Search results for: FCRA

The Eastern District of California recently approved a $1.375 million settlement between a certified class of former employee plaintiffs and an employer defendant.  The class consisted of all individuals who worked for the defendant between March 30, 2013 and May 1, 2018.  The defendant was alleged to have misused FCRA consent forms to improperly run background checks, along with a series of wage and hour violations under California law.

In Carrasco v. Romanoff Floor Covering, Inc., 2021 U.S. Dist. LEXIS 84502 (E.D. Cal. Apr. 28, 2021), the court granted final approval over the above-referenced settlement.  Per the preliminary settlement approval, set out in Bailey v. Romanoff Floor Covering, Inc., 2020 U.S. Dist. LEXIS 125694, at *3 (E.D. Cal. July 15, 2020), the 2,989-member FCRA class received 30% of the net settlement amount, and the 702-member California class asserting wage and hour claims received 70% of the net settlement amount.  Administrative costs and attorney fees amounted to $388,750, reducing the net settlement to $986,250.  Ultimately, the FCRA settlement netted each class member approximately $99, and the wage and hour settlement netted each class member approximately $983.

Relatively speaking, the FCRA settlement was significantly smaller than the class’s wage and hour settlement, but did allow the class to litigate in federal court and benefit from federal class certification procedures under Rule 23.  FCRA defendants should be on the lookout for efforts to bootstrap federal consumer privacy statutes to largely state-law claims to obtain federal jurisdiction, and think creatively about ways to ensure litigation occurs in their preferred venue.

 

Last month, the Eastern District of Pennsylvania dismissed a pro se plaintiff’s third attempt at bringing a claim under FCRA and FDCPA.  Blackwell v. United Auto Credit, 2021 U.S. Dist. LEXIS 50681 (E.D. Pa. Mar. 18, 2021).  While a reminder of what is necessary to survive federal pleading standards, the case also discusses the essential elements of a claim under these federal privacy statutes.  Read on for a recap.

First, let’s take a look at the (alleged) facts.  Plaintiff filed suit against United Auto Credit (“UAC”) alleging that UAC harassed him over a debt that Plaintiff disputed.  This purportedly occurred over a period spanning two years, from February 2019 through the suit’s filing in December 2020.

Recall that the FDCPA is designed to protect consumers from abusive debt collection practices.  To be successful, a FDCPA claim has to show that the plaintiff was harmed by a violation of the statute, where the debt was primarily for personal or family reasons, and, importantly, where the individual in violation is a ‘debt collector.’  Here, although Plaintiff asserted in the Complaint that UAC is a debt collector, the Complaint was devoid of any alleged facts to support this assertion.  Similarly, despite alleging that UAC had used harassing and abusive tactics to collect the debt, Plaintiff did not provide any details specifying UAC’s alleged misconduct.

The FCRA, by contrast, applies to credit reporting agencies, or ‘furnishers’ of the information that is compiled into a credit report.  As UAC is clearly not a credit reporting agency, the court interpreted Plaintiff’s Complaint to assert that UAC was a ‘furnisher.’  Well, in the context of the FCRA, for a viable noncompliance claim against a furnisher, a plaintiff must show that the defendant was aware of a disputed debt and failed to investigate the situation.  Here, the Plaintiff asserted that the debt was disputed, but again, the lack of detail proved fatal.  He did not include what was inaccurate about the debt, that any reporting agency had been made aware, or that UAC had not properly investigated.  In short, Plaintiff did not include “any of the factual detail that he has to include to state a plausible claim under FCRA.”

The Court surprisingly gave Plaintiff one final chance to amend his Complaint (for a total of four opportunities to state a cognizable claim—which is three opportunities over what CPW would have permitted).  Will Plaintiff (finally) get his act together with yet another bite at the apple?  Time will tell-and CPW will be there to keep you in the loop.  Stay tuned.

Another day, another data privacy litigation dismissed.  In this instance, the Eastern District of Louisiana rejected a plaintiff’s second attempt at pleading violations of the Fair Credit Reporting Act (“FCRA”) in Hanberry v. Chrysler Capital, No. 21-397, 2021 U.S. Dist. LEXIS 77478 at *1-*2 (E.D. La. Apr. 22, 2021).  Read on to learn more.

The plaintiff in Hanberry held a vehicle loan through Chrysler Capital.  After multiple attempts to amend her claims in a previous lawsuit, the plaintiff filed this new case, alleging identical FCRA claims against the defendant.  In the complaint, the plaintiff alleged that Chrysler Capital violated the FCRA, 15 U.S.C. § 1681s-2, by “reporting to unspecified credit reporting agencies inaccurate and incomplete information regarding [plaintiff’s] account.”  2021 U.S. Dist. LEXIS 77478 at *1-*2.  The plaintiff also alleged she sent a letter to Chrysler Capital seeking a reinvestigation into her account. Id. at *2.

