TURNER et al v. EXPERIAN INFORMATION SOLUTIONS INC et al
Filing
67
ORDER granting 51 Motion to Seal; granting 60 Motion for discovery ; granting 60 Motion to Stay response time to summary judgment motion. By MAGISTRATE JUDGE MARGARET J. KRAVCHUK. (CWP)
UNITED STATES DISTRICT COURT
DISTRICT OF MAINE
JEFF TURNER AND TANYA TURNER, )
)
Plaintiffs,
)
)
v.
)
)
EXPERIAN INFORMATION
)
SOLUTIONS INC., et als.,
)
)
Defendants
)
No. 1:13-CV-00010-DBH
ORDER
Plaintiffs Jeff and Tanya Turner bring this action against HSBC Mortgage Services Inc.,
Equifax Information Services LLC1, and Experian Information Solutions Inc. The Turners allege
violations of the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq. On June 21, 2013, HSBC
filed a motion for summary judgment well ahead of the deadline set in the scheduling order.
(Motion for Summary Judgment, ECF No. 52; Scheduling Order, ECF Nos. 18, 58.) In
connection with its summary judgment motion, HSBC has filed a motion to seal portions of the
summary judgment pleadings and the entirety of certain supporting documents. (Motion to Seal,
ECF No. 51.) The Turners, for their part, have filed a motion for discovery pursuant to Rule
56(d) due to the timing of HSBC’s summary judgment motion. (Motion for Discovery and Stay,
ECF Nos. 59, 60.) The court referred for disposition the motion to seal and the motion for
discovery and stay.2 The summary judgment motion is not ready for disposition because the
1
There is a stipulation of dismissal as to Equifax. (ECF No. 63.)
In their motion for discovery, the Turners request as one alternative form of relief a stay of their deadline to
oppose HSBC’s summary motion until 14 days after the completion of discovery. This order reinstitutes the
scheduling order deadlines for completion of discovery, currently October 8, 2013. (See ECF No. 58.)
2
Turners’ deadline for opposing that motion has been stayed. I now grant the motion to seal and
the motion for discovery pursuant to Rule 56(d).
BACKGROUND
A.
The Turners’ amended complaint
In their amended complaint, the Turners alleged that, in 2008, HSBC foreclosed on a
mortgage it held on the Turner’s former home. In connection with the foreclosure, HSBC agreed
to release the Turners from liability for any deficiency on the note secured by the mortgage.
(Am. Compl. ¶ 13, ECF No. 39.) In April 2011, the Turners sought financing to build a home on
property they own. Prospective lenders reported to the Turners that their credit reports indicated
a past due balance of $43,469 owed to HSBC. (Id. ¶¶ 15-17.) Although HSBC agreed to release
the Turners from liability on the note, HSBC erroneously continued to report an unpaid
obligation on the note. (Id. ¶¶ 14, 18.) The Turners disputed the report with HSBC to no avail.
(Id. ¶ 19.) Eventually, on August 30, 2011, the Turners disputed the credit report entries under
the Fair Credit Reporting Act. (Id. ¶ 21.) HSBC sent the Turners a letter dated September 15,
2011, in which HSBC acknowledged that the credit reports should read “completed foreclosure”
with no balance due. In the letter HSBC indicated that it requested that the credit bureaus update
their reports. (Id. ¶ 27.) However, as of September 26, 2012, Mr. Turner’s Experian and
Equifax reports still showed the debt. (Id. ¶¶ 30, 32.) Mrs. Turner’s Experian and Equifax
reports showed the debt as late as August 20, 2012. (Id. ¶¶ 29, 31.) The Turners complain that
they have been denied credit numerous times and they allege that the inaccurate reporting by
HSBC is to blame and that lenders specifically pointed to the HSBC debt as a reason to deny
credit. (Id. ¶¶ 33-37.)
