Washington v. CSC Credit Services, Inc.

Citations: 180 F.R.D. 309; 1998 U.S. Dist. LEXIS 10609; 1998 WL 388672Docket: CIV. A. No. 97-0971

Court: District Court, E.D. Louisiana; July 8, 1998; Federal District Court

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The Court denied motions for reconsideration from defendants CSC Credit Services, Inc. and Equifax, Inc., which sought to overturn a previous ruling regarding the plaintiffs' Motion to Certify Class. The motions were assessed under Federal Rule of Civil Procedure 54(b) and treated as motions to alter or amend judgments based on Federal Rule of Civil Procedure 59(e). The defendants needed to demonstrate an intervening change in law, new evidence, or a clear error in the prior ruling. The Court found that the defendants did not meet this standard, as they failed to identify significant legal or factual errors.

Key arguments from the defendants included claims that only the Federal Trade Commission can grant injunctive relief under the Fair Credit Reporting Act (FCRA), that the certified class definition was circular and prejudged liability, and that plaintiffs could not establish violations of the FCRA due to insurance companies obtaining written authorizations from consumers. The Court noted a lack of Fifth Circuit guidance on private injunctive relief under the FCRA, highlighting conflicting district court rulings from other Circuits. Ultimately, the Court concluded that federal courts maintain equitable power to issue injunctions unless explicitly restricted by Congress, which the FCRA does not do in this context. The Court indicated that a recent amendment to the FCRA did not limit the ability for private litigants to seek injunctions under Section 1681e.

Legislative authority indicates that Congress intended for consumer remedies and the Federal Trade Commission (FTC) to be complementary, allowing consumers to seek court recourse for violations of the Fair Credit Reporting Act (FCRA). Injunctive relief is available to individuals under the FCRA, and even if such relief were not available, a class action could proceed for declaratory relief under Rule 23(b)(2) of the Federal Rules of Civil Procedure, which allows for actions where the opposing party's behavior affects the class as a whole. A declaration of violation by defendants under Section 1681e(a) of the FCRA could lead to a subsequent injunctive action by the FTC. 

The class is defined as individuals whose credit reports were improperly provided to insurance companies from April 2, 1995, to the present, by defendants CSC Services, Inc. or Equifax Inc. Defendants argue that the class definition is circular and prejudges liability, citing a similar case, Forbush v. J.C. Penney Co., where the Fifth Circuit dismissed such arguments. To clarify the class boundaries, the court will amend the definition to remove the phrase "in violation of 15 U.S.C. 1681e(a)" and instead incorporate specific FTC recommendations. These include obtaining a blanket certification from insurance companies asserting permissible use of credit reports and prohibiting sharing the reports, as well as separate certifications for each report requested. Defendants argue that the FTC’s recommendations are unreasonably stringent, but this pertains to the merits of the claim rather than the validity of the class definition.

Credit reporting agencies may be required to obtain consumers' written authorization for disclosures, similar to the procedures for medical records, which is relevant to the class action claim's merits. The FTC recommendations establish an objective standard for defining the class and assessing what constitutes 'reasonable' procedures. Defendants argue that plaintiffs cannot demonstrate violations of the Fair Credit Reporting Act (FCRA) because insurance companies' acquisition of written authorizations eliminates the need to evaluate the credit reporting agencies’ compliance with reasonable procedures. However, there is no evidence that defendants knew whether insurance companies obtained these authorizations, nor did the insurance companies inform defendants of such authorizations. The insurance companies' duty to use reports for permissible purposes is separate from the obligation of credit reporting agencies to implement reasonable procedures for consumer privacy protection.

If injunctive relief under the FCRA is unavailable or class certification under Rule 23(b)(2) is deemed inappropriate, certification under Rule 23(b)(3) is warranted. This requires that common legal or factual questions predominate over individual issues, and that a class action is the superior method for resolving the controversy. Relevant considerations include members' interests in controlling their claims, existing litigation, concentration of litigation in one forum, and potential management challenges. The determination of whether common issues prevail and if a class action is superior necessitates an understanding of the claims and legal context. Despite defendants citing cases that suggest individual inquiries for each class member, this case involves distinct defendants with independent duties. Liability rests on a singular factual determination and a uniform question of federal law applicable to all plaintiffs.

Defendants' procedures for issuing consumer credit reports to insurance companies are under scrutiny, particularly regarding whether written authorizations from consumers were mandatory, if an initial blanket certification from insurers was required, and whether separate certifications for each report were necessary. The Court's analysis indicates that defendants' procedures were consistently applied across the potential class, allowing liability to be assessed without individual circumstances. The key legal question pertains to the reasonableness of these procedures under the Fair Credit Reporting Act (FCRA). Unlike prior cases requiring individualized inquiries, this case presents a uniform liability issue applicable to all plaintiffs.

However, damages may necessitate individualized analysis due to the potential for plaintiffs to seek actual or statutory damages under the FCRA for negligent or willful noncompliance. Should willful noncompliance be found, class action maintenance through the damages phase is justified, allowing plaintiffs to opt out for larger claims while others seek statutory damages, which require minimal individual inquiry. The situation represents a compelling rationale for class action, as individual claims may not be economically viable. Class treatment for liability will enhance efficiency, and separate trials for damages would be wasteful. The Seventh Amendment concerns from prior cases do not apply, as damages issues would not overlap significantly with liability determinations.

The Court grants class certification based on the considerations outlined in Rule 23(b)(3). Key points include: class members lack sufficient incentive to pursue individual actions due to minimal potential damages; there are no other pending lawsuits by the plaintiffs on this matter; consolidating the case minimizes the risk of conflicting outcomes regarding defendants' compliance with the Fair Credit Reporting Act (FCRA); and any significant management challenges are likely to arise only during the damages phase, which can be addressed through separate trials without impacting liability certification. The Court denies motions for reconsideration from defendants CSC Credit Services, Inc. and Equifax, Inc. and amends the class definition to include individuals whose credit reports were improperly shared with insurance companies from April 2, 1995, to the present. The class is certified under Fed. R.Civ. P. 23(b)(2) or alternatively under Fed. R.Civ. P. 23(b)(3). The Court also certifies issues presented in previous orders to the Fifth Circuit Court of Appeals. Although CSC's motion was technically untimely, it is considered due to its support of Equifax's arguments. The Court notes that liability issues can proceed as a class action even if damages must be individually addressed, as established in Fed. R.Civ. P. 23(c)(4) and its Advisory Committee Notes.