Consumer Finance Class Actions: FCRA and FACTA Leveraging New - - PowerPoint PPT Presentation

Consumer Finance Class Actions: FCRA and FACTA

Leveraging New Developments in Certification, Damages and Preemption

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WEDNESDAY, MARCH 21, 2012

Presenting a live 90-minute webinar with interactive Q&A

Barry Goheen, Partner, King & Spalding, Atlanta Donna L. Wilson, Partner, Buckley Sandler, Santa Monica, Calif. James A. Francis, Atty, Francis & Mailman, Philadelphia

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Legal Counsel to the Financial Services Industry

FCRA AND FACTA CLASS ACTIONS

DONNA L. WILSON

6

• The Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681

et seq., protects consumer credit rights by regulating the collection, dissemination, and use of consumer credit information:

– § 1681b(c)(1) prohibits consumer reporting agencies (“CRA”) from

furnishing consumer credit information in transactions not initiated by, and without the consent of, the consumer except when the request is made in connection with a “firm offer of credit or insurance.”

– § 1681m(d)(1) requires businesses obtaining consumer credit

information to make certain disclosures to the consumer, including that the consumer satisfied the criteria for the credit or insurance

• ffered at the time of solicitation and that the consumer may opt out.

GENERAL OVERVIEW: FCRA

7

GENERAL OVERVIEW: FACTA

• The Fair and Accurate Credit Transactions Act

(“FACTA”), enacted December 4, 2003, amended FCRA to add the “truncation requirement”:

– § 1681c(g)(1): “Except as otherwise provided in this

subsection, no person that accepts credit cards or debit cards for the transaction of business shall print more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of sale or transaction.” (Emphasis added.)

– § 1681n and § 1681o provide to individual consumers a

cause of action for willful and negligent violations of the truncation requirement.

8

PREEMPTION OF STATE LAWS

• Generally, FCRA preempts only those state laws

dealing with collection, distribution, or use of information about consumers to the extent the state law is inconsistent with federal law (§ 1681t(a)).

• Nevertheless, FCRA contains a number of exceptions

to the general rule in which a state law is preempted although it is consistent with FCRA (§ 1681t(b)).

• The relationship between § 1681t(b)(1)(F), added in

1996, and the prior-existing § 1681h(e) is frequently litigated.

9

PREEMPTION OF STATE LAWS (cont.)

• Section 1681(b)(1)(F) vs. Section 1681h(e)

– 15 U.S.C. § 1681(b)(1)(F): preempts all state law claims

relating to the responsibilities of any persons who furnish information to consumer reporting agencies.

– 15 U.S.C. § 1681h(e): expressly prohibits any defamation,

invasion of privacy or negligence action by a consumer against a CRA, any user of information, or any person who furnishes information to a CRA with respect to reporting of information except as to false information furnished with malice or willful intent to injure consumer.

– Different courts reconcile these sections in multiple ways,

with three major approaches.

10

PREEMPTION OF STATE LAWS (cont.)

• Approach 1: The Total Preemption View

– Some courts have held that § 1681(b)(1)(F) rendered § 1681h(e)

useless by subsuming it entirely, preempting all state claims against furnishers of credit information.

• Purcell v. Bank of Am., 659 F.3d 622 (7th Cir. 2011):

– First appellate decision addressing issue squarely. – Held: § 1681h(e) created no right to recover for willfully false reports but merely did not preempt such claim, and the addition of § 1681(b)(1)(F) demonstrated Congressional intent to preempt all

state claims.

– But: other courts have noted the total preemption

approach renders § 1681h(e) superfluous in violation of cardinal rule of statutory construction.

11

PREEMPTION OF STATE LAWS (cont.)

• Approach 2: The Statutory View

– Other district courts have found that § 1681(b)(1)(F)

preempts only those state law claims arising from statute, while common law claims for defamation, invasion of privacy, and negligence are preempted by § 1681(h)(e) unless based on malicious or willful intent to injure the consumer.

– But: courts criticizing this view note that the Supreme

Court has held “state law” refers to both common and statutory law, and that the legislative history of § 1681(b)(1)(F) demonstrates intent to establish uniform regulations, which may arise from statute or common law.

12

PREEMPTION OF STATE LAWS (cont.)

• Approach 3: The Temporal View

– Still other district courts have held that § 1681(b)(1)(F) only

preempts state-law claims arising from acts occurring after the credit information furnisher knew, or should have known, the information was inaccurate.

• Based on § 1681s-2(b), which refers to duties after the furnisher is

aware of a dispute regarding accuracy.

• Claims arising before furnisher knew the information was inaccurate

are subject only to qualified preemption under § 1681h(e).

– But: courts criticizing this approach note it paradoxically

immunizes furnishers with knowledge of the inaccuracy while leaving those acting without such knowledge exposed to potential common-law liability.

13

PREEMPTION OF STATE LAWS (cont.)

• State laws are preempted by § 1681t(b) of FCRA if

they impose requirements or prohibitions on:

– Exchange of information among affiliated companies – Information that may be included in credit reports – Responsibilities of persons who furnish information to credit

bureaus

– Duties of persons providing adverse action notices due to use of

credit reports

– Procedures credit bureaus must follow when responding to

consumer disputes

– Prescreening activities based on credit reports – Form and content of the summary of consumer rights distributed

by credit bureaus

14

PREEMPTION OF STATE LAWS (cont.)

• State laws are preempted by § 1681t(b) of FCRA if

they impose requirements or prohibitions on (cont.):

– Fraud alerts in consumer credit files – “Red flag” procedures for identifying possible instances of

identity theft

– Blocking information resulting from identity theft – Truncating credit card and debit card account numbers – Truncating social security numbers on credit reports to consumer – Debt collector notice of fraudulent information – Coordination of identity theft complaint investigations – Prohibiting the sale of debt caused by identity theft

15

PREEMPTION OF STATE LAWS (cont.)

• Certain state laws are expressly saved from preemption (§

1681t(b)(1)(F)):

–

California Civil Code § 1785.25(a) and Massachusetts Annotated Laws,

• Ch. 93, § 54A(a), both prohibiting a person from furnishing information

to a CRA that the person knows to be incomplete and inaccurate

–

But see Liceaga v. Debt Recovery Solutions, LLC, 86 Cal.Rptr.3d 876 (Cal. Ct. App. 2008) (holding that exemption to FCRA preemption applies only to Cal. Civ. Code § 1785.25(a) and subsection creating private cause of action is preempted) and Leet v. Cellco P’ship, 480 F.

• Supp. 2d 422 (D. Mass. 2007) (FCRA’s failure to preempt subsection

creating cause of action under Ch. 93, § 54A(a) is fatal to private claim).

–

Compare Catanzaro v. Experian Info. Solutions, Inc., 671 F. Supp. 2d 256 (D. Mass. 2009) (subsection of Mass. Ann. Laws, Ch. 93, § 54A creating private cause of action is neither “requirement” nor “prohibition” but merely mechanism of enforcement, and is not preempted).

