IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
JOHN L. DOHERTY, JR. )
) Civil Action No. 07-3049
TRANS UNION, LLC, ET AL. )
PLAINTIFF JOHN L. DOHERTY, JR.’S MEMORANDUM OF LAW IN SUPPORT OF HIS RESPONSE IN OPPOSITION TO DEFENDANT DELL FINANCIAL SERVICES’ MOTION FOR PARTIAL SUMMARY JUDGMENT
Plaintiff John L. Doherty, Jr., through counsel, hereby respectfully submits this Memorandum of Law in opposition to Defendant Dell Financial Services’ (“Dell”) Motion for Partial Summary Judgment (“Motion”) (Docket No. 23). For the reasons below, the Motion should be denied.
Plaintiff is a victim of identity theft at the hands of his estranged brother, William Doherty. Defendant Dell is the company that permitted William Doherty to obtain at least two computers (one on a business credit account and a second on a consumer credit account) in Plaintiff’s name using his good credit. It then proceeded to hold Plaintiff (not William Doherty) accountable for the debts. Over the course of approximately three and one-half years, Dell demanded payment from Plaintiff, sent debt collectors after him, ruined Plaintiff’s good name and credit, and caused him significant economic and non-economic damages. Dell did this even though it knew that Plaintiff was a “victim” (according to Dell’s own records) of identity theft.
The pending Motion involves a single duty under the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. §§ 1681 et seq. It is the duty of a credit furnisher, such as Dell, to investigate and correct inaccurate credit data upon receipt of a dispute through a consumer reporting agency (“CRA”). The duty is found at FCRA section 1681s-2(b).
Here, Dell failed to fulfill its investigative duties under FCRA section 1681s-2(b) at least seven (7) times. It held, and continues to hold, Plaintiff responsible for a debt that he did not incur, even though Dell’s own records as well as other documents and testimony uniformly confirm that Plaintiff is a victim of fraud. Dell contends that its investigations have been held up because it did not receive a police report. Yet this corporate requirement (which Dell applies selectively) simply does not exist in the applicable law, undermines the goals of FCRA investigations, and amounts to an excuse for Dell to collect money from the victim if it cannot collect it from the perpetrator in cases of identity theft or fraud.
In the pending Motion, Dell takes aim only at Plaintiff’s claim that Defendant violated FCRA section 1681s-2(b) in a willful manner, but does not contest that it acted negligently. A willful violation would allow Plaintiff to seek punitive damages from a jury, in addition to statutory and actual damages. See 15 U.S.C. § 1681n. For willful conduct, the FCRA also does not limit Plaintiff’s common law claims in any way. Dell postures that there exist no genuine issues of material fact here and that it is entitled to judgment as a matter of law on Plaintiff’s FCRA willfulness claim. By inference, Dell also argues that Plaintiff’s common law claims are “preempted.” Dell is mistaken.
When the factual record is set forth in full, as it is below by Plaintiff, it becomes evident that Dell’s Motion lacks merit. The parties disagree about several key factual issues, particularly about what Dell found and did not find during its purported “investigations” into Plaintiff’s repeated disputes. Moreover, Dell is not entitled to judgment as a matter of law here. If a victim of identity theft such as Plaintiff cannot proceed to a jury with a willful claim for Dell’s repeated and systemic violations of FCRA section 1681s-2(b) under the facts of this case, it is difficult to imagine the circumstances when such a claim would be possible.
Finally, it must be noted that Plaintiff’s FCRA willfulness claim does not attempt to reach new ground. It is a type of claim that multiple courts within this Circuit and other circuits have allowed to go to the jury. Indeed, Plaintiff’s willfulness claim here is a claim grounded in factual determinations about a defendant’s “reasonableness” or “reckless disregard,” determinations that are typically left for a jury. Because Defendant’s conduct and violations can reasonably be found to be willful, Plaintiff’s common law claims are not “preempted” or limited by the FCRA in any way.
In sum, the complete factual record here, when upheld against the well-settled “reckless disregard” standard for willful violations under the FCRA, can only lead to a finding that Dell’s Motion must be denied.
Pursuant to Federal Rule of Civil Procedure 56(c), a motion for summary judgment will only be granted:
if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law.
Fed. R. Civ. P. 56(c). In other words, summary judgment may only be granted if the movant shows, by admissible evidence, that there exists no genuine issue of material fact that would permit a reasonable jury to find for the nonmoving party. Wetzel v. Tucker, 139 F.3d 380, 383 n.2 (3d Cir. 1998); Miller v. Indiana Hosp., 843 F.2d 139, 143 (3d Cir.), cert. denied, 488 U.S. 870 (1988).
