Reynolds v. Hartford-Class Action Defense Cases: “Adverse Action” Under Federal FCRA (Fair Credit Reporting Act) Applies To Initial Premium Set By Insurer Ninth Circuit Holds In Case Of First Impression

Federal Court Also Holds that Liability for Violations of Fair Credit Reporting Act (FCRA), and that “Willful” Noncompliance Under FCRA’s Punitive Damage Provision Includes Reckless Disregard

In two class action lawsuits filed against insurance companies for alleged violations of the federal Fair Credit Reporting Act separate statement motion to compel responses, 15 U.S.C. §§ 1681 et seq., (1) class action defense attorneys representing Hartford moved for summary judgment on the grounds that the initial rate set for a new policy holder cannot constitute an “adverse action” because there is no “increase” in the rate charged; and (2) class action defense attorneys representing GEICO sought summary judgment claiming the class representative lacked standing, that it did not contract to issue the plaintiff a policy, and that the premium charged would have been the same even if it had not considered plaintiff’s credit history. In each case, the district court granted summary judgment in favor of the insurers; the Ninth Circuit consolidated the cases for purposes of its opinion.

In a case of first impression, the Ninth Circuit Court of Appeals held that if the rate initially set by an insurance company would have been lower but for its reliance on a consumer’s credit report, then a notice of adverse action must be provided under the FCRA. Reynolds v. Hartford Fin. Serv. Group, Inc., 435 F.3d 1081 (9th Cir. 2006). Congress enacted the FCRA to ensure fair and accurate reporting of credit information affecting consumers. The statutory scheme has been characterized by courts as both comprehensive and complex. One aspect of the FCRA requires that consumers be informed of “adverse actions” taken in reliance on credit reports so that they can dispute or explain any negative information contained in such reports. “Adverse action notices advise consumers that an adverse action has been taken against them, and the nature of that action, and alerts them that they may view a copy of the consumer report that triggered the adverse action free of charge and correct any errors affecting their economic well-being.” Id., at 1085.

Class Action Court Decisions FCRA Class Actions Uncategorized

Class Action Defense Cases-Roberts v. BJC Health: Defense Appeal Of Order Remanding Class Action To State Court Not Reviewable On Appeal Even Though State Court May Lack Jurisdiction Because Of ERISA Preemption Eighth Circuit Holds

28 U.S.C. § 1447(d) Bars Review of Class Action Defense Appeal of Order Remanding Case to State Court on Grounds that Federal Court Lacked Subject Matter Jurisdiction Over Action Roberts v. BJC Health System, 452 F.3d 737 (8th Cir. 2006), concerned a putative class action filed in Missouri state court alleging that certain medical procedures were systematically “miscoded” so that patients were overcharged for the procedures. The defense removed the action to federal court on the grounds of federal question subject matter jurisdiction, asserting that ERISA completely preempted the class action claims.

Class Action Court Decisions Removal & Remand Uncategorized

Chicago Federal Judge Dismisses Warrantless Surveillance Class Action Against AT&T Agreeing With Defense That State Secrets Privilege Applies: Class Action Defense News

On July 21st, we posted an article concerning Hepting v. AT&T Corp., ___ F.Supp.2d ___ (N.D. Cal. July 20, 2006), where a San Francisco federal district court refused to dismiss a putative class action against AT&T for its participation in the government’s warrantless surveillance program. In part, the California federal court rejected a defense argument by AT&T and the federal government (which had intervened in the putative class action) that the claims were barred by the state secrets privilege.