The FCRA requires furnishers of credit information to (i) provide accurate information on consumers to credit reporting agencies under section 1681s-2(a), and (ii) comply with certain obligations upon notice by a credit reporting agency of a dispute under section 1681s-2(b).  However, the FTC, or other authorized governmental agency, has the sole power to enforce § 1681s-2(a).  To put it otherwise, there is no private right of action under the subsection of the FCRA upon which plaintiff’s claim was based.   The court concluded that the plaintiff’s allegation stating “she notified the credit reporting agencies of a dispute and then also notified Chrysler Capital herself,” was insufficient to satisfy Rule 12(b)(6) for purposes of stating a claim under the FCRA.  Accordingly the court dismissed the complaint for failure to state a claim under either Section 1681s-2(a) or 2(b).

For more on this area of the law, stay tuned.  CPW will be there.

 

 

In Hood v. Action Logistix, LLC, 2021 U.S. Dist. LEXIS 569974, the Eastern District of Missouri considered everyone’s favorite FCRA issue: standing for procedural violations!  The plaintiff applied for a job with defendant, which ran a background check on the plaintiff after extending a tentative offer of employment.  Following receipt of the background check, the defendant informed the plaintiff that he was no longer eligible for employment due to information in the report.  Under § 1681b(b)(3)(A) of the FCRA, anyone who obtains a consumer report for employment purposes is required to provide both an FCRA Summary of Rights and a copy of the report to the consumer before adverse action is taking.

The plaintiff sued, claiming that he was not provided with the FCRA Summary of Rights, and was not permitted to review the report and address any information in it before his offer of employment was withdrawn.  He did not, however, claim that any information in the report was inaccurate, or that his review would have resulted in him obtaining employment.

The defendant moved to dismiss, claiming that the court lacked subject matter jurisdiction because the plaintiff lacked a concrete injury, and therefore lacked standing to sue.  The court, relying on Spokeo, Inc. v. Robins, as well as the Third and Seventh Circuits, found that a procedural violation of the FCRA in instances like this could give rise to a concrete injury.  Interestingly, however, the court also noted that the Ninth Circuit disagreed with the Third and Seventh Circuits.  Reviewing the language and legislative history of the FCRA, along with other legal authority regarding standing, the court determined that the plaintiff had standing to bring suit for this procedural violation of the FCRA.

As these standing cases develop, time will tell whether the Ninth Circuit sticks by its position that these sorts of technical violations do not constitute injuries, or whether there is a developing consensus in courts across the country that these kinds of violations do give plaintiffs standing to sue.  And of course, this all may change depending on how the Supreme Court rules later this year.  CPW will be there as this area of the law continues to develop.  Stay tuned.

 

Editor’s Note: This is a live feed that will be updated continuously during the argument. If new content does not load, refresh or revisit the page for the latest updates. Earliest posts at the bottom. Live blog begins at 9:55 am eastern and will continue until concluded.

11:32: DONE!

11:28 Clement: On standing respondent’s view is material risk enough under Spokeo.  But if that it, everyone can bring suit for traffic violations where didn’t realize in any harm-Article III would be opened to trivial injuries where people should be toasting good  luck, not suing someone who didn’t injure them.  There are people in systems of government who can pursue violations of statutes without being harmed themselves-they are called prosecutors.  And on typicality-typicality required at onset of the case from the beginning.  Not just a trial issue.  Defense had right to depose class representatives.  Class representatives bring case-why having atypical class representative problem from start.  And antitrust cases asked about by Breyer dissimilar-damages issue not that important.  In statutory damages, particularly seeking punitives is a real problem here. Plaintiffs saying not to worry-but is abuse court needs to stop by finding worst named plaintiff possible.  Not to be case can have standing by suffering a material risk and no injury realized.

11:27 Issacharoff: Difficult to imagine fact pattern more uniform than what have here.  Terrorists or drug king pins on OFAC list not who have here-Americans listed improperly. Claims are typical and all people put in harms way by uniform course of conduct.

11:25 Issacharoff: Spokeo left open.  Remains question whether court best off handling as standing and then file suit in state court or simply rule against on merits.

11:24: Barrett: Can you ever have a bare procedural violation with respect to consumer protections like FCRA where designed to protect against risk of harm?  Whether have information on two pages instead of one, must have a writing, limiting numbers of credit receipt–all of these designed to protect from risk of harm.  Can he think of any procedural harm that be bare violation not cognizable under Spokeo?