The party opposing the motion for summary judgment is entitled to have his/her allegations taken as true, to receive the benefit of the doubt when his/her assertions conflict with those of the movant and to have inferences from the underlying facts drawn in his/her favor. Big Apple, BMW, Inc. v. BMW of North America, Inc., 974 F.2d 1358, 1362-63 (3d Cir. 1992), cert. denied, 507 U.S. 912 (1993) (emphasis added). In analyzing the moving party’s burden under Rule 56(c), the Third Circuit has stated that “[i]f there is any evidence in the record, from any source, from which a reasonable inference in the respondent’s favor may be drawn, the moving party simply cannot obtain a summary judgment, no matter how many affidavits are filed (citations omitted). …The ‘burden’ then is insurmountable.” In re Japanese Electronic Prods. Antitrust Litig., 723 F.2d 238, 258 (3d Cir. 1983), reversed on other grounds, 475 U.S. 574 (1986); see also Boyle v. County of Allegheny, Pennsylvania, 139 F.3d 386, 393 (3d Cir. 1998).
A court may not, at the summary judgment stage, weigh evidence or make credibility decisions. These tasks are left to the factfinder. Petruzzi’s IGA Supermarkets, Inc. v. Darling-Delaware Co., Inc., 998 F.2d 1224, 1230 (3d Cir.), cert. denied, 510 U.S. 994 (1993). To raise a genuine issue of material fact, the respondent need not match, item for item each piece of evidence proffered by the movant. Big Apple, BMW, Inc., 974 F.2d at 1362-63. As the Third Circuit has explained:
In practical terms, if the opponent has exceeded the “mere scintilla” threshold and has offered a genuine issue of material fact, then the court cannot credit the movant’s version of events against the opponent, even if the quality of the movant’s evidence far outweighs that of its opponent. It thus remains the province of the factfinder to ascertain the believability and weight of the evidence.
In re Unisys Savings Plan Litigation, 74 F.3d 420, 433 n. 10 (3d Cir. 1996) (citing Big Apple, BMW). If there are gaps in the pertinent materials submitted by the movant, without explanation, that justifies denial of the motion. O’Donnell v. United States, 891 F.2d 1079, 1082 (3d Cir. 1989).
In the case at bar, there exist genuine issues of material fact and Dell is not entitled to judgment as a matter of law. Summary judgment, therefore, is inappropriate.
A. Dell Failed To Conduct Reasonable Investigations Into Plaintiff’s Repeated Disputes, In Willful Violation Of FCRA Section 1681s-2(b)
The FCRA provides consumers with private causes of action against any person who violates any section of the Act. FCRA sections 1681n states as follows:
Any person who willfully fails to comply with any requirement imposed under this subchapter with respect to any consumer is liable to that consumer . . . .
15 U.S.C. § 1681n(a). (Emphasis added).
The requirement at issue here pertains to the duty of credit furnishers, such as Dell, to investigate and correct disputed consumer credit data. 15 U.S.C. § 1681s-2(b). It is well settled that FCRA section 1681s-2(b) “provide[s] a private right of action for a consumer against furnishers of information who have willfully or negligently failed to perform their duties upon notice of a dispute.” DiMezza v. First USA Bank, Inc., 103 F. Supp.2d 1296, 1300 (D.N.M. 2000).
The central issue in the pending Motion is whether Plaintiff can proceed to the jury with his claim that Dell “willfully” (per FCRA section 1681n) violated FCRA section 1681s-2(b). Courts in this Circuit and in others circuits have had many occasions to examine both a credit furnisher’s duty under FCRA section 1681s-2(b) as well as the FCRA’s standard for willful violations under section 1681n.
1. Dell Failed In Its Duty As A Credit Furnisher To Conduct A Reasonable Investigation Under FCRA Section 1681s-2(b)
FCRA section 1681s-2(b) provides in pertinent part:
(b) Duties of furnishers of information upon notice of dispute
(1) In general
After receiving notice pursuant to section 1681i (a)(2) of this title of a dispute with regard to the completeness or accuracy of any information provided by a person to a consumer reporting agency, the person shall—
(A) conduct an investigation with respect to the disputed information;
(B) review all relevant information provided by the consumer reporting agency pursuant to section 1681i (a)(2) of this title;
(C) report the results of the investigation to the consumer reporting agency;
(D) if the investigation finds that the information is incomplete or inaccurate, report those results to all other consumer reporting agencies to which the person furnished the information and that compile and maintain files on consumers on a nationwide basis; and
(E) if an item of information disputed by a consumer is found to be inaccurate or incomplete or cannot be verified after any reinvestigation under paragraph (1), for purposes of reporting to a consumer reporting agency only, as appropriate, based on the results of the reinvestigation promptly—
(i) modify that item of information;
(ii) delete that item of information; or
(iii) permanently block the reporting of that item of information.