Class Actions In The News Uncategorized

Verizon Class Action Defense Case-Harris v. Verizon: Corporations That Comply With California Unclaimed Property Law (UPL) By Delivering Duplicate Stock Certificates To State Controller Have Absolute Immunity Against Suit From Shareholders

California Court Rejects Putative Class Action by Shareholder Whose Stock Escheated to the State Against Corporation Confirming Absolute Immunity Defense to UPL Claims

In a class action defense case of first impression, on July 19, 2006, a California appellate court upheld a court order sustaining a demurrer to a putative class action complaint against a corporation for alleged violations of California’s Unclaimed Property law (UPL), California Code Civ. Proc., §§1500-1582. Harris v. Verizon Communications, ___ Cal.App.4th ___, 2006 WL 20008884 (Cal.App. July 19, 2006). The putative class action was premised on the corporation’s alleged failure to provide notice required by the UPL. Specifically, plaintiff Gene Harris worked for GTE Corporation in the 1970s and 1980s, receiving shares in the corporation as a “fringe benefit.” Slip Opn., at 3. In 1990, without notice to Harris and without his knowledge, GTE transferred his shares to the State Controller. In accordance with California law, the Controller sold the shares and held the proceeds; eventually Harris submitted a claim and was 1999 the Controller sent him the funds held on his behalf. _Id._

Despite receiving the funds, Harris filed two class actions. In September 2001, Harris filed a putative class action lawsuit against the State Controller for failure to provide notice to shareholders before selling stock that had escheated to the State. Slip Opn., at 3. That case was resolved in favor of the defense in 2004, when a California appellate court held that the UPL “do[es] not require the Controller to provide notice to apparent owners of escheated stock before the Controller sells the stock.” Harris v. Westly, 116 Cal.App.4thh 214, 224 (Cal.App. 2004). In October 2001, Harris filed a putative class action against GTE for delivering his shares of stock to the Controller without notice. Slip Opn., at 4. The defense demurred; the trial court dismissed the class action against GTE, agreeing that GTE had an absolute immunity defense under the UPL. Id.

Class Action Court Decisions Uncategorized

McSherry v. Capital One-Class Action Defense Issues: No Right Of Indemnity Under FCRA (Fair Credit Reporting Act) Or TILA (Truth In Lending Act) Federal Court Holds

Federal District Court Grants Motion to Strike Third-Party Complaint for Indemnity/Contribution Against Parent

Plaintiffs Kristen and William McSherry Jr. (“William Jr.”) filed suit against Capital One FSB and others alleging violations of the federal Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA), and Truth in Lending Act (TILA), together with Washington state law claims for defamation and invasion of privacy. McSherry v. Capital One FSB, ___ F.R.D. ___, 2006 WL 1420839 (W.D. Wash. 2006). Capital One filed a third-party complaint against plaintiff’s father, William McSherry Sr., (“William Sr.”) for indemnity and contribution because “[a]ccording to several documents in the record, including Plaintiffs’ complaint, it appears that the debt allegedly incurred by [William Jr.], may have been incurred by [William Sr.].” Slip Opn., at 2. The district court granted plaintiffs’ motion to strike, finding that “[w]hile it does appear that Capital One’s allegedly tortuous actions or omissions would not have occurred but for [William Sr.’s] alleged actions, this is not enough.” _Id_., at 1 and 12.

The federal court began with a summary of federal law on impleader actions, noting that it must be based on “an assertion of the third-party defendant’s derivative liability to the third-party plaintiff” and that it “cannot be used to assert any . . . rights to recovery arising from the same transaction or occurrence as the underlying action.” Slip Opn., at 3-4 (citation omitted). Here, the plaintiffs’ complaint was carefully drafted to seek damages solely based on Capital One’s acts or omissions in response to communications from plaintiffs concerning the debt:

Class Action Court Decisions FCRA Class Actions RESPA/TILA Class Actions Uncategorized

15 U.S.C. § 1681b – Permissible purposes of consumer reports: Statutory Language for the Defense Lawyer of Class Action Lawsuits Under the FCRA (Fair Credit Reporting Act)

As a resource for the class action defense lawyer defending against class actions under the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq., we provide the text of the FCRA on this site for attorneys.

§ 1681b. Permissible purposes of consumer reports

(a) In general.

Subject to subsection (c), any consumer reporting agency may furnish a consumer report under the following circumstances and no other:

(1) In response to the order of a court having jurisdiction to issue such an order, or a subpoena issued in connection with proceedings before a Federal grand jury.