2
The Turners allege that HSBC “wrongly furnish[ed] inaccurate information” to the credit
bureaus. (Id. ¶¶ 43, 47.) They allege that the defendants all willfully or negligently failed to
comply with the requirements of the Fair Credit Reporting Act. (Id. ¶ 49.) The Turners’ claim
against HSBC is found in count three. They allege four violations under 15 U.S.C. § 1681s2(b)(1), one violation under subsection (A), a second violation under subsection (B), a third
violation under subsections (C) and (D), and a final violation under subsection (E). By
subsection, these claims are based on:
(A): failure “to fully and properly investigate” their disputes after receipt of
notice;
(B): failure “to review all relevant information provided by the consumer
reporting agencies”;
(C) & (D): publication of the HSBC tradeline and failure “to accurately and
completely report the results of a lawful investigation”; and
(E): failure “to modify, delete and/or permanently block the reporting of
inaccurate information.”
(Am. Compl. ¶¶ 73-76.)
B.
HSBC’s summary judgment motion
HSBC’s summary judgment motion seeks to establish, as undisputed fact, that upon
receipt of the notice of the Turners’ dispute, it reviewed the relevant information, conducted an
investigation, provided every credit reporting agency (CRA) with the correct information, and
instructed the CRAs to modify what they were reporting. This communication was
accomplished by HSBC through the e-OSCAR3 credit reporting system. According to HSBC,
these facts demonstrate that it fully satisfied its obligations under section 1681s-2(b)(1). (Mot. at
1-3 & n.2, ECF Nos. 51-1 (unredacted version), 52 (redacted version).) HSBC’s supportive
3
The e-OSCAR acronym stands for electronic online solution for complete and accurate reporting.
3
factual presentation is found in a 43-paragraph statement of material facts. (ECF No. 51-2
(unredacted version), 53 (redacted version).)
C.
The Turners’ response / motion for discovery
In opposition to HSBC’s motion, the Turners have filed a “Rule 56(d) Statement,” which
has been construed as a motion for discovery pursuant to Rule 56(d). They report that HSBC has
not been responsive to outstanding discovery initiatives and that HSBC’s premature summary
judgment motion has effectively stayed all discovery. In their motion, the Turners outline their
theory of the case and the discovery they would like to have before being required to file a fullblown summary judgment response. (ECF No. 59.) The thrust of their motion is that HSBC has
to demonstrate more than just an investigation and a response to the CRAs through the eOSCAR system. They assert that “HSBC has to show that it permanently changed its records to
avoid re-reporting the inaccurate information.” (Pl.’s Rule 56(d) Statement at 2, ECF No. 59.)
They indicate that they have good reason to believe that HSBC, despite responding in proper
fashion through the e-OSCAR system concerning the merits of the Turners’ dispute, nevertheless
failed to delete or permanently block the debt from being re-reported. Consequently, they say,
HSBC continued to report through one reporting channel that the Turners had a delinquent
$43,000 debt, even though HSBC reported otherwise through the e-OSCAR system when
presented with notice of their dispute. According to the Turners, “Now that the motion has been
filed it is clear that there is one simple area of inquiry that must be explored, namely, what steps,
if any, HSBC took to prevent future misreporting of the inaccurate balance after Plaintiffs’
September 2011 dispute and whether those steps were successful.” (Id. at 3.)
4
D.
HSBC’s motion to seal and the Turners’ response
In conjunction with its motion for summary judgment, HSBC has filed a motion to seal
so that it may redact from the public version of its motion papers all references to and discussion
of its internal written procedures for responding to credit reporting disputes. Although HSBC’s
redactions are made in a way that hides even the existence of internal procedures, the mere
existence of such procedures is not deserving of a protective order. I reference their existence
here simply to avoid the additional burden of instructing HSBC to revise its public versions,
particularly to unredact non-controversial statements indicating the mere existence of written
procedures or that HSBC followed its own procedures, such as are found on pages 1, 2, 6, 8, and
11, and footnote 3, of its motion for summary judgment. This somewhat hyperbolic approach to
redaction is also evident in the redacted version of HSBC’s statement of material fact. Suffice it
to say that, other than redacting the name of its written procedures and certain language found
therein, in most instances HSBC has redacted statements to the rather trivial effect that steps it
took in response to the Turners’ dispute were taken pursuant to its written policies. Beyond
these redactions, HSBC has redacted the attached exhibits that contain its written policies (Def.’s
Exs. E & F), as well as screenshots of its electronic systems “platform” (Def.’s Exs. H & I).