16

DAMAGES RECOVERABLE UNDER FCRA AND FACTA

• Actual damages

– Under section 1681o(a)(1), a plaintiff may bring an action

and recover actual damages for a negligent violation.

• Statutory damages

– Under section 1681n(a)(1)(A), a plaintiff may bring an

action and recover statutory damages between $100 and $1,000 for a willful violation.

• Punitive damages and attorneys’ fees

– Under sections 1681n(a)(2), 1681n(a)(3) and 1681o(a)(2),

a plaintiff may also seek punitive damages, costs and attorneys’ fees.

• There is NO statutory limit on an aggregate award.

17

DAMAGES RECOVERABLE UNDER FCRA AND FACTA (cont.)

• Safeco Insurance Co. v. Burr, 551 U.S. 47 (2007)

– In Safeco, the Supreme Court clarified the “willfulness” standard

that must be met for statutory damages under § 1681n(a)(1)(A) includes knowing, intentional, and reckless violations.

– “Reckless” conduct entails “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.”

– “Thus, a company subject to 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.”

18

DAMAGES RECOVERABLE UNDER FCRA AND FACTA (cont.)

• How have courts interpreted “Reckless”?

– Shannon v. Equifax Info. Servs., 764 F. Supp. 2d 714 (E.D. Pa.

2011)

• Consumer who successfully challenged creditor’s attempt to

collect debt that had already been paid sued CRA under FCRA for it failure to correct credit file. When CRA confirmed debt with creditor, creditor incorrectly affirmed that debt was

• wed. CRA moved for summary judgment.
• Motion granted as to willful violation because CRA’s

investigation procedures, which were consistent with prior case law and did not pose “known or obvious risk” of reproducing inaccurate information, were not “reckless.”

19

DAMAGES RECOVERABLE UNDER FCRA AND FACTA (cont.)

• How have courts interpreted “Reckless” (cont.)?

– Price v. TransUnion, LLC, 737 F. Supp. 2d 281 (E.D. Pa. 2010)

• Consumer whose credit report contained information about

another individual with the same name notified CRA three times of inaccuracy and CRA failed to correct its records. Consumer sued CRA under FCRA. CRA moved for summary judgment on claim of willful violation.

• Summary judgment denied because CRA’s failure to correct

consumer’s credit file despite repeated requests could be found reckless by jury.

20

DEVELOPMENTS IN CLASS CERTIFICATION – DAMAGES

• Murray v. GMAC Mortgage Corp., 2005 WL

3088435 (N.D.Ill. Nov. 15, 2005):

• Lender sent credit solicitation to consumers that allegedly

did not constitute “firm offer of credit” after obtaining information from credit reporting agency, as required by § 1681b(c)(1)(B)(i).

• Putative class action filed on behalf of 1.2 million

recipients of similar offers from GMAC, demanding statutory damages of $100 to $1,000 per person.

• District court denied class certification because, among
• ther things, the plaintiff chose to forego compensatory

damages in favor of statutory damages, and the potential award would be “ruinously high.”

21

DEVELOPMENTS IN CLASS CERTIFICATION – DAMAGES (cont.)

• In Murray v. GMAC Mortgage Corp., 434 F.3d 948

(7th Cir. 2006), the Seventh Circuit reversed:

• Representative plaintiff could forego compensatory damages

in order to achieve class certification unless the district court finds that personal injuries of all or almost all of the claimants are large in relation to statutory damages.

• Rejected GMAC’s argument that class treatment was

impractical because a court cannot know whether a firm offer

• f credit was made without examining each recipient’s

circumstances.

• No due process infirmity based on disproportionality of

damages at the class certification stage of the litigation.

22

DEVELOPMENTS IN CLASS CERTIFICATION – DAMAGES (cont.)

• Murray influenced decisions nationwide
• Strictly applied in firm offer cases
• Asbury v. People’s Choice Home Loan, Inc., No. 05-

5483, 2007 WL 809531 (N.D. Ill. Mar. 12, 2007)

– demanded defendant show cause as to why it should not be

sanctioned for its arguments running squarely against Murray with regard to damages.

• But see Villagran v. Central Ford, Inc., 524 F. Supp. 2d

866 (S.D. Tex. 2007)

– awarded summary judgment to defendant but explained in

dicta that, had it addressed the merits of class certification, certification would be inappropriate because defendant sent

• ut several sets of different mailings, and individual inquiries

were necessary to determine which of several different mailings was sent to each potential class member.

23

DEVELOPMENTS IN CLASS CERTIFICATION – DAMAGES (cont.)

• Murray has been followed in FACTA

truncation cases:

– Bateman v. American Multi-Cinema, Inc., 623 F.3d

708 (9th Cir. 2010)

• Rejected earlier California district courts’ decisions finding

that Rule 23(b)(3)’s superiority requirement allows courts to consider the proportionality of actual damages to actual harm

• Limiting class availability due to potential for “enormous”

liability would subvert legislative intent behind FACTA

• Agreed with Murray that the class certification stage is not

the appropriate time to evaluate whether damages are excessive

24

DEVELOPMENTS IN CLASS CERTIFICATION – DAMAGES (cont.)

• Harris v. Mexican Specialty Foods, Inc., 564 F.3d

1301 (11th Cir. 2009)

– Overruled Grimes v. Rave Motion Pictures Birmingham, L.L.C.,

552 F. Supp. 2d 1302 (N.D. Ala. 2008), which held that FACTA language “not less than $100 and not more than $1,000” was unconstitutionally void for vagueness and because imposition of punitive damages without actual damages was necessarily disproportionate.

– Held that Congress permissibly limited juries’ discretion by

creating range of statutory damages.

– Statutory damages provision did not constitute punitive

damages.

– Note: On remand, district court denied class certification on the

grounds that the plaintiff could not demonstrate an ascertainable class without individualized inquiry into each class member’s case.

25

DEVELOPMENTS IN CLASS CERTIFICATION – DAMAGES (cont.)

• Subsequent history of Murray and Bateman

– Both cases were resolved for a fraction of the potentially

enormous damages.

– After Safeco was decided, the Murray defendant was granted

summary judgment because the defendant had not acted recklessly as a matter of law.

– The Bateman class settled for popcorn coupons valued at about

$23 per class member (well under the potential $100-$1000 in statutory damages), less than $300,000 in attorneys’ fees and a $7500 incentive payment to the class representative. Fewer than 1000 class members responded to the class notice, and the remaining coupons were distributed at theaters.

26

DEVELOPMENTS IN CLASS CERTIFICATION – Credit Reporting

• Inaccurate credit report cases under FCRA

– Most courts have denied class certification on grounds that

individualized inquiries were necessary to determine whether reports contained accurate information

• E.g., Owner-Operator Independent Drivers Association, Inc.
• v. USIS Commercial Services, Inc., 537 F.3d 1184 (10th Cir.