(2) In accordance with the written instructions of the consumer to whom it relates.

(3) To a person which it has reason to believe

(A) intends to use the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to, or review or collection of an account of, the consumer; or

(B) intends to use the information for employment purposes; or

(C) intends to use the information in connection with the underwriting of insurance involving the consumer; or

(D) intends to use the information in connection with a determination of the consumer’s eligibility for a license or other benefit granted by a governmental instrumentality required by law to consider an applicant’ s financial responsibility or status; or

(E) intends to use the information, as a potential investor or servicer, or current insurer, in connection with a valuation of, or an assessment of the credit or prepayment risks associated with, an existing credit obligation; or

(F) otherwise has a legitimate business need for the information

(i) in connection with a business transaction that is initiated by the consumer; or

(ii) to review an account to determine whether the consumer continues to meet the terms of the account.

(4) In response to a request by the head of a State or local child support enforcement agency (or a State or local government official authorized by the head of such an agency), if the person making the request certifies to the consumer reporting agency that

(A) the consumer report is needed for the purpose of establishing an individual’s capacity to make child support payments or determining the appropriate level of such payments;

(B) the paternity of the consumer for the child to which the obligation relates has been established or acknowledged by the consumer in accordance with State laws under which the obligation arises (if required by those laws);

(C) the person has provided at least 10 days’ prior notice to the consumer whose report is requested, by certified or registered mail to the last known address of the consumer, that the report will be requested; and

(D) the consumer report will be kept confidential, will be used solely for a purpose described in subparagraph (A), and will not be used in connection with any other civil, administrative, or criminal proceeding, or for any other purpose.

(5) To an agency administering a State plan under Section 454 of Title 42 for use to set an initial or modified child support award.

FCRA Class Actions Statutes & Rules Uncategorized

Class Action Defense Issues–Federal Fair and Accurate Credit Transactions Act (FACTA)

Class Action Defense Attorneys Urged to Advise Clients about FACTA Requirements Congress has amended the Fair Credit Reporting Act to include the Fair and Accurate Credit Transactions Act. That statute requires that credit card receipts provided to customers be modified so that the credit card number shown on the receipt is truncated and so that the expiration date is omitted. Defense attorneys are encouraged to be proactive in warning their clients about the statute, which takes effect in December 2006.

Class Actions In The News FCRA Class Actions Uncategorized

Mervyn’s Class Action Defense Case-Californians for Disability Rights v. Mervyn’s: California Supreme Court Holds Proposition 64 Applies “Retroactively” To Section 17200 Unfair Competition Law (UCL) Claims

California Supreme Court’s Decision Adds “Standing” to Class Action Defense Arsenal Against UCL Claims Pending at Time of Proposition 64’s Passage

California’s Unfair Competition Law (UCL), California Bus. & Prof. Code, §§ 17200 et seq., was enacted “to protect consumers and competitors” alike from unfair competition in commercial markets for goods and services “by promoting fair competition,” Kasky v. Nike, 27 Cal.4th 939, 949 (Cal. 2002). While government entities may enforce the provisions of the UCL, California law also permits private parties to enforce its terms. Generally, however, the UCL was not intended to provide a means of redressing a personal injury; rather, California’s statutory scheme permits a party on behalf of the public (other consumers or competitors) to enjoin an unlawful or unfair business practice. These so-called “representative actions” are often filed as class actions. The California Supreme Court today resolved the issue of whether Proposition 64, approved in November 2004, applies to cases pending at the time of its passage. Californians for Disability Rights v. Mervyn’s, ___ Cal.4th ___ (Cal. July 24, 2006).