11:22: Kavanaugh: Saw publication in Spokeo as what supported standing.

11:21 Kavanaugh: Good argument for 8,153 for reasonable procedures but more concerned with 6,000 whose information not published.  In Spokeo the information was published, is a big distinction as he sees it.  When Spokeo talked about risk of harm, talking about harm beyond publication zip codes.  Different from risk of harm when no publication to begin with.  On risk of harm-damages v. injunctive relief.  With damages he doesn’t think risk of harm is itself a harm under Spokeo.

11:17 Issacharoff: Spokeo brought together different analytic strains.  If look at cases in Spokeo and cases decided since then at district court level-what have is damages harms and injunctive relief.  Injunctive relief more exacting under Lujan.  Difference also between facial and as applied challenges.  And if generalized claims to public at large or private rights as seen by Congress.  Spokeo looks at all through material risk of harm.

11:16 Kagan: Material risk of harm under Spokeo-what does that mean?

11:15 Issacharoff: Evidence presented to jury (factual determinations as to violation of statute) not that.

11:15 Kagan: Class members complaining about getting two envelopes in mail rather than one.  No harm no foul situation?

11:14 Issacharoff: Congress passed PSLRA-thought best for strongest claimant to take the lead.  Substantive law on class certification not changed though.  Look if claims or defenses same as rest of class-no other way to distinguish.  Common answers to common questions.

11:12 Issacharoff: No would not be able to sue there but difference in downloadable computer files.

11:12 Alito: Suppose in 1786 someone getting ready to publish a newspaper article about person and just before published owner of paper said no, not going to, so never published.  Would that person have been able to sue for defamation?  Was at risk of being defamed but harm never materialized.

11:10 Issacharoff:  Yes would be a material risk.  Fact is ¼ of class impacted in this way within class period-so is material risk.

11:08 Alito: Assume TransUnion has computer program that will flag first name and last name on OFAC list.  If everyone flagged even if no inquiry about that person-would they have standing?

11:07 Issacharoff: Yes-that is right way to think about it.  Federal Rules of Evidence Rule 403 and others put burden on objecting court to raise at trial for it to be considered on appeal.  Look at mechanics of class certification of Rule 23-consider as early as practicable.  At class certification unclear what trial will be-petitioner’s argument to court of appeals didn’t address typicality and instead said Ramirez has no claim-because he had no damages, etc.  Only problem with retelling on appeal that this comes up.  No evidence before district court at time of certification that anything atypical about Ramirez’ claim.

11:07 Breyer: In classes damages may differ, but issues can be the same.  What about person testifying about “extra” or “special” damages.  Shouldn’t other side be able to object to this evidence being introduced at trial by saying damages egregious and would prejudice jury?

11:05 Issacharoff: Yes.

11:04 Thomas: Agree every member of the class has to have standing?

11:03 Issacharoff: Spokeo addressed material risk, not subjective knowledge.  Question is if material risk of being harmed and if Congress sought to deter material risk by statute.

11:02 Issacharoff: Question of if harmed.  Would have standing, citing Footnote 6 of Lexmark.

11:01 Roberts: Say Congress creates statute for private right of action where anyone can sue if drive within .25 miles of drunk driver.  What if found out later had driven near drunk driver-sue?

11:00 Issacharoff (Ramirez): Being mislabeled a terrorist is scarlet letter of our time.  Petitioner couldn’t identify single correct OFAC match since 2002.

11:00 Prelogar: Denial of information how would describe what happened here.  On these facts, Spokeo factors all support finding of standing.  Substantial likelihood inaccurate information about class members would be disseminated to third party and Congress intended to protect from this scenario.  Other hypotheticals involving other statutes not case at hand.

10:57 Barrett: Havens Realty-isn’t that case distinguishable because involved discrimination and not informational privacy?

10:54 Prelogar: In Spokeo court said risk of harm in some circumstances can be enough.  But Spokeo didn’t say limited to common law harms that have been already identified.

10:53 Kavanaugh: Risk of harm-wants to make sure he understands.  His is that risk of harm that is not itself separate cognizable harm is not enough.  Is that right?

10:52 Prelogar: Think informational standing separate-look at Congress judgment, if common law recognized, etc.

10:52 Gorsuch: Congress says must be provided in particular form.  Is that enough for injury in fact or something else must be shown?

10:50 Kagan: Different member of class could have testified at trial, or alternatively TransUnion could have had other class members testify at trial.  That isn’t Rule 23 issue, is it?

