Ramirez v. Trans Union, LLC

Filing 233

ORDER DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT. Signed by Magistrate Judge Jacqueline Scott Corley on 3/27/2017. (ahm, COURT STAFF) (Filed on 3/27/2017)

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1 2 3 4 5 6 7 8 9 UNITED STATES DISTRICT COURT 10 NORTHERN DISTRICT OF CALIFORNIA United States District Court Northern District of California 11 12 SERGIO L. RAMIREZ, Plaintiff, 13 14 15 16 Case No.12-cv-00632-JSC ORDER DENYING DEFENDANT’S MOTION FOR SUMMARY JUDGMENT v. TRANS UNION, LLC, Re: Dkt. Nos. 218, 221, 227 & 230 Defendant. 17 18 Plaintiff contends that between January and July 2011 Trans Union violated three Fair 19 Credit Reporting Act (FCRA), 15 U.S.C. 1681 et seq., requirements: (1) that credit reporting 20 agencies establish “reasonable procedures” to ensure the “maximum possible accuracy” of 21 information provided about consumers under 15 U.S.C. §1681e(b); (2) that credit reporting 22 agencies “clearly and accurately” disclose “all information in the consumers file at the time of [a] 23 request” under § 1681g(a), and (3) that credit reporting agencies provide a statement of consumer 24 rights with each such disclosure under § 1681g(c). Trans Union argues that summary judgment is 25 appropriate on all of Plaintiff’s claims because Plaintiff cannot establish that Trans Union willfully 26 violated the FCRA. Because a reasonable jury could find otherwise, summary judgment is 27 inappropriate. The Court declines to reconsider Trans Union’s Article III standing arguments as 28 the Court has considered—and rejected—these arguments in multiple previous orders. 1 2 A. Willful Violations under the FCRA Plaintiff’s FCRA claims are all premised on a “willful” violation. A willful violation 3 entitles a consumer to statutory damages ranging from $100 to $1,000, as well as punitive 4 damages, and attorney’s fees and costs. See 15 U.S.C. § 1681n. A violation of the FCRA is 5 willful if it is either knowing or reckless. See Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 57 6 (2007). “[A] company subject to FCRA does not act in reckless disregard of it unless the action is 7 not only a violation under a reasonable reading of the statute’s terms, but shows that the company 8 ran a risk of violating the law substantially greater than the risk associated with a reading that was 9 merely careless.” Id. at 69. “That is, the defendant must have taken action involving ‘an unjustifiably high risk of harm that is either known or so obvious that it should be known.’” 11 United States District Court Northern District of California 10 Bateman v. American Multi–Cinema, 623 F.3d 708, 711 n.1 (9th Cir. 2010) (quoting Safeco, 551 12 U.S. at 68). Trans Union contends that its conduct was not willful as a matter of law and therefore 13 it is entitled to summary judgment. 14 1. Clearly Established Law is not Required 15 Trans Union first insists that the FCRA willfulness analysis mirrors qualified immunity; 16 that is, to get to a jury a plaintiff must show that the defendant’s conduct violated “clearly 17 established” law—provided by “controlling authority within the Circuit, or an overwhelming body 18 of authority outside the Circuit.” (Dkt. No. 218-5 at 28:10-13.) Not so. 19 First, in Syed v. M-I, LLC, 846 F.3d 1034 (9th Cir. 2017), opinion amended and superseded 20 on denial of reh’g, No. 14-17186, ___ F.3d ___, 2017 WL 1050586 (9th Cir. Mar. 20, 2017), the 21 Ninth Circuit considered a question of first impression under the FCRA. In ruling that the 22 defendant’s FCRA violation was willful as a matter of law, the court squarely rejected defendant’s 23 argument that its “interpretation of the statute [wa]s objectively reasonable in light of the dearth of 24 guidance from federal appellate courts and administrative agencies. Id. at *8. Instead, the court 25 held that “[a] lack of guidance [] does not itself render [defendant’s] interpretation reasonable.” 26 Id. “Notwithstanding that we are the first federal appellate court to construe Section 27 1681b(b)(2)(A), this is not a ‘borderline case. An employer ‘whose conduct is first examined 28 under [a] section of the act should not receive a pass because the issue has never been decided.” 