2008)

– Others have expressed concern about greater potential for

actual damages

• E.g., Gardner v. Equifax Info. Services, LLC, No. 06-3102,

2007 WL 2261688 (D. Minn. Aug. 6, 2007) (finding plaintiffs were inadequate because of their choice to forego actual damages, and individualized inquiry necessary for plaintiffs with actual damages)

27

DEVELOPMENTS IN CLASS CERTIFICATION – Credit Reporting (cont.)

• Inaccurate credit report cases under FCRA (cont.)

– But see Summerfield v. Equifax Information Services, LLC,

264 F.R.D. 133 (D.N.J. 2009) and Chakejian v. Equifax Information Services, LLC, 256 F.R.D. 492 (E.D. Pa. 2009)

• Plaintiffs alleged that Equifax violated FCRA by not disclosing

the name and address of the public records vendor Equifax hired to verify the record.

• Courts held that because all members of the class based their

claims on the fact that Equifax sent them an allegedly misleading form letter, plaintiffs were injured in substantially the same way under substantially similar factual circumstances.

• Rejected Equifax’s claims that the class representative’s failure

to bring claims for actual damages rendered the class representative inadequate.

28

DEVELOPMENTS IN CLASS CERTIFICATION – FACTA

• Litigating the scope of FACTA

– Initially, truncation cases focused on paper credit card

receipts provided to a customer at the point of sale.

– Recently, plaintiffs have tested the scope of FACTA

by arguing it should be applied to receipts sent through the mail and electronically.

– Cases turn on courts’ interpretations of “point of sale”

and “electronically printed.”

– Several district courts have held that emailed receipts

must comply with the truncation requirement.

29

DEVELOPMENTS IN CLASS CERTIFICATION – FACTA

• Litigating the scope of FACTA (cont.)
• Two federal appellate courts have rejected applying FACTA to

emailed receipts:

– Shlahtichman v. 1-800 Contacts, Inc., 615 F.2d 794 (7th Cir.

2010), cert. denied, 131 S. Ct. 1007 (2011)

• The court rejected a FACTA claim for an emailed receipt lain

meaning of “print” precludes FACTA actions for emailed receipts.

• Overall statutory context suggested it applied to “face-to-face

transactions that take place in a ‘bricks-and-mortar’ store . . . At which the consumer is handed a receipt.”

• Court found FACTA to be “unambiguous.”

– Simonoff v. Expedia, Inc., 643 F.3d 1202 (9th Cir. 2011)

• The court adopted the Simonoff decision, agreeing that it was

consistent with “the plain meaning of ‘print’ and ‘electronically printed’ and their context in the statute.”

30

DEVELOPMENTS IN CLASS CERTIFICATION – FACTA

• Other recent FACTA litigation:

– Long v. Tommy Hilfiger U.S.A., Inc., --- F. 3d ----, 2012 WL

180874 (3rd Cir. Jan. 24, 2012)

• Retailer printed receipt that properly truncated credit card account

number and year of expiration date but showed two-digit month of card’s expiration.

• Third Circuit held that “expiration date” refers to “information or data

. . . contained in the expiration date ‘field’ on the face of the credit or debit card,” so printing any portion of the expiration date violates FACTA.

• However, retailer’s interpretation of FACTA to allow partial

expiration dates was not “objectively unreasonable” as set forth in Safeco, and thus was not a willful violation.

31

DEVELOPMENTS IN CLASS CERTIFICATION – FACTA

• Does post-complaint compliance with FACTA impact

class certification?

• Leysoto v. Mama Mia I, Inc., 255 F.R.D. 693 (S.D. Fla. 2009)

– among other factors, compliance with FACTA within two months of being sued weighed against class certification.

• But see Bateman v. American Multi-Cinema, Inc., 623 F.3d

708 (9th Cir. 2010) – compliance within weeks of being sued was irrelevant at the class certification stage, as FACTA contains no “safe harbor.”

• In any case, good-faith compliance once defendant is aware
• f the violation may be a factor bearing on the fact-finder’s

“willfulness” inquiry. See Edwards v. Toys “R” Us, 527 F.Supp.2d 1197 (C.D. Cal. 2007).

32

LITIGATION STRATEGIES AND CONSIDERATIONS (cont.)

• Case Evaluation

– Early case assessment: Evaluate the cost of defense versus

chronic settlement of unmeritorious claims and the precedential value of a settlement

– How to reach an early and cost-effective resolution of class

action claims that will not result in payment of attorneys’ fees that are disproportionately large in relation to the amount that will benefit or can be achieved by individual plaintiffs participating in a class action

– Control future litigation: identify trends to ward off future

lawsuits; know when to resolve a case and when to to defend a suit

33

LITIGATION STRATEGIES AND CONSIDERATIONS (cont.)

• Use Safeco to argue that there was not a “willful”

violation

• Many cases will involve mass mailings in the

millions

• Class notice alone could cost millions of dollars
• Murray v. GMAC Mortgage suggests settlement

funds averaging $1 per class member are per se unreasonable

• Although they provide value to the class, cash

alternatives (e.g., free credit reports) will be highly scrutinized under the Class Action Fairness Act (CAFA)

34

CONTACT INFORMATION

Donna L. Wilson, Esq. dwilson@buckleysandler.com 424-203-1010 www.buckleysandler.com

DISPROPORTIONATE OR BANKRUPTING LIABILITY IN FCRA CLASS ACTIONS

Barry Goheen KING & SPALDING LLP

1180 Peachtree Street, N.E. Atlanta, GA 30309-3521 (404) 572-4600 bgoheen@kslaw.com

March 21, 2012

36

• Enacted in 1970, intended to promote efficiency in

the nation’s banking system and to protect consumer privacy. See TRW Inc. v. Andrews, Inc., 534 U.S. 19, 24 (2001)

• FCRA “was crafted to protect consumers from the

transmission of inaccurate information about them and to establish credit reporting practices that utilize accurate, relevant, and current information in a confidential and responsible manner.” Cortez v. Trans Union, LLC, 617 F.3d 688,707 (3d Cir. 2010).

5

FAIR CREDIT REPORTING ACT

37

• Enacted December 2003, amended FCRA effective

December 2006

• Among other things, FACTA provides that “no

person that accepts credit or debit cards for the transaction of business shall [electronically] print more than the last 5 digits of the card number . . . upon any receipt provided to the cardholder at the point of sale of transaction.” 15 U.S.C. §1681c(g)(1).

5

FAIR AND ACCURATE CREDIT TRANSACTIONS ACT

38

• Claims for negligent violations: actual damages
• Claims for willful violations: actual or statutory

damages in range of $100 to $1,000; punitive damages

• No injunctive relief in private actions
• Reasonable attorneys’ fees for successful plaintiff
• No cap on damages in class actions certified under

FCRA/FACTA

5

REMEDIES UNDER FCRA/FACTA

39

1) DISPROPORTIONATE LIABILITY: Should a court consider or compare the potential damages to the class to the actual harm to the class in deciding class certification? 2) BANKRUPTING LIABILITY: Should an otherwise certifiable class be denied certification if the potential damages award would put the defendant

• ut of business?