The scope of the UCL is extremely broad. It defines “unfair competition” to “include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code.” The Supreme Court has referred to this as “sweeping language” and declared that it is intended to cover “‘anything that can properly be called a business practice and that at the same time is forbidden by law.'” Bank of the West v. Superior Court, 2 Cal.4th 1254, 1266 (Cal. 1992) (citation omitted). As the court explained, “[i]n essence, an action based on Business and Professions Code section 17200 to redress an unlawful business practice ‘borrows’ violations of other laws and treats these violations, when committed pursuant to business activity, as unlawful practices independently actionable under section 17200 et seq. and subject to the distinct remedies provided thereunder.” Farmers Ins. Exchange v. Superior Court, 2 Cal.4th 377, 383 (Cal. 1992) (citation omitted).

Class Action Court Decisions Class Actions In The News Uncategorized

15 U.S.C. § 1681a – Definitions; rules of construction: Statutory Language of the FCRA (Fair Credit Reporting Act) for the Class Action Defense Lawyer

As a resource for the defense lawyer defending against class actions under the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq., we provide the text of the FCRA on this site for attorneys.

§ 1681a. Definitions; rules of construction

(a) Definitions and rules of construction set forth in this section are applicable for the purposes of this title.

(b) The term “person” means any individual, partnership, corporation, trust, estate, cooperative, association, government or governmental subdivision or agency, or other entity.

(c) The term “consumer” means an individual.

(d) Consumer Report

(1) In general.

The term “consumer report” means any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to e used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer’ s eligibility for

(A) credit or insurance to be used primarily for personal, family, or household purposes;

(B) employment purposes; or

(C) any other purpose authorized under section 1681b of this title.

(2) Exclusions.

Except as provided in paragraph (3), the term “consumer report” does not include

(A) subject to section 1681s-3 of this title, any

(i) report containing information solely as to transactions or experiences between the consumer and the person making the report;

(ii) communication of that information among persons related by common ownership or affiliated by corporate control; or

(iii) communication of other information among persons related by common ownership or affiliated by corporate control, if it is clearly and conspicuously disclosed to the consumer that the information may be communicated among such persons and the consumer is given the opportunity, before the time that the information is initially communicated, to direct that such information not be communicated among such persons;

(B) any authorization or approval of a specific extension of credit directly or indirectly by the issuer of a credit card or similar device;

(C) any report in which a person who has been requested by a third party to make a specific extension of credit directly or indirectly to a consumer conveys his or her decision with respect to such request, if the third party advises the consumer of the name and address of the person to whom the request was made, and such person makes the disclosures to the consumer required under section § 1681m of this title; or

(D) a communication described in subsection (o) or (x).

(3) Restriction on sharing of medical information.

Except for information or any communication of information disclosed as provided in section 1681b(g)(3), the exclusions in paragraph (2) shall not apply with respect to information disclosed to any person related by common ownership or affiliated by corporate control, if the information is–

(A) medical information;

(B) an individualized list or description based on the payment transactions of the consumer for medical products or services; or

(C) an aggregate list of identified consumers based on payment transactions for medical products or services.

FCRA Class Actions Statutes & Rules Uncategorized

General Overview Of The Federal Fair Credit Reporting Act (FCRA): Class Action Defense Issues

In 1970, Congress enacted the FCRA (Fair Credit Reporting Act, 15 U.S.C. §§ 1681 et seq.) to “require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information,” 15 U.S.C. § 1681(b). Congress did so based on its recognition that, “There is a need to insure that consumer reporting agencies exercise their grave responsibilities with fairness, impartiality, and a respect for the consumer’ s right to privacy.” § 1681(a)(4). And to ensure that its goals were met, Congress enacted a section of the FCRA that specifically prohibits consumer reporting agencies from avoiding the effects of the law through “corporate” or “technological circumvention,” see §1681x. Courts have referred to the FCRA’s statutory scheme as both “comprehensive,” FTC v. Manager, Retail Credit Co., 515 F.2d 988, 989 (D.C. Cir. 1975), and “complex,” Skwira v. United States, 344 F.3d 64, 74 (1st Cir. 2003). We provide but a brief overview here.

A “consumer reporting agency” is defined as “any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports.” 15 U.S.C. § 1681a(f).

FCRA Class Actions Uncategorized