2 1 Id. at *9 (quoting Cortez v. Trans Union, LLC, 617 F.3d 688 (3d Cir. 2010)). It follows, then, that 2 a plaintiff need not show that a defendant’s conduct violated clearly established law to prove a 3 willful violation of the FCRA. 4 Second, even apart from Syed’s controlling holding, no court has held that a defendant can 5 be found to have willfully violated the FCRA only when its conduct violates clearly established 6 law. Safeco did not so hold; instead, after reviewing the FCRA statutory language at issue, the 7 Supreme Court held that given the lack of prior authority interpreting the statute contrary to 8 defendant Safeco’s interpretation, and given the statute’s ambiguity, Safeco’s interpretation of the 9 statute was not reckless as a matter of law. 551 U.S. at 70-71. In other words, an FCRA defendant’s conduct cannot be willful if it involves an objectively reasonable interpretation of the 11 United States District Court Northern District of California 10 statute and there is no prior authority to the contrary. Such a conclusion is a far cry from holding 12 that the law must first be clearly established that the defendant’s conduct violates the FCRA 13 before it can be found willful. See Heaton v. Soc. Fin., Inc., No. 14-CV-05191-TEH, 2015 WL 14 6744525, at *6 (N.D. Cal. Nov. 4, 2015) (rejecting defendants’ contention “that if a statute is 15 unclear and there is no precedential guidance as to what a valid interpretation may be, a violation 16 may not be considered willful” as an overstatement of Safeco’s holding). The cases Trans Union 17 relies on are similar to Safeco. For example, in Redman v. RadioShack Corp., 768 F.3d 622 (7th 18 Cir. 2014), the court described the violation there as not “willful because it consisted of a 19 permissible interpretation of an ambiguous statute” and there were no previous cases to alert the 20 company of its erroneous interpretation. Id. at 639 (citing Safeco, 551 U.S. at 68). 21 2. The Section 1681g Disclosure Claims 22 Plaintiff makes two 1681g claims. First, that when Plaintiff requested his consumer file, 23 that is, his credit report, Trans Union unlawfully failed to disclose that Plaintiff was identified as a 24 potential OFAC match, even though that information was communicated to customers who asked 25 for Plaintiff’s credit report. (Dkt. No. 221-25.) Second, that when Trans Union did disclose to 26 Plaintiff that he is identified as a potential match, Trans Union did not provide Plaintiff with a 27 summary of rights as required by section 1681g(c). (Dkt. No 221-24.) Trans Union contends that 28 no reasonable trier of fact could find that it willfully violated either FCRA provision. 3 1 a) 1681g(a) Claim 2 The FCRA, 15 U.S.C. § 1681g(a), provides in part that “[e]very consumer reporting 3 agency shall, upon request, ... clearly and accurately disclose to the consumer: (1) All information 4 in the consumer’s file at the time of the request.” (emphasis added). Trans Union argues that its 5 conduct was not willful as a matter of law because the FCRA did not require Trans Union to 6 disclose the OFAC Alert to a consumer and, even if it did apply, Trans Union did disclose the 7 information in compliance, or arguable compliance, with the FCRA. 8 9 10 United States District Court Northern District of California 11 i. The FCRA Applies to the OFAC Alert Trans Union advances two arguments in support of its theory that the FCRA does not apply to OFAC information or its OFAC Alert product. Neither is availing. First, Trans Union’s interpretation of “consumer file” as not including information about a 12 consumer having an OFAC Alert is not objectively reasonable for the reasons explained by the 13 Third Circuit in Cortez. The FCRA defines “consumer file” as “all of the information on that 14 consumer recorded and retained by a consumer reporting agency regardless of how the 15 information is stored.” 15 U.S.C. § 1681a(g). Trans Union argues that because the OFAC Alert 16 information was not part of its own database, and was instead maintained by Accuity, it was not 17 part of Plaintiff’s “consumer file,” or at least its interpretation of consumer file as not including 18 information so maintained was not unreasonable. As the Cortez court explained, however, Trans 19 Union’s interpretation ignores that the FCRA expressly provides that a credit reporting agency has 20 a duty of disclosure to a consumer of all “information on [a] consumer . . . regardless of how the 21 information is stored.” 