5

TWO ISSUES

40

• 1. Murray v. GMAC Mortgage Corp., 434 F.3d 948 (7th
• Cir. 2006)
• 2. Stillmock v. Weis Markets, Inc., 385 Fed. Appx. 267

(4th Cir. 2010)

• 3. Bateman v. American Multi-Cinema, Inc., 623 F.3d

708 (9th Cir. 2010)

5

LEADING OPINIONS REJECTING DISPROPORTIONALITY THEORY THAT JUSTIFIES DENIAL OF CLASS CERTIFICATION

41

• Class action involving whether letter mailed to 1.2

million persons constituted “firm offer of credit” within FCRA

• Denial of certification reversed: “The reason that

damages can be substantial . . . does not lie in an ‘abuse’ of Rule 23; it lies in the legislative decision to authorize awards as high as $1,000 per person, . . . combined with GMACM’s decision to obtain the credit scores of more than a million persons.” 434 F.3d at 953.

• “The district judge sought to curtail the aggregate

damages for violations he deemed trivial. Yet it is not appropriate to use procedural devices to undermine laws of which a judge disapproves.” Id. at 953-54.

5

MURRAY

42

• Stillmock
• FACTA “truncated receipt” case; defendant

printed nearly 15 million non-complying receipts

• Denial of certification reversed: “The Court is

not convinced that the fact that an individual plaintiff can recover attorney’s fees in addition to statutory damages of up to $1,000 will result in enforcement of the FCRA by individual actions of a scale comparable to the potential enforcement by way of class action.” 385

• Fed. Appx. at 275 (quoting Tchoboian v.

Parking Concepts, Inc., 2009 WL 2169883, *9 (C.D. Cal. July 16, 2009))

5

THE 2010 APPELLATE OPINIONS

43

• Bateman
• FACTA “truncated receipt” case; defendant printed over

290,000 non-complying receipts, thus possible damages award of $29 million to $290 million

• Denial of certification reversed: “None of the[]

enumerated factors [in the superiority portion of Rule 23(b)(3)] appear to authorize a court to consider whether certifying a class would result in disproportionate damages.” 623 F.3d at 713.

• “There is no indication in the statute, nor any indication

in the legislative history, that Congress provided for judicial discretion to depart from the $100 to $1000 range where a district judge finds that damages are disproportionate to harm.” 623 F.3d at 719.

5

THE 2010 APPELLATE OPINIONS

44

• Bateman (cont.)
• “To the extent that statutory damages serve a deterrent

purpose, a court undermines that purpose in denying class certification on the basis of the proportionality of actual harm and statutory liability.” 623 F.3d at 719.

• “Allowing denial of class certification because of the

sheer number of violations and amounts of potential statutory damages would allow the largest violators of FACTA to escape the pressure of defending class actions and, in all likelihood, to escape liability for most

• violations. In other words, whatever risk of over

deterrence class certification poses, refusing to certify a class on these grounds poses the risk of significant under deterrence.” 623 F.3d at 719.

5

THE 2010 APPELLATE OPINIONS

45

• Hanlon v. Palace Entertainment Holdings, LLC, 2012 WL 27461

(W.D. Pa. Jan. 3, 2012)

• FACTA receipt case; approx. 1,850,000 receipts printed during

class period

• Settlement class approved: “The superiority of a class action

suit for violations of FACTA has been seriously questioned. Courts’ concerns arise from the nature of the remedy the statute provides; it awards substantial statutory damages of between $100 and $1,000 per violation but does not require the plaintiff to prove any monetary harm at all. This could result in potentially annihilating statutory damages to be awarded against a defendant business despite the plaintiff having suffered no ill effects at all.” But court cited Bateman for the proposition that “the amount and proportionality of potential damages should not be considered for purposes of certification.” Id., *4 (internal citations and quotations omitted).

5

RECENT DISTRICT COURT OPINIONS

46

• Engel v. Scully & Scully, Inc., __ F.R.D. __, 2011 WL 4091468

(S.D.N.Y. Sept. 14, 2011)

• FACTA truncated receipt case
• Class certification granted: “Where proceeding

individually would be prohibitive due to the minimal recovery, the class action device is frequently superior to individual actions.” Id., *11 (quotation omitted).

• “Although I conclude that a class action is a superior

method for resolving these claims, the question of whether a large statutory damages verdict would be excessive where no plaintiff was actually harmed is not yet ripe.” Id., n.5.

5

RECENT DISTRICT COURT OPINIONS

47

• Hammer v. JP’s Southwestern Foods, 267 F.R.D. 284

(W.D. Mo. 2010):

• FACTA truncated receipt case, approx. 45,000

class members

• Class certification granted: “[T]he potential for

a large damage award should not be considered in assessing the superiority of class certification.” 267 F.R.D. at 290.

• Request for decertification denied: 2011 WL

183972 (W.D. Mo. Jan. 19, 2011)

5

RECENT DISTRICT COURT OPINIONS

48

• Ratner v. Chemical Bank N.Y. Trust Co., 54 F.R.D. 412

(S.D.N.Y. 1972)

• Wilcox v. Commerce Bank of K.C., 474 F.2d 336 (10th
• Cir. 1973)
• London v. Wal-Mart Stores, 340 F.3d 1246 (11th Cir.

2003)

• Leysoto v. Mama Mia I, 255 F.R.D. 693 (S.D. Fla. 2009)
• The Stillmock Concurrence

5

COURTS HOLDING THAT PROPORTIONALITY OF DAMAGES TO HARM IS A FACTOR

49

• Ratner
• Truth in Lending Act case, certification sought on

behalf of 130,000 cardholders

• Class certification denied: plaintiff had alleged only

“technical” violations of TILA; “allowance of thousands of minimum recoveries like plaintiff’s would carry to an absurd and stultifying extreme the specific and essentially inconsistent remedy Congress prescribed as the means of private enforcement.” 54 F.R.D. at 414, 416.

5

COURTS HOLDING THAT PROPORTIONALITY OF DAMAGES TO HARM IS A FACTOR

50

• Wilcox:
• London:

5

COURTS HOLDING THAT PROPORTIONALITY OF DAMAGES TO HARM IS A FACTOR

Certification inappropriate in TILA case where “the complaint contains no indication of any actual damages in substantial or provable amount” and “aggregated relief would be oppressive in consequence and difficult to justify.” 474 F.2d at 347. “[E]ven though economic harm is not an element of the ... common law claim for restitution, it may be required for superiority under the Federal Rules of Civil Procedure. This is especially likely when, as in the present suit, the defendants’ potential liability would be enormous and completely out of proportion to any harm suffered by the plaintiff.” 340 F.3d at 1255 n.5.