15 U.S.C. § 1681s-2(b).
a. Plain Text Reading Of FCRA Section 1681s-2(b)
The text of this statutory provision is clear. See United States v. Ron Pair Enterprises, Inc., 489 U.S. 235 (1989) (where the statute’s language is plain, the court’s function is to enforce it according to its terms); United States v. Cheryl Schneider, 14 F.3d 876, 879 (3d Cir. 1994) (“The best evidence of Congress’ intent is the text of the statute.”). Contrary to Dell’s suggestion, there is no requirement for any consumer to provide a “police report” or any particular document or evidence in order to invoke a proper dispute. Nor is a police report a requirement for any type of a section 1681s-2(b) investigation. FCRA section 1681s-2(b) merely requires “notice” of a dispute pursuant to “section 1681i(a)(2),” and then shifts the burden to the credit furnisher to take several specific steps in conducting an investigation. FCRA section 1681i(a)(2), in turn, provides:
(2) Prompt notice of dispute to furnisher of information
(A) In general
Before the expiration of the 5-business-day period beginning on the date on which a consumer reporting agency receives notice of a dispute from any consumer or a reseller in accordance with paragraph (1), the agency shall provide notification of the dispute to any person who provided any item of information in dispute, at the address and in the manner established with the person. The notice shall include all relevant information regarding the dispute that the agency has received from the consumer or reseller.
15 U.S.C. § 1681i(a)(2). There is absolutely no requirement for a police report in any part of the statute implicated here.
b. Case Law Interpreting FCRA Section 1681s-2(b)
Nor has any court found such a requirement in an FCRA section 1681s-2(b) case. Federal courts have construed FCRA section 1681s-2(b) to require furnishers of credit data, such as Dell, not only to conduct an investigation into credit bureau disputes, but also to be qualitatively reasonable in their investigations as the circumstances warrant. Johnson v. MBNA America Bank, NA, 357 F.3d 426, 431 (4th Cir. 2004); see also Bruce v. First U.S.A. Bank, Nat. Ass’n., 103 F. Supp. 2d 1135, 1143 (E.D. Mo. 2000). As the Fourth Circuit observed in affirming a denial of a credit finisher’s motion for summary judgment in an FCRA case, a jury may find that a credit furnisher’s investigation was unreasonable if the evidence establishes (such as in this case) that the credit furnisher did not look beyond the information contained in its own computer system and did not consult any underlying documents, such as the original account application. Johnson v. MBNA America Bank, NA, 357 F.3d 426, 431 (4th Cir. 2004).
Moreover, questions of the reasonableness of a company’s investigation under the FCRA are usually left for the jury. See Cushman v. Trans Union Corp., 115 F. 3d 220, 225-27 (3d. Cir. 1997); Henson v. CSC Credit Servs., 29 F.3d 280 (7th Cir. 1994); see also Johnson v. MBNA, supra; Richardson v. Fleet Bank of Mass., 190 F. Supp.2d 81, 88 (D. Mass. 2001) (noting reasonableness of FCRA investigation is usually a question for a jury); Agosta v. Inovision, Inc., 2003 WL 22999213 (E.D. Pa. Dec. 16, 2003) (denying summary judgment in an FCRA case and allowing reasonableness of credit furnisher’s investigation to be determined by jury); Evantash v. G.E. Capital Mortg. Servs., Inc., 2003 WL 22844198 (E.D. Pa. Nov. 25, 2003) (same); Sheffer v. Experian Info. Solutions, Inc., Civ. No. 02-7407, 2003 WL 21710573 (E.D. Pa. July 24, 2003) (same).
Dell comes forward with no authority at all in support of its defense that it allegedly had no duty to conduct a reasonable investigation into Plaintiff’s disputes because he did not provide it with a police report. Nor does Dell cite any authority in support of the proposition that a reasonable investigation could not have been conducted under the circumstances of this case without a police report. There is no dispute that Plaintiff has proffered evidence of at least seven (7) disputes that put Dell on “notice,” as set forth under the statue at section 1681s-2 and according to the methods for such notice agreed upon by Dell and the major CRAs. (See Facts at ¶¶ 45, 46). The burden then shifted to Dell to conduct reasonable investigations. Defendant simply did not do that. It rather shifted the burden back to Plaintiff to deliver a police report, which he was neither required nor able to do.
c. Application To Facts
Under the applicable standard, the facts of record here and reasonable inferences therefrom can lead a reasonable jury to find for the Plaintiff and against Dell on the issue of the reasonableness of Dell’s alleged “investigations” into Plaintiff’s credit disputes.
First, a reasonable jury could find that Dell never investigated the actual dispute — whether the consumer account was fraudulently opened in Plaintiff’s name. (See Facts at ¶¶ 18, 56, 57). Defense witnesses admitted under oath that Dell never answered that question because it allegedly was prevented from investigating this matter in the absence of a police report. (See Facts at ¶¶ 48, 56). Thus, a reasonable jury could find that Dell never truly “investigated” at all per FCRA section 1681s-2(b).
