirect” disputes contemplate that the dispute is logged with a “reseller,” the FCRA defines a “reseller” to also be a CRA.  See 15 U.S.C §§ 1681a(f) and 1681a(u).  Accordingly, a reasonable reading of the statute would permit a consumer to dispute indirectly with one CRA so as to place another CRA in the chain on notice of the dispute.

D. PLAINTIFF ADEQUATELY PLED A CLAIM AGAINST MOVING DEFENDANTS FOR DEFAMATION.

Plaintiff’s Amended Complaint also alleges a sufficient amount of facts to provide Moving Defendants with adequate notice of the plausible claims for defamation including that:

1. the defamatory statement at issue is the reporting of a two tax liens against Plaintiff;

2. the statement was false because the both the tax liens reported do not belong to Plaintiff;

3. download michael jackson movie the statement was defamatory because it placed a derogatory reflection on Plaintiff’s credit information and debt repayment history, paints Plaintiff as financially irresponsible and delinquent, reflected disgracefully on Plaintiff’s character, and diminished Plaintiff’s high standing, reputation and good name;

4. the statement was published by LexisNexis either directly via communications to the national CRAs containing the defamatory statements, or  indirectly via the sale and publication of Plaintiff’s credit reports to creditors, credit grantors and other entities containing the defamatory statement received from Defendants;

5. the statement was made by LexisNexis knowingly, recklessly, and/or with negligent disregard for the truth of the statements and was a direct and proximate cause, as well as a substantial factor, in bringing about the injured alleged.

(Am. Compl. ¶¶12-26, 49-56).  Similar to Plaintiff’s claims regarding Moving Defendants operating as a CRA, these allegations are hardly “speculative” in nature and should not be dismissed.

E. PLAINTIFF IS PERMITTED TO SEEK EQUITABLE RELIEF AS A COMMON LAW REMEDY.

Finally, Moving Defendants’ Motion regarding Plaintiff’s claims for equitable relief under the common law marks another example where Moving Defendants have ignored the rules on alternative pleading.  Just as a plaintiff is permitted to plead alternative theories of liability, the same applies to remedies:

A motion to dismiss which invokes Rule 12(b)(6) challenges the sufficiency of the amended complaint. In my view, the amended complaint, whatever its failings, cannot be dismissed for lack of specificity, and plaintiff has a right to pursue alternate theories of recovery.

U.S. v. Abington Memorial Hosp., 2003 WL 22358490 at *1 (E.D. Pa. Sept. 9, 2003).  See also  Preferred Real Estate Investments, Inc. v. Edgewood Properties, Inc., 2007 WL 81881, at * 4 (D.N.J. Jan. 9, 2007) (“Plaintiffs may plead alternative theories requesting damages and specific performance until discovery may better elucidate which remedy, if any, is appropriate.”); In re K-Dur Antitrust Litigation, 338 F. Supp. 2d 517, 544 (D.N.J. 2004) (“Plaintiffs, however, are clearly permitted to plead alternative theories of recovery.  Consequently, it would be premature at this stage of the proceedings to dismiss the Indirect Purchasers’ and the Commonwealth’s unjust enrichment claims on this basis.”); Green v. Altman, 2004 WL 2106552, at *9 (E.D. Pa. Sept. 21, 2004) (“Plaintiff is correct in his contention that the election of remedies rule does not prevent him from pleading alternative theories at this stage of the proceedings.”)

Furthermore, Moving Defendants’ statement that monetary relief is the preferred or only appropriate remedy here is cavalier and mistaken.  Plaintiff does not wish to have public records that do not belong to him accompany him for the rest of his life, and it is certainly within this Court’s power to grant declaratory or equitable relief.

Moving Defendants’ unfounded accusations that Plaintiff has “camouflaged” his intent to seek equitable relief pursuant to the FCRA have no basis in fact.  There is nothing in the Amended Complaint that suggests as much.  On the contrary, Plaintiff amended his original Complaint specifically to withdraw his claims for equitable relief under the FCRA.

V.    CONCLUSION

For the foregoing reasons, Plaintiff respectfully requests that this Court deny LexisNexis Risk & Information Analytics Group, Inc. and Reed Elsevier, Inc.’s Motion to Dismiss in its entirety.

Respectfully Submitted,

FRANCIS & MAILMAN, P.C.

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FOUNDATION SERVICE, )

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R.K. LOCK & ASSOCIATES, )

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ROBERT K. LOCK, JR., ESQ. )

and )

PHILLIP MANGER )

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TRACY WEBSTER )

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Defendants. )

____________________________________)

AMENDED COMPLAINT - CLASS ACTION

I.  INTRODUCTION

1.   This is a consumer class action brought for Defendants’ violations of the Credit Repair Organizations Act, 15 U.S.C. § 1679, et seq. (“CROA”) and Illinois Credit Services Organizations Act, 81 ILCS § 605/1, et seq. (“CSOA”).  This law is designed to protect the public from unfair or deceptive business practices by credit repair organizations.

II.   JURISDICTION AND VENUE

2. Jurisdiction of this Court arises under 28 U.S.C. §§ 1331, 1337, and supplemental jurisdiction exists for the state law claims pursuant to 28 U.S.C. § 1367.

3.   Venue lies in this district pursuant to 28 U.S.C. § 1391(b).

III.   PARTIES

4. Plaintiffs h/w, are natural persons residing at _______________IL 61362.

5. Defendant Consumer Advocate Foundation Service (“CAF”) is a business entity that regularly conducts business in the State of Illinois, with its principal office located at P.O. Box 280686, Columbia, S.C. 29228.

6. Defendant Credit Collections Defense Network (“CCDN”) is a business entity that regularly conducts business in the State of Illinois, with its principal office located at 22 South Franklin Street, Cattaraugus, NY 14719.

7. Defendant Credit Collections Reconciliation Network (“CCRN”) is a business entity that regularly conducts business in the State of Illinois, with its principal office located at 7144 North Harlem Avenue, Suite 323, Chicago, IL 60631.  Based upon information and belief, CCRN is the successor in interest to CCDN, and was opened circa October 2008.

8. Defendant Beacon Consulting Services, LLC (“BCS”) is a business entity that regularly conducts business in the State of Illinois, with its principal office located at 1254 Hunters Bldg E, Hoffman Estates, IL 60192.

9. Defendant R.K. Lock & Associates (“RKL”) is a law firm that regularly conducts business in the State of Illinois with offices located at 7144 North Harlem Avenue, Suite 323, Chicago, IL 60631.

10. Defendant Robert K. Lock, Jr. Esquire (“Lock”) is an Illinois licensed attorney with offices located at 7144 North Harlem Avenue, Suite 323, Chicago, IL 60631.  Lock is a partner of RKL and a founding member of CCDN.

11. Defendant Phillip M. Manger (“Manger”) is an attorney with offices located at 19 Taunton Hill Road, Newtown, CT 06470.  Manger is a founding member of CCDN.

12. Defendant Tracy Webster (“Webster ”) is an individual in the employ of CCDN, which regularly conducts business in the State of Illinois, with his principal office located at 22 South Franklin Street, Cattaraugus, NY 14719.

13. At all times pertinent hereto, Defendants used instrumentalities of interstate commerce or the mails, to sell, provide or perform, or represented that they could or would sell, provide or perform, a service, in return for the payment of money or other valuable consideration, for the express or implied purpose of improving a consumer’s credit record, credit history or credit rating, or providing advice or assistance to a consumer for that purpose.

14. At all times pertinent hereto, Defendants were acting by and through their agents, servants, and/or employees, who were acting under the direct supervision and control of Defendants.

IV.  

FACTUAL ALLEGATIONS

A. The Credit Repair Enterprise and Activities Carried Out By All Defendants As to Plaintiff and the Class

15. As with many credit repair operations, Defendants act in concert with one another to perpetuate illegal credit repair activities.  Unsuspecting consumers are lead to believe that Defendants can legally remove inaccurate, derogatory, and otherwise hurtful, tradelines, debts and accounts reporting on their credit reports.

16. Defendants enlist consumers through their websites, www.ccdnlaw.com, www.ccrnlaw.com, www.billsaregone.com and www.creditcardsaregone.com, to pay Defendants for the credit repair services described more fully below.

17. Through their websites, Defendants persuade consumers that they have the ability to eliminate the debts of the consumer through their program.  Defendants further misrepresent themselves to be above the law, stating in their Frequently Asked Questions (“FAQ”) section that attorneys and courts cannot harm Defendants.  (A true and correct copy of Defendants’ FAQ is attached hereto as Exhibit A and incorporated herein).

18. When a consumer enrolls in Defendants’ services, he/she signs a contract (“Contract”), which provides for payment of an initial fee.  With the initial fee comes the inclusion of seven (7) accounts (“Accounts”) to be disputed by Defendants.  Additional accounts can be included within the program for an additional fee of $100.00, which Defendants term a “gift.”  (A true and correct copy of the Contract is attached hereto as Exhibit B and incorporated herein).

Shoot on Sight psp 19.   Upon enlisting Defendants’ services, consumers are instructed to cease payments on the Accounts and to refrain from making any applications for credit.  Additionally, consumers are warned to not: (1) request copies of their credit reports without permission from Defendants; (2) apply for credit; and/or (3) speak to any government agency, creditor, or third party debt  collector regarding the Accounts.  If any of are taken, the consumer is considered in breach of contract and must pay a $100.00 “reinstatement fee” to continue within the program.  See Contract, Exhibit B.

20. In addition to paying the above fees charged by the Defendants, the consumer agrees to share fifty percent (50%) of all “back-end monies” with Defendants.  These “back-end monies” result from federal lawsuits instituted by Defendants following the dispute process.  See Contract, Exhibit B.

21. Following the dispute process, many of the Accounts may remain on the consumer’s credit reports.  These Accounts become the subject of third party debt collection, which is the exact situation contemplated by the Defendants.  At this point, the consumer is directed to use a provided outline (“Complaint Outline”) to memorialize all contact with the third party debt collectors. Once completed, the consumer forwards the same to the Defendants.  (A true and correct copy of the Complaint Outline supplied by Defendants is attached hereto as Exhibit C and incorporated herein).