51

• Leysoto
• FACTA “truncated receipt” class action with

approximately 46,000 members, thus potential statutory damages range of between $4,600,000 and $46,000,000; defendant’s net worth was approximately $40,000

• Certification denied: if certification were granted,

“Mama Mia would face almost certain insolvency, despite the fact that its conduct caused no actual

• damages. … Such an outcome would not be a fair,

efficient, or cost-effective adjudication of the controversy.” 255 F.R.D. at 698.

5

COURTS HOLDING THAT PROPORTIONALITY OF DAMAGES TO HARM IS A FACTOR

52

• Leysoto (cont.)
• “[T]o grant the requested class relief would allow this Plaintiff, and his

counsel, to dangle the Sword of Damocles over Defendant, without any showing of actual economic harm.” 255 F.R.D. at 699.

• Helms v. Consumerinfo.com, Inc., 236 F.R.D. 561, 569 (N.D. Ala. 2005)

(denying certification in Credit Reporting Organizations Act case: “Given that Defendant does not offer fraudulent services, considering that Plaintiff has exhibited little if any actual damages, and with an eye to the likelihood that class damages would be disproportionately large when compared to Defendant’s actual conduct, the Court concludes that allowing the action to proceed in class form is not superior.”).

• Hillis v. Equifax Consumer Services, Inc., 237 F.R.D. 491, 506 (N.D. Ga.

2006), (denying certification in Credit Reporting Organizations Act case where potential damages would “approach[] $200 million”: “[T]he damages would be far out of proportion to the violations alleged.”).

5

COURTS HOLDING THAT PROPORTIONALITY OF DAMAGES TO HARM IS A FACTOR

53

• Stillmock concurring opinion
• “Ordinarily, a company that violates FACTA will do so not once
• r twice, but instead thousands or even millions of times. …

And because FACTA provides for statutory damages of at least $100, such suits almost by definition expose companies to liability that is orders of magnitude beyond their income or net worth, regardless of the size of the corporation.” 385 Fed. Appx. at 280 (Wilkinson, J., concurring).

• “FACTA class actions threaten businesses of every size with

devastating classwide liability for what may be harmless statutory violations.” Id. (quoting 1 McLaughlin on Class Actions § 2:38).

5

COURTS HOLDING THAT PROPORTIONALITY OF DAMAGES TO HARM IS A FACTOR

54

• Under Murray and Bateman, considerations of large damage

awards are merely hypothetical at class certification stage; if the class trial results in a disproportionate damages award, “[a]n award that would be unconstitutionally excessive may be reduced, … but constitutional limits are best applied after a class has been certified.” Murray, 434 F.3d at 954; see also Bateman, 623 F.3d at 723 (“We … conclude that it is not appropriate to evaluate the excessiveness of the award at this [class certification] stage of the litigation.”).

• Under Ratner, London, and others, the potentially disproportionate

damages award when compared with the actual harm sustained by the class members is a proper consideration in assessing the superiority component of class certification; an award that would be

• ut of all proportion to the harm would suggest that class treatment

is not the superior method of adjudication.

5

SUMMARY ON DISPROPORTIONATE LIABILITY

55

• Leysoto
• Stillmock concurrence
• Concurrence in Parker v. Time Warner

Entertainment Co., 331 F.3d 13 (2d Cir. 2003)

• Bateman

5

BANKRUPTING OR ANNIHILATING LIABILITY

56

• Leysoto
• “[C]ourts generally reason that FACTA certification would permit

potentially annihilating statutory damages to be awarded against a defendant business, without any requirement or proof

• f actual harm. … The Court shares this concern.” 255 F.R.D.

at 698.

• “And while there is no indication of misconduct or malicious

intent in this dispute, the threat of annihilation associated with certification does not serve the purpose of the legislation, and moreover, is simply unnecessary to effectively enforce the Act and compensate victims of identity theft. As such, the Court finds, based on the facts presented in this matter, that individual actions against Mama Mia are a superior method to adjudicate any remaining FACTA disputes.” Id. at 699.

5

BANKRUPTING OR ANNIHILATING LIABILITY

57

• Stillmock Concurrence:
• “I see nothing in the statute, however, that mandates class

treatment of FACTA claims or precludes a district court from considering the prospect of annihilative liability in the certification calculus.” 385 Fed. Appx. at 276 (Wilkinson, J., concurring)

• “Rather than considering annihilative damages as they bear on

due process, … it is preferable for a district court to address them in the context of Rule 23(b)(3)’s superiority requirement. Doing so … permits a district court to declare that a device is not superior when a plaintiff whose members suffered no identity theft of any sort still threatens to wipe an entire company off the map.” Id. at 278.

5

BANKRUPTING OR ANNIHILATING LIABILITY

58

• Stillmock Concurrence (cont.):
• “I worry that the exponential expansion of statutory

damages through the aggressive use of the class action device is a real jobs killer that Congress has not sanctioned.” Id. at 276. “It is doubtful that Congress intended to cause these thousands of innocent employees to lose their jobs and paychecks by bankrupting their employer, in a situation where no plaintiff suffered identity theft.” Id. at 280.

5

BANKRUPTING OR ANNIHILATING LIABILITY

59

• Parker Concurrence:
• Case involved statutory damages for cable

subscribers with $1,000 minimum payment; “I do not believe that in specifying a $1,000 minimum payment for … violations, Congress intended to expose [violators] to liability for billions of dollars.” 331 F.3d at 27 (Newman, J., concurring).

• “A claim of this sort creates a tension between the

statutory provisions for minimum damages and the Rule 23 provisions for class actions that probably was not within the contemplation of those who promulgated either the statute or the rule.” Id. at 26.

5

BANKRUPTING OR ANNIHILATING LIABILITY

60

• Murray did not address bankrupting or annihilating damages
• Stillmock panel opinion did not address but directed the district

court to address upon remand

• Bateman did not address the issue: “We reserve judgment as to

whether a showing of ‘ruinous liability’ would warrant denial of class certification in a FACTA or similar action.” 623 F.3d at 723.

• The district court in Hammer rejected the defendants’ argument:

“[T]he court is not persuaded that Defendants’ concerns about the potentially ruinous effects of a judgment, settlement or other resolution regarding damages outweighs the benefit of certifying a class at this stage of the litigation.” 267 F.R.D. at 290.

5

BANKRUPTING OR ANNIHILATING LIABILITY

61

• Greater consensus at present than disproportionate

liability cases: defendants have stronger ground to defeat class certification where they can demonstrate that the potential damages award would bankrupt the company

• “It staggers the imagination to believe that Congress

intended to impose annihilating damages on an entire company and the people who work for it for lapses of a somewhat technical nature and in a case where not a single class member suffered actual harm due to identity theft.” Stillmock, 385 Fed. Appx. at 279 (Wilkinson, J., concurring)

• Better argument for smaller companies than large

corporations

5

SUMMARY ON BANKRUPTING/ANNIHILATING LIABILITY

62

• Trend in federal appellate courts is to reject disproportion between

potential damages and actual harm sustained by class as a basis to deny certification: “allowing consideration of the potential enormity

• f any damages award would undermine the compensatory and

deterrent purposes of FACTA.” Bateman, 623 F.3d at 722.

