Michael Dreher v. Experian Information Solutions

Citations: 856 F.3d 337; 2017 WL 1948916; 2017 U.S. App. LEXIS 8358Docket: 15-2119

Court: Court of Appeals for the Fourth Circuit; May 11, 2017; Federal Appellate Court

Original Court Document: View Document

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The Fourth Circuit Court of Appeals addressed an appeal involving Michael T. Dreher against Experian Information Solutions, Inc. The case originates from a class action judgment of $11,747,510 concerning the Fair Credit Reporting Act (FCRA). The court evaluated whether Experian's listing of a defunct credit card company as a "source of information" on Dreher's credit report constituted a sufficient injury to establish Article III standing. The court concluded that Dreher did not demonstrate a concrete injury related to the allegedly incorrect information, which is necessary for constitutional standing. Consequently, the court vacated the judgment and remanded the case with instructions for dismissal. 

Dreher's issues began during a security clearance background check in 2010 when a delinquent credit card account in his name was discovered. The card had been taken out by his cousin to cover expenses for a bowling alley. Dreher sought clarification from Experian and Advanta, the issuer of the credit card, regarding the delinquent account. Despite multiple attempts to rectify the situation, including letters and requests for verification, he received inadequate responses and ultimately felt stressed and frustrated by the process, although his security clearance was not adversely affected. The delinquent account was eventually removed from his credit file in June 2012.

In early 2010, the Utah Department of Financial Institutions closed Advanta due to its inability to survive the 2008 financial crisis, appointing the FDIC as receiver. Deutsche Bank acquired a security interest in Advanta's receivables and designated CardWorks, Inc. and CardWorks Servicing LLC as servicers effective August 1, 2010. CardWorks operated under the Advanta name, using its prior contact information and website to facilitate a smooth transition for customers. A letter signed by Tom Wineland of the FDIC on October 4, 2010, confirmed that Advanta’s name would appear on consumer credit reports for clarity and consistency, as Deutsche Bank remained the successor creditor. 

On September 21, 2011, Dreher filed a lawsuit against Experian and CardWorks in the Eastern District of Virginia, later amending his complaint to include three class claims and seven individual claims, alleging Experian willfully violated the Fair Credit Reporting Act (FCRA) by omitting "CardWorks" from Advanta tradelines on credit reports. Experian sought partial summary judgment on the class claims, asserting a lack of evidence for willfulness, but the district court denied this motion on May 30, 2013. The court certified a class of individuals who requested credit disclosures from Experian after August 1, 2010, and received reports identifying only Advanta as the source of tradeline information. Experian's subsequent petition for an interlocutory appeal on this certification was denied.

Cross-motions for partial summary judgment were filed on October 31, 2014, where Experian contended that Dreher and the class lacked Article III standing, while Dreher maintained that Experian willfully violated the FCRA. The district court ruled in favor of Dreher, determining that Experian's omission of CardWorks was not objectively reasonable, thus constituting a willful violation of the FCRA.

Experian's motion was denied on the grounds that the Fair Credit Reporting Act (FCRA) establishes a statutory right to obtain the sources of information for one's credit report, and failure to disclose these sources constitutes a sufficient "injury-in-fact" for constitutional standing. The district court did not assess whether the injury was specific or concrete, concluding that any statutory violation was adequate for Article III standing. It acknowledged that the ruling presented a significant legal question, meriting an immediate appeal to expedite the litigation's resolution. Experian's attempt to file an interlocutory appeal was unsuccessful. In February 2015, the district court separated the class claim from individual claims for distinct jury trials. The parties agreed to stipulate $170 in statutory damages per class member, leading to a total judgment exceeding $11.7 million in August 2015. Experian appealed, with the case held pending the Supreme Court's ruling in Spokeo, Inc. v. Robins, which addressed standing issues. The review of summary judgment is conducted de novo, maintaining the same legal standards used by the district court, and all facts are viewed favorably towards the nonmoving party. Standing, derived from Article III, section 2 of the Constitution, ensures that federal courts address actual cases or controversies, preventing judicial overreach into political powers. In class actions, standing is assessed based on personal injury claims by the named plaintiff; without sufficient harm allegations, the plaintiff cannot establish standing.

