Newlin v. Comcast Cable of Indiana Inc

Filing 43

OPINION AND ORDER. The Court finds that the Defendant is entitled to a verdict in its favor. Signed by Judge Theresa L Springmann on 01/27/2015. (rmn)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
JOHN R. NEWLIN,

)
)
Plaintiff,
)
)
v.
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)
COMCAST CABLE OF INDIANA, INC., )
)
Defendant.
)

CAUSE NO. 2:12-CV-430-TLS

OPINION AND ORDER
The Plaintiff, John R. Newlin, sought cable services from Defendant Comcast Cable of
Illinois/Indiana/Michigan, Inc.. After the Plaintiff discovered that the Defendant had obtained his
credit report, despite the Plaintiff having invoked the Defendant’s policy to accept a $50.00
deposit and positive proof of identification in lieu of checking his credit, he sued the Defendant
for statutory damages under the Fair Credit Reporting Act (FCRA), specifically § 1681n of Title
15 of the United States Code, as he did not suffer any actual damages. The Defendant does not
deny that it obtained the consumer report, but disagrees that it violated the FRCA, much less that
it committed a willful violation. The parties proceeded to trial without a jury. Pursuant to Federal
Rule of Civil Procedure 52(a), and after observation of the witnesses at trial and review of the
trial exhibits, the Court enters the following written findings of facts and conclusions of law.

FINDINGS OF FACT
At trial, the Court heard testimony from the Plaintiff and from Rosario Sanfelice,
Comcast’s Director of Credit and Collections. The following facts are based on admitted exhibits
and from testimony elicited at trial, and are undisputed except where noted.
In August 2012, the Plaintiff sought to buy cable services for his existing home. The

Plaintiff and his wife settled on receiving services from the Defendant after reviewing the
company’s packages, pricing, and billing and credit policies. Because the Plaintiff and his wife
anticipated looking for a new home and obtaining a mortgage, the Plaintiff considered it
important that the Defendant’s credit policy, which he obtained from its website, would permit
him to avoid having his credit report reviewed. The policy provided:
A credit check and/or deposit is required for new customers (and customers with
less than six (6) months of payment history) who lease more valuable Comcast
equipment or request Comcast Digital Voice services with a new phone number.
If you select a credit check, you may also be asked to pay a partial deposit. If you
do not want a credit check, you may choose to pay the full deposit. The full
amount of any deposit will be applied to your account balance after twelve (12)
months, as long as the account has been in good standing for the previous six (6)
months.
(Tr. Ex. 3.) The Plaintiff was being diligent about his credit rating and believed that a check on
his credit would negatively impact his credit score.
On August 6, 2012, the Plaintiff contacted Comcast using the online instant messaging
services available through the company’s website. After he had selected the cable television
services he wished to purchase, the following exchange took place between the Plaintiff and the
customer service representative who was helping him:1
Atul kumar>
You have chosen a great package with excellent features and benefits that I am
certain you will enjoy. So let me go ahead and provide you with the best customer
service experience as well.
Atul kumar>
Comcast has recently adopted stricker [sic] Federal guidelines to protect our
customers from Identity theft. In order for me to create your Comcast account,
I’m required to do a Credit Check. May I have the following information in order

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The representative was employed by a third-party vendor that Comcast relies on to process new
orders for Comcast services.

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to process a credit check. Your complete Social Security Number?
Guest_>
on your website it says that I can pay a deposit of $50 and not have a credit check
performed. I would like to do this
Atul kumar>
Ok
Atul kumar>
Please allow me few moment.
Atul kumar>
I will process the order but you need to verify the ID at the time of installation by
submitting valid ID proof to the Techinicians [sic].
Guest_>
yes ok
Atul kumar>
Thank you.
Atul kumar>
I will send you the secured link for payment.
Guest_>
ok
(Trial Ex. 1.) The Plaintiff paid $50 to Comcast by credit card, which Kumar acknowledged had
been processed. Kumar stated that the Plaintiff had successfully created an account, and that his
“estimated first month’s bill will be $32.04 including taxes and fees as you have made the
payment of $50.00.” (Id.)2
On this same date, Comcast obtained a copy of the Plaintiff’s consumer report.
According to Comcast procedures, a credit report is run when an order is created if the box for

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The fee was a one-time installation fee of $34.99. Kumar also confirmed that the regular
monthly charges would be $39.99 plus taxes.