A reasonable jury can also find that Dell’s actions, if they amount to an “investigation,” were not a reasonable investigation, thus in violation of FCRA section 1681s-2(b)(1)(A). For example, a reasonable jury could conclude that Dell should have examined the underlying application, the delivery address, the phone number or driver’s license information on the credit application, signatures, etc., in order to resolve the dispute of whether the account in question was really a result of fraud. Dell took none of those actions. (See Facts at ¶¶ 28, 29, 46, 47, 56, 57). Certainly, Dell had or could have gathered enough information concerning this dispute to determine that Plaintiff was a victim of fraud; it could have done so despite the fact that it did not have a police report. If Dell truly needed a police report, it would have tried getting one on its own, but it did not even try. (See Facts at ¶ 49). Dell only examined information on its Vision Plus database, which was the very basis of the erroneous reporting. (See Facts at ¶¶ 16, 28, 49). It makes little sense to conduct a fraud investigation into data that a consumer is disputing as fraudulent by simply confirming that, in fact, the disputed data matches the same data on Dell’s computers. There should have been no doubt that there was such as match, since Dell’s computer was the source originator of the data being reported to the CRAs.
A reasonable jury could also find that if Dell believed that it could not come to a conclusive result, or could not “verify” the fact of the fraud due to a lack of a police report or for any other reason, it should have deleted or blocked the future reporting of the account, as the FCRA provides at section 1681s-2(b)(1)(E). This would have been an easy solution for Dell. FCRA section 1681s-2(b) provides that if a furnisher truly cannot get to the bottom of a dispute, or if its investigation is “incomplete” or “inconclusive,” it should err on the side of caution and simply block or delete the disputed account. Dell, however, even refused to do that. (See Facts at ¶ 48) (admitting that investigation was never completed).
In sum, as virtually every other FCRA summary judgment decision in this Circuit has found, these types of considerations present genuine issues of material fact as to the “reasonableness” of a company’s conduct in “investigating.” These issues are inappropriate for disposition at summary judgment and must go to the jury.
2. Dell’s Conduct Here May Be Deemed By A Reasonable Jury To Constitute A Willful Violation Of The FCRA Under Section 1681n
Under the facts of this case, a reasonable jury may find not only that Dell violated FCRA section 1681s-2(b) by failing to properly investigate Plaintiff’s repeated disputes, but that it did so willfully.
a. The Legal Standard: Reckless or Conscious Disregard
The standard to show a “willful” violation under the FCRA is not high. A plaintiff need not show malice, but only that the defendant recklessly committed an act in conscious disregard for the rights of others. See Cushman v. Trans Union Corp., 115 F. 3d 220, 227 (3d. Cir. 1997). This is a lower standard than the standard for willful violations or punitive damages claims under most common law torts. Although the terms “willful” or “willfully” are not defined in the FCRA, case law has held that neither malice nor evil motive need be established for a finding of a willful violation. Id.; see also Stevenson v. TRW, Inc., 987 F.2d 288, 294 (5th Cir.1993) (citing Fischl v. General Motors Acceptance Corp., 708 F.2d 143, 151 (5th Cir. 1983)).
Many courts have noted that willfulness under the FCRA is demonstrated by recklessness and not by a knowing violation of the law. See id. at 293 (citing Pinner v. Schmidt, 805 F.2d 1258, 1263 (5th Cir.1986), cert. denied, 483 U.S. 1022 (1987)); Cushman, 115 F. 3d at 227; see also Reynolds v. Hartford Fin. Servs. Group, 435 F.3d 1081, 1097-99 (9th Cir. 2006) (discussing meaning of “willfully” with CRA and relying on Cushman). Such reckless or conscious disregard may be found when a defendant adopts a policy either knowing it to be in “contravention of the rights possessed by consumers under the FCRA or in reckless disregard for whether the policy contravenes those rights.” Cushman, 115 F. 3d at 227; see also Reynolds v. Hartford Fin. Servs. Group, 435 F.3d 1081, 1097-99 (9th Cir. 2006).