22. Following completion of the Complaint Outline, federal actions are instituted through a network of attorneys culled by Defendants RKL, Lock, and Manger to file said actions.  Said network of attorneys include, but are not limited to, Defendants RKL, Lock, and Manger.

23. Defendants, pursuant to the Contract, receive fifty percent (50%) of all monies resulting from the above federal actions.  Consumers are directed to forward said monies to Defendants within seven days of receipt.  See Contract, Exhibit B.

B. Factual Allegations As To The Plaintiff

24. Blood: The Last Vampire movie download In early 2006, Plaintiffs visited Defendant CAF’s website.

25. Soon thereafter, circa May 2006, Plaintiffs were persuaded to engage Defendants’ credit repair services.

26. On or about May 2006, Plaintiffs signed the Contract and completed the accompanying forms.

27. The Contract did not comply with the contractual requirement provisions of CROA.

28. The Contract provided, inter alia¸ that Plaintiffs would pay to Defendants an initial fee prior to any service by Defendants. Additionally, the Contract provided that Plaintiffs would pay Defendant $100.00 per Account to be disputed over the initial seven Accounts.

29. On or about July 28, 2006, Plaintiffs paid Defendants $1,433.33 (“Initial Payment”).  Thereafter, on or about August 31, 2008, Plaintiffs made an additional payment of $500.00 for the dispute of additional Accounts by Defendants.

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30. Defendants did not fully perform any services for Plaintiffs before charging and receiving the Initial Payment.

V.   CLASS ACTION ALLEGATIONS

31. Plaintiffs bring this action individually and as a class action, pursuant to Rules 23(a) and 23(b) of the Federal Rules of Civil Procedure, on behalf of the following Class:  all persons in the United States of America who, beginning five years prior to the filing of this Complaint and continuing through the resolution of this action, paid money which was received by the Defendants and/or for whom Defendants performed any credit repair services.  For purposes of Count Two of this Complaint, Plaintiffs also bring this action solely on behalf of a Illinois Subclass of all such persons residing in the State of Illinois.

32. The Class is so numerous that joinder of all members is impracticable.   The Class numbers in the tens of thousands.  The identities of the Class members may be obtained from Defendants’ records.

33.   There are questions of law and fact common to the Class which predominate over any questions affecting only individual Class members.  The principal common questions are: (1) whether Defendants violated the CROA by charging or receiving payment for services from a consumer before fully performing such services; and (2) whether Defendants made false and misleading statements to Plaintiffs and the Class members.  The principal common questions for the Illinois subclass are: (1) whether Defendants violated the CSOA by charging or receiving payment for services from a consumer before fully performing such services; and (2) whether Defendants made false and misleading statements to Plaintiffs and the Class members.

34. Plaintiffs’ claims are typical of the claims of the Class, which all arise from the same operative facts and are based on the same legal theories.

35. Plaintiffs will fairly and adequately protect the interests of the Class.  Plaintiffs are committed to vigorously litigating this matter and have retained counsel experienced in handling class actions and claims involving unlawful business practices.  Neither Plaintiffs nor their counsel has any interests which might cause them not to vigorously pursue this claim.

36. This action should be maintained as a class action because the prosecution of separate actions by individual members of the Class would create a risk of inconsistent or varying adjudications with respect to individual members which would establish incompatible standards of conduct for the parties opposing the Class, as well as a risk of adjudications with respect to individual members which would as a practical matter be dispositive of the interests of other members not parties to the adjudications or substantially impair or impede their ability to protect their interests.

37. The Defendants have acted on grounds generally applicable to the Class, thereby making appropriate final injunctive relief or corresponding declaratory relief with respect to the Class as a whole.

38. The questions of law or fact common to the members of the Class predominate over any questions affecting only individual members.

39.   A class action is a superior method for the fair and efficient adjudication of this controversy.  The interest of Class members in individually controlling the prosecution of separate claims against Defendants is small because damages under the CROA and CSOA may be small.  Management of the Class claims is likely to present significantly fewer difficulties than those presented in many class claims.

VI.   CLAIMS

COUNT ONE

Credit Repair Organizations Act

40. Plaintiffs repeat and reallege all paragraphs above as if fully set forth herein.

Higher Learning release 41. At all times pertinent hereto, Plaintiffs were “consumers” as that term is defined by section 1679a(1) of the CROA.

42. Appaloosa video At all times pertinent hereto, Defendants were “credit repair organizations” as that term is defined by section 1679a(3) of the CROA.

43.

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The CROA regulates the business practices of credit repair organizations.

44. During the relevant time period, Defendants violated the CROA in numerous respects, including but not limited to the following.

A. Prohibited Practices – untrue or misleading statements Frankenstein full movie

45. John Q release Section 1679b(a) of the CROA prohibits untrue or misleading statements with respect to any consumer’s credit worthiness, credit standing or credit capacity to any consumer reporting agency or any person.

46. Defendants violated this provision by using promotional literature and advertising which contained uniformly false, untrue, deceptive and misleading statements regarding the credit repair services at issue and the Plaintiffs’ rights.

47. Defendants further violated this section by using false pretenses and falsely communicating to consumer reporting agencies that Plaintiffs were victims of fraud when requesting implementations of  fraud alerts.

B. Payment Violations - payment in advance, § 1679b(b)

48. Section 1679b(b) of the CROA states that “No credit repair organization may charge or receive any money order or other valuable consideration for the performance of any service which the credit repair organization has agreed to perform for any consumer before such service is fully performed.”

49. When a consumer retains the services of a credit repair organization, he or she is not required to make any payment for said services until the services have been fully performed, as required by section 1679b(b) of the CROA.

50. Despite this clear and unambiguous requirement, at all times relevant hereto, it was and is the practice and policy of Defendants to require and collect payment from consumers before any work has been fully performed on the consumers’ behalf.

51. Defendants’ payment scheme requires their customers to pay an initial fee which is collected before items are taken off the client’s credit report, and therefore is assessed before full performance of services.

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At the time Plaintiffs made their $1,433.33 Initial Payment and a $500.00 subsequent payment, Defendants had not fully performed services.

53. As a result of the violations of the CROA, Defendants are liable to Plaintiffs and the Class for the greater of actual damages or the amount paid to Defendants, punitive damages, costs and reasonable attorneys’ fees, pursuant to section 1679g(a) and (b) of the CROA.

COUNT TWO

Illinois Credit Services Organizations Act

54.

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Plaintiffs hereby incorporate by reference each and every allegation contained in the foregoing paragraphs as if set forth fully herein.

55. The Illinois CSOA regulates all persons who, for money or valuable consideration, provides or performs, or represents that he or she can or will provide or perform, the service of improving a consumer’s credit record.  Persons or entities performing these services are called “credit services organizations.”  81 ILCS § 605/2.

56. At all times pertinent hereto, Defendant was a “credit services organization” as defined in section 605/5(3) of the CSOA.

57. House of 9 trailer The CSOA prohibits credit services organizations, as well as their salespersons, agents and representatives, from, among other things, charging for or accepting payment in advance of full and complete performance of their services 81 ILCS § 605/5(1); making, counseling or advising any buyer of credit services to make any statement which is untrue or misleading to a consumer credit reporting agency, 81 ILCS § 605/5(3); and from making or using any untrue or misleading representations in the offer or sale of the services which operates or would operate as a fraud or deception upon any person in connection with the offer or sale of the services of a credit services organization, 81 ILCS § 605/5(5).

58.   The provisions of the Illinois CSOA are not inconsistent with the provisions of the CROA and, under section 1679j of the CROA, Defendant is not exempt from the compliance requirements of the CSOA.

59. Defendant is prohibited from engaging in the activities described in sections 605/5 (1), (3), and (5) of the CSOA.  However, Defendant has violated those sections by: accepting payment prior to completion of its services and making uniformly false, untrue, deceptive and misleading statements regarding the credit repair services at issue and the Plaintiffs’ rights.

60. A violation of any provision of the CSOA is deemed by law to be a violation of the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 ILCS § 505/2 et seq., which provides for recovery of actual damages and attorneys’ fees and costs.  815 ILCS § 505/10(a) and (c).

61. By virtue of the violations of law as aforesaid, and pursuant to the CSOA, Plaintiffs and the Illinois Subclass are entitled to an award of actual damages in the amount paid by them to Defendant, reasonable attorneys’ fees and costs, and all other relief permissible under Illinois law.  815 ILCS § 505/10(a) and (c).

VII.   JURY TRIAL DEMAND

62. Plaintiffs demand trial by jury as to all issues so triable.

VIII.   PRAYER FOR RELIEF

WHEREFORE, Plaintiffs respectfully pray that relief be granted as follows:

(a)

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That an order be entered certifying the proposed Class under Rule 23 of the Federal Rules of Civil Procedure and appointing Plaintiff and their counsel to represent the Class;

(b) That an order be entered declaring that Defendants’ actions as described above are in violation of the CROA and the CSOA that the contracts shall be treated as void and may not be enforced by any court or any other person, pursuant to 15 U.S.C. § 1679f(c);

(c) That an order be entered enjoining Defendants from continuing to charge and receive amounts for services that have not been fully performed and from entering into contracts with Plaintiffs and members of the Class in violation of the CROA and CSOA;

(d) That judgment be entered against Defendants for actual damages pursuant to 15 U.S.C. § 1679g(a)(1) and the CROA and CSOA;

(e) That judgment be entered against Defendants for punitive damages pursuant to 15 U.S.C. § 1679g(a)(2) and the CROA and CSOA;

(f) That the Court award costs and reasonable attorney’s fees under the CROA and CSOA; and

(h) That the Court grants such other and further relief as may be just and proper.

Respectfully submitted,

FRANCIS & MAILMAN, P.C.

