The U.S. Court of Appeals for the Ninth Circuit recently affirmed the trial court’s denial of a motion for a remand to state court and the dismissal of the plaintiffs’ class action suit alleging violations of the federal Fair Credit Reporting Act by a credit reporting agency.
In so ruling, the Ninth Circuit panel concluded that: (1) the allegations of injury to the plaintiffs’ informational and privacy interests were sufficiently concrete to support Article III standing; and (2) none of the information the plaintiffs contended the credit reporting agency failed to include in its § 1681g disclosures is subject to disclosure under the FCRA’s § 1681g(a)(1), (3) or (5), considered individually or in combination.
A copy of the opinion in Tailford v. Experian Information Solutions is available at: Link to Opinion.
In late 2017, a data breach in a cloud storage location revealed information on millions of households, including the households of the plaintiffs, in a large spreadsheet. The plaintiffs alleged this information was bought from the defendant, a credit reporting agency. Following this breach, the plaintiffs requested and received from the credit reporting agency various § 1681g disclosures.
As you may recall, credit reporting agencies must “clearly and accurately disclose to the consumer” various items of information upon the request of the consumer. See 15 U.S.C. § 1681g.
The plaintiffs filed a class action lawsuit in state court contending that the credit reporting agency failed to include in its § 1681g disclosures several pieces of information they alleged the agency was required by the FCRA to provide, including behavioral data from its marketing database and the identity of parties receiving that information, “soft inquiries” from third parties and affiliates, the identity of certain parties who procured consumer reports, and the date on which employment data was reported.
The credit reporting agency removed the case to federal court and filed a motion to dismiss for failure to state a claim.
The plaintiffs countered with a motion for remand to state court. The plaintiffs argued in their remand motion that the credit reporting agency had not met its burden of establishing Article III standing. The trial court denied the plaintiffs’ motion, holding that removal under § 1441 was proper because there was no question that the plaintiffs’ complaint raised issues under the FCRA, a federal law, and that there was no initial requirement for the credit reporting agency to prove subject matter jurisdiction in order to remove an action.
The trial court also granted the credit reporting agency’s motion to dismiss, holding that none of the information missing from the § 1681g disclosures sent to the plaintiffs was required to be disclosed under the FCRA. The plaintiffs timely appealed.
The Ninth Circuit has adopted a two-step framework to determine whether alleged violations of FCRA provisions are sufficiently concrete to confer standing: “(1) whether the statutory provisions at issue were established to protect [a plaintiff’s] concrete interests (as opposed to purely procedural rights), and if so, (2) whether the specific procedural violations alleged in this case actually harm, or present a material risk of harm to, such interests.” Robins v. Spokeo, Inc., 867 F.3d 1108, 1113 (9th Cir. 2017) (“Spokeo III”).
The Ninth Circuit held that, in this case, both Spokeo III prongs were met.
Regarding the first prong, the Ninth Circuit found the plaintiffs’ complaint alleged the violation of specific provisions of the FCRA established to protect concrete interests of privacy and accuracy in the reporting of consumer credit information, and not merely procedural rights.
As to the second prong of Spokeo III, the Ninth Circuit also held the plaintiffs’ complaint contained sufficient allegations of non-disclosure of information under § 1681g to “present a material risk of harm” to the plaintiffs’ concrete interest in consumer privacy.
Therefore, the Ninth Circuit affirmed the trial court’s denial of the plaintiffs’ motion to remand.
The plaintiffs also contended that the trial court erred in granting the credit reporting agency’s motion to dismiss. They argued that various combinations of § 1681g(a)(1), (3), and (5) require that “all information” in a consumer’s file must be disclosed when requested and that four specific categories of data should have been included in the credit reporting agency’s §1681g disclosures: behavioral data from the marketing database and the identity of parties receiving that information, soft inquiries by third parties, the identity of all parties procuring credit reports, and the date on which employment dates were reported. The credit reporting agency responded that its § 1681g disclosures were in full compliance with the FCRA and that nothing required was omitted.
The plaintiffs argued that § 1681g(a)(1) encompasses “all information” maintained by a credit reporting agency, contending that the statutory language, “[a]ll information in the consumer’s file at the time of the [§ 1681g] request,” is entitled to “a liberal construction in favor of consumers when interpreting the FCRA,” and thus includes all the information in the credit reporting agency’s Admin Reports. The credit reporting agency countered that §1681g(a)(1) cannot and should not be read so broadly.
The Ninth Circuit agreed with the credit reporting agency and concluded that none of the information the plaintiffs contended the credit reporting agency failed to disclose is of the type that has been included in a consumer report in the past or is planned to be included in such a report in the future.
Next, regarding the credit reporting agency’s failure to disclose several soft inquiries by third parties in the § 1681g disclosures, the Ninth Circuit held that soft inquiries were not part of the plaintiffs’ “file[s]” under §1681g(a)(1), and therefore did not need to be disclosed under that provision.
The Ninth Circuit also determined that the plaintiffs were incorrect in contending that the soft inquiries must be disclosed under § 1681g(a)(3). Credit reporting agencies must disclose “each person… that procured a consumer report.” 15 U.S.C. § 1681g(a)(3). However, the Court noted that a prerequisite of a necessary disclosure under § 1681g(a)(3) is the actual procurement of a consumer report by an identified party and the plaintiffs nowhere alleged that the credit reporting agency actually sent the inquiring parties anything, or that whatever was sent was a consumer report.
Additionally, the plaintiffs further alleged that the credit reporting agency violated § 1681g(a)(5) regarding two promotional inquiries made with respect to one of the plaintiffs by two banks. The Ninth Circuit was not persuaded and reasoned that, although § 1681g(a)(5) requires disclosure of “inquiries” without reference to “consumer report,” that section is limited to inquiries leading to a firm offer of credit. As the plaintiffs nowhere alleged that these two inquiries led to an offer, the Court concluded the plaintiffs failed to sufficiently plead a violation of § 1681g(a)(5) based on the non-disclosure of the two banks’ soft inquiries.
The plaintiffs also alleged that § 1681g(a)(1) and (3) require the credit reporting agency to disclose the behavioral data included in the marketing database in the § 1681g disclosures sent to the plaintiffs.
The Ninth Circuit first found that the data maintained in the database was aggregate data, organized by zip code and not individualized to any consumer. Therefore, the Court held that such aggregate data is not information that ever has been or might arguably be included in an individual consumer report and is thus not part of a consumer’s “file” and not subject to disclosure under § 1681g(a)(1) of the FCRA.
For the same reason, the Ninth Circuit held that the credit reporting agency was not required under § 1681g(a)(3) to disclose the identity of each person who procured the behavioral data, because the behavioral data was not part of a “consumer report.”
Finally, the plaintiffs argued that the credit reporting agency violated § 1681g(a)(1) by failing to disclose the dates on which the plaintiffs’ employment dates were reported to the agency. However, the Ninth Circuit concluded that the date employment dates were reported can have no “bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living.” 15 U.S.C. § 1681a(d)(1). That information, therefore, need not be included in a § 1681g disclosure.
Accordingly, the Ninth Circuit affirmed the trial court’s denial of the plaintiffs’ motion to remand to state court and its dismissal with prejudice of the plaintiffs’ complaint for failure to state a claim.