Donna Soutter v. Equifax Information Services , 498 F. App'x 260 ( 2012 )

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 11-1564
DONNA K. SOUTTER, For herself and on behalf of all similarly
situated individuals; TONY LEE WEBB,
Plaintiffs – Appellees,
v.
EQUIFAX INFORMATION SERVICES, LLC,
Defendant – Appellant.
------------------------------------
CHAMBER OF COMMERCE OF THE UNITED STATES OF AMERICA;
CONSUMER DATA INDUSTRY ASSOCIATION,
Amici Supporting Appellant,
VIRGINIA POVERTY LAW CENTER; VIRGINIA TRIAL LAWYERS
ASSOCIATION; RAPPAHANNOCK LEGAL SERVICES, INC.; LEGAL AID
JUSTICE CENTER; NATIONAL ASSOCIATION OF CONSUMER ADVOCATES,
Amici Supporting Appellees.
Appeal from the United States District Court for the Eastern
District of Virginia, at Richmond. Robert E. Payne, Senior
District Judge. (3:10-cv-00107-REP)
Argued: September 19, 2012 Decided: December 3, 2012
Before GREGORY, SHEDD, and AGEE, Circuit Judges.
Reversed and remanded by unpublished opinion. Judge Shedd wrote
the opinion, in which Judge Agee joined. Judge Gregory wrote a
dissenting opinion.
ARGUED: Paul D. Clement, BANCROFT, PLLC, Washington, D.C., for
Appellant. Deepak Gupta, Washington, D.C., for Appellees. ON
BRIEF: Jeffrey S. Bucholtz, KING & SPALDING LLP, Washington,
D.C.; Barry Goheen, Merritt E. McAlister, KING & SPALDING LLP,
Atlanta, Georgia, for Appellant. L. Steven Emmert, SYKES,
BOURDON, AHERN & LEVY, PC, Virginia Beach, Virginia; Leonard A.
Bennett, CONSUMER LITIGATION ASSOCIATES, PC, Newport News,
Virginia; Stuart T. Rossman, NATIONAL CONSUMER LAW CENTER,
Boston, Massachusetts, for Appellees. Robin S. Conrad, Kate
Comerford Todd, NATIONAL CHAMBER LITIGATION CENTER, INC.,
Washington, D.C.; John H. Beisner, Jessica Davidson Miller,
Geoffrey Wyatt, SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP,
Washington, D.C., for Chamber of Commerce of the United States
of America, Amicus Supporting Appellant. Brad D. Weiss, Emily
D. Barnes, CHARAPP & WEISS, LLP, McLean, Virginia, for Consumer
Data Industry Association, Amicus Supporting Appellant. Thomas
D. Domonoske, Harrisonburg, Virginia, for Amici Supporting
Appellees.
Unpublished opinions are not binding precedent in this circuit.
2
SHEDD, Circuit Judge:
Equifax Information Services, a credit reporting agency
(CRA), appeals the district court’s certification of a class of
Virginia residents with potentially inaccurate Virginia court
judgments on their credit reports. Because the certified class
does not satisfy the requirements of Federal Rule of Civil
Procedure 23, we reverse.
I.
A.
On June 22, 2007, the Virginia Credit Union filed suit
against Donna Soutter in the Richmond General District Court to
recover a $15,000 credit card debt. After Soutter and the
Credit Union agreed to a payment plan, the Credit Union agreed
to dismiss the suit. Unfortunately, the Credit Union’s attorney
failed to inform the District Court, and a default judgment was
entered against Soutter. At Soutter’s request, the Credit Union
moved to set aside the judgment, and on March 20, 2008, the
District Court entered an order that noted Soutter’s case was
“set aside and dismissed without prejudice.” (J.A. 430).
After this order, Soutter sent notice to Equifax,
requesting that Equifax remove the judgment from her credit
report. At that time, Equifax informed Soutter that the
judgment was not yet on her file. On December 20, 2008, Soutter
3
sent an additional letter to Equifax, claiming that she was
denied credit because of the judgment. She included a copy of
the District Court order dismissing the action against her with
this letter. In response, Equifax removed the judgment from her
report.