BY:

Attorneys for Plaintiff and the Class

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

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Plaintiff,

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)         Civil Action No.

EQUIFAX INFORMATION SERVICES LLC,

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PLAINTIFF S MEMORANDUM OF LAW IN SUPPORT OF HIS RESPONSE IN OPPOSITION TO DEFENDANT EQUIFAX INFORMATION SERVICES LLC’S MOTION FOR PARTIAL SUMMARY JUDGMENT

Plaintiff, through counsel, respectfully submits this Memorandum of Law in opposition to Equifax Information Services LLC’s (“Equifax”) Motion for Partial Summary Judgment (“Motion”).   For the numerous reasons stated below, Equifax’s Motion should be denied and Plaintiff’s claims must proceed to a jury trial.

I.

INTRODUCTION

Plaintiff filed this action against Equifax to recover for the damages that he suffered as a result of Equifax’s unlawful credit reporting practices.  Equifax is one of the country’s three major consumer reporting agencies (“CRAs”).   Plaintiff’s Complaint asserts that Equifax violated the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. §§ 1681 et seq., as amended, both willfully and negligently, and presents several state law claims as well.  As Equifax has only moved for partial summary judgment, and has not challenged Plaintiff’s claim that it negligently violated the FCRA or Plaintiff’s claim for actual damages, Plaintiff confines his memorandum to a discussion of the willfulness and preemption arguments that Equifax has raised.

This case arises from Equifax’s conduct in wrongfully reporting a $37,500 civil judgment (the “judgment”) from the Court of Common Pleas of Philadelphia County (“CCP”) on Plaintiff’s credit report despite having knowledge of its inaccuracy.   There is no dispute that the judgment should not have appeared on Plaintiff’s credit report after February 2005.  The horrendously derogatory judgment prevented Plaintiff from buying a home for his family in the summer of 2005, and not surprisingly, caused Plaintiff to suffer other significant economic and non-economic harm as well.

However careless Equifax’s reporting of the judgment may have been initially, it is Equifax’s actions following Plaintiff’s multiple disputes of the judgment that provide a solid evidentiary foundation for Plaintiff’s willfulness claim.  The factual record demonstrates that on two separate occasions in June and July of 2005, Equifax falsely represented to Plaintiff that in the process of investigating his disputes, it had “contacted” the “source” of the judgment, which it identified as the “Philadelphia County Court.”  These statements were totally false.  Equifax had never contacted anyone, much less the Philadelphia Court of Common Pleas, regarding Plaintiff’s dispute.  Nor were Equifax’s misstatements innocent, as discovery has revealed that Equifax never contacts a court regarding a consumer’s dispute of a public record. Equifax’s deliberate misrepresentations to Plaintiff concerning what it did to investigate his disputes and its concealment of its actual activities alone present genuine issues of material fact that Equifax willfully violated the FCRA according to any application of our Circuit’s well- defined standard for FCRA willfulness claims.

The record also presents additional independent bases to support a jury finding that Equifax willfully violated the FCRA.  In response to another of Mr. Plaintiff’s disputes, Equifax informed Mr. Plaintiff that it had conducted a reinvestigation (again listing the Philadelphia County Court as its source), but this time that it had “verified” the accuracy of the $37,500 judgment against him with the courthouse.  This was also untrue.  What Equifax did was follow its usual policy and simply sent a one-page form to the public records vendor from whom it had originally obtained the judgment and “parrot” the same inaccurate information that it received back from the vendor on Plaintiff’s credit report.  Additionally, while Plaintiff had actually provided Equifax with court records demonstrating its gross error (clearly showing that the judgment had been entered in his favor by this time), Equifax never even bothered to pass these pivotal documents along to the vendor because it never forwards such documents to an information furnisher as a matter of practice.

These specific practices by Equifax — deliberately misrepresenting its activities and systematically failing to investigate a consumer’s dispute and forward the relevant information he has provided to the information furnisher — readily meet the “reckless disregard” standard for willfulness established by the Third Circuit in the seminal case of Cushman v. Trans Union Corp., 115 F.3d 220, 227 (3d. Cir. 1997).   In denying Equifax’s willfulness challenge, this Court will not be carving any new ground or expanding Cushman.  Indeed, each time courts within this Circuit have examined similar practices by a CRA, they have held that such practices presented evidence from which a reasonable jury could reach a finding of willfulness.   This Court may also find Judge Brody’s reasoning in Lawrence v. Trans Union, LLC, 296 F. Supp. 2d 582 (E.D. Pa. 2003) instructive.  Lawrence is an FCRA case involving a disputed judgment in which the court rejected virtually identical arguments concerning willfulness asserted by CRA Trans Union at summary judgment on the basis of similar systemic practices and facts.

In sum, Plaintiff presents solid evidence from which a jury could conclude that Equifax committed a willful violation of the FCRA.  For this reason and the others discussed below, Plaintiff’s state law claims should survive summary judgment as well.   As such, Equifax’s Motion should be denied in its entirety.

II. COUNTER-STATEMENT OF FACTS

A. Equifax Ignores Plaintiff’s Repeated Attempts To Correct The Inaccurate Reporting Of The Judgment

Following a car accident in front of Philadelphia City Hall — where another car crashed into Plaintiff’s car from the rear — it appears that Mr. Plaintiff was sued in the Philadelphia CCP.  (Plaintiff’s Dep. at 72-73, 75-76) (attached hereto as Exhibit A).   Plaintiff never received notice of that action and knew nothing about it until he saw a $37,500 judgment reporting against him on his Equifax credit report in January 2005.  (Plaintiff’s Dep. at 73, 75-76).  Immediately, Plaintiff retained counsel and the judgment was appealed and vacated as of February 2005.  (Plaintiff’s Dep. at 76-78); (see also CCP Notice of Appeal, presented for review January 7, 2005, attached hereto as Exhibit B).  He then won the case and the judgment was entered in his favor.  (See Exhibit E, infra).

Equifax’s Director of Consumer Customer Care Alicia Fluellen conceded that following a Notice of Appeal a judgment should no longer be reporting against a consumer:  “what should have happened was the very first time we received the Notice of Appeal, it should have been removed from the credit file.  But that didn’t happen.”  (Fluellen Dep. at 81; see also id. at 82, conceding Equifax’s reporting post-appeal was erroneous) (attached hereto as Exhibit C).

Plaintiff testified at his deposition that he waited for the order vacating the judgment and contacted Equifax to ask that the judgment be removed from his credit file in February 2005.   (Plaintiff’s Dep. at 74-75).  Plaintiff had started looking to purchase a home in the spring of 2005 and knew that a recent $37,500 judgment against him would be a major obstacle, which in fact it was.  (Plaintiff’s Dep. at 45-51).  Equifax claims that it never received notice of that dispute.  (Def. Mem. at 4-5).

It is uncontested that Equifax received three subsequent disputes from Plaintiff requesting that it cease reporting the $37,500 judgment against him on his file — a June 8, 2005 letter, a July 21, 2005 letter and an August 8, 2005 telephone call.  (See Def. Mem. at 3-4).  Importantly, with the June 8 letter Plaintiff himself sent Equifax a copy of the Notice of Appeal.  (See id.; see also Plaintiff’s 6-8-05 letter to Equifax and supporting documentation, attached hereto as Exhibit D).  With his July 21 dispute letter Plaintiff also included a copy of the Report and Award of Arbitrators from the appeal (entered June 22, 2005), which stated on its face that “We find in favor of Defendant[] Shadee Plaintiff.”  (See id.; see also Plaintiff’s 7-21-05 letter to Equifax and supporting documentation, attached hereto as Exhibit E) (emphasis added).  At no time did Equifax forward these court records to the public records vendor from whom it obtained information about the judgment.  (See Fluellen Dep. at 28-29, 76, 85-94).

Despite Plaintiff’s repeated disputes and his supporting court papers, Equifax continued to report the $37,500 judgment against Plaintiff through the time of this lawsuit, finally supplying Plaintiff with a corrected credit file in December 2005.  (See Fluellen Dep. at 95, 115-16; and also at 103-04).

B. Equifax Falsely Informed Mr. Plaintiff That It Had Contacted The Philadelphia County Court Concerning His Disputes When It Had Not

In connection with Mr. Plaintiff’s June and July 2005 written disputes concerning the judgment, Equifax wrote to Mr. Plaintiff to explain the results of its investigation.    (See Investigation Results dated 6-24-05, attached hereto as Exhibit F); (See Investigation Results dated 7-29-05, attached hereto as Exhibit G).  In its letters, Equifax advised Mr. Plaintiff that its “investigation [was] completed” and that it had “contacted each source [of the disputed judgment] directly.”  Id. (emphasis added). The letters listed the source it contacted as the “Philadelphia Cty Court, Broad & Market STS.”  Id.

However, at her deposition, after several evasive answers, Equifax’s corporate representative admitted that neither Equifax nor anyone acting on its behalf ever contacted the Philadelphia County Court:

• Universal Soldier: The Return full movie

19    Q.    Okay.  So this is not true when it says on

20    this letter that the Philadelphia City Court, Broad

21    and Market Street in Philadelphia was contacted by

22    Equifax in connection with this investigation?

23               MR. PERLING:  Objection to form.

24         Misstates evidence.  The best evidence is this

25         exhibit, and it does not say what you just said

1         your question.

2               THE WITNESS:  Yeah, it doesn’t say that.

3    Q.    (By Mr. Soumilas)  What’s the answer to

4    that question, ma’am?  Was that court, the

5    Philadelphia County Court ever contacted by Equifax

6    or any of its vendors or anyone on its behalf in      

7    connection with the investigation of this June 8th,

8    2005 dispute?

9         A.    No.

(See Fluellen Dep. at 70-71; see generally 65-71, 76-81).  In fact, Equifax never contacted anyone regarding Mr. Plaintiff’s June 8th dispute, including the public records vendor from whom it obtained the judgment in the first place, and did nothing to investigate Mr. Plaintiff’s disputes besides look at Plaintiff’s dispute correspondence.  (Id.); (see also Def. Mem. at 3-4).