HSBC also has redacted references to these exhibits that are found in the authenticating
declaration of Kimberley S. Roberts, one of HSBC’s business information analysts (ECF No. 531 (redacted version). Lastly, HSBC has redacted from the Roberts declaration statements to the
effect that it has a policy of selecting a certain payment rating code when presented with certain
options on the e-OSCAR system’s drop down menu and that it also has a policy or practice
related to reports involving joint borrowers. (Roberts Declaration ¶¶ 14-15.)
5
The Turners have filed an opposition memorandum in response to the motion to seal.
They primarily complain that HSBC seeks to file the affidavit of Attorney Smerage and its
exhibits under seal. However, a review of the public version of the Smerage affidavit (ECF No.
53-19) reveals that the affidavit is not meant to be sealed. That is to say, the redactions found in
the attached exhibits simply protect the Turners’ social security numbers and mortgage account
number. This is perfectly appropriate, as such redactions are required by local practice.
DISCUSSION
I address first the motion to seal before addressing the more involved legal question
associated with the Turners’ request for leave to conduct discovery prior to responding to
HSBC’s summary judgment motion.
A.
Motion to seal (ECF No. 51)
HSBC’s motion to seal is filed pursuant to Local Rule 7A and paragraph 7 of the parties’
consent confidentiality order (ECF No. 30). The Turners have not suggested that HSBC’s
motion to seal imposes any obstacle on their ability to review the materials that HSBC wishes to
withhold from its public filings. HSBC merely seeks a protective order under Rule 26 that will
shield its written policies and related statements from public view. As grounds, HSBC maintains
that the documents in question are proprietary business records. (Motion to Seal ¶ 3.) It fears
disclosure to its competitors and the unfair advantage such disclosure would afford them. (Id. ¶
4.) It alleges that this harm outweighs the marginal benefit the public would gain from having
access to the documents in question. (Id.)
Because the scope of civil discovery is so broad, the Rules provide that a court may issue
a protective order when the circumstances call for one. Pursuant to Rule 26(c), a court may issue
a protective order, “for good cause, . . . to protect a party or person from annoyance,
6
embarrassment, oppression, or undue burden or expense.” Fed. R. Civ. P. 26(c). Among other
possibilities, a court may limit the scope of disclosure or discovery, limit who may see the
discovery materials, and require that material be filed under seal. Fed. R. Civ. P. 26(c)(1)(A)(H). “Rule 26(c) is highly flexible, having been designed to accommodate all relevant interests
as they arise. The ‘good cause’ standard in the Rule is a flexible one that requires an
individualized balancing of the many interests that may be present in a particular case.” Gill v.
Gulfstream Park Racing Ass’n, 399 F.3d 391, 402 (1st Cir. 2005) (quoting United States v.
Microsoft Corp., 165 F.3d 952, 959-60 (D.C. Cir. 1999)). Relevant interests include the interest
in confidentiality and privacy. Id. (citing Seattle Times Co. v. Rhinehart, 467 U.S. 20, 35 n.21
(1984)). Although there has never been a tradition of public access to pretrial discovery, see
Seattle Times Co., 467 U.S. at 32-33, the public’s right to access a document is elevated when a
party seeks to introduce the document in court proceedings. Anderson v. Cryovac, Inc., 805 F.2d
1, 7 (1st Cir. 1986). Consequently, pretrial dispositive motions and the documents considered in
connection with them are often viewed as having a different status than discovery documents.
Id. at 11-13 (acknowledging that some courts have recognized a public right of access to
summary judgment motions). The First Circuit has indicated that “only the most compelling
reasons” can override the public’s right of access to judicial records. In re Gitto Global Corp.,
422 F.3d 1, 6 (1st Cir. 2005) (quoting FTC v. Standard Fin. Mgmt. Corp., 830 F.2d 404, 410 (1st
Cir. 1987)). The courts “must carefully balance the competing interests that are at stake in the
particular case.” Siedle v. Putnam Invs., 147 F.3d 7, 10 (1st Cir. 1998).