Multiple cases within this District, examining the willfulness standard in FCRA investigation cases for consumer reporting agencies, have found that plaintiffs may proceed to trial with their willfulness claims where the defendant’s conduct is not merely a result of a negligent act that was promptly cured. See Sheffer v. Experian Info. Solutions, Inc., Civ. No. 02-7407, 2003 WL 21710573 at *3 (E.D. Pa. July 24, 2003) (Schiller, J.) (defendant’s conduct was willful, and not merely an “isolated instance of human error . . . promptly cure[d]”) (quoting Boris v. Choicepoint Servs., 249 F. Supp.2d 851, 862 (W.D. Ky. 2003)) (emphasis added); see also Lawrence v. Trans Union, LLC, Civ., 296 F.Supp. 2d. 582, 590, 2003 WL 22992081 at *5 (E.D. Pa. Dec. 11, 2003) (Brody, J.); Crane v. Trans Union, LLC, 282 F. Supp. 2d 311, 321 (E.D. Pa. 2003) (Dalzell, J.); Evantash v. G.E. Capital Mortgage Servs., Inc., Civ. No. 02-1188, 2003 WL 22844198 *8 (E.D. Pa. Nov. 25, 2003) (Davis, J.).
Chief Judge Bartle also agreed with this interpretation of the willfulness standard under the FCRA when he recently permitted punitive damages to go to the jury in an FCRA investigation matter with facts less egregious than the case at bar. See Abusaab v. Equifax Information Services LLC, Civ. No. 05-5094, 2006 WL 1214782 (E.D. Pa. May 4, 2006).
FCRA cases involving investigations by credit furnishers such as Dell are no different. See DiPrinzio v. MBNA America Bank, NA, Civ. No. 04-872, 2004 WL 2039175 (E.D. Pa. Aug. 24, 2005) (Smith, J.). The DiPrinzio court, for example, denied summary judgment and permitted the plaintiff to proceed to trial with her punitive damages claim because the credit furnisher failed to conduct a reasonable investigation and to clearly disclose that the disputed account had charges that were incurred by the plaintiff’s former husband after separation. Id.; see also Sheffer v. Experian Info. Solutions, Inc., Civ. No. 02-7407, 2003 WL 21710573 at *3 (E.D. Pa. July 24, 2003) (Schiller, J.) (punitive damages permitted to go to jury against CRAs and credit funisher after multiple failed investigations).
b. Safeco Only Affirmed The Reckless Disregard Standard
Dell makes much of the U.S. Supreme Court’s 2007 decision in Safeco, but Dell’s reliance on Safeco is ironic because the Safeco decision, if anything, undermines Dell’s argument. See Safeco Insurance Co. of America v. Burr, 127 S. Ct. 2201 (2007). In Safeco, the U.S. Supreme Court was asked to decide which of two conflicting standards governed FCRA willfulness claims, and it adopted the lower and least rigorous “reckless disregard” standard, which this Court has followed for years.
Prior to Safeco, there was a circuit split as to what level of scienter should be applied in assessing FCRA willfulness claims. Several circuits had held that a knowing violation of the law (higher standard) was required for a consumer to prove willfulness under the FCRA, while others, including the Third Circuit and the Ninth Circuit, had held that “reckless disregard” (lower standard) was all that was required. In Safeco, the U.S Supreme Court endorsed our Circuit’s standard, and held that proof of “reckless disregard” by a defendant (i.e. not a knowing violation of law, as the credit industry argued) is sufficient to establish a willful violation of the FCRA. Safeco, 127 S.Ct. at 2208-2210.
“Reckless disregard” is precisely the FCRA willfulness standard that this Court has followed for many years. See Cushman v. Trans Union Corp., 115 F. 3d 220, 227 (3d. Cir. 1997). In Safeco, the U.S. Supreme Court cited our Circuit’s decision in Cushman as the correct standard for assessing willfulness claims, not the intentional disregard standard. Safeco therefore forever disposed of the argument that a consumer-plaintiff must show that a defendant knowingly violated the FCRA.
Thus, the inquiry now is not the standard for a willfulness claim, but rather when the “reckless disregard” standard is met in an FCRA case brought against a defendant. Unlike the situation in the circuits which had previously followed the knowing violation standard, this question has been thoroughly investigated and answered by the courts within this Circuit, as discussed and cited above. These cases also demonstrate that the reckless disregard standard is a fact-bound inquiry, a concept that our Circuit just recently reiterated. See Whitfield v. Radian Guaranty, Inc., 501 F.3d 262 (3d Cir. 2007). Indeed, in Whitfield the Third Circuit, in a post-Safeco FCRA decision, reversed a grant for summary judgment on an FCRA willfulness claim and held that the issue of willfulness was for the jury to decide. Id. at 271. The Third Circuit stated:
We do not suggest that a factfinder could not or would not determine that [the defendant] did not act willfully. Instead, we hold that whether it did so is a factual issue, not a question of law, and it therefore cannot be decided either on appeal or by the District Court as a matter of law.
Id. at 271. ) (Emphasis added).
c. Application To Facts
Here, Plaintiff has come forward with more than sufficient evidence to present a genuine issue of material fact as to whether Dell willfully violated the FCRA in connection with the seven (7) section 1681s-2(b) disputes that it allegedly processed. As in Whitfield, supra, willfulness is a factual issue that must be left for the jury.