10:48 Sotomayor: Legal claims of plaintiffs all the same, correct? And Ramirez may be atypical with amount of damages he would receive, but why is that issue under Rule 23(a)?

10:47 Prelogar: No, not position.

10:46 Alito: Isn’t it her position that always injury in fact when Congress says information must be disclosed in particular form and fail to disclose in that form?

10:45 Prelogar: Here where one individual placed on stand and gave specific testimony about his experiences, typicality problem because not representative of class members and they should not benefit from that testimony.

10:43 Breyer: Say class of antitrust plaintiffs all of whom have to pay higher price for price fixing-they could be represented by consumer who bought more product than rest of class so had higher damages.  Or class action for class sent to emergency room from injuries and named plaintiff also had to have surgery.  In examples named plaintiffs just suffered worse harm-but are their claims not typical?

10:40 Prelogar: Not saying that but used wrong legal lens that may have resulted in improper certification of class.  Not saying abuse of discretion though.  They think Ramirez’s injuries are atypical.

10:39 Thomas: Is she saying that district court abused discretion in certifying class here?

10:38 Prelogar: Is a stretch to say that is not wrong, mere first and last name match is a match to first and last name on other list but not different from saying John Smith and John Wayne potential match.

10:38 Prelogar: If informational standing best basis for second of two violations, then court doesn’t need to do Spokeo analysis.

10:26 Roberts: How is position different from that of the respondent?

10:35 Prelogar (United States) In Spokeo-discussed whether violation statutory right constitutes injury.  Class members have standing here and created real risk of harm from OFAC alert as wrongly labeled for terrorist watch list.  What Congress sought to prevent and what common law protected.  Under this court’s informational standing cases all plaintiffs have standing for violation of those rights.  Real question though here as to whether Rule 23 should be certified.

10:34 Clement: In the end no getting around two fatal flaws-proof of actual de fact injury needed and district court refused to certify state law claims on that ground.  District court certified though under Ninth Circuit FCRA precedent.  But that was wrong.  Ramirez also suffered injuries when not typical under Rule 23.  Class certification cannot stand.

10:33 Clement: Court made clear in Lujan and others need to maintain at standing at every stage of the case.  For hypo discussing clock runs out on injury.  But if becomes clear at trial risk of harm to people did not materialize, could say based on evidence in record they don’t have standing.

10: 32 Barrett: What if file in year 2, litigation drags on and case not come to conclusion for year 6 (with Kagan hypo).  What if home free and no cancer would they lose standing?  That would be odd way to think about it.

10:31 Clement: Gist of Spokeo is that need injury in fact, injury in the law does not do it.  For people focused on public v. private rights, for statute like one at issue here where structure is certain individuals have a right to enforce any violation of a subchapter that is strong indication Congress did not determine private right.

10:30 Clement: On remand lower court should decertify the class because issue of injury not common to the class.  Also need to recognize if don’t have injury class must show individually.  Class here wrong for reasons in briefing.

10:28 Clement: May be certain risks of harm so high that material risk may be enough for injury in fact.  But 25% chance of dissemination of credit report here not enough.

10:27 Kavanaugh: He wants to understand risk of harm.  Risk of harm alone not enough for damages as opposed to injunctive relief-how he read TransUnion’s brief.  Are they saying risk of harm not enough for damages unless risk of harm separate harm-risk of harm may create emotional injury, for example.  Is that right?

10:27 Clement: Here what is actually published is not in fact false-if go to OFAC website today, you will get hit for Ramirez.  So what is communicated is his name is a potential match for same first and last name.

10:26 Gorsuch: Common law defamation presumed in rise to injury.  Common law presumes an injury.  Why wouldn’t same result apply here?

10:25 Clement: What makes material risk injury in fact here-idea that would ruin day if information disclosed about you, etc that requires knowledge of it.  How does material risk translate into material fact?

10:24 Gorsuch: So for those in group where no information sent to third parties, you are saying they must have some knowledge of the information to have material risk of injury?

10:24 Clement: What we have here is not material risk to class in this case.

10:23 Gorsuch: Is it there is no material risk these people face or they didn’t know about it (going back to Kagan hypo).

10:22 Clement: People suing in sixth year-those people cannot recover.  They would know in five year period.  If you are suing for risk that never materializes at that point you cannot maintain action for damages.

10:22 Kagan: Suppose that for this cancer you get or don’t within five years.  Say lawsuit filed six years later, same claim, same class.  Some people who got cancer in class and some who have not.  If everyone has standing within five years shouldn’t they have standing in six because they have all suffered harm?