I conclude that HSBC’s interest in protecting its written credit reporting procedures from
public dissemination outweighs the public’s presumptive right to access these documents in the
context of this particular dispute, at this particular time. At present, this case does not raise a
7
significant controversy related to the contents of HSBC’s written procedures. Indeed, it is not
entirely clear why HSBC felt the need to file its procedures as exhibits in this case as the legal
arguments it raises in its summary judgment motion do not hinge on the existence of the written
procedures or the particular language found therein. At most, the procedures simply suggest that
HSBC has developed procedures to help its employees comply with HSBC’s credit reporting
obligations.4 What matters at present is what HSBC did or did not do in connection with its
credit reporting concerning the Turners, not the fact that it followed its internal policies or
procedures. Given this particular presentation, HSBC’s motion is granted. The issue of
maintaining sealed status for the exhibits in question may be revisited if it comes to pass that the
contents of the procedures are deemed germane to legal issues raised in the litigation. That will
likely depend on the nature of the Turners’ presentation and whether it relies on alleged errors or
omissions in the procedures. At present, the Turners have not raised such an argument.
B.
The motion for discovery (ECF No. 60)
Pursuant to Rule 56(d) of the Federal Rules of Civil Procedure5, the court may, among
other things, defer consideration of a motion for summary judgment to allow the nonmovant time
to take discovery, if the nonmovant “shows by affidavit or declaration that, for specified reasons,
it cannot present facts essential to justify its opposition.” Fed. R. Civ. P. 56(d). This rule
“describes a method of buying time for a party who, when confronted by a summary judgment
motion, can demonstrate an authentic need for, and an entitlement to, an additional interval in
which to marshal facts essential to mount an opposition.” Resolution Trust Corp. v. N. Bridge
Assocs., 22 F.3d 1198, 1203 (1st Cir. 1994). “[D]istrict courts should construe motions that
invoke the rule generously, holding parties to the rule’s spirit rather than its letter.” Id. A Rule
4
5
HSBC has a legal obligation to develop such procedures. See 15 U.S.C. § 1681s-2(e)(1)(B).
Formerly Rule 56(f).
8
56(d) movant must proffer the following: (1) “good cause for the failure to have discovered the
facts sooner”; (2) “a plausible basis for believing that specified facts, susceptible of collection
within a reasonable time frame, probably exist”; and (3) “how the emergent facts, if adduced,
will influence the outcome of the pending summary judgment motion.” Id.; see also RiveraTorres v. Rey-Hernandez, 502 F.3d 7, 10 (1st Cir. 2007).
The thrust of HSBC’s motion is that it fully satisfied its section 1681s-2(b)(1) duties by
correctly notifying credit reporting agencies, through the e-OSCAR system, that the Turners’
HSBC mortgage tradeline needed to be modified to indicate, among other things, that the current
balance and amount past due fields should both read “0.” (Motion for Summary Judgment at 78.) The thrust of the Turners’ motion for discovery is that they believe that HSBC separately
continued to misreport a $43,000 outstanding obligation through other credit reporting channels.6
They maintain that they have a good-faith basis to think this because “the information known at
this time shows that Experian reports for both Plaintiffs after September 2011 and through 2012
included a $43,000 balance associated with the HSBC account and say that HSBC reported the
balance as of November 2011.” (Mot. for Discovery at 6 (citing copies of the Turners’ credit
reports from August and September 2012, ECF No. 59-2, Exs. B & C, and Experian’s eleventh
interrogatory response, ECF No. 59-2, Ex. D, PageID #909).) The Turners say that such
reporting ran afoul of section 1681s-2(b)(1)(E), which requires that furnishers promptly take
6
According to the Turners:
Typically furnishers use two separate systems for handling disputes and for regular reporting of
credit information to the credit reporting agencies. See generally National Consumer Law Center,
Fair Credit Reporting (7th Ed. 2010), Chapter 6. The e-OSCAR system that HSBC references
repeatedly in its motion is the electronic system for responding to disputes. But a different
system, the Metro 2 Format, is used for reporting credit information on a regular basis. If the
furnisher’s internal records which populate the Metro 2 Format are not changed, a correction made
using an e-OSCAR form will be superseded by later resubmission of the original inaccurate
information.
