Gorman v. Wolpoff & Abramson examines creditor obligations under Fair Credit Reporting Act (FCRA)

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Ninth Circuit SealWhat must a creditor do when notified of a dispute by a Credit Reporting Agency (CRA)? Under the Fair Credit Reporting Act (FCRA), the creditor is obligated to conduct “an investigation with respect to the disputed information.” 15 U.S.C. § 1681s-2(b)(1)(A). But does that investigation have to be “reasonable?” In a case involving a complicated dispute about credit card charges, the Ninth Circuit, in Gorman v. Wolpoff & Abramson, said that such investigations must be reasonable, following the Fourth Circuit.

Dismissing the contention that the absence of the word “reasonable” authorizes unreasonable investigations, the Court said:

“ This court has not addressed MBNA’s contention about the FCRA’s investigation requirement. But, MBNA made — and lost — the same argument before the Fourth Circuit. Johnson v. MBNA Am. Bank, NA, 357 F.3d 426, 429-31 (4th Cir. 2004). Concluding that the statute includes a requirement that a furnisher’s investigation not be unreasonable, the Fourth Circuit first noted that the plain meaning of the term “investigation” is a “ ‘detailed inquiry or systematic examination,’ ” which necessarily “requires some degree of careful inquiry.” Id. at 430 (quoting Am. Heritage Dictionary 920 (4th ed. 2000)). Second, the Fourth Circuit reasoned that because the purpose of the provision is “to give consumers a means to dispute — and, ultimately, correct — inaccurate information on their credit reports,” id. at 430-31, a “superficial, unreasonable inquir[y]” would hardly satisfy Congress’ objective. Id. at 431. The Seventh Circuit, without discussing the issue, has also found an implicit reasonableness requirement. See Westra v. Credit Control of Pinellas, 409 F.3d 825, 827 (7th Cir. 2005) (“Whether a defendant’s investigation [pursuant to § 1681s-2(b)(1)(A)] is reasonable is a factual question normally reserved for trial.”); see also Johnson, 357 F.3d at 430 n.2 (“[D]istrict courts that have considered the issue have consistently recognized that the creditor’s investigation must be a reasonable one.” (citing cases)).

(Slip op., at pp. 277-278.) The Ninth Circuit found this reasoning more than sufficient. The Court went on to evaluate the reasonableness of a number of investigations by the creditor, finding them to be reasonable on the offered facts.

The Court then flirted with a pre-emption issue related to state law claims arising out of credit reporting: “The preemption question presents a difficult issue of first impression.” (Slip op., at p. 296.) But after building the suspense with a discussion of district courts in "disarray" on the issue, the Court concluded that an insufficiency of evidence would preclude a libel claim by the debtor, rendering a decision on the pre-emption claim unnecessary. The wind-up was good; the Court had me ready to learn how they were going to untangle the statutory interpretation issue that confounded district courts on the pre-emption question.

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Blog reading suggestions: Lawyerist and Caveat Emptor

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It's been a while since I suggested some additional law-related blogs for your consideration.  Here are two that are worth a look:

  • Lawyerist:  Dedicated predominantly to identifying technology to help the small firm stay nimble and keep up with biglaw.

  • Caveat Emptor:  Law, politics and news from a consumer advocate's point of view.

Take a look and see what you think.  Don't forget that RSS feeds can deliver most blogs to your e-mail inbox, RSS reader or browser.

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Ninth Circuit certifies interesting e-mail question to California Supreme Court in Kleffman v. Vonage Holdings

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As I play weekend catch-up and work through the list of items to consider for posting, I saw a Ninth Circuit case that I saved for its technology angle.  Periodically, the Ninth Circuit gets a tricky question of first impression about California law.  When the answer to the question could prove significant, the Ninth Circuit will occasionally certify a question to the California Supreme Court, in the hope that the California Supreme Court will bail them out and take the question.  In Kleffman v. Vonage Holdings, the Ninth Circuit certified this question:

“Does sending unsolicited commercial e-mail advertisements from multiple domain names for the purpose of bypassing spam filters constitute falsified, misrepresented, or forged header information under Cal. Bus. & Prof. Code § 17529.5(a)(2)?

Yes.  Why yes?  Because there isn't any spam out there that isn't faking its header information.  Perhaps an overstatement, but so close to true that the differential is insignificant.  The fact that spam comes from multiple domain names is just an additional irritation.  Somebody oughta' file a class action...