10:21 Clement: Yes, but say that can tell from type of carcinogen within 1 year of exposure that going to get cancer or not, that would be different scenario.

10:20 Kagan: Suppose that there is carcinogen in drinking water and 50% chance getting cancer, Congress passes law that everyone exposed can get statutory damages.  Suppose there is then a class action of people exposed to carcinogen.  Would that satisfy Article III?

10:18 Clement: His claim is not typical of average class member. Typicality asks for something more than commonality.

10:17 Sotomayor: Wouldn’t you agree this is typical claim that law was passed to protect people from this sort of situation?

10:16 Clement: First potentially on Rule 23(a)(3) claims and defenses must be typical.

10:16 Sotomayor:  She reads Rule 23 as requiring typical claims and defenses.  Everyone in class designated as potential match on OFAC list and everyone received same two mailings.  Does Rule 23 require typical damages though?  Also TransUnion didn’t object to Ramirez testimony or seek discovery from absent class members-this is trial error, not error in certifying class.

10:15 Clement: Hard to unpack.  Could have hurt Ramirez and TransUnion.  Evidence submitted for thousands of people unlike Ramirez.  Also theoretical problem that when court exercising jurisdiction over all absent class members, can’t fix by only giving relief to small percent (25%).

Alito: If we were to agree with you district court should have certified only a narrower class-those persons who information was disclosed to third parties, would that preclude recovery by other members of the class?

Breyer: Why in class action where named plaintiff for instance suffers a head injury for example but not rest of class, why can’t you object at trial as to evidence?

10:14 Alito: Is there really no harm? Say person sees person has been flagged as someone whose name resembles name of person on list.  Isn’t that some psychological injury they suffered?

10:13 Clement: Respectfully no.  Of the people who had reports disseminated and no one but Ramirez complained.  Possible that no harm no foul.

10:12 Alito: The class members who se information was disclosed to third parties certainly have reason to worry about that, wouldn’t you say?

10:12 Clement: Not proper objection to raise-what Ramirez was testifying about was highly relevant in own individual action and not permitted by Rules Enabling Act.

10:10 Breyer: All class members typical in letters got, Ramirez also had other injuries.  When trial took place possible for lawyer for company to object to introduction of all evidence about Ramirez as has nothing to do with typical injury suffered by class?

10:09 Clement: Named plaintiff has to have injuries TYPICAL of class.  That should be rule of law to solve problem here.  For commonality and predominance separate inquiry.

10:08 Thomas: What would be definition of test for typicality?

10:08 Clement: If look at enforcement provision FCRA-gives consumer cause of action for any violation with respect to the consumer and 100 different requirements imposed.  Have public enforcement of statute as well-FTC can bring enforcement action and do in front of FTC itself.

10:07: Clement: Yes they would have standing, contract situation different from what have here.

10:06 Thomas: If one of  petitioners clients contracted to get information in credit report and didn’t get report for period of time, would that client have standing to sue petitioner?

10:04 Roberts: (Questioning standing of class members) If misleading information about someone shouldn’t they be able to do something about it?

10:03: Clement: Ramirez’s injuries atypical of typical class member who merely received two envelopes containing their information privacy at home.  Precludes serving as class representative.

10:00: Clement (for TransUnion): Class certified here suffers from two fatal defects.  Absence of class member standing and typicality.  Simply receiving information in non-compliant format is not a concrete injury.

9:58: Depending on how the Court rules, this case may have a significant impact on what data privacy class actions can proceed in federal court going forward.

9:55: Here we go!  Buckle your seatbelts everyone-this should be an interesting ride.  In case you missed it, the Acting Solicitor General Elizabeth Prelogar requested to participate  in the TransUnion oral argument as amicus curiae.  The amicus brief of the United States argues that “the courts below did not adequately consider whether respondent’s status as class representative, and his testimony concerning the distinct injuries he suffered, created an untoward risk that the jury’s statutory-damages award would overcompensate unnamed class members who did not suffer comparable injuries.”  The United States also argues that the case should be remanded to the court of appeals to consider whether petitioner raised an adequate contemporaneous objection to the procedures utilized at trial.

The Fair Credit Reporting Act (“FCRA”) is a frequently litigated data privacy statute.  [Note: For more on the FCRA and what it requires, check out this overview].  In a recent litigation involving claims under the FCRA, the Court denied the defendant’s motion to dismiss.  The opinion is a reminder of the essential elements of a FCRA claim and what a plaintiff must allege to satisfy federal pleading standards, as explained in greater detail below.  Jones v Sky Group USA, LLC, 2021 U.S. Dist. LEXIS 27951, at *1 (M.D. Fla. Feb. 16, 2021).