617 F.3d at 711 (quoting 15 U.S.C. § 1681a(g)). Congress did not 22 “intend[] to allow credit reporting companies to escape the disclosure requirement in § 1681a(g) 23 by simply contracting with a third party to store and maintain information that would otherwise 24 clearly be part of the consumer’s file and is included in a consumer report.” Id. “Congress clearly 25 intended the protections of the FCRA to apply to all information furnished or that might be 26 furnished in a consumer report.” Id. Thus, not only is Trans Union’s interpretation of “consumer 27 file” as not including OFAC information unreasonable, it was emphatically rejected by the Third 28 Circuit in Cortez before the violation at issue in this lawsuit. Id. at 712 (“We hold that 4 1 information relating to the OFAC alert is part of the consumer’s ‘file’ as defined in the FCRA.”). 2 Likewise, Trans Union’s second argument that the OFAC information was not required to be disclosed because the OFAC Alert provided to its customers in a consumer report was 4 somehow not part a consumer report is equally unreasonable. Congress unambiguously defined 5 “consumer report” to include a “communication of any information by a consumer reporting 6 agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, 7 general reputation, personal characteristics, or mode of living which is used or expected to be used 8 in whole or in part for the purpose in establishing the consumer’s eligibility for—(A) credit . . . to 9 be used primarily for personal, family or household purposes.” 15 U.S.C. § 1681a(d)(1). Trans 10 Union insists that its OFAC Alert service is just part of “a routine PATRIOT Act identification 11 United States District Court Northern District of California 3 verification” and should not be used for credit eligibility determinations. (Dkt. No. 218-5 at 12 30:24.) This interpretation of “consumer report” is objectively unreasonable and was squarely 13 rejected by the Cortez court. “It is difficult to imagine an inquiry more central to a consumer’s 14 ‘eligibility’ for credit than whether federal law prohibits extending credit to that consumer in the 15 first instance. The applicability of the FCRA is not negated merely because the creditor/dealership 16 could have used the OFAC Screen to comply with the USA PATRIOT Act, as well as deciding 17 whether it was legal to extend credit to the consumer.” Cortez, 617 F.3d at 707–08. Further, long 18 before the alleged violation at issue here, OFAC regulations and the Treasury Department’s 19 website provided that OFAC information in a credit report is governed by the FCRA. Cortez, 617 20 F.3d at 722; “What Is This OFAC Information On My Credit Report,” 21 https://www.treasury.gov/resource-center/faqs/Sanctions/Pages/faq_general.aspx#basic,” 22 Questions 70, 71, (last visited March 27, 2017). 23 Trans Union’s interpretation of “consumer file” and “consumer report” contradicts the 24 plain language of the FCRA and at the time of the violation at issue here a federal court had told 25 Trans Union that its interpretation was wrong. 26 ii. A Jury Could Find Trans Union Failed to Comply with the FCRA 27 Next, Trans Union contends that even if it was required to disclose the OFAC information 28 to consumers upon their request for their consumer report, its disclosure of the OFAC information 5 1 in a separate letter to the class members was an objectively reasonable interpretation of the FCRA 2 disclosure requirements and thus not willful. Indeed, beginning in January 2011, if an individual 3 contacted Trans Union to request a credit report and the individual’s name had an OFAC Alert, 4 Trans Union would mail the individual a copy of his credit report, and separately mail him a letter 5 stating that his name was a potential match to the OFAC database. Trans Union argues that this 6 was all that was legally required was all that was technologically feasible during the class period 7 as well. 8 9 Trans Union’s interpretation of the disclosure requirement is not objectively reasonable. The FCRA is unambiguous: if a