Equifax actions regarding the Mr. Plaintiff’s July 2005 dispute were no different.  Even though it informed Mr. Plaintiff that it contacted the Philadelphia County Court, it did not contact anyone.  (See Fluellen Dep. at 76-82); (see also Exhibit G); (see also Def. Mem. at 3-4).   In “investigating” these two disputes Equifax did nothing besides misread Plaintiff’s supporting court papers (see Fluellen Dep. at 65-71, 80-81) and then falsely stated in standard letters that it had investigated the dispute by contacting the Philadelphia CCP.  (See id. at 118-19); (see also Def. Mem. at 3-4).

With respect to Plaintiff’s August 2005 dispute, Equifax sent Plaintiff a similar type of letter with its purported “investigation” results.  (See Investigation Results dated 8-13-05, attached hereto as Exhibit H).  That letter also informed Plaintiff that Equifax had contacted the Philadelphia County Court “directly.”  (Id. at pgs. 1 and 2 of 8).  Again, this was not true:

25       Q.    And then it says, NDR courier will pick

1    up, Philadelphia, Pennsylvania 19107.  Was there ever

2    any communication concerning this dispute by Equifax

3    directly to any court in Philadelphia?

4         A.    Not that I can tell here by looking at the

5    documents, no.

(Fluellen Dep. at  88).  While this time Equifax actually contacted its public records vendor that supplied the judgment to it in connection with the August 2005 dispute, Equifax does not know whether the vendor ever contacted the Philadelphia CCP.  (Fluellen Dep. at 37, 106-07, 121).

In discovery, Plaintiff learned the true reality behind where and how Equifax obtains it public records information and what it really did in terms of responding to Mr. Plaintiff’s disputes.  Equifax does not obtain its public records data from the Philadelphia CCP; it obtains it from an independent vendor.  (Fluellen Dep. at 86).  Likewise, in the instances when it actually contacts anyone in reference to a consumer’s dispute, it only contacts the vendor, never the court.  (See Fluellen Dep. at 31-34, 69-71, 88); (see also id. at 98) (“we will stipulate that NDR is the company that provided the information to Equifax from the courthouse”).  Yet Equifax, as a matter of routine practice, represents to consumers such as Mr. Plaintiff that it has contacted the court directly, and conceals from consumers the true source of the information that it is reporting about them and the actions it takes in response to a dispute, even though it is required to fully disclose this information to consumers by law.   (See generally Fluellen Dep. at 31-34; 82-99).  Equifax’s letters to consumers misinform them that the entity that is supplying the judgment information is really the courthouse, and that Equifax had “contacted” the courthouse “directly” in order to verify the records when a consumer contacts it about a dispute.  (See generally Fluellen Dep. at 31-34, 82-99, 118-19); (see also Exhibits F, G and H).

C. Equifax’s “Parroting” Practices Under The Circumstances Of This Case Further Demonstrate Its Reckless Disregard For Consumer Rights

When Equifax actually looks into a consumer dispute concerning a judgment by doing anything other than looking at its own records and the consumer’s correspondence, it generally contacts the credit furnisher who provided it with the disputed credit information in the first instance.  (Fluellen Dep. at 34-37, and generally at 26-37).  Then Equifax reports on the consumer file what its credit furnisher (in this case, a public records vendor) tells it to report, without conducting any independent investigation or doing anything further besides parroting the word of its credit finisher.  (Fluellen Dep. at 34-37, 94).

Importantly, Equifax does not forward any letter or supporting documentation that a consumer submits with his or her dispute to the credit furnisher that is supplying the disputed information to Equifax in the first instance.  (Arnold Dep. pp. 71-72) ; (see generally Fluellen Dep. at 29, 76).  Thus a consumer’s supporting documentation (such as the Notice of Appeal and the Report and Award of Arbitrators that Plaintiff sent to Equifax) remains archived with Equifax but are not forwarded on to the furnisher as a matter of course.  (Id.).

Despite depriving its credit furnishers of this type of vital information and supporting documentation, Equifax limits its “investigation” to a one-page form called a “CDV” (or “ACDV” when the form is automated or in electronic format) communication with the furnisher and does nothing further.  (See Fluellen Dep. in Sheffer at 85-86, 97-99, 105);  (See Arnold Dep. at 97-104).  Thus, when a furnisher such as a public records vendor responds to a CDV form simply by checking the “verified” as accurate box, Equifax will do nothing other than publicize on the consumer’s credit report the information that the furnisher states.  (Id).  Ms. Fluellen’s deposition testimony concerning Equifax’s parroting procedures, cited above, is the very basis that led Judge Schiller in Sheffer to allow a willfulness claim and punitive damages to be presented to the jury against Equifax in that case.  See Sheffer v. Experian Info. Solutions, Inc., Civ. No. 02-7407, 2003 WL 21710573 at * 3 (E.D. Pa. July 24, 2003) (citing Ms. Fluellen’s deposition testimony).

In this case, Ms. Fluellen confirmed that Equifax’s investigation policies are still the same and that Equifax verified the accuracy of the $37,500 judgment in August 2005 simply because its public records vender so stated, and for no other reason.  (See Fluellen Dep. 8, 93-94).  Indeed, when Equifax actually bothered to contact its public record vendor (National Data Retrieval, now ChoicePoint) concerning Mr. Plaintiff’s dispute in August 2005, Equifax  “verified” that the judgment was accurate as one against Mr. Plaintiff simply because that is what furnisher National Data Retrieval stated in its CDV form response.  Equifax so verified the accuracy of the judgment for no other reasons and despite the clear proof to the contrary that Plaintiff had already supplied to Equifax in June and July 2005 in the form of CCP records.   (See Fluellen Dep. 94, see generally 29-36); (see also National Data Retrieval CDV with response date 8/29/05, attached hereto as Exhibit K).

III. APPLICABLE STANDARD

Pursuant to Federal Rule of Civil Procedure 56(c), a motion for summary judgment will only be granted:

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if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law.

Fed. R. Civ. P. 56(c).  In other words, summary judgment may only be granted if the movant shows, by admissible evidence, that there exists no genuine issue of material fact that would permit a reasonable jury to find for the nonmoving party.  Wetzel v. Tucker, 139 F.3d 380, 383 n.2 (3d Cir. 1998); Miller v. Indiana Hosp., 843 F.2d 139, 143 (3d Cir.), cert. denied, 488 U.S. 870 (1988).

The party opposing the motion for summary judgment is entitled to have his/her allegations taken as true, to receive the benefit of the doubt when his/her assertions conflict with those of the movant and to have inferences from the underlying facts drawn in his/her favor.  Big Apple, BMW, Inc. v. BMW of North America, Inc., 974 F.2d 1358, 1362-63 (3d Cir. 1992), cert. denied, 507 U.S. 912 (1993).  In analyzing the moving party’s burden under Rule 56(c), the Third Circuit has stated that “[i]f there is any evidence in the record, from any source, from which a reasonable inference in the respondent’s favor may be drawn, the moving party simply cannot obtain a summary judgment, no matter how many affidavits are filed (citations omitted) . . . .  The ‘burden’ then is insurmountable.”  In re Japanese Electronic Prods. Antitrust Litig., 723 F.2d 238, 258 (3d Cir. 1983), reversed on other grounds, 475 U.S. 574 (1986); see also Boyle v. County of Allegheny, Pennsylvania, 139 F.3d 386, 393 (3d Cir. 1998).

A court may not, at the summary judgment stage, weigh evidence or make credibility decisions.  These tasks are left to the factfinder.  Petruzzi’s IGA Supermarkets, Inc. v. Darling-Delaware Co., Inc., 998 F.2d 1224, 1230 (3d Cir.), cert. denied, 510 U.S. 994 (1993).  To raise a genuine issue of material fact, the respondent need not match, item for item each piece of evidence proffered by the movant.  Big Apple, BMW, Inc., 974 F.2d at 1362-63.  As the Third Circuit has explained:

In practical terms, if the opponent has exceeded the “mere scintilla” threshold and has offered a genuine issue of material fact, then the court cannot credit the movant’s version of events against the opponent, even if the quality of the movant’s evidence far outweighs that of its opponent.  It thus remains the province of the factfinder to ascertain the believability and weight of the evidence.

In re Unisys Savings Plan Litigation, 74 F.3d 420, 433 n. 10 (3d Cir. 1996) (citing Big Apple, BMW).  If there are gaps in the pertinent materials submitted by the movant, without explanation, that justifies denial of the motion.  O’Donnell v. United States, 891 F.2d 1079, 1082 (3d Cir. 1989).   In the case at bar, there exist genuine issues of material fact, and Equifax is not entitled to judgment as a matter of law.  Summary judgment is therefore inappropriate.

IV.         ARGUMENT

Inside Man move

Through documents and deposition testimony, Plaintiff clearly has demonstrated that genuine issues of material fact exist as to whether a reasonable jury could find that Equifax’s conduct willfully violated the FCRA, and Equifax is not entitled to judgment as a matter of law.  Accordingly, Equifax’s Motion must be denied.

A. Sliver There Are Genuine Issues of Material Fact That Equifax’s Policies And Practices Led To Willful Violations Of The FCRA

Equifax argues that it is entitled to summary judgment as to Plaintiffs’ FCRA section 1681n claim allegedly because no reasonable jury could find that it acted willfully in violation of the FCRA.  (See Def. Mem. at 9).