First, some background.

  • The Jones Complaint alleged that Sky Group violated the FCRA by twice obtaining the plaintiff’s credit report from two Consumer Credit Reporting Agencies, for marketing purposes, and without the plaintiff’s consent.  The plaintiff alleged that “she ‘never applied for any account with Sky Group,’ but even if she had, any application with Sky Group for a loan would have been void ab initio because [Sky Group] engages in ‘usurious’ loans under Florida law.”
  • The plaintiff also alleged that Sky Group “engages in consumer lending of high-interest bearing loans” and obtained her credit report “to assess whether she would be a good loan prospect for [Sky Group’s] marketing purposes.”  The plaintiff attached to the complaint Sky Group’s online business description and the disclosures from the two reporting agencies reflecting that Sky Group had obtained her report.
  • Finally, the plaintiff alleged that Sky Group certified to the reporting agencies that the plaintiff initiated the request for a credit report when the plaintiff did not make such request.

Sky Group’s motion to dismiss argued that the allegations in the complaint were speculative, conclusory, and failed to allege facts regarding Sky Group’s intent for its use of the credit report.  The court disagreed, denying Sky Group’s motion.

The court’s denial centered upon what is (and is not) necessary at the pleadings stage to allege a FCRA claim.  As the court noted, under well-established federal precedent, to state a FCRA claim a plaintiff must allege: “(i) that there was a consumer report, (ii) that defendants used or obtained it, (iii) that they did so without a permissible statutory purpose, and (iv) that they acted with the specified culpable mental state.”  Id. at *3 (quotation omitted).  Additionally, the FCRA identifies three permissible purposes for disclosure of a consumer report: (1) extending credit; (2) reviewing an account; and (3) collections.  The FCRA imposes civil liability when the violation is willful (i.e. knowingly or recklessly violated).  To prove a reckless violation, a consumer must establish that the company’s action is ‘a violation under a reasonable reading of the statute’s terms.

In the context of this dispute, the court concluded that the plaintiff adequately pled that Sky Group obtained her credit report for marketing purposes or, alternatively, for illegal “usurious” purposes.  Id. at *5-*6.  Accepting the allegations as true, the court agreed that these were not permissible purposes and did not constitute an “objectively reasonable interpretation” of the permissible purposes.

Time will tell whether plaintiff will be able to prevail on the merits of her claim after making it past defendant’s motion to dismiss.  And in the meantime, for more developments in the area of data privacy litigation, stay tuned.  CPW will be there.

 

 

The Fair Debt Collection Practices Act (“FDCPA”) is a significant piece of legislation.  It has regulated “debt collectors,” as defined by statute, for over 40 years.  Recently, the Consumer Financial Protection Bureau issued a new rule implementing the statute’s enforcement (for CPW’s prior coverage, check out here and here).  Despite these significant developments, however, a recent opinion reminds us of one significant shortcoming concerning the FDCPA: the Supreme Court has never addressed standing under the statute.  In the absence of precedent from the nation’s highest court, this recent opinion highlights a common standing analysis performed by courts faced with standing issues under FDCPA claims.  Read on to learn more.

In Salermo v. Watters, No. 19-cv-02791, 2021 U.S. Dist. LEXIS 16169 (S.D. Tex. Jan. 28, 2021), the court granted in part and denied in part a motion to dismiss several FDCPA claims.  The plaintiff received a loan from a credit union that she intended to use to repay credit card debt.  The defendant, a law firm allegedly retained by the credit union to collect on the loan, sent the plaintiff a signed debt collection letter (the “Letter”) on its letterhead.  The defendant’s signature and its letterhead were at the heart of the plaintiff’s two main arguments.

First, the plaintiff argued that the letterhead and signature violated the FDCPA because it implied that an attorney had reviewed her case and drafted the letter.  The plaintiff argued that this violated the FDCPA’s restriction on debt collectors from using “any false, deceptive, or misleading representation”.  This included falsely representing any communication is from an attorney or using “false representation or deceptive means” to collect or attempt to collect a debt.  The plaintiff alleged the letterhead and signature caused her to become “upset and frightened” because they implied that an attorney had reviewed her case and drafted the letter.