(Motion for Discovery at 5, n.4.)
9
steps to “permanently block the reporting” of inaccurate information discovered during an
investigation of a consumer dispute. (Id. at 4.)
The Turners’ Rule 56(d) presentation provides a plausible basis for believing that they
will discover facts sufficient to overcome HSBC’s summary judgment motion. Assuming that
summary judgment is overcome, full discovery is likely to enhance the Turners’ evidentiary
presentation at trial. Their approach to discovery has been diligent to date and they have in no
respect slept on their rights. They also have good cause for not possessing detailed evidence
about HSBC’s post-September 2011 reporting activity or its efforts to block such reporting. That
information is in HSBC’s possession and HSBC has, to date, resisted discovery initiatives
targeted at the information on the ground that such evidence is immaterial to the Turners’ suit.
Contrary to HSBC’s position, as explained below, the Turners have shown that the evidence they
seek is material to their claim against HSBC.
The Fair Credit Reporting Act, or FCRA, is meant “to ensure fair and accurate credit
reporting, promote efficiency in the banking system, and protect consumer privacy.” Safeco Ins.
Co. v. Burr, 551 U.S. 47, 52 (2007). Section 1681s-2 of the FCRA imposes specific obligations
on “furnishers of information to credit reporting agencies.” 15 U.S.C. § 1681s-2. Among these
obligations is a prohibition against reporting information known to be false. Id. § 1681s2(a)(1)(A), (B). The FRCA also imposes an obligation on those who regularly furnish
information to correct and update information erroneously furnished to the agencies in the past,
including the obligation to “not thereafter furnish to the agency any of the information that
remains not complete or accurate.” Id. § 1681s-2(a)(2)(A), (B).
In the event the furnisher receives notice of a dispute concerning reported information,
the furnisher is subject to additional duties. These require the furnisher to:
10
(A) conduct an investigation with respect to the disputed information;
(B) review all relevant information provided by the consumer reporting agency
pursuant to section 611(a)(2) [15 USCS § 1681i(a)(2)];
(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.
Id. § 1681s-2(b)(1).
The FRCA provides a private cause of action against a furnisher that “is negligent in
failing to comply with any requirement” of the Act. Id. § 1681o. Proof of “willful
noncompliance” provides the private litigant with additional remedies. Id. § 1681n. However,
there is a limitation on liability that withholds from private litigants the right to base a cause of
action on violations of subsection (a) of section 1681s-2. Id. § 1681s-2(c). Thus, for example, a
consumer may not bring an action against a furnisher based on the furnisher’s initial provision of
inaccurate information, but may only bring suit for violation of section 1681s-2(b), after giving
the furnisher proper notice of a dispute and an opportunity to comply with subsection (b).
Chiang v. Verizon New Eng. Inc., 595 F.3d 26, 36 (1st Cir. 2010); Boggio v. USAA Fed. Sav.
Bank, 696 F.3d 611, 615-16 (6th Cir. 2012).
As indicated in the foregoing statutory excerpt, among the furnisher’s duties under
section 1681s-2(b), upon discovering inaccurate reporting of an item of information, is the duty
11
to promptly “modify,” “delete,” or “permanently block the reporting of that item of information.”
15 U.S.C. § 1681s-2(b)(1)(E)(iii). According to HSBC, its use of the e-OSCAR system to
respond to the agencies’ notices of dispute fully satisfied subsection (E) as a matter of law.
(Mot. for Summary J. at 13-14.) For this proposition HSBC cites Stroud v. Bank of America,
886 F. Supp. 2d 1308 (S.D. Fla. 2012). (Mot. at 14.) Stroud involved, however, only a claim of
inadequate investigation. 866 F. Supp. 2d at 1312. In that context, the court said, among other
things, that it was not unreasonable for Bank of America to rely, in connection with its
investigation, on a transmission from a credit reporting agency made through the e-OSCAR
system. Id. at 1316. Stroud does not support the proposition that a furnisher satisfies all of its
statutory obligations by sending a consumer-favorable report to the credit reporting agencies
through the e-OSCAR system. In fact, Stroud states that one way a consumer can support a
claim is by proving a furnisher failed to modify, delete, or permanently block the reporting of an
item of information after finding the information to be inaccurate. Id. at 1313. This is in
harmony with the language of subsection (b)(1)(E) of section 1681s-2.