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More coverage of Meyer v. Sprint Spectrum

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Greatsealcal100In Meyer v. Sprint Spectrum L.P. (January 29, 2009), the California Supreme Court considered a matter, arising under the California Consumer Legal Remedies Act (CLRA; Civ. Code, § 1750 et seq.), in which plaintiffs sued the defendant cellular telephone company, alleging that its arbitration agreement and other remedial provisions were unconscionable. In Meyer, the plaintiffs did not allege that these provisions had been enforced against them or caused them damage. The primary issue considered by Meyer was whether, under these circumstances, a plaintiff may obtain injunctive relief to compel the removal of the allegedly unconscionable provisions under the CLRA. The ancillary issue was whether a plaintiff may obtain declaratory relief pursuant to Code of Civil Procedure section 1060 to declare these provisions unlawful and unenforceable. The Supreme Court concluded that neither form of relief was available to plaintiffs, affirming the decision below.

The Meyer decision has all the hallmarks of a case that will be misused and misunderstood for years to come.  Its holding regarding "damages" will be grist for the deceptive briefing mill. One significant point made in the decision, and likely to be ignored when inconvenient for some defendant's demurrer, is that “any damages” can be something other than “actual” or “pecuniary damages”:

“ As to the first argument, plaintiffs contend that the phrase “any damage” is not synonymous with “actual damages,” which generally refers to pecuniary damages. The language of section 1780(a) indicates that plaintiffs are correct. If “any damage” and “actual damages” were synonymous, then it seems likely only the latter phrase would have been used in the first part of subdivision (a). The juxtaposition of the two phrases so close together indicates that the phrases have different meanings. Moreover, the breadth of the phrase “any damage” indicates a category that includes, but is greater than, “actual damages,” i.e. those who are eligible for the remedy of “actual damages” are a subset of those who have suffered “any damage.” Sprint does not dispute this point. It concedes that “any damage” may encompass harms other than pecuniary damages, such as certain types of transaction costs and opportunity costs.

(Slip op., at p. 5, footnote omitted.) Construing Kagan v. Gibraltar Sav. & Loan Assn. (1984) 35 Cal.3d 582 to fit this rubric, the Meyer Court noted that in Kagan, the plaintiff wasn’t charged an improper fee, but did expend time and resources resisting the fee after the financial institution announced its intention to assess the fee. (Slip op., at pp. 8-9.)

The opinion has other interesting holdings. For example, the Meyer Court explicitly declares that the statute of limitation applicable to a CLRA claim is subject to a delayed discovery rule, based on an objective reasonable consumer standard. (Slip op., at p. 12, citing Chamberlain v. Ford Motor Co. (N.D.Cal. 2005) 369 F.Supp.2d 1138, 1148.) The decision also confirms that settling with a plaintiff individually does not undermine a plaintiff’s status as a legitimate class representative.

From the consumer standpoint, Meyer is mixed bag of holdings. But on the damage issue, the UCL Practitioner likely has the right of it when noting that this looks suspiciously like Proposition 64 creep.

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Supreme Court denies request to depublish Hewlett-Packard v. Superior Court (Rutledge)

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Greatsealcal100While the decision to grant the Brinkley Petition is arguably the most noteworthy action the California Supreme Court today (see post), the Court took at least one other action of note to class action practitioners. In Hewlett-Packard v. Superior Court (Rutledge) (2008) 167 Cal.App.4th 87, the Supreme Court denied a depublication request. The Hewlett-Packard decision is noted here on The Complex Litigator.

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Sprint settles early termination fee (ETF) claims and topclassactions.com helps consumers get their share

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The Complex Litigator previously reported on Sprint's win before a jury and loss in a related Court trial on claims arising from Sprint's practice of charging Early Termination Fees (ETFs) to consumers.  Now, Sprint has apparently reached a settlement of those claims, and TopClassActions.com is provinding consumers with a helping hand.  Visit their page explaining the Sprint settlement, and you will be walked through the claim-form process with loving care.

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Comcast (ab)using oligopoly power to interfere with movie downloading

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Comcast came under fire in April 2008 for throttling BitTorrent traffic on their network, even when network congestion was not an issue.  (Daniel A. Begun, The FCC v. Comcast, Round 2 (April 25, 2008) hothardware.com.)  BitTorrent peer-to-peer traffic describes distributed download services where a computer requesting a file (often a large file, like a movie) both downloads tiny pieces of the file from multiple users on the internet and provides other downloaders with access to those same pieces.  The argument from Comcast was that torrent traffic was all illegal content, such as pirated software and movies, but that is no longer true.

Comcast backed off of its packet content-based throttling plan, but phase 2 is here.  "The new system, which is now in place, monitors the amount of downstream traffic a user consumes and not what that traffic is actually composed of."  (Daniel A. Begun, Comcast's New Network Throttling Now In Place (January 6, 2009) hothardware.com, via digg.com.)