In order to show “willfulness” under the FCRA (which would justify punitive damages among other things), a plaintiff need not show malice, but only that the credit reporting agency “knowingly and intentionally committed an act in conscious disregard for the rights of others.”  See Cushman v. Trans Union Corp., 115 F. 3d 220, 227  (3d. Cir. 1997).  Although the terms “willful” or “willfully” are not defined in the FCRA, case law has held that neither malice nor evil motive need be established for a finding of a willful violation.  See Stevenson v. TRW, Inc., 987 F.2d 288, 294 (5th Cir.1993) (citing Fischl v. General Motors Acceptance Corp., 708 F.2d 143, 151 (5th Cir.1983)).  Many courts have noted that willful under the Act is demonstrated by a showing of “knowingly and intentionally committed an act in conscious disregard for the rights of others.”  See id. at 293 (citing Pinner v. Schmidt, 805 F.2d 1258, 1263 (5th Cir.1986), cert. denied, 483 U.S. 1022 (1987)); Cushman, 115 F. 3d at 227; see also Reynolds v. Hartford Fin. Servs. Group, 435 F.3d 1081, 1097-99 (9th Cir. 2006) (discussing meaning of “willfully” with CRA and relying on Cushman). Such conscious disregard may be found when a credit reporting agency adopts a policy either knowing it to be in “contravention of the rights possessed by consumers under the FCRA or in reckless disregard for whether the policy contravenes those rights.”  Cushman, 115 F. 3d at 227; see also Reynolds, 435 F.3d at 1097-99.

Multiple cases within this District, examining the willfulness standard within the precise context of a CRA’s duty to investigate consumer duties, have repeatedly found that a CRA shows a reckless disregard for a consumer’s rights when it fails to forward “all relevant information,” including documentation that a consumer sends to the CRA in support of his or her dispute, to the furnisher supplying the credit data, as specifically required 15 U.S.C. § 1681i(a)(2)(A).  Lawrence v. Trans Union, LLC, Civ., 296 F.Supp. 2d. 582, 590, 2003 WL 22992081 at *5 (E.D. Pa. Dec. 11, 2003); Crane v. Trans Union, LLC, 282 F. Supp. 2d 311, 321 (E.D. Pa. 2003).

Moreover, multiple cases within this District have held that a consumer may show a willful violation under the FCRA if the CRA has a policy or practice of merely parroting the responses of credit furnishers, rather than conducting an independent investigation as required by 15 U.S.C. § 1681i.  See Lawrence, Civ. 296 F.Supp. 2d. 582, 590,  2003 WL 22992081 at * 5; Evantash v. G.E. Capital Mortgage Servs., Inc., Civ. No. 02-1188, 2003 WL 22844198 * 8 (E.D. Pa. Nov. 25, 2003); Crane, 282 F. Supp. 2d at 321; Sheffer v. Experian Info. Solutions, Inc., Civ. No. 02-7407, 2003 WL 21710573 at * 3 (E.D. Pa. July 24, 2003) (all claims, including punitive damages, to go to jury in FCRA case against Equifax and other defendants).

Cases from other federal courts have also held that consumers may proceed to trial with their FCRA section 1681n willful claims based upon conduct — by Equifax — similar to what courts within the Third Circuit have found could constitute a willful violation of the law.  See Apodaca v. Discover Fin. Servs. et al., ___ F.Supp. 2d ___, Civ. No. 04-0717, 2006 WL 538667 (D.N.M. Mar. 2, 2006) (denying Equifax’s motion for partial summary judgment and permitting consumer to proceed to trial with willfulness/punitive damages claim stemming from improper investigation procedures); Sampson v. Equifax Info. Servs. LLC, Civ. No. 204-187 (S.D. Ga. Aug. 29, 2005) (denying Equifax’s motion for summary judgment and permitting consumer to proceed to trial with willfulness/punitive damages claim stemming from Equifax’s improper investigation procedures).

Here, Plaintiff has demonstrated Equifax’s “reckless disregard” for consumer rights in several ways.

First, Equifax failed in its duty to conduct an independent investigation by merely parroting its public records vendor’s response to its CDV in August 2005 and doing nothing further.  The testimony of Equifax’s corporate representative Alicia Fluellen has already been the basis for one decision within this District allowing punitive damages against Equifax to proceed to the jury.   See Sheffer v. Experian Info. Solutions, Inc., Civ. No. 02-7407, 2003 WL 21710573 at * 3 (E.D. Pa. July 24, 2003) (citing Ms. Fluellen’s deposition testimony and allowing willfulness claim/punitive damages to be presented to the jury due to Equifax’s practice and policy of parroting furnisher responses despite consumer disputes).  The same testimony, cited herein, is equally applicable to this case as it pertains to Equifax’s general policies and practices.  (See Fluellen Dep. in Sheffer pp. 85-86, 97-99, 105).

In this case Ms. Fluellen corroborated that testimony and confirmed that Equifax has not changed its parroting practices.  (See Fluellen Dep. 4, 36-37, 93-94).   Indeed, in August 2005 Equifax conducted no independent investigation whatsoever, despite having received ample notice from Plaintiff by that time, including actual court records, that the $37,500 judgment should not be reporting against him.  Equifax simply parroted the CDV response of its furnisher — that the judgment should continue to report against Plaintiff, and for only that reason “verified” the judgment’s accuracy.  That is the essence of parroting.  Accordingly, as in Sheffer, the issue of willfulness must go to the jury.  See also Lawrence v. Trans Union, LLC, Civ., 296 F.Supp. 2d. 582, 590, 2003 WL 22992081 at *5 (E.D. Pa. Dec. 11, 2003) (practice or policy of parroting can be willful violation under FCRA); Crane v. Trans Union, LLC, 282 F. Supp. 2d 311, 321 (E.D. Pa. 2003) (same).

Second, Equifax repeatedly misrepresented to Plaintiff in its letters that it had “contacted” the Philadelphia CCP at Broad and Market Streets “directly” in processing his disputes.  (See Exhibit F, G, H).  These communications concealed the truth from Plaintiff regarding what Equifax did in its purported “investigation” into Plaintiff’s disputes and also concealed who the true source of Equifax’s credit data was with respect to judgments (i.e., the public records vendor as opposed to the CCP).    The FCRA requires CRAs to identify to consumers the true source of where they are getting credit information.  See 15 U.S.C. § 1681i(a)(6).  Equifax misrepresented that to Plaintiff and did so with standard letters that demonstrate its practice of doing so with these type of disputes.   (See generally Fluellen dep. at 31-34; 69-71).

Equifax’s Ms. Fluellen testified that as a matter of course Equifax does not identify to consumers the true identity of who furnishes public records data to Equifax, as it did not to Plaintiff in this case.  (See Fluellen Dep. at 31-34, 86-87, 98).  Nor were Equifax’s letters isolated mistakes, or mere human error.  Sheffer v. Experian Info. Solutions, Inc., Civ. No. 02-7407, 2003 WL 21710573 at * 3 (willful claim permitted to go to jury where Equifax’s conduct was “not the result of mere human error  . . . [that] was promptly cured”) (citing Boris v. Choicepoint Servs., 249 F. Supp.2d 851, 862 (W.D. Ky. 2003)).  A reasonable jury could find that Equifax’s practice of telling consumers that it “contacted” the Philadelphia CCP at Broad and Market Streets “directly,” when in fact it had not, as well as its failure to make sure that the true court records concerning the judgment were actually reviewed as part of its investigation, show a “reckless disregard” for consumer rights.

Finally, Equifax’s repeated and systematic failures to stop reporting the judgment as one against Plaintiff after February 2005 is unfathomable when Plaintiff put Equifax on written and oral notice so many times, and when Equifax is supposed to update judgment information with current data almost on a daily basis.   (See Fluellen Dep. at  23 and also generally at 14-15, 17-21).

These facts establish that Equifax knowingly and regularly disregards the FCRA’s requirements.  Thus, Plaintiff may be permitted to proceed with his willfulness claim to trial.

B. Plaintiff’s Common Law Claims Are Not Preempted

Equifax contends that Plaintiff should not be permitted to proceed to trial with his common law claims of defamation, negligence and invasion of privacy/false light.  (See Def. Mem. at 7).  The entire and exclusive basis for Equifax’s preemption argument is that it did not “willfully” violate the FCRA.   For the same reasons that Plaintiff may show willfulness and thus proceed to trial with his FCRA section 1681n claim, discussed above, Equifax’s preemption argument fails.

Further, the limitations to common law liability set forth at FCRA section 1681h(e), on which Equifax relies, impose a “willfulness” threshold only for actions stemming from disclosures to the consumer, but not all FCRA actions.  As one court recently explained:

Section 1681h(e) suggests not that Congress has limited actions brought in all areas regulated by the FCRA but that defendants will have qualified immunity from actions based on information disclosed pursuant to certain provisions of the FCRA. Webb v. Bob Smith Chevrolet, Inc., 2005 WL 2065237 at *5 (W.D.Ky. Aug. 24, 2005). In McAnly v. Middleton & Reutlinger, P.S.C., 77 F.Supp.2d 810, 814-15 (W.D.Ky.1999), the district court explained that, ‘section 1681h(e) is not actually a preemption provision. Rather, it is a quid pro quo grant of protection for statutorily required disclosures. Since various parts of the federal statute require consumer reporting agencies and information users to disclose information to consumers under certain circumstances, this section guarantees that the agencies or users cannot be sued for those required disclosures [under FCRA sections 1681g, 1681h and 1681m] under state tort law.  It makes sense that acts required to be done by the FCRA are immunized from state tort liability.’

Poore v. Sterling Testing Sys., Inc., 410 F.Supp. 2d 557, 573 (E.D. Ky. 2006).

Here, Plaintiff’s common law claims are based on information provided by Equifax to  third parties, such as a prospective mortgage lender and other existing and potential creditors.  It is not based on the disclosures to consumers required under sections 1681g, 1681h and section 1681m.  Nor is it based on information disclosed by a user of a consumer report.  Accordingly, Plaintiff’s state law claims are not prohibited under section 1681h(e).