The jury can, for example, reasonably determine that Dell’s conduct was in reckless or conscious disregard for Plaintiff’s rights because Dell repeatedly and systemically failed to get to the bottom of no less than seven (7) disputes of fraud. The jury can reasonably find that Dell’s practice of never going beyond the limited information in its Vision Plus database (to examine the original application or the shipping information) in handling fraud investigations shows a reckless disregard. The jury could reasonably find that Dell’s selective application of the “police report requirement” (for fraud claims allegedly involving the family or friends of the consumer, or an address match only) shows a reckless disregard for the duties set forth at FCRA section 1681s-2(b).
Other facts may also support a “reckless disregard” finding by the jury: the fact, for example, that Dell extends credit freely over the Internet or by telephone only, without ever seeing the purchasers or verifying their true identities (see Facts at ¶ 23); the fact that Dell is aware of a major corporate-wide problem with identity theft (amounting to as many as 60 fraud or identity theft disputes per day), but has still failed to implement any uniform written policies or procedures for dealing with these disputes (see Facts at ¶¶ 24, 25, 26); the fact that Dell added Plaintiff’s address as the person responsible for the disputed debt only after the police advised Dell that Plaintiff was the victim (see Facts at ¶ 37); the fact that Dell failed in so many investigations, despite receiving so much notice (see Facts at ¶¶ 7, 8, 9, 18, 28, 39, 42, 45, 46); the fact that, to this day, Dell maintains that Plaintiff owes and must pay a debt which Dell allowed to be fraudulently incurred in his name (see Facts at ¶¶ 35, 54, 55); and the list goes on.
In sum, the record here provides more than sufficient evidence on which a jury may reasonably make a reckless or conscious disregard finding. Accordingly, Dell’s Motion should be denied.
3. FCRA Section 1681g(e) Does Not Change The Fact That No Police Reports Are Required For FCRA Section 1681s-2(b) Investigations
Stretching for any support of its defense, Dell’s counsel (although notably not its witnesses) comes forward and argues that the “police report requirement” that Dell imposes for some disputes of identity theft or credit fraud is actually well grounded in law, citing FCRA section 1681g(e). This argument lacks all legal and factual support.
FCRA section 1681g(e) provides:
(e) Information available to victims
(1) In general
For the purpose of documenting fraudulent transactions resulting from identity theft, not later than 30 days after the date of receipt of a request from a victim in accordance with paragraph (3), and subject to verification of the identity of the victim and the claim of identity theft in accordance with paragraph (2), a business entity that has provided credit to, provided for consideration products, goods, or services to, accepted payment from, or otherwise entered into a commercial transaction for consideration with, a person who has allegedly made unauthorized use of the means of identification of the victim, shall provide a copy of application and business transaction records in the control of the business entity, whether maintained by the business entity or by another person on behalf of the business entity, evidencing any transaction alleged to be a result of identity theft to—
(A) the victim;
(B) any Federal, State, or local government law enforcement agency or officer specified by the victim in such a request; or
(C) any law enforcement agency investigating the identity theft and authorized by the victim to take receipt of records provided under this subsection.
(2) Verification of identity and claim
Before a business entity provides any information under paragraph (1), unless the business entity, at its discretion, otherwise has a high degree of confidence that it knows the identity of the victim making a request under paragraph (1), the victim shall provide to the business entity—
(A) as proof of positive identification of the victim, at the election of the business entity—
(i) the presentation of a government-issued identification card;
(ii) personally identifying information of the same type as was provided to the business entity by the unauthorized person; or
(iii) personally identifying information that the business entity typically requests from new applicants or for new transactions, at the time of the victim’s request for information, including any documentation described in clauses (i) and (ii); and
(B) as proof of a claim of identity theft, at the election of the business entity—
(i) a copy of a police report evidencing the claim of the victim of identity theft; and
(ii) a properly completed—
(I) copy of a standardized affidavit of identity theft developed and made available by the Commission; or
(II) an affidavit of fact that is acceptable to the business entity for that purpose.
See 15 U.S.C. § 1681g(e)(1) & (2).
a. Plain Text Reading
Dell’s counsel somehow reads this provision as allowing Dell to shift the burden back to the consumer in the case of a section 1681s-2(b) dispute and demand a police report. FCRA section 1681g(e) simply does not say that, or even come close to saying that. This section places certain burdens on a consumer who seeks documents from a business which opened a fraudulent account in the consumer’s name, and states that when that consumer’s true identity is genuinely in question, the business may require certain proof (including a police report in limited instances) before releasing that information. The rule in section 1681g(e) is designed to give more rights to consumers, not less, but assures that information about a fraudulent application is provided by a business only to the victim or the appropriate government authority, and not to the thief or another perpetrator.