HSBC disagrees with this view and puts forward the supposition that the disputed
tradeline may have persisted on the Turners’ credit report even after HSBC instructed the
agencies to modify the tradeline simply because one or more of the credit reporting agencies
neglected to update its records. (Mot. at 16.) That may prove to be the case, but it is too early to
say for sure without affording the Turners the opportunity to conduct discovery into the matter.
Alternatively, HSBC argues that there can be no claim against it even if it negligently re-reported
the inaccurate information to the credit reporting agencies. (Id. at 15 n.13.) Supposing HSBC
did err and re-report the mistaken information, HSBC argues that such an error would require the
Turners to commence a new round of dispute resolution before bringing suit. Otherwise, says
12
HSBC, the Turners would “bootstrap” a claim for violation of section 1681s-2(a), which is not
allowed by the limitation on liability. (Id. (citing unpublished district court decisions that do not
bear the weight of the assertion).) I do not agree with this interpretation of the FCRA. Such a
reading would effectively nullify the protections extended under section 1681s-2(b)(1)(E).
Rather, I read the language of subsection (b)(1)(E) prospectively. The provision requires a
furnisher, “as appropriate,” to “promptly (i) modify . . ., (ii) delete . . ., or (iii) permanently block
the reporting of that item of information.” This language is plainly meant to impose an
obligation on furnishers to refrain from re-reporting information, already the subject of a proper
consumer dispute, which the furnisher has determined is inaccurate, incomplete, or unverifiable.
See Drew v. Equifax Info. Servs., LLC, 690 F.3d 1100, 1108 (9th Cir. 2012) (reversing summary
judgment award to furnisher, Chase Bank) (“The most thorough investigation means nothing,
however, if the results of the investigation are not put to good use. Subparagraphs (D) and (E) of
§ 1681s-2(b)(1) required Chase to rectify past misreporting and prevent future misreporting of
information that is ‘incomplete’ and ‘inaccurate.’”); Wang v. Asset Acceptance LLC, No.
3:2009-cv-04797, 2010 U.S. Dist. Lexis 91946, *20, 2010 WL 2985503, *7 (N.D. Cal. July 27,
2010) (unpublished order denying motion to dismiss) (“While the duties imposed by § 1681s2(b) are not triggered until notice is provided pursuant to § 1681i, there is no indication that
Congress intended a consumer . . . to continually redispute the inaccurate or incomplete
reporting of the same debt in order to ensure an accurate credit report.”) (emphasis in original).
Consequently, if the disputed HSBC tradeline persisted on the Turners’ credit reports even after
HSBC responded to the notice of their dispute using the e-OSCAR system, and if the tradeline
persisted because of new reporting activity by HSBC, then such re-reporting would reflect a
13
failure on HSBC’s part to modify, delete, or permanently block the reporting of that item of
information.
CONCLUSION
HSBC’s motion to seal (ECF No. 51) is granted. The Turners’ motion for discovery
(ECF No. 60) is granted. Discovery in conformance with the scheduling order (ECF No. 18)
should recommence promptly. The scheduling order permits each side to pursue depositions,
among other discovery initiatives, and the discovery alternatives proposed by the Turners on
page 8 of their motion for discovery fall within the scheduling order’s parameters. The
discovery deadline of October 8, 2013, and all subsequent deadlines are no longer stayed as to
any party and the deadlines established on July 2, 2013, are re-established. The response to the
currently pending summary judgment motion will be due twenty-one (21) days following the
close of discovery, unless a subsequent notice of intent is filed and the pending motion is
withdrawn.
CERTIFICATE
Any objections to this report shall be filed in accordance with Federal Rule of Civil
Procedure 72.
So Ordered.
August 5, 2013
/s/ Margaret J. Kravchuk
U.S. Magistrate Judge
14
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?