consumer requests, the credit reporting agency must “clearly and accurately” disclose to the consumer all information in the consumer file. See 15 U.S.C. § 11 United States District Court Northern District of California 10 1681g(a). Trans Union’s second letter, however, did not “clearly” disclose that it was providing 12 the consumer with information from the consumer’s file; to the contrary, it disclaimed that it was 13 doing so by prefacing its letter by stating that the information was being provided “as a courtesy to 14 you” and not, rather, as required by law. (Dkt. No 221-24.) It thus created, at best, an ambiguity as 15 to whether the information was in the consumer’s file, and thus included on the consumer’s credit 16 report, even though Trans Union presented the information to its customers as part of a 17 consumer’s credit report. While Cortez did not address this issue, the lack of caselaw does not 18 mean that Trans Union’s violation cannot be willful. See Syed, 2017 WL 1050586, at *9 (finding 19 that the plaintiff stated a claim for a willful violation of the FCRA even though the relevant legal 20 issue presented an issue of first impression). A reasonable jury could find the violation willful. 21 22 b) 1681g(c) Claim The record also supports a finding that Trans Union violated the FCRA’s directive that a 23 consumer reporting agency provide “with each written disclosure by the agency to the consumer” 24 a summary of consumer rights. 15 U.S.C. § 1681g(c)(2). Assuming, as Trans Union contends, 25 that the second letter is such a disclosure, it did not contain the summary of consumer rights. 26 Trans Union’s argument that it was reasonable to interpret the statute as being satisfied with the 27 summary being provided with the first disclosure (which did not include any OFAC information) 28 is unreasonable, especially since the second letter did not in any way reference the first letter. 6 1 Trans Union’s insistence that it was not technological feasible to do anything more than it did is a 2 question for the jury. The Court cannot conclude that no reasonable trier of fact could find that 3 Trans Union willfully violated section 1681g(c). 4 3. 5 The FCRA, Section 1681e(b), provides: 6 7 8 9 Section 1681e(b) Reasonable Procedures Claim Whenever a consumer reporting agency prepares a consumer report it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates. 15 U.S.C. § 1682e(b). “Liability under § 1681e(b) is predicated on the reasonableness of the credit reporting agency’s procedures in obtaining credit information.” Guimond v. Trans Union 10 Credit Info. Co., 45 F.3d 1329, 1333 (9th Cir. 1995). Plaintiff argues that Trans Union violated United States District Court Northern District of California 11 12 this section by using name-only matching to place on OFAC Alert in a consumer’s file. a) Maximum Possible Accuracy of Trans Union’s OFAC Alert 13 Trans Union contends that no jury could find its use of name-only matching violates 14 section 1681e(b) because it advised its customers that they must engage in human review to verify 15 that the OFAC Alert was actually for someone on the OFAC list. The Cortez court, however, 16 rejected a related version of this argument: “We are not persuaded that Trans Union’s private 17 contractual arrangements with its clients can alter the application of federal law, absent a statutory 18 19 20 provision allowing that rather unique result.” Cortez, 617 F.3d at 708 (rejecting Trans Union’s reliance on language in its contractual agreements wherein “the creditor or subscriber agrees to be ‘solely responsible for taking any action that may be required by federal law as a result of a match 21 to the OFAC File, and shall not deny or otherwise take any adverse action against any consumer 22 based solely on TransUnion’s OFAC Advisor services.’”). 