b. FCRA Section 1681g(e) Inapplicable To The Case At Bar
The process outlined in FCRA section 1681g(e) is simply not the one implicated here. Plaintiff is not claiming that Dell failed to provide him with the original application or other documentation relating to the origination of the fraud. Dell has never claimed that it could not properly identify Plaintiff. And FCRA section 1681g(e) is not logically tied in any way to the investigation claims under FCRA section 1681s-2(b) in this case.
c. Legislative History And Congressional Intent
The more general notion advanced by Dell’s counsel that the requirements of 1681g(e) must be tied to this case because they relate to identity theft is nonsensical. It is true that the Fair and Accurate Credit Transactions Act of 2003, Pub. L. No. 108-159 (2003) (“FACTA Amendments”) altered many provisions of the FCRA and added several additional sections to the FCRA related to identity theft. Overall, the FACTA Amendments tried to give consumers more protection against identify theft. The fact that the FACTA Amendments added sections to the FCRA, however — some (like section 1681g(e)) requiring police reports — is not tantamount to a conclusion that businesses are entitled to a police report from victims of identity theft in every instance, or that if a victim does not or cannot produce a police report, a credit furnisher can simply abrogate its duties under any section of the FCRA, including section 1681s-2(b).
It is a basic canon of statutory construction that in construing two or more federal statutory provisions or statutes, a court must give effect to both wherever possible. See Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1017-1018, 104 S.Ct. 2862, 2881 (1984) (“where two statutes are capable of co-existence, it is the duty of the courts, absent a clearly expressed congressional intention to the contrary, to regard each as effective”). Contrary to Defendant’s suggestion, there is nothing irreconcilable, superfluous, or onerous about Dell having to comply with both FCRA section 1681s-2(b) when a consumer gives notice of a dispute and also with FCRA section 1681g(e) when a consumer makes an appropriate claim for information or documentation. Nor does any reasonable reading of the FCRA suggest that credit furnisher investigation duties are in any way affected by FCRA section 1681g(e) or the FACTA Amendments in general. Further, Dell does not provide any authority to that effect.
Importantly, the FACTA Amendments altered certain provisions of the investigation duties of consumer reporting agencies (at section 1681i) and also for credit furnishers (at section 1681s-2). In making those changes to investigation duties, Congress could have provided a “police report requirement” in connection with investigations of identity theft disputes. It did not.
The FACTA Amendments, for example, imposed additional duties on credit furnishers to handle direct disputes from consumers (section 1681s-2(a)(8)) and also certain duties to “block” information from reporting in the future (section 1681s-2(b)(E)(iii)). If Congress wished to impose a “police report requirement” in certain furnisher investigation cases, it knew how to do it. The fact that Congress amended the section at issue here (section 1681s-2(b)) through FACTA, but placed police report requirements only in other sections of the FCRA and not in that section, further demonstrates that Congress did not intend to place a police report requirement upon anybody (consumer or credit furnishers) in the context of section 1681s-2(b) dispute investigations. Dell is simply mistaken in arguing that its practice of requiring police reports from victims of fraud for certain section 1681s-2(b) disputes is unjustified under the FCRA.
d. Public Policy
It should also be noted that the FCRA is to be liberally construed in favor of consumers, not the credit industry. See Philbin v. Trans Union and Equifax Corp., 101 F. 3d 957, 962 (3d. Cir. 1996); Guimond v. Trans Union and Equifax Credit Info. Co., 45 F.3d 1329 (9th Cir. 1995). Here, Dell seeks a construction of FCRA section 1681s-2(b) — not recognized by any court or other authority ever before — that places additional burdens on consumers that are victims of fraud or identity theft. Nothing in either the letter or the spirit of the FCRA supports such a conclusion.
e. No Objectively Reasonable Application
Importantly, Dell is way off-base in arguing that a jury cannot reasonably find that its “police report requirement” in handling section 1681s-2(b) disputes is in willful noncompliance with the FCRA, purportedly because Dell relied in good faith on the police report language found in section 1681g(e). Unlike the FCRA section 1681m requirements at issue in Safeco, there is no objectively reasonable application here of sections 1681g(e) and 1681s-2(b) that would support the arguments of Dell’s counsel. As discussed above, section 1681g(e) did not change a furnisher’s duty under section 1681s-2(b). Where a defendant’s conduct is based on an “objectively unreasonable” application of the FCRA, courts have had no difficulty in allowing willful claims to proceed. See Korman v. Walking Co., 503 F. Supp.2d 755, 2007 WL 2437958 at *5 (E.D. Pa. Aug. 28, 2007) (Robreno, J.) (allowing FCRA willfulness claim to proceed where defendant had no basis in the statutory text on which to make its objective reading argument, discussing FCRA section 1681c(g)).