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“risk management” remains checked during the ordering process. The risk management option is
intended to minimize Comcast’s risk of not receiving payment for equipment and bills, and to
protect the consumer’s identity. The ordering system’s default setting is for the box to be
marked. If a consumer declines, then the box is unchecked and the representative verifies
identification and collects a $50 deposit. However, $50.00 does not cover the actual cost of
Comcast equipment or the typical monthly service charges. The Plaintiff’s bills reflect that his
first month’s bill was reduced by $50, which meant that Comcast (more accurately, the third
party vendor) did not delineate his payment as a deposit.
The Plaintiff learned that Comcast had run his credit when he obtained his credit report
from Equifax Credit Report. The Plaintiff canceled his services with Comcast due to its handling
of the situation.

ANALYSIS
The Plaintiff alleges that Comcast violated 15 U.S.C. § 1681b(f) and 1681n when it
obtained the Plaintiff’s consumer report without a permissible purpose. Section 1681b(f)
provides that a person “shall not use or obtain a consumer report for any purpose” except those
purposes that are “authorized” under the statute. The authorized, or permissible, purposes for
obtaining a report are provided in § 1681b(a), which allows a report to be provided to a person
who “intends to use the information in connection with a credit transaction involving the
consumer on whom the information is to be furnished and involving the extension of credit to, or
review or collection of an account of, the consumer” or who “otherwise has a legitimate business
need for the information . . . in connection with a business transaction that is initiated by the

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consumer.” 15 U.S.C. § 1681b(a)(3). A person who “willfully fails to comply” with the
requirements of the FCRA when obtaining a consumer report may be civilly liable to the
consumer. 15 U.S.C. § 1681n(a) (civil liability for willful noncompliance).
A company has a legitimate business need when it assesses a consumer’s eligibility for a
business service, and to verify the identity of the consumer to prevent identity theft. See Bickley
v. Dish Network, LLC, 751 F.3d 724, 731 (6th Cir. 2014) (finding that service providers “have a
legitimate interest in confirming that prospective consumers are who they claim to be and are
eligible for services. This prevents the corporation from providing services that might not be
reimbursed and protects innocent consumers . . . whose identity might otherwise be stolen”). The
Plaintiff argues that the parties structured the August 6, 2012, transaction so that no legitimate
need arose because Comcast, pursuant to its policy, agreed to accept a $50 deposit in lieu of
performing a credit check. The Court finds that, even if Comcast lacked a legitimate business
need based on this arrangement and thus violated the FRCA, the Plaintiff has not established that
Comcast’s violation was willful, a necessary showing to obtaining any recovery under 1681n.
In Safeco Insurance Co. of America v. Burr, the Supreme Court analyzed whether the
phrase “willfully fails to comply” in section 1681n(a) extends to reckless behavior. 551 U.S. 47
(2007). The Supreme Court held that liability under section 1681n extends to actions known to
violate the FCRA, as well as to actions stemming from a reckless disregard of a statutory duty.
Id. at 57–58. The Court explained that “[w]hile ‘the term recklessness is not self-defining,’ the
common law has generally understood it in the sphere of civil liability as conduct violating an
objective standard: action entailing ‘an unjustifiably high risk of harm that is either known or so
obvious that it should be known.’” Id. at 68 (quoting Farmer v. Brennan, 511 U.S. 825, 836