• This potential for “enormous” damages “does not lie in an ‘abuse’ of

Rule 23; it lies in the legislative decision to authorize awards as high as $1,000 per person, combined with multiple violations of the statute.” Bateman, 623 F.3d at 722; Murray, 434 F.3d at 953.

• FACTA and FCRA cases can present “a perfect storm in which two

independent provisions combine to create commercial wreckage far greater than either could alone.” Stillmock, 385 Fed. Appx. at 276 (Wilkinson, J., concurring).

5

CONCLUSION

63

Barry Goheen bgoheen@kslaw.com 404.572.4618 Barry Goheen is a partner in King & Spalding's Business Litigation Practice Group. He practices in the firm's general and commercial litigation area and focuses on class actions and other multi- party litigation.

• Mr. Goheen has served as lead or co-counsel in over 40 class actions in all areas of the law,

including antitrust, securities fraud, consumer protection, financial services and products, product liability, privacy, and general commercial disputes in state and federal courts representing such clients as The Coca-Cola Company, Wal-Mart, SunTrust Banks, Bank of America, Countrywide, Fifth Third, Brown & Williamson Tobacco Corporation, Jefferson-Pilot Life Insurance Company, Equifax, and Lockheed Martin Corporation. His class action matters include:

• Participation in several phases of a multi-phase trial of a product liability class action in

Miami, Florida.

• Co-counsel in the defense of nationwide class action brought against insurance company

alleging unfair insurance practices.

• Lead counsel in the defense of a proposed nationwide RICO class action brought against

automobile manufacturer alleging misrepresentation of horsepower in the vehicles.

• Co-counsel in the defense of nationwide antitrust class action brought by purchasers of

souvenirs at NASCAR events.

• Lead or co-counsel in defense of over 30 proposed class actions brought by consumers of

cigarette products, obtaining dismissal or denial of class certification in all but two cases.

• Lead counsel in numerous class actions arising out of services and products affecting the

financial services industry, including for Equifax, SunTrust, Bank of America, Countrywide, Fifth Third, Advance America, and Harland Financial Solutions.

JAMES A. FRANCIS Francis & Mailman, PC Land Title Building, 19th Floor 100 South Broad Street Philadelphia, PA 19110 Phone: 215-735-8600 Fax: 215-940-8000 E-mail: jfrancis@consumerlawfirm.com www.consumerlawfirm.com

 Statutory Damage remedies, 15 U.S.C. § 1681n, $100-

$1,000

 Low Willfulness Threshold  Range of potential violations  Availability of clients

THE FCRA IS A PLAINTIFF’S STATUTE

65

 Class experience into FCRA vs. Individual experience

into Class litigation

 FACTA vs. Conventional FCRA  Seventh, Ninth, Third and Fourth Circuits  California, Chicago, Pennsylvania and Virginia

DEVELOPMENT OF FCRA CLASS JURISPRUDENCE

66

 Damages  Willfulness  Class membership  Standard procedures  Form notices

CASE SELECTION: CLASS PROOFS

67

 Consumer Reporting Agencies  Creditor-furnishers  Employers  Users

FCRA DEFENDANTS

68

 Accuracy driven  Dispute/reinvestigation claims  Often larger damages  Very individualized

FCRA INDIVIDUAL CASES

69

 FACTA Truncation Cases, § 1681c(g)  Adverse Action Notice Cases, §1681m

TYPES OF FCRA CLASS CASES

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 Disclosure violations- 1681g

• Sears v. eFunds Corp., 08 C 985, 2010 WL 183362 (N.D. Ill. Jan. 20, 2010) on

reconsideration sub nom. Searcy v. eFunds Corp., 08 C 985, 2010 WL 1337684 (N.D. Ill.

• Mar. 31, 2010) (SCAN – Banking CRA failed to provide full files to consumers on request)
• Domonoske v. Bank of Am., N.A., 705 F. Supp. 2d 515, 516 (W.D. Va. 2010) (Mortgage

lender’s failure to provide credit score disclosures “as soon as reasonably practicable.”)

• Gillespie v. Equifax Info. Services, LLC, 05 C 138, 2008 WL 4614327 (N.D. Ill. Oct. 15,

2008) (CRA alleged to have violated the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681g(a)(1), by failing to disclose clearly and accurately the date of first delinquency in the consumer files of persons with reported delinquent credit accounts.)

TYPES OF FCRA CLASS CASES

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 Impermissible Purpose - 1681b

• In re Trans Union Corp. Privacy Litig., 00 C 4729, 2005 WL 2007157 (N.D. Ill. Aug. 17, 2005)

(Target marketing list constitutes a credit report and cannot be sold for target marketing purposes.)

• Cappetta v. GC Services Ltd. P'ship, 654 F. Supp. 2d 453, 455 (E.D. Va. 2009) (Credit card debt

collector obtained consumer reports of non-obligated spouse)

• In re Countrywide Fin. Corp. Customer Data Sec. Breach Litig., MDL 1998, 2009 WL 5184352

(W.D. Ky. Dec. 22, 2009) (Personal information was involved in an alleged theft committed by a Countrywide employee.)

• Washington v. CSC Credit Services, Inc., 178 F.R.D. 95, 99 (E.D. La. 1998) order amended on

denial of reconsideration, 180 F.R.D. 309 (E.D. La. 1998) vacated sub nom. Washington v. CSC Credit Services Inc., 199 F.3d 263 (5th Cir. 1900) and rev'd sub nom. Washington v. CSC Credit Services Inc., 199 F.3d 263 (5th Cir. 1900) (“Apart from obtaining an initial blanket certification from the insurance companies, defendants have exercised no oversight over the insurance companies to ensure that the reports are being used for proper purposes.”)

TYPES OF FCRA CLASS CASES

72

 Pre-screening/ Firm Offer Cases -

§1681b

• Murray v. GMAC Mortg. Corp., 434 F.3d 948, 951 (7th Cir. 2006) (“GMACM had not made

the “firm offer of credit” that is essential when a potential lender accesses someone's credit history without that person's consent, see 15 U.S.C. § 1681b(c)(1)(B)(i); second, GMACM's

• ffer did not include a “clear and conspicuous” notice of the recipient's right to close her

credit information to all who lacked her prior consent, see 15 U.S.C. § 1681m(d)(1)(D).”)