Second, the plaintiff also argued that the Letter deceived her concerning the validity of her debt.  The Letter stated that the debt “will be presumed to be valid” if the plaintiff failed to dispute it within a period of time.  In reference to who or what would consider the debt to be “valid,” the plaintiff alleged that the Letter deliberately omitted the words “by the debt collector”.  This omission caused her to believe that her failure to dispute the debt would confirm the debt’s validity to parties besides the debt collector, e.g., creditors, courts, etc.  The plaintiff repeated her arguments that this violated the FDCPA’s restrictions on “false, deceptive, or misleading representation” and using “false representation or deceptive means”.  The plaintiff also introduced a new argument that the omission violated the FDCPA’s requirement that a debt collector notify a consumer that a failure to dispute a debt will cause the debt to be assumed valid by the debt collector.

Salermo is a good exercise in standing under FDCPA claims.  The court reminded us that the Supreme Court has not addressed standing under the FDCPA.  In the absence of precedent from the nation’s highest court, the court applied the Supreme Court’s decision in Spokeo Inc v Robins, 136 S. Ct. 1540 (2016), where standing under the Fair Credit Reporting Act (“FCRA”) was evaluated.  The Salermo court noted that in Spokeo, alleging a statutory violation was not sufficient under the FCRA.  Article III standing was also required.  Applying Spokeo to the case before it, the court determined that the plaintiff had standing for its false representation claims, but found the plaintiff lacked standing for its validity of debt argument.

For the first argument, the court found the plaintiff’s allegations showed that an “unsophisticated consumer reading the [L]etter . . . could reasonably conclude that an attorney prepared and sent it”.  In other words, the court stated, receiving a communication like the Letter “by its nature increases fear and apprehension that a lawsuit is imminent (or that litigation will be involved) when it perhaps might not be.”  Accordingly, “that same fear will exist even in situations where the consumer knows that the debt is valid.”

On the second argument, the court stated the plaintiff did not plead that the debt was not valid and noted that the plaintiff’s counsel conceded the debt’s validity.  The court stated that the FDCPA does not “accord a consumer the right to have others assume that a debt isn’t valid when in fact it is.”

The court also highlighted the defendant’s failure to contest the plaintiff’s pleading for its attorney involvement claim.  The court noted the defendant’s failure was “curious because the complaint appears quite unsupported in this regard”.  The court focused specifically on the plaintiff’s use of “upon information and belief”.  The court observed while “pleading upon information and belief is permissible in a general sense,” this was not a license to turn an otherwise insufficiently pleaded allegation into an allegation recognizing.  The court stated that such allegations must still be supported by “related information or facts” that will “establish that belief.”  The court further compared the plaintiff’s “upon information and belief” allegation with the “typical phrasing” that “[p]laintiff is informed and believes and upon such information and belief alleges”.

So there you have it-Salermo is a reminder of how interconnected FDCPA and FCRA analyses can become.  For more developments in the area of FDCPA and FCRA litigation stay tuned.  CPW will be there.

A recent, brief opinion provides us with an overview of the elements required to sustain claims under the Fair Credit Reporting Act (“FCRA”) and Fair Debt Collection Practices Act (“FDCPA”).  Whether you are developing new expertise or honing your craft, this case provides a convenient review of the elements required for causes of action under both statutes, reminding plaintiffs what must be alleged and guiding defendants as to what to look for while drafting a motion to dismiss.

In Scalercio-Isenberg v. Select Portfolio Servicing, No. 20-cv-4501, 2021 U.S. Dist. LEXIS 15117 (D.N.J. Jan. 27, 2021), the court granted a motion to dismiss claims against a mortgage servicer.  The plaintiff alleged that the defendant, its mortgage servicer, violated federal and state credit reporting statutes.  The plaintiff alleged that although it regularly made its mortgage payments on time, the defendant held the payments in a “suspense” account, falsely reported late payments to consumer reporting agencies, and opened an unauthorized escrow account in the plaintiff’s name.

The FCRA requires that the furnisher of information to a consumer reporting agency provide only accurate information.  To help enforce this, the FCRA permits a cause of action against a furnisher of information.  This claim requires: (1) the plaintiff notify the consumer reporting agency of disputed information; (2) the consumer reporting agency then notifies the furnisher of the disputed information; and (3) the furnisher fails to investigate and modify the disputed information.

The court found the plaintiff’s FCRA claim failed because he did not allege the second element.  The court determined that the defendant’s duty, as the furnisher of allegedly disputed information, to investigate was not triggered because the plaintiff did not allege that the consumer reporting agency notified the defendant of the disputed information.  Instead, the plaintiff alleged it directly notified the consumer reporting agency and the defendant.  The plaintiff’s notice did not trigger the defendant’s duty to investigate.