f. No Factual Basis
Equally as important, there is absolutely no factual basis here to support the good faith reliance argument that Dell’s counsel suggests. This is not a case where Dell has come forward with evidence that it studied the “police report requirement” or received advice from counsel and fairly concluded that such a requirement was appropriate. Rather, one of Dell’s 30(b)(6) witnesses, familiar with Dell’s FCRA compliance efforts, testified that the police report requirement is a Dell practice – and not an FCRA requirement as far as Dell was concerned. (See Exhibit 1, Reina’s Dep. at 43:23-44:7). That same witness admitted Dell has never studied, considered nor analyzed whether consumers can obtain police reports in cases of identity theft. (See Exhibit 1, Reina’s Dep. at 48:2-17). Importantly, Dell admits that it is not simply seeking police reports, but ones that identify the perpetrator, whom Dell can presumably pursue. (See Exhibit 1, Reina’s Dep. at 41:6-15, 42:1-6, 43:5-11). When asked whether Dell has any idea whether police reports routinely identify perpetrators or how many identity theft crimes go unsolved, Dell’s 30(b)(6) witness had no idea. (See Exhibit 1, Reina’s Dep. at 40:9-10).
Thus, despite defense counsel’s suggestion, this is not a case where Dell carefully studied the accessibility, contents and function of police reports in identity theft cases and in good faith, upon an objectively reasonable reading of FCRA section 1681g(e) and with advice from counsel, decided that police reports were necessary for certain FCRA section 1681s-2(b) disputes of identity theft or fraud. Rather, this is a case were counsel is trying to come up with some explanation in retrospect to justify its client’s reckless actions and practices.
In sum, the applicable law here did not require Plaintiff to submit a police report and Dell knew it when it kept on rejecting Plaintiff’s section 1681s-2(b) disputes. Defendant’s police report requirement is simply not based on applicable law and constitutes one of several practices that show a reckless disregard for the rights of victims of identity theft, such as Plaintiff. Accordingly, Dell’s Motion should be denied.
B. Because Dell’s Conduct Was Willful, Plaintiff’s Common Law Claims Are Not “Preempted” By FCRA Section 1681h(e)
Dell contends that Plaintiff should not be permitted to proceed to trial with his common law claims of defamation, negligence and invasion of privacy/false light. (See Def. Mem. at 14). The entire and exclusive basis for Dell’s “preemption” argument is that it did not “willfully” violate the FCRA. For the same reasons that Plaintiff may show willfulness and thus proceed to trial with his FCRA claim, discussed above, Dell’s preemption argument fails. See DiPrinzio v. MBNA America Bank, N.A., Civ. No. 04-872, 2005 WL 2039175 at *3-5 (E.D. Pa. Aug. 24, 2005) (negligence claim, including relief for punitive damages, not preempted where jury could find that FCRA section 1681s-2(b) violation was willful).
Further, the limitations to common law liability set forth at FCRA section 1681h(e), on which Dell relies, impose a “willfulness” threshold only for actions stemming from disclosures to the consumer, but not all FCRA actions. As one court recently explained:
Section 1681h(e) suggests not that Congress has limited actions brought in all areas regulated by the FCRA but that defendants will have qualified immunity from actions based on information disclosed pursuant to certain provisions of the FCRA. Webb v. Bob Smith Chevrolet, Inc., 2005 WL 2065237 at *5 (W.D.Ky. Aug. 24, 2005). In McAnly v. Middleton & Reutlinger, P.S.C., 77 F.Supp.2d 810, 814-15 (W.D.Ky.1999), the district court explained that, ‘section 1681h(e) is not actually a preemption provision. Rather, it is a quid pro quo grant of protection for statutorily required disclosures. Since various parts of the federal statute require consumer reporting agencies and information users to disclose information to consumers under certain circumstances, this section guarantees that the agencies or users cannot be sued for those required disclosures [under FCRA sections 1681g, 1681h and 1681m] under state tort law. It makes sense that acts required to be done by the FCRA are immunized from state tort liability.’
Poore v. Sterling Testing Sys., Inc., 410 F.Supp. 2d 557, 573 (E.D. Ky. 2006).
Here, Plaintiff’s common law claims are based on information provided by Dell to the CRAs, and for Dell’s conduct in failing to properly handle Plaintiff’s repeated disputes. They are not based on the disclosures to consumers required under sections 1681g, 1681h and 1681m. Nor are they based on information disclosed by a user of a consumer report. Accordingly, Plaintiff’s state law claims are not prohibited or limited under section 1681h(e) in the case at bar.
For all of the reasons set forth above, Defendant Dell’s Motion for Partial Summary Judgment should be denied.
FRANCIS & MAILMAN, P.C.
/s/ John Soumilas
Attorney for Plaintiff
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Philadelphia, PA 19110