• White v. E-Loan, Inc., C05-02080SI, 2006 WL 2411420 (N.D. Cal. Aug. 18, 2006) (“White

may establish that the four corners of the E-Loan offer were too vague to constitute a firm

• ffer of credit.”)
• Stawski v. Secured Funding Corp., 06-CV-0918, 2008 WL 647024 (E.D. Wis. Mar. 6, 2008)
• Kudlicki v. Capital One Auto Fin., Inc., 241 F.R.D. 603 (N.D. Ill. 2006)

TYPES OF FCRA CLASS CASES

73

 Conventional Credit Reporting - §1681e(b)

• Acosta v. Trans Union, LLC, 243 F.R.D. 377, 379 (C.D. Cal. 2007) (“Claims against consumer credit

reporting agencies deriving from the procedures by which these agencies produce credit reports for individuals with credit reports discharged through Chapter 7 bankruptcy proceedings.”) See also White v. Experian, 05cv1070 (C.D. Cal. August 19, 2008)

• Soutter v. Equifax Info. Services, LLC, 3:10CV107, 2011 WL 1226025 (E.D. Va. Mar. 30, 2011)

(“Soutter alleges that Equifax systematically ignored hundreds of thousands of public records showing that Virginia civil judgments had been satisfied, vacated, or appealed.”)

• Clark v. Experian Info. Solutions, Inc., CIV.A.8:00-1217-24, 2002 WL 2005709 (D.S.C. June 26,

2002) (Defendants produced consumer credit reports that inaccurately stated that the consumer’s account had been “included in bankruptcy” when only the non-party co-obligor had filed.)

• Smith v. HireRight Solutions, Inc., 711 F. Supp. 2d 426, 429 (E.D. Pa. 2010) (“The action is brought
• n behalf of the thousands of employment applicants throughout the country who have purportedly

been the subject of prejudicial, misleading, and inaccurate background reports performed by Defendant and sold to employers.”) (CRA reporting duplicate offenses and failing to update expungements)

TYPES OF FCRA CLASS CASES

74

 Conventional Credit Reporting - §1681i

• Chakejian v. Equifax Info. Services LLC, 256 F.R.D. 492, 495 (E.D. Pa. 2009) When

consumers disputed a civil judgment, the CRA misrepresented that it had contacted courthouses in investigating their disputes and provided consumers with the name and address of the courthouse where the disputed public record originated rather than the vendor from whom it actually obtained the data.) See also Summerfield v. Equifax Info. Services LLC, 264 F.R.D. 133 (D.N.J. 2009), reconsideration denied (Jan. 4, 2010)

• Williams v. LexisNexis Risk Mgmt. Inc., CIV A 306CV241, 2007 WL 2439463 (E.D. Va. Aug.

23, 2007) (“If the consumer does not provide copies of two forms of identification with the initial request for a reinvestigation, LexisNexis does not begin a reinvestigation immediately, but instead sends the consumer a form requesting that the consumer prove his or her identity by sending LexisNexis photocopies of two forms of identification.”)

• Gardner v. Equifax Info. Services, LLC, CIV.06-3102ADM/AJB, 2007 WL 2261688 (D.
• Minn. Aug. 6, 2007) (“Equifax generally does not perform reinvestigation of disputes

initiated by consumers located in CSC's zip codes.”)

TYPES OF FCRA CLASS CASES

75

 Employment Reports- §1681b(b)(3)

• Beverly v. Wal-Mart Stores, Inc., CIV.A. 3:07CV469, 2008 WL 149032 (E.D. Va. Jan. 11,

2008) (“According to plaintiff, defendant took adverse action against him based on his criminal background report before it had provided him with a copy of the report.”)

• Anderson v. National Notary Association (E.D. Va.); Daily v. NCO (E.D. Va.); Black v. Winn

Dixie (N.D. FL); Hall v. Vitran (N.D. Ohio).

TYPES OF FCRA CLASS CASES

76

 Employment Reports- §1681k

• Williams v. LexisNexis Risk Mgmt. Inc., CIV A 306CV241, 2007 WL 2439463 (E.D. Va. Aug.

23, 2007) (“If the consumer does not provide copies of two forms of identification with the initial request for a reinvestigation, LexisNexis does not begin a reinvestigation immediately, but instead sends the consumer a form requesting that the consumer prove his or her identity by sending LexisNexis photocopies of two forms of identification.”);

• Beverly v. Wal-Mart Stores, Inc., CIV.A. 3:07CV469, 2008 WL 149032 (E.D. Va. Jan. 11,

2008) (“According to plaintiff, defendant took adverse action against him based on his criminal background report before it had provided him with a copy of the report.”);

• Ryals v. HireRight Solutions, Inc., CIV.A. 3:09CV625 (28 million dollar Nationwide

settlement based upon CPA’s failure to timely notify applicants)

TYPES OF FCRA CLASS CASES

77

“[W]here willfulness is a statutory condition of civil liability, we have generally taken it to cover not only knowing violations of a standard, but reckless ones as well . . .” Safeco Ins. Co. of Am. v. Burr, U.S., 127 S.Ct. 2201, 2208-09 (2007) (emphasis added). The Court defined recklessness as “action entailing ‘an unjustifiably high risk of harm that is either known or so

• bvious that it should be known.’” Id. at 2215.

78

Whether: 1) The CRA’s Compliance Department establishes internal compliance procedures and ensures that those compliance procedures are properly and consistently followed by the CRA’s Compliance officers. 2) The CRA provides sufficient financial resources for its Compliance Department. Murray v. Indymac Bank, F.S.B., No. 04 C 7669, 2007 WL 2741650, at *4 (N.D. Ill. Sept. 13, 2007)

79

3) The Compliance Department employees have FCRA knowledge, through:

• Consultation with attorneys.
• Keeping abreast of current developments in FCRA law

relating to their duties. 4) The CRA regularly trains its employees on FCRA requirements and compliance.

• Employees attend yearly training.
• Employees have specific credentials or experience

regarding their compliance duties. Murray v. Indymac Bank, F.S.B., No. 04 C 7669, 2007 WL 2741650, at *4 (N.D. Ill. Sept. 13, 2007)

80

 Experian argued that Levine could not prove a willful violation because the

Act was unclear about sales of reports for consumers with closed accounts, and an interpretation that the sales were permitted was reasonable. Experian relied on the intervening decision in Safeco Insurance Company

• f America v. Burr, 551 U.S. 47, 127 S.Ct. 2201, 2208-09, 2215-16, 167

L.Ed.2d 1045 (2007), to support its argument that a company does not willfully violate the Act by interpreting it erroneously so long as its interpretation is not “objectively unreasonable.” Levine v. World Fin. Network Nat. Bank, 554 F.3d 1314, 1317 (11th Cir. 2009)

 Long v. Tommy Hilfiger, U.S.A., Inc., No. 11-1554, __ F.3d ___, 2012 WL

180874 (3d Cir. 2012) (finding violation under FACTA but no willfulness regarding merchant’s use of expiration dates)

81

 Trans Union correctly reminds us that we are the first court of

appeals to address whether the FCRA applies to information from OFAC's SDN List in the form of an alert reported by a credit reporting agency. This does not, however, result in a borderline case

• f liability as Trans Union suggests. It merely establishes that the

issue has not been presented to a court of appeals before. The credit agency whose conduct is first examined under that section of the Act should not receive a pass because the issue has never been

• decided. The statute is far too clear to support any such license.