C.        Plaintiff Withdraws His Claim Under The Pennsylvania Unfair Trade

Practices and Consumer Protection Law

Equifax finally contends that Plaintiff should not be permitted to proceed to trial with his claim under the Pennsylvania Unfair Trade Practices and Consumer Protection Law (“CPL”).  (See Def. Mem. at 8).  Equifax inaccurately claims that there is “no cause of action under the CPL.”  (Id.).  Although at least two federal courts within this District have held that a consumer-plaintiff may bring a Pennsylvania CPL claim along with an FCRA claim alleging that a CRA reported inaccurate credit information about him or her,  Plaintiff hereby withdraws this statutory claim.  Accordingly, that issue is moot for purposes of this Motion.

V. CONCLUSION

For the reasons stated above, this Court should deny Equifax’s Motion for Summary Judgment.

Respectfully submitted,

FRANCIS & MAILMAN, P.C.

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

MALIK HODGE, on behalf of himself and all others similarly situated

Plaintiff,

v.

PREMIER CREDIT OF NORTH AMERICA, LLC

Defendant.

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Civil Action No. 09-1644

Class Action

______________________________________________________________________________

MEMORANDUM OF LAW IN SUPPORT OF PLAINTIFF’S RESPONSE IN OPPOSITION TO DEFENDANT’S PARTIAL MOTION TO DISMISS OR STRIKE THE CLASS ACTION ALLEGATIONS OF THE AMENDED COMPLAINT

______________________________________________________________________________

FRANCIS & MAILMAN, P.C.

JAMES A. FRANCIS

GREGORY GORSKI

Land Title Building, 19th Floor

100 South Broad Street

Philadelphia, PA 19110

(215) 735-8600

TABLE OF CONTENTS

PAGE

I. PRELIMINARY STATEMENT ……………………………………………………………………1

II. BACKGROUND …………………………………………………………………………………………..3

A. Defendant Has No Permissible Basis To Call A Non-Debtor

And Misrepresent The Reason For Its Call To Coerce Private

Information About A Purported Debtor …………………………………………………………3

B. Defendant Uses A Standardized Telephone Call Script To

Deceive Third Parties ………………………………………………………………………………….4

C. Plaintiff’s Amended Complaint Includes All The Necessary

Elements To Adequately Allege A Class Action …………………………………………….5

III. LEGAL STANDARD …………………………………………………………………………………….6

A. A Well Pled Complaint Need Only Allege Claims That Are

Not “Speculative” To Defeat A Motion To Dismiss Pursuant

To Rule 12(b)(6) 6

B. The Legal Standard When Considering A Motion To Dismiss

Class Action Allegations Pursuant to Rule 12(b)(6) Does Not Change ……………..8

IV. ARGUMENT ……………………………………………………………………………………………….10

I.  PLAINTIFF HAS ADEQUATELY PLED A PLAUSIBLE CLASS ACTION CLAIM AGAINST DEFENDANT

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10

A. Plaintiff Amended Complaint Alleges A Class Of Purported Debtors Whose Rights Under The FDCPA Were Violated 10

B. Class Actions Alleging Harm Caused By The Use Of

Standardized Scripts Are Certifiable 12

II.  DEFENDANT’S ARGUMENTS IN OPPOSITION TO CLASS CERTIFICATION ARE PREMATURE 13

V. CONCLUSION ……………………………………………………………………………………………14

TABLE OF AUTHORITIES

PAGE

Ashcroft v. Iqbal,

129 S. Ct. 937 (2009) 8

Baas v. Dollar Tree Stores, Inc.,

2007 WL 2462150 (N.D.Cal. 2007)

Dark Streets

13

Beck v. Maximus,

457 F.3D 291(3d. Cir. 2006) 1

Bell Atlantic Corp. v. Twombly,

550 U.S. 554 (2007) A Perfect Day video 6, 7, 8

Borough of Morrisville v. Delaware River Basin Commission,

382 F. Supp. 543 (E.D.Pa. 1974) 8

Broussard v. Meineke Discount Muffler Shops, Inc.,

155 F.3d 331 (4th Cir. 1998) Flood download 12

Buck v. Hampton Twp. Sch. Dist.,

452 F.3d 256 (3d Cir. 2006) 7

Chedwick v. UPMC,

619 F. Supp.2d 172 (W.D.Pa. 2007) 13

Clark v. McDonald’s Corp.,

213 F.R.D. 198 (D.N.J. 2003) 9

Clark v. State Farm Mut. Auto. Ins. Co.,

231 F.R.D. 405 (C.D.Cal. 2005)

14

Costlow v. United States,

552 F.2d 560 (3d Cir. 1977) Up Pompeii download 7

General Tel. Co. of Southwest v. Falcon,

457 U.S. 147 (1982) 8, 9, 11

Grainger v. State Sec. Life Ins. Co.,

547 F.2d 303 (5th Cir. 1977) 12

Gutierrez v. Johnson & Johnson, Inc.,

2002 U.S. Dist. LEXIS 15418 (D.N.J. Aug. 12, 2002) 9

Huff v. N. D. Cass Co. of Ala.,

485 F.2d 710 (5th Cir. 1973) 8, 9

In re LifeUSA Holding Inc.,

242 F.3d 136 (3d Cir. 2001) 12

In re The Prudential Ins. Co. of Am. Sales Practices Litig.,

962 F. Supp. 450 (D.N.J.1997) 12

Karan v. Nabisco, Inc.,

78 F.R.D. 388 (W.D.Pa. 1978) 9, 10

King v. Gulf Oil Co.,

581 F.2d 1184 (5th Cir. 1978) 8

Korman v. Walking Co.,

503 F. Supp.2d 755 (E.D.Pa. 2007)

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13, 14

Miller v. Beneficial Management Corp.,

977 F.2d 834 (3d Cir. 1992) 7

Moore v. PaineWebber, Inc.,

306 F.3d 1247 (2d Cir. 2002) 12

Neitzke v. Williams,

490 U.S. 319 (1989) 7

Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc.,

259 F.3d 154 (3d Cir. 2001) 8, 9

Palladino ex rel. U.S. v. VNA of Southern New Jersey, Inc.,

68 F. Supp.2d 455 (D.N.J. 1999) 10

Phillips v. County of Allegheny,

515 F.3d 224 (3d Cir. 2008) 7, 8

Pinker v. Roche Holdings Ltd.,

292 F.3d 361 (3d Cir. 2002) 7

Sames v. Gable,

732 F.2d 49 (3d Cir. 1984) 7

Satterwhite v. City of Greenville, Tex.,

578 F.2d 987 (5th Cir. 1978) Grumpy Old Men ipod 9

Scheuer v. Rhodes,

416 U.S. 232 (1974) The Good Bad and the Ugly ipod

The Puffy Chair video

7, 8

Shannon v. Hess Oil Virgin Islands Corp.,

96 F.R.D. 236 (D.V.I. 1982) Higher Learning movie full 11

Smith v. Weeks,

2002 WL 31750203 (E.D. Pa. Dec. 9, 2002) 7

South Broward Hosp. Dist. v. MedQuist Inc.,

516 F. Supp.2d 370 (D.N.J. 2007) Christmas with the Kranks psp 9

Swierkiewicz v. Sorema N. A.,

534 U.S. 506 (2002) 6

Umland v. PLANCO Financial Services, Inc.,

542 F.3d 59 (3d Cir. 2008) 7

Unger v. National Residents Matching Program,

928 F.2d 1392 (3d Cir. 1991) 10

Urban v. Breier,

401 F. Supp. 706 (D.Wis. 1975) 11

Weathers v. Peters Realty Corp.,

499 F.2d 1197 (6th Cir. 1974) 8

Williams v. Empire Funding Corp.,

227 F.R.D. 362 (E.D.Pa. 2005) 12

Yaffe v. Powers,

454 F.2d 1362 (1st Cir.1972) 10

STATUTES

15 U.S.C. §1692 Fame movie download 1, 3

15 U.S.C. §1692b 1, 3

15 U.S.C. §1692d 4

15 U.S.C. §1692e 3, 4

15 U.S.C. §1692f

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OTHER AUTHORITY

Wright & Miller, 7A FEDERAL PRACTICE & PROCEDURE. §1785 9, 11

I. PRELIMINARY STATEMENT

Defendant’s Motion to Dismiss (the “Motion”) the Class Allegations in Plaintiff’s Amended Complaint should be denied for the simple reason that Plaintiff has sufficiently pled a plausible class action claim for violation of the Fair Debt Collection Practices Act, 15 U.S.C. §1692 et seq. (“FDCPA”).  The class claim arises from Defendant’s use of a deceptive standardized script whenever its representatives make collection calls to third-party non-debtors.  Among other things, the FDCPA prohibits debt collectors from contacting third parties about a consumer’s debt and communicating information about that consumer’s debt to those third parties, except in several specifically delineated instances.  See, e.g., 15 U.S.C. §1692b & 1692c(b); see also Beck v. Maximus, 457 F.3d 291, 294-295 (3d. Cir. 2006)(discussing limitations on contacts with third parties and non-debtors).

Plaintiff’s Amended Complaint alleges that Defendant’s collector employees, as matter of policy and practice, telephone third parties by impersonating a home mortgage company or other fiduciary loan provider.  By surreptitiously calling in connection with a fictitious credit application, these employees seek to elicit improper information about the consumer debtor’s whereabouts and/or his or her financial condition. Class members (the purported debtors) are harmed by such a practice because its results in disclosure of their personal financial information and data, and coerces the contacted third parties into providing private information about the class member that is prohibited by the FDCPA.  A class action of this kind involving uniform or standardize practices, particularly scripts, is eminently certifiable even when the practice involves oral communications as in this case.

Defendant’s Motion does not provide any proper basis for dismissal of the Amended Complaint. The Motion at best does nothing more than point out possible factual disputes between the parties. The existence of a material issue of fact, however, is not grounds to obtain a dismissal on the pleadings.

Defendant’s Motion is also procedurally defective. Much of Defendant’s Motion is dedicated to arguments opposing class certification under the guile of a motion to dismiss. The propriety of a class claim is typically addressed once Plaintiff has been afforded a sufficient amount of class related discovery and files a motion for class certification.  It is for this reason that dismissal of class claims on the pleadings alone is extraordinarily rare. Furthermore, Defendant’s attempt to sneak in the backdoor by arguing class certification points on a motion to dismiss has been roundly criticized by the courts.