23 Trans Union also contends that it cannot be found to have acted willfully because 24 25 26 following Cortez it modified its OFAC Alert to state that an individual’s name was a “potential match” rather than just a “match.” Plaintiff counters that the addition of the word “potential” was not a procedure designed to “assure maximum possible accuracy” because three different Trans 27 Union witnesses testified that there was no evidence that any Trans Union customer whose file 28 7 1 contained an OFAC Alert was in fact an individual on the OFAC list. (Dkt. No. 221-8 at 62:25- 2 63:6; Dkt. No. 221-15 at 67:6-15; Dkt. No. 221-19 at 37:9-13.) Under the FCRA, a credit report is 3 inaccurate or misleading if it is patently incorrect or “misleading in such a way and to such an 4 extent that it can be expected to adversely affect credit decisions.” Carvalho v. Equifax Info. 5 Servs., LLC, 629 F.3d 876, 890 (9th Cir. 2010) (internal citation omitted). A reasonable trier of 6 fact could find that Trans Union’s OFAC Alert was misleading given that the evidence supports a 7 finding that none of the consumers flagged as a potential match were in fact a match; in other 8 words, a jury could find that if Trans Union had used more information than just a matching name 9 to flag a consumer—such as a matching birth date—none of the class members would be even a potential match. In addition, that Plaintiff’s consumer report did not included the “potential” 11 United States District Court Northern District of California 10 language supports an inference that Trans Union’s procedure did not ensure maximum possible 12 accuracy. (Dkt. No. 221-11.) Trans Union’s insistence that Cortez suggested that inclusion of the word “potential” could 13 14 have defeated liability is not persuasive. See Cortez, 617 F.3d at 708-09. That is not how this 15 Court reads Cortez. In response to Trans Union’s argument that it merely identified Ms. Cortez as 16 a “possible” match, the Third Circuit observed that, in fact, Trans Union identified her as a 17 “match,” not someone with a name similar to one on the OFAC list or as a possible match. Id. 18 The Third Circuit did not suggest that identifying Ms. Cortez as a possible match would have been 19 sufficient under the FCRA; to the contrary, in the following paragraph the court states that 20 1681e(b)’s “maximum possible accuracy” standard “requires more than merely allowing for the 21 possibility of accuracy.” Id. at 709. Trans Union also insists that there was nothing more that it could have done to ensure the 22 23 maximum possible accuracy of its OFAC Alert due to technological limitations. There is a 24 material dispute of fact on this issue. Among other evidence, an Experian credit report for Mr. 25 Ramirez during the class period states “NAME DOES NOT MATCH OFAC/PLC LIST.” (Dkt. 26 No. 221-22 at ¶ 5 and Ex. B.1) Further, that Trans Union removed the OFAC Alert of each class 27 1 28 Although Trans Union objects to the Bhatia Affidavit, its objections relate to other portions of his declaration and not those cited here. (Dkt. No. 227-4 at 21.) 8 1 member who contacted Trans Union following receipt of the OFAC letter creates a dispute as to 2 Trans Union’s infeasibility argument. It is for the jury, not the Court, to weigh the reasonableness 3 of Trans Union’s procedures. See Guimond, 45 F.3d at 1333. 4 B. 5 Trans Union’s Other Arguments The Court declines to consider Trans Union’s other arguments in favor of summary 6 judgment as these are a rehash of the same Article III standing arguments which the Court 7 previously rejected. 8 CONCLUSION 9 For the reasons stated above, and at oral argument on March 22, 2017, Trans Union’s 10 United States District Court Northern District of California 11 motion for summary judgment is DENIED. Trans Union’s objections to Plaintiff’s evidence are denied as moot. The Court did not 12 rely on any of the objected to evidence in reaching its decision here. Likewise, Plaintiff’s motion 13 for leave to file a sur-reply is DENIED as moot as the Court did not rely on any expert testimony 14 in reaching its decision here. (Dkt. No. 230.) 15 This Order disposes of Docket Nos. 218, 221, and 227. The parties’ related administrative 16 motions to seal are DENIED WITHOUT PREJUDICE to Trans Union’s submission of a narrowly 17 tailored request for sealing that comports with Local Rule 79-5 and the requirements for sealing in 18 the dispositive motion context. Trans Union shall file its renewed motion to seal by April 5, 2017. 19 20 IT IS SO ORDERED. Dated: March 27, 2017 21 22 JACQUELINE SCOTT CORLEY United States Magistrate Judge 23 24 25 26 27 28 9

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