Second, the plaintiff alleged the defendant violated the FDCPA by sending “monthly mortgage debt collection statements” that contained “false, erroneous information” and intentionally omitted the plaintiff’s allegedly timely payments.

The FDCPA regulates how a debt collector may collect debts.  The FDCPA applies to debt collectors, which the statute defines as “any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.”  15 U.S.C. § 1692a(6).  As may be expected, the meaning of “debt collector” is often disputed, and Scalercio was no exception.

The court found the plaintiff’s FDCPA claim failed because the defendant was not a debt collection agency.  The court noted the plaintiff did not allege the mortgage was in default when the defendant became its servicer, which was required for the defendant to be considered a debt collection agency under the FDCPA.

Overall, Scalercio is a short but sweet opinion that reminds us of common pleading issues that may emerge when litigating claims under the FCRA or FDCPA.

For data privacy litigations filed in state court, one strategic option that should be considered by defense counsel is whether the case can (and should) be removed to federal court.  When a plaintiff asserts a claim under federal law, removal to federal court may be based on federal question jurisdiction.  Straightforward, right?

Well, what about when a plaintiff files suit in state court, asserting exclusively state law causes of action, but some of plaintiff’s claims are preempted under federal law?  Can a defendant still remove the litigation to federal court on the basis of federal question jurisdiction?  In a decision out this week concerning Fair Credit Reporting Act (“FCRA”) preemption, the Southern District of New York answered this question with a resounding NOPE.  Torres v. Wakefield & Assocs., 1:20-cv-09343, 2021 U.S. Dist. LEXIS 10345 (S.D.N.Y. Jan. 20, 2021).

In Torres, the plaintiff initially sued in New York state court and the defendant removed the case to the Southern District of New York.  Upon removal, the Torres plaintiff sought to have the case kicked back to state court, on the basis that the complaint did not state any claim for relief based on a federal statute.  In response, the defendant argued that certain of plaintiff’s claims were preempted under the FCRA and the Fair Debt Collection Practices Act (“FDCPA”).

In a succinctly worded opinion, the court rejected defendant’s invocation of the FCRA and FDCPA as a basis for federal jurisdiction.  Citing well-established precedent from the Second Court of Appeals, the court explained that “[o]rdinarily, preemption is a defense to be asserted in state court and not a ground for removal, except in a limited number of cases in which ‘complete preemption’ applies.”  The court held that the FCRA and FDCPA are not of the group of “certain federal statutes [] construed to have such ‘extraordinary’ preemptive force that state-law claims coming within the scope of the federal statute are transformed, for jurisdictional purposes, into federal claims—i.e., completely preempted.’”

Accordingly, because the FCRA and FDCPA did not “completely preempt” all of plaintiff’s state law claims, the litigation was remanded back to state court.  Whether the Torres defendant will escape the litigation through assertion of a preemption defense remains to be seen (although this is not a new issue insofar as the FCRA is concerned).  Stay tuned.

Back in August, CPW reported on a developing issue in the consumer privacy space – one of the “big three” consumer reporting agencies (“CRAs”) was sued for using “matching technology” against the “Specially Designated Nationals” list maintained by the U.S. Department of the Treasury’s Office of Foreign Assets Control, and similar “terrorist watch lists,” on consumers’ credit reports.  This practice occasionally resulted in consumers incorrectly being presented as “potential” matches against these lists on their credit reports.  The Ninth Circuit found in Ramirez v. TransUnion LLC, 951 F.3d 1008 (9th Cir. 2020) that TransUnion’s failure to use additional identifiers, such as date of birth, to verify the matches could be found to be objectively unreasonable.

In a first of its kind ruling, the Ninth Circuit also found in Ramirez that every class member needed to have Article III standing at the final stages of a damages suit.  It determined that the class of 8,185 consumers who had received inaccurate reports using the matching technology could obtain money damages, although Judge McKeown penned a dissent concluding that only the 1,853 consumers whose credit reports were requested by a potential credit grantor had standing to assert a claim.  The Court also reduced the punitive damages award per class member, finding the sum to be excessive in violation of due process.  TransUnion appealed both issues and petitioned the Supreme Court for a writ of certiorari in September.

This morning, the Supreme Court granted TransUnions’ petition.  While it declined to take up the punitive damages issue, it granted cert for the question: “Whether either Article III or Rule 23 permits a damages class action where the vast majority of the class suffered no actual injury, let alone an injury anything like what the class representative suffered.”

This decision is sure to impact future class action litigation and issues of standing, especially for claims under the FCRA.  Will we have another Spokeo on our hands?  Will the majority’s position or Judge McKeown’s dissent win the day?  We’ll be sure to let you know.