II. BACKGROUND

A. Defendant Has No Permissible Basis To Call A Non-Debtor and Misrepresent The Reason For Its Call To Coerce Private Information About A Purported Debtor.

Debt collectors such as Defendant often do not follow the traditional practice of filing a collection lawsuit to obtain a judgment against a purported debtor in Court and then executing on the judgment in order to collect a debt. Debt collectors instead often employ strategies that effectively harass purported debtors into payment.

Once such tactic is calling people who do not owe any debts but who may know the purported debtor. Debt collectors will purchase contact information about the purported debtor’s family, friends, neighbors and co-workers and then make calls to these third-parties to learn more about the debtor and/or pressure him or her into paying the debt. The existence of such practices led Congress to place strict limitations on third-party collection calls in connection with the collection of a consumer debt. See, e.g., 15 U.S.C. §§1692b & 1692c(b).

In this case, the telephone calls in question involve Defendant’s representatives calling third-party non-debtors and misrepresenting that the third-party was named as a reference in connection with a fictitious loan in order to deceive the third-party into providing private information about the purported debtor.  The described conduct is unquestionably prohibited by numerous FDCPA provisions because:

• Defendant misrepresented its identity;

• Defendant contacted a third-party to obtain information unrelated to the purported debtor’s location; and

• Falsely represented that its telephone call was related to a fictitious loan or credit application.

See 15 U.S.C. §§1692(b)(1) & (e)(2)(A).

In addition to these specific violations of the FDCPA, the described conduct also violates general prescriptions in the FDCPA against:

• “engaging in conduct the natural consequence of which is to harass, oppress or abuse any person in connection with the collection of a debt; ”

• using “false representations or deceptive means to collect or attempt to collect any debt or to obtain information” and

• John Q rip using “unfair or unconscionable means to collect or attempt to collect a debt.”

Id. at §1692(d), (e)(10) & (f).  Accordingly, Defendant has absolutely no permissible basis to engage in the type of conduct described in Plaintiff’s Amended Complaint.

B. Defendant Uses A Standardized Telephone Call Script To Deceive Third-Parties.

In addition to deceiving, harassing and threatening Plaintiff personally,  Defendant took aim at Plaintiff’s father, a third-party non-debtor.  Defendant’s representative contacted Plaintiff’s father, and misrepresented that she was calling from a home mortgage company in order to obtain information about Plaintiff in order to process a home loan. Defendant’s representative further misrepresented to Plaintiff’s father that Plaintiff would be able to obtain the fictitious loan faster if Plaintiff’s father would cooperate and provide additional information about Plaintiff.  Defendant’s representative then began asking Plaintiff’s father questions unrelated to determining the location of Plaintiff in order to surreptitiously gain further private information about Plaintiff.   See Am. Compl., at ¶ 10.

Defendant’s was using a standardized “script” in connection with the call to Plaintiff’s father. The script is used as a matter of course whenever a representative contacts a third-party. Defendant dubs the script described above as the “Reference Script.”  See Ex. A., Reference Script.    As can be gleaned from reviewing this standardized script attached, the script is crafted to deceive any third-party called into giving private information about consumers in violation of the FDCPA.  The script achieves it goal by misrepresenting to the third-parties that they had been named as a reference in connection with a credit application just at the representative did to Plaintiff’s father.

C. Plaintiff’s Amended Complaint  Includes All The Necessary Elements To Adequately Allege A Class Action.

Plaintiff specifically alleged in the Amended Complaint the facts surrounding the misleading and deceptive call that was placed to Plaintiff’s father using the standardized script:

Paragraph 10 - On or about March 6, 2009, Defendant then contacted Plaintiff’s father wherein Defendant’s representative misrepresented that she was calling from a home mortgage company in order to obtain information about Plaintiff in order to process a home loan. Defendant’s representative further misrepresented to Plaintiff’s father that Plaintiff would be able to obtain the fictitious loan faster if Plaintiff’s father would cooperate and provide additional information about Plaintiff. Defendant’s representative then began asking Plaintiff’s father questions, inter alia, about where he worked, how long he had been working, his marital status, and other personal questions unrelated to determining the location of Plaintiff.

See Am. Compl., at ¶ 10.

Plaintiff further specifically alleged that Defendant was using a standardized script to deceive third parties:

Paragraph 9 - Defendant also, as a matter of policy and practice, contacts third-parties whose identities are obtained from skip tracing efforts and uses a script which deceives the third-parties into giving unauthorized information about consumers by misrepresenting to the third-parties that they had been named as a reference in connection with a credit application.

See id. at ¶ 9.

Applying these factual allegations which includes the use of a standardized script in connection with telephone calls to third-parties, Plaintiff provides a plausible statement of the Class’ composition:

All persons in the United States of America for whom Defendant, in attempting to collect an alleged debt from them, contacted a third-party starting one year prior to the filing of this action and through the date of judgment herein.

See id. at ¶ 19.  Plaintiff further specifically pled all the elements required under Rule 23(a) and (b) for a class action including numerosity, commonality, typicality, adequacy and predominance. See id. at ¶¶ 20-27.  Accordingly, Plaintiff has adequately set forth plausible class action allegations and deserves the opportunity to conduct discovery on the claim.

III. LEGAL STANDARD

A. A Well Pled Complaint Need Only Allege Claims That Are Not “Speculative” To Defeat A Motion To Dismiss Pursuant To Rule 12(b)(6).

Universally recognized as a notice pleading standard, Rule 8(a)(2) of the Federal Rules of Civil Procedure calls for a plaintiff filing a complaint in the federal courts to simply provide “a short and plain statement of the claim showing that the pleader is entitled to relief.”  See Bell Atlantic Corp. v. Twombly, 550 U.S. 554, 555 (2007) (“A complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations.”) See also Swierkiewicz v. Sorema N. A., 534 U.S. 506, 513 (2002) (calling Rule 8 a “simplified notice pleading standard.”)

When a federal court reviews the sufficiency of a complaint, before the reception of any evidence either by affidavit or admissions, its task is necessarily a limited one. The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims.

Scheuer v. Rhodes, 416 U.S. 232, 236 (1974).    “[T]he threshold level to be met by a plaintiff to withstand a motion to dismiss is very low.”  Smith v. Weeks, 2002 WL 31750203, at *5 (E.D. Pa. Dec. 9, 2002)

The Third Circuit after Twombly has consistently held that in considering a motion to dismiss pursuant to Rule 12(b)(6) the Court shall:

‘accept all factual allegations in the complaint as true and view them in the light most favorable to the plaintiff’ and  ‘determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief.’

Umland v. PLANCO Financial Services, Inc., 542 F.3d 59, 64 (3d Cir. 2008) (quoting Buck v. Hampton Twp. Sch. Dist., 452 F.3d 256, 260 (3d Cir. 2006) and Pinker v. Roche Holdings Ltd., 292 F.3d 361, 374 n. 7 (3d Cir. 2002)).  See also Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir. 2008) (finding Pinker “remains an acceptable statement of the standard” and “finding [Twombly] confusing”).  “Rule 12(b)(6) does not countenance … dismissals based on a judge’s disbelief of a complaint’s factual allegations.”  Twombly, 550 U.S. at 556 (quoting Neitzke v. Williams, 490 U.S. 319, 327 (1989)). “A well-pleaded complaint may proceed even if it appears ‘that a recovery is very remote and unlikely.’” Id. (quoting Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)).

To the extent Twombly or more recently Ashcroft v. Iqbal, 129 S. Ct. 937 (2009), impacts the standard of review of a Rule 12(b)(6) motion, these opinions merely clarify  that a complaint must “raise a right to relief above the speculative level.”  Twombly, 550 U.S. at 555.  The Third Circuit in Phillips noted that Twombly “‘simply calls for enough facts to raise a reasonable expectation that discovery will reveal evidence’ of the necessary element.” 515 F.3d 224, 234 (3d Cir. 2008) (quoting Twombly, 550 U.S. at 556).

B. The Legal Standard When Considering A Motion to Dismiss Class Action Allegations Pursuant to Rule 12(b)(6) Does Not Change.

The exact same standard of review that would be applied to an individual claim on a motion to dismiss is applied to the class action allegations. See Legal Standard, Sec. A, supra.  To the extent class action allegations affects the analysis at all, courts are uniformly in agreement that the maintainability of a class action ordinarily should not be decided in connection with a motion to dismiss.

The motion under Rule 12(b) to dismiss the complaint is not the proper vehicle for attacking the validity of plaintiffs’ class action allegation. Such a challenge can properly be made when plaintiff moves for determination of class under Rule 45 of the Local Rules of Civil Procedure.

Borough of Morrisville v. Delaware River Basin Commission, 382 F. Supp. 543, 547 (E.D.Pa. 1974). See also Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 166 ( 3d Cir. 2001) ( holding that it is ordinarily “necessary for the court to probe behind the pleadings” in analyzing the propriety of class action.) (quoting General Tel. Co. of Southwest v. Falcon, 457 U.S. 147, 160 (1982)); King v. Gulf Oil Co.,  581 F.2d 1184, 1186 (5th Cir. 1978) (“The propriety of class action suits can seldom be determined on the basis of pleadings alone.”); Huff v. N. D. Cass Co. of Ala., 485 F.2d 710, 713 (5th Cir. 1973) (holding that analysis of class action allegations “usually should be predicated on more information than the complaint itself affords.”) (citing Wright & Miller, 7A FEDERAL PRACTICE & PROCEDURE. § 1785); Weathers v. Peters Realty Corp.,  499 F.2d 1197, 1200 (6th Cir. 1974) (“ordinarily the determination [of the propriety of a class action] should be predicated on more information than the pleadings will provide.”).