To establish standing, Dreher must meet the "irreducible constitutional minimum" of a "case" or "controversy," which involves a three-part test: (1) suffering an injury in fact, (2) that is fairly traceable to the defendant's conduct, and (3) likely to be redressed by a favorable judicial decision. The burden to prove these elements lies with the party seeking federal jurisdiction, and all three are prerequisites for standing. Dreher faces challenges specifically with the first requirement, injury in fact, which necessitates an "invasion of a legally protected interest" that is "concrete and particularized." 

In the Spokeo case, the Supreme Court clarified that "particularization" and "concreteness" are distinct, independent requirements for establishing injury. The Ninth Circuit had erroneously conflated these in its decision to reinstate Robins’ claim against Spokeo, which involved allegations of incorrect personal information dissemination. The Supreme Court vacated the Ninth Circuit's ruling, emphasizing that an injury must be "de facto," meaning it must exist and be real, although it may not necessarily be tangible. Intangible injuries can also be considered concrete, depending on historical context and congressional judgment. However, merely having a statutory right does not fulfill the injury requirement; a plaintiff cannot claim standing through a "bare procedural violation" without demonstrating concrete harm.

A violation of the Fair Credit Reporting Act (FCRA) may not necessarily result in a concrete injury, as illustrated by the Spokeo Court's explanation. The Court noted that even if a consumer reporting agency (CRA) fails to provide required notices, the accuracy of the information may remain intact, and not all inaccuracies cause harm. For example, an incorrect zip code is unlikely to lead to concrete harm. Consequently, a technical violation of the FCRA may not constitute an "injury in fact" for constitutional purposes.

In this case, Dreher alleges that Experian violated 15 U.S.C. § 1681g(a)(2) by failing to clearly and accurately disclose the source of a tradeline reporting from Advanta Bank, which he claims is CardWorks. Dreher asserts he suffered an "informational injury" due to denial of specific information he was entitled to under the FCRA. However, even if CardWorks is a valid source under the statute and a violation occurred, Dreher's complaint does not establish a concrete injury.

An "informational injury" can be an intangible injury recognized as an Article III injury in fact, but a statutory violation alone does not suffice for standing. A constitutionally cognizable informational injury requires a lack of access to legally entitled information that results in real harm. Courts evaluate whether such injuries are traditionally recognized in legal contexts. Dreher fails to provide a common law analogy for his alleged injury under the FCRA, and while the absence of such an analogy is not determinative, it does not aid his case in proving a concrete injury.

Spokeo asserts that Congress is capable of identifying intangible harms that satisfy Article III standing requirements, making its judgment significant. A recent case, Friends of Animals v. Jewell, determined that a plaintiff experiences a concrete informational injury when denied access to statutorily required information, aligning with Congress's intent to prevent such harm. However, Dreher has not demonstrated that knowing he was communicating with a CardWorks employee instead of an Advanta employee impacted the fairness or accuracy of his credit report or improved the efficiency of the credit resolution process. His argument regarding the importance of knowing the identity of the representative is viewed as a customer service issue rather than a legal harm. The court noted that this situation is comparable to a consumer contacting their bank, indicating no substantial harm as intended by the Fair Credit Reporting Act (FCRA). Dreher's claim of a statutory violation lacks a concrete negative impact, failing to meet the standing requirements established in Spokeo. The court found no evidence that dealing with CardWorks representatives impeded Dreher's ability to resolve his credit report issues, nor did the identification issue affect the accuracy of the report. Furthermore, Dreher's claim that the delinquent account threatened his security clearance was unfounded, as the account did not materially affect the background check process. His references to other cases are deemed irrelevant since those involved deprivation of information that negatively impacted the plaintiffs' actions.

The Supreme Court determined that the non-profit organizations experienced a concrete injury sufficient for legal standing, as access to certain information would enhance their participation in the judicial selection process. This conclusion was supported by the precedent set in *Federal Election Commission v. Akins*, where voters were found to have suffered a concrete injury by being denied information necessary for evaluating candidates, directly linked to their voting rights. In contrast, Dreher failed to show that the credit report's naming of "Advanta" instead of "CardWorks" negatively impacted him. He was still able to obtain a fair credit report and resolve his credit issues. Expert testimony indicated that identifying the creditor's name is often more beneficial for consumers, especially in identity theft cases. Consequently, the court concluded that Dreher did not experience any real harm, which is necessary to establish standing under Article III. As a result, the district court's judgment was vacated, and the case was remanded for dismissal due to lack of jurisdiction, emphasizing that a court cannot proceed without jurisdiction.