Comcast would like consumer to believe that this throttling is about protecting its network from bandwidth hogs, like large file downloaders.  What is more likely the motivation for this second effort at throttling is the desire to keep its the lucrative video-on-Demand service free from competition created by other download services, like Netflix.  This is just more anti-competitive behavior from your friendly neighborhood cable company.  Don't forget that comcast also imposes a 250GB monthly cap on users.  A high definition movie could consume 5-10GB of capacity in one download.  These moves are intended to discourage customers from looking beyond Comcast for video-on-demand.  Somebody ought to do something about this behavior.

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Cable set-top box class action against Time Warner are centralized in New York

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I recently reported on proposed class action suits filed against Time Warner in California and Kansas, among other states.  That background information about those class action can be found in this post, but, in a nutshell, the suits challenge as unlawful the inability of consumers to purchase their set-top boxes outright.  On December 8, 2008, the MDL consolidated six class actions in the Southern District of New York.  (In re Set-Top Cable Television Box Antitrust Litig., ___ F.Supp.2d ___ (December 8, 2008).)

Via ClassActionDefenseBlog.

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Private actions under the California’s Consumer Credit Reporting Agencies Act are preempted by the Fair Credit Reporting Act

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Greatsealcal100There has been a fair bit of speculation that the weak economy would generate a substantial amount of consumer class action activity in areas of finance, including lending, consumer credit and debt collection.  In California, the door to one such area was slammed shut, absent action by the California Supreme Court or the United States Supreme Court.  In Liceaga v. Debt Recovery Solutions LLC (December 29, 2008) the Court of Apppeal (First Appellate District, Division One) held that the federal Fair Credit Reporting Act completely preemted private rights of action under California's Consumer Credit Reporting Agencies Act. 

“Plaintiff and appellant Rebecca Liceaga, apparently the victim of identity theft, filed a complaint against Debt Recovery Solutions, LLC, a collection agency, for damages that she claims were caused when it furnished to a consumer credit reporting agency information about her which it knew or should have known was inaccurate. The complaint alleged a violation of California’s Consumer Credit Reporting Agencies Act, Civil Code section 1785.1 et seq. (CCRAA). The trial court granted defendant’s motion for judgment upon the pleadings upon the ground that any private right of action provided by the CCRAA is preempted by the corresponding federal Fair Credit Reporting Act (15 U.S.C. § 1681 et seq.) (FCRA)).

In this appeal we are called upon to determine whether the FCRA preempts private rights of action as to “furnishers” of wrongful information and whether, if so, Congress has specifically excepted California actions from preemption. We conclude that private actions under the CCRAA are preempted, without exception, by FCRA.

(Slip op., at p. 1.)  The opinion that follows is a fairly standard analysis under the Supremacy Clause.  It is a loss for consumers, since economic downturns and debt collection misconduct have been known to loiter in each other's company.  Actions by California are not preempted, but it is a metaphysical certainty that cash-strapped California won't be keeping up with the prosecution of CCRAA actions at a level consistent with the likely rate of abuse.

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Comcast, Time Warner sued for anti-competitive prohibition on set-top box purchases

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The cell phone companies like providing subsidized handsets because the long-term contracts are worth more to them than the subsidy they provide on the hanset.  Cable companies use their oligopoly position to provide hardware through an entirely different model.  They "rent" consumers the hardware customers need for digital and enhanced services (movies on demand, information services, etc.).  Customers can't buy the set-top box on the open market and still receive the full set of services from their cable provider.  Those fees add up when a customer has multiple televisions on which enhanced services are desired.


As it turns out, consumers are challenging this scheme as an illegal tying arrangement, alleging Sherman Act violations, among other things.  In August 2008, class action lawsuits were filed in, among other states, California and Kansas, challenging Time Warner's practice of preventing customers from purchasing their set-top boxes.  You can read some background on those suits here.

Now Comcast is in the crosshairs.  Ars Technica reports, via Multichannel News, that Comcast was sued in late November for similar anti-competitive practices.  (Nate Anderson, Comcast sued for not selling set-top boxes, Cable-CARDs (December 26, 2008) arstechnica.com.)

Let me just add, on a personal note, that I can't think of a more deserving industry.  Earlier tonight I spent some time unplugging (to reset) the pathetic set-top box that I received from Time Warner after they took my beautiful MOXI boxes from me (while I sobbed uncontrollably).  As I noted in a June 4, 2008 post, Time Warner acquired Adelphia in my part of Southern California.  Time Warner then set about pushing their junky boxes with their junky menu systems on anyone that had Adelphia equipment.  The conspiracy theorist in me thinks that they intentionally fried my two boxes, which both "failed" within a month of each other.  Of course, it could have been bad luck.  But since I can't go out and buy the control box I want, I'll never know.

Suits like these broke the AT&T phone monopoly (back when you couldn't buy a home telephone of your choosing).  If these suits have any effect on the cable industry and its anti-competitive behaviors, I'll be a big fan.
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