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Defendant’s claim, that courts purportedly “sanction the dismissal of class allegations prior to discovery,” is a gross misstatement. See Def. Br., at 7.  The solitary case that Defendant relies upon for support itself acknowledges that dismissal of a class action claims on the pleadings is appropriate only in “rare cases.” Clark v. McDonald’s Corp., 213 F.R.D. 198, 205 (D.N.J. 2003). See also Satterwhite v. City of Greenville, Tex.,  578 F.2d 987, 998 (5th Cir. 1978) (holding that only in “rare instances, maintainability may be determined on the basis of the pleadings”) (emphasis added); South Broward Hosp. Dist. v. MedQuist Inc., 516 F. Supp.2d 370, 401-02 (D.N.J. 2007) (“Dismissal of class allegations at this stage should be done rarely and that the better course is to deny such a motion because ‘the shape and form of a class action evolves only through the process of discovery.’”) (quoting Gutierrez v. Johnson & Johnson, Inc., 2002 U.S. Dist. LEXIS 15418, *16 (D.N.J. Aug. 12, 2002) (emphasis added)); Wright & Miller, supra § 1785.3 (the practice employed in the overwhelming majority of class actions is to resolve class certification only after an appropriate period of discovery).

Additionally, both the Third Circuit  and the United States Supreme Court precedent refute such a conclusion. See  Newton, 259 F.3d at 166;  General Tel. Co. of Southwest 457 U.S. at 160. See also Karan v. Nabisco, Inc., 78 F.R.D. 388, 408 (W.D.Pa. 1978) (“the preferable course is to permit discovery to continue as to the national class rather than prematurely to exclude the class.”).  The First Circuit perhaps best summarized the impropriety of Defendant’s assertion:

To pronounce finally, prior to allowing any discovery, the non-existence of a class or set of subclasses, when their existence may depend on information wholly within defendants’ ken, seems precipitate and contrary to the pragmatic spirit of Rule 23. Evidence which might be forthcoming might well shed light on a final decision on this issue.

Yaffe v. Powers, 454 F.2d 1362, 1366 (1st Cir. 1972). Defendant has thus taken the “rare” exception to general rule and erroneously pronounced it as the legal standard.

IV. ARGUMENT

I. PLAINTIFF HAS ADEQUATELY PLED A PLAUSIBLE CLASS ACTION CLAIM AGAINST DEFENDANT.

Applying the proper standard of review to Defendant’s Motion, the class action claim in Plaintiff’s Amended Complaint is hardly the “rare” exception that warrants departure from the ordinary standard of permitting Plaintiff to take discovery related to the class allegations.  As an initial matter, Defendant notably takes no issue whatsoever with Plaintiff’s pleading of the individual facts surrounding the calls made to Plaintiff and his father. Indeed, Defendant appears to admit outright that these transgressions occurred and that its conduct violates of the FDCPA’s prohibitions.   Therefore, any suggestion that Plaintiff’s Amended Complaint fails to articulate a claim for relief can be disposed of out of hand.

A. Plaintiff’s Amended Complaint Alleges A Class of Purported Debtors Whose Rights Under The FDCPA Were Violated.

As Defendant should know, the allegations in the pleadings are not meant to be read in isolation.

[W]hen deciding if the plaintiff can prove no set of facts which would entitle it to relief such that a motion to dismiss should be granted, it is this Court’s duty to read the Complaint as a whole and draw any and all reasonable inferences for the plaintiff.

Palladino ex rel. U.S. v. VNA of Southern New Jersey, Inc.  68 F. Supp.2d 455, 463 (D.N.J. 1999) (citing Unger v. National Residents Matching Program, 928 F.2d 1392 (3d Cir. 1991). Defendant, nonetheless, isolates the class definition from the rest of Plaintiff’s averments and erroneously argues that the proposed class would include supposed “permissible” calls to third-parties. See Def. Br., Argument, Sec. I.A. Defendant, however, is ignoring the rest of the pleadings which unambiguously set forth that Plaintiff’s contention that Defendant is using a standardized script as a matter of course whenever a third-party is called, meaning that all calls that Defendant makes to third-parties violate the FDCPA.  Therefore, when one properly reviews the Amended Complaint as a whole, it is obvious that Defendant’s argument is meritless.

Defendant’s argument at best does nothing more than confirm that a question of fact may exist as to the ultimate size of the class. Moreover, the simple fact that the class definition in the pleadings may not ultimately be the definition that Plaintiff uses in moving for class certification, or that the Court chooses to certify, is of no instance. Plaintiff or the Court remains free to revise the class definition consistent with discovery as the litigation proceeds.

Even after a certification order is entered, the judge remains free to modify it in the light of subsequent developments in the litigation. For such an order, particularly during the period before any notice is sent to members of the class, “is inherently tentative.” This flexibility enhances the usefulness of the class-action device.

General Telephone Co. of Southwest, 457 U.S. at 160.  See also Urban v. Breier, 401 F. Supp. 706, 709 (D.Wis. 1975) (“The fact that each of these criteria are not set forth with specificity on the face of the complaint is not a matter of great concern at this time.”) (citing Wright & Miller, supra, §1798); Shannon v. Hess Oil Virgin Islands Corp.,  96 F.R.D. 236, 240 (D.V.I. 1982) (“even imprecisely drafted class action allegations may be readily cured . .  . by a precisely worded class certification order entered upon timely submission of the formal Rule 23 application and the completion of any relevant discovery conducted thereto.”).

B. Class Actions Alleging Harm Caused By The Use of Standardized Scripts Are Certifiable.

Certification of class actions based on a defendant’s employment of a standardized or uniform practice, particularly scripts, in connection with oral communication is well accepted. See, e.g., In re The Prudential Ins. Co. of Am. Sales Practices Litig., 962 F. Supp. 450, 514 (D.N.J. 1997) (certifying class action where “plaintiffs’ allegations and the evidence presented to the Court demonstrate that throughout the country, Prudential agents uniformly misled class members with virtually identical oral misrepresentations.”) aff’d 148 F.3d 283 (3d Cir. 1998); Moore v. PaineWebber, Inc., 306 F.3d 1247, 1255 (2d Cir. 2002) (“evidence of materially uniform misrepresentations is sufficient to demonstrate the nature of the misrepresentation”).

The cases cited by Defendant even confirm that standardize or scripted communications are worthy of class certification.  See In re LifeUSA Holding Inc.  242 F.3d 136, 146 (3d Cir. 2001) (distinguishing classes where oral communications are “uniform or scripted”); Broussard v. Meineke Discount Muffler Shops, Inc., 155 F.3d 331, 341 (4th Cir. 1998) (distinguishing classes where oral communications are “standardized”); Grainger v. State Sec. Life Ins. Co. 547 F.2d 303, 307 (5th Cir. 1977) (distinguishing classes where oral communications are “standardized”).  Indeed, Judge Robreno even confirmed that class certification is appropriate in debt collection cases when the “plaintiff can show that defendant’s oral communications for debt-collection purposes were uniform, such that defendant’s callers strictly adhered to a scripted format for the telephone conversations.” Williams v. Empire Funding Corp. 227 F.R.D. 362, 373 (E.D.Pa. 2005).

Defendant’s argument once again at best does nothing more nothing more than point out that that a factual question may exist as to whether the conduct at issue is standardized.  Although Plaintiff strains to see how Defendant intends to prove that the conduct at issue was not standardized given that a standardize script actually exists (Ex. A), the Court is not required to resolve factual questions at the pleading stage. Therefore, Defendant’s argument as such is similarly meritless.

II. DEFENDANT’S ARGUMENTS IN OPPOSITION TO CLASS CERTIFICATION ARE PREMATURE.

It is well settled that a defendant’s attempt to argue about the propriety of class certification on a motion to dismiss is inappropriate.  See Chedwick v. UPMC, 619 F. Supp.2d 172, 189 (W.D.Pa. 2007) (“It would be premature to dismiss [the plaintiff’s] class action averments at this early stage . . .since the issue of class certification will be more appropriately addressed when the record is more fully developed.”); Baas v. Dollar Tree Stores, Inc.  2007 WL 2462150, *3 (N.D.Cal. 2007) (finding that courts generally “review class allegations through a motion for class certification” and not when “discovery has not yet commenced and Plaintiffs have not yet moved to certify their class pursuant to Rule 23.”)  Defendant’s attempt to bring credence to this procedurally flawed approach by citing Rule 23(d)(1)(D) (formerly Rule 23(d)(4)) is similarly flawed.  As Judge Robreno summarized:

A motion to strike class allegations under Rule 23(d)(4) seems, for all practical purposes, identical to an opposition to a motion for class certification. Several district courts have held that Rule 23(d)(4) motions to strike class allegations are premature and that the proper avenue is to oppose the plaintiff’s motion for class certification. . . . Rule 23(d)(4) is the procedural mechanism for striking class allegations from the complaint once the Court determines that maintenance of the action as a class is inappropriate.

*     *     *

It would be improper to allow Defendants to slip through the backdoor what is essentially an opposition to a motion for class certification before Plaintiffs have made such a motion and when discovery on the issue is still on-going.

Korman v. Walking Co., 503 F. Supp.2d 755, 762-63 (E.D.Pa. 2007) (citations omitted).  See also Clark v. State Farm Mut. Auto. Ins. Co., 231 F.R.D. 405, 407 (C.D.Cal. 2005) (finding defendant’s motion to dismiss premature when the motion is “addressing whether a class should be certified”).  Defendant’s Motion is precisely the backdoor attempt at prematurely raising class certification questions that Judge Robreno warned against.  Accordingly, Defendants arguments in Sections II and III of its brief should be disregarded.

V. CONCLUSION

For the foregoing reasons, Plaintiff respectfully requests that this Court deny Defendant’s Motion to Dismiss in its entirety.

Respectfully Submitted,

FRANCIS & MAILMAN, P.C. The Last Metro video

BY: /s/ James A. Francis JAMES A. FRANCIS

GREGORY GORSKI

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100 South Broad Street

Philadelphia, PA 19110

(215) 735-8600