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(1994)). The Court concluded that “a company subject to [the] FCRA does not act in reckless
disregard of it unless the action is not only a violation under a reasonable reading of the statute’s
terms, but shows that the company ran a risk of violating the law substantially greater than the
risk associated with a reading that was merely careless.” Id. The Court found that even though
one of the two defendants had violated the statute, the violation was not reckless because it was
based on a reasonable reading of the FCRA, and because there was no authoritative guidance
from either the courts of appeal or the Federal Trade Commission on how the statute should be
interpreted. Id. at 70.
It is not clear whether Comcast believed consumer permission was statutorily necessary
to run a credit check, or was just a normal aspect of its business practice. It is likewise unclear
whether Comcast thought that, by offering the payment of a deposit as an alternative to running a
credit check, an otherwise legitimate business need would be dissolved and it would be exposing
itself to statutory damages if it then obtained a consumer report. There is certainly no
authoritative guidance from the Federal Trade Commission on the impact of the parties’
agreement on the legitimate business need. And the only circuit opinion remotely on point is a
1999 decision from the Second Circuit. See Scott v. Real Estate Fin. Grp., 183 F.3d 97 (2d Cir.
1999). In Scott, the plaintiffs used the services of a real estate broker to find a rental home.
According to the plaintiffs, they expressly conditioned their offer to rent a particular home on the
homeowner being willing to forego a credit check. The homeowner rejected the condition and
insisted on credit checks, and the real estate broker obtained the plaintiffs’ consumer reports
without their knowledge. The court held that the broker did not have a legitimate business need
for the plaintiffs’ consumer report under those circumstances. Id. at 100 (stating that a fact finder

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who credited the plaintiffs’ testimony “could find that they conditioned their offer to rent on the
owner’s willingness to forego a credit check” and that the broker “knew that there was no longer
a pending transaction” between the homeowners and the plaintiffs “as soon as his clients insisted
on the credit report”). The court reasoned that parties who structure negotiations so that an offer
to enter a business transaction is made with the express condition that no credit check will be
conducted, have expressed interest “too inchoate” to give the other party a legitimate business
need in connection with a business transaction. Id.
In the end, the answers to whether a legitimate business need existed after the Plaintiff
expressed his desire to pay a deposit is not relevant because nothing presented at trial
demonstrates that the Defendant acted knowingly, intentionally, or recklessly in disregarding the
protections of the FCRA. The Plaintiff argues that the evidence shows that Comcast knew,
through Kumar, that “it had no reason to pull Mr. Newlin’s credit report.” (Pl.’s Post-Trial Br.
8.) This argument ignores the evidence pointing to the conclusion that Kumar made an error
during the ordering process that negated any such knowledge. According to credible trial
testimony, if Kumar had unchecked the default for risk management, Comcast would not have
obtained the consumer report. The testimony also revealed that the Plaintiff’s $50 credit card
payment was applied as a payment instead of being held as a deposit. Once a mistake was made
in the ordering process and the risk management box remained checked, Comcast obtained the
report, but it did not do so knowing that it was violating the FRCA or the Plaintiff’s rights.
Perhaps a reasonable person in Kumar’s position would have known that he should uncheck the
box, but that goes to negligence, not willfulness. See, e.g., Redman v. RadioShack Corp., 768
F.3d 622, 627 (7th Cir. 2014) (comparing the known or obvious risk of failing to delete the

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expiration date on the consumer’s credit-card or debit-card purchase receipt with a negligence
standard that would ask whether a reasonable person would have deleted it). By relying on the
risk management default setting in its ordering system, Comcast did not take any risks of
violating the law that were substantially greater than those that can be associated with ordinary
carelessness.
The Court finds that Comcast did not knowingly and intentionally ignore the Plaintiff’s
desires to avoid a credit check (although it certainly would have appeared that way to the
Plaintiff who was not privy to Comcast’s internal documentation). Despite having the burden to
prove Comcast’s violation was willful, the Plaintiff did not attempt to present any evidence that
Comcast had a deliberate policy of ignoring consumer requests pertaining to credit reports, or a
deliberate practice of ignoring its own policy with respect to the deposits, or that it was aware of
problems with its system but took no remedial action. Cf. Redman, 768 F.3d at 638 (“The
company had to know that there was a risk of error because the identical risk had materialized
previously. Knowing the risk and failing to take any precaution against it—though a completely
adequate precaution would have cost nothing—were indicative of willful violation.”) (emphasis
added). The existence of a willfulness requirement in the FRCA statute bars recovery in this
case.

CONCLUSION
For the reasons stated above, the Court finds that the Defendant is entitled to a verdict in
its favor.
SO ORDERED on January 27, 2015.

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s/ Theresa L. Springmann
THERESA L. SPRINGMANN
UNITED STATES DISTRICT COURT
FORT WAYNE DIVISION

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