Cortez v. Trans Union, LLC, 617 F.3d 688, 722 (3d Cir. 2010)

82

 Liability factors individualized?

• Dispute letters vs. Notice letters
• Accuracy an element?
• Uniformity of procedures

PREDOMINANCE OF INDIVIDUAL ISSUES

83

 Damages individualized?

• Actual Damages?

 Liquidated (e.g. cost of credit report or score)  Objectively determinable (e.g. cost of correcting file or of higher interest rate)  Smaller class size

 Strategies attempted:

• Statutory damages (or $1,000 <)
• Individual damage trials
• Formula for damages
• Issue only certification (See e,g. Pella Corp. v. Saltzman, 606 F.3d

391, 395 (7th Cir. 2010) cert. denied, 131 S. Ct. 998, 178 L. Ed. 2d 826 (U.S. 2011))

PREDOMINANCE OF INDIVIDUAL ISSUES

84

 A determination of statutory damages in a federal statute is linked only to

the amount necessary to achieve deterrence and may be awarded on a uniform, per-plaintiff basis without the need for any “fact specific calculations of actual injury.” Six (6) Mexican Worker v. Ariz. Citrus Growers, 904 F.2d 1301, 1309-10 (9th Cir. 1990).

 See, e.g., Acosta v. Trans Union, LLC, 240 F.R.D. 564, 571 (C.D. Cal.

2007); Bonner v. Home123 Corp., 2006 U.S. Dist. LEXIS 54418, at *18-19 (N.D. Ind. Aug. 4, 2006); White v. Imperial Adjustment Corp., 2002 U.S.

• Dist. LEXIS 26610, at *56-57 (E.D. La. 2002); In re Farmers Ins. Co.,

FCRA Litig., 2006 U.S. Dist. LEXIS 27290, at *38-39 (W.D. Okla. Apr. 13, 2006); Cavin v. Home Loan Ctr., Inc., 236 F.R.D. 387, 393 (N.D. Ill. 2006) ; Ashby v. Farmers Ins. Co., 2004 U.S. Dist. LEXIS 21053 at *14 (D. Or. Oct. 18, 2004); Braxton v. Farmer’s Ins. Group, 209 F.R.D. 654, 661 (N.D. Ala. 2002); Hernandez v. Midland Credit Mgmt., 236 F.R.D. 406, 412 (N.D. Ill. 2006); Wollert v. Client Servs., Inc., 2000 U.S. Dist. LEXIS 6485, at *5-6 (N.D. Ill. Mar. 24, 2000).

STATUTORY DAMAGES ARE NOT INDIVIDUALIZED

85

 “Under these circumstances, it strains credulity to conclude that the

individual damages issues presented by the purported class which Plaintiffs seek to certify would be anything other than simple and

• straightforward. Pragmatically, the only substantive difference

between putative class members for purposes of affixing the statutory damages figure within the statutory damages range of $100 to $1,000 or in awarding punitive damages is the number of receipts received by a single class member during the approximately eighteen months at issue. And indeed, this difference does not complicate matters very much at all given that the class can be broken down into subcategories based upon the number of violating receipts received per putative class member.”

 Stillmock v. Weis Markets, Inc., 385 F. App'x. 267, 273 (4th Cir.

2010)

STATUTORY DAMAGES ARE INDIVIDUALIZED

86

 “In sum, many class members appear to have real, viable claims for

actual damages suffered as a result of TI's failure to comply with the

• FCRA. These actual damages are often ten, and up to twenty times

greater than the statutory damages for which each class member is

• eligible. If punitive damages are tried individually, where they would

be measured for constitutional reasonableness against each individual plaintiff's full range of compensatory damages, these individual class members might permissibly be entitled to punitive remedies many times greater than they would be were punitive damages measured only against statutory damages, as they would have to be in the proposed class action.”

 Williams v. Telespectrum, Inc., CIV.A.3:05CV853, 2007 WL 6787411

(E.D. Va. June 1, 2007)

INDIVIDUALIZED ISSUES FOR PUNITIVE DAMAGES?

87

 Possibly, if Actual damages are significant:  Preston, 2004 U.S. Dist. LEXIS 28914 at *12, n.14 (“[T]he Plaintiffs’

contention that actual damages cannot, therefore exceed the value of a $9.00 credit report is incorrect.”);

 Gardner v. Equifax Info. Servs., LLC, 2007 WL 2261688, at *5 (D.

• Minn. 2007) (distinguishing and citing Murray, “[T]his Court finds that

in the instant case, it is not clear ‘[t]hat actual loss is small and hard to quantify.”);

 Clark v. Experian Info. Solutions, Inc., 2002 WL 2005709 (D.S.C.

2002) (finding from the evidence before it that the respective FCRA allegation—the erroneous reporting of a bankruptcy in the credit files

• f a “bankruptcy innocent” co-obligor—presented claims with

provable actual damages.)

88



See Murray v. GMAC Mortg. Corp., 434 F.3d 948, 952-53 (7th Cir. 2006):

The district court's second reason-that Murray should have sought compensatory damages for herself and all class members rather than relying on the statutory-damages remedy-would make consumer class actions

• impossible. What each person's injury may be is a question that must be resolved one consumer at a time.

Although compensatory damages may be awarded to redress negligence, while statutory damages require wilful conduct, introducing the “easier” negligence theory would preclude class treatment. Common questions no longer would predominate, and an effort to determine a million consumers' individual losses would make the suit unmanageable. Yet individual losses, if any, are likely to be small-a modest concern about privacy, a slight chance that information would leak out and lead to identity theft. That actual loss is small and hard to quantify is why statutes such as the Fair Credit Reporting Act provide for modest damages without proof of injury.

See also:



Chakejian v. Equifax Information Services, LLC, 256 F.R.D. 492 (E.D. Pa. 2009)



Summerfield v. Equifax Information Services, LLC, 264 F.R.D. 133 (D.N.J. 2009)

89

 National Association of Consumer Advocates

• Membership assistance
• FCRA Conference
• www.NACA.net

 National Consumer Law Center (NCLC)

• Fair Credit Reporting, Seventh Edition
• Training, Conferences and Staff consulting
• www.ConsumerLaw.org

90

Certified Class Counsel in over 30 Class Actions; Named Top 100 Super Lawyer in Both Pennsylvania and Philadelphia multiple years; Argued Cortez v. Trans Union, LLC , 617 F.3d 688 (3d Cir. 2010); among many other important cases

FRANCIS & MAILMAN A PROFESSIONAL CORPORATION

91