Although it is not required to do so, Equifax chooses to
record court judgments on consumer credit reports. Equifax has
never directly collected these judgments itself, instead relying
on vendors to provide the information. Since February 2007,
LexisNexis has been Equifax’s vendor for collecting Virginia
court records. Virginia’s court system is comprised of more
than 250 individual circuit and general district courts. Each
county and independent city has a general district court with
jurisdiction over small claims—those less than $25,000. There
are 120 circuit courts of general jurisdiction. The court
records are managed by the Office of Executive Secretary of the
Supreme Court of Virginia, which operates a shared case
management system for the state’s courts. The clerk of each
local court uses a uniform system for recording judgments, and
the judgment sheet available in the case management system lists
only the most recent case disposition. For example, if a case
is vacated and then later dismissed, the system would record the
case simply as dismissed.
4
LexisNexis used several different collection methods for
capturing the court records. It used in-person review for all
circuit courts through independent contractors. These in-person
reviews have some variety as well-some clerks provide a weekly
summary printout to the reviewer, some let the reviewer peruse
paper records, and some permit the reviewer use of the computer
and case management system. For the general district courts,
the Supreme Court provided LexisNexis with bulk data feeds until
May 2009. LexisNexis then used independent contractors to
verify the bulk feeds in person. In May 2009, the Supreme Court
stopped providing these feeds. LexisNexis then used a
“webscrape” program to grab the data from the Court’s website.
This practice ended in December 2009 when the Virginia Supreme
Court enacted new security measures, including a challenge-
response test, that limited the ability of automated programs to
access the public records. LexisNexis thus had to switch
exclusively to in-person review from December 2009 to February
2010 for general district court records. LexisNexis admittedly
had difficulty performing its task of collecting records from
time to time.
B.
On February 17, 2010, Soutter filed this civil action
against Equifax in the Eastern District of Virginia, alleging
that Equifax violated the Fair Credit Reporting Act (FCRA) by
5
using unreasonable procedures in reporting judgments from the
Virginia court system. In her initial class complaint, Soutter
sought to represent a class of “[a]ll consumers for whom Equifax
furnished a consumer report which reported a judgment that was
either set aside, vacated or dismissed with prejudice.” (J.A.
14). Nine days later, Soutter filed an amended class complaint
narrowing the proposed class to all consumers in Virginia “about
whom Equifax furnished a consumer report to a third party that
showed a civil judgment in the General District Court for the
City of Richmond at any time on or after February 17, 2008”
when, as of the date of the report, the judgment had been set
aside. (J.A. 25). During discovery, Soutter changed her
proposed class for the second time, amending it to include
judgments from all Virginia trial courts. (J.A. 450). In
moving to certify the class, she changed the class definition
for the third time, while also “suggest[ing]” that persons with
actual damages of more than $1,000 should be excluded. (J.A.
216). Soutter offered a fourth change to the class definition
in her reply brief to the certification motion, leading the
district court to begin the subsequent hearing on class
certification by noting “this giving me a dartboard to throw at
doesn’t help me much. I want to know what the class is now that
you think ought to be certified.” (J.A. 624). Soutter
6
confirmed that the class she sought to certify was the class
defined in her reply brief.
During this hearing, Equifax attacked Soutter’s ability to
ascertain the size and scope of the class. In response, Soutter
explained that, by ordering judgment disposition data from the
Virginia Supreme Court, the class could be readily ascertained.
Unfortunately, Soutter’s efforts were counterproductive in that
the data she ordered did not even contain her own name.
Despite the ever-evolving class definition, on March 30,
2011, the district court granted Soutter’s motion and certified
the following class:
All natural persons, for whom Equifax’s records note
that a credit report was furnished to a third party
who requested the credit report in connection with an
application for credit on or after February 17, 2008
to February 17, 2010, other than for an employment
purpose, at a time when any Virginia General District
Court or Circuit Court judgment that had been
satisfied, appealed, or vacated in the court file more
than 30 days earlier was reported in Equifax’s file as
remaining unpaid, which persons suffered actual
damages of less than $1,000 as a result of a report by
Equifax that did not accurately report that the
judgment had been satisfied, appealed, or vacated.
(J.A. 717-18).
Equifax filed a petition for permission to appeal under
Rule 23(f) raising, among other issues, the difficulty with
ascertaining the class given the exclusion of individuals with
actual damages claims of greater than $1,000. In response,
during a status conference, Soutter requested that the class
7
definition be amended again—marking at least the fifth proposed
change to the class definition. The district court agreed and
amended the class definition by deleting the reference to
persons who suffered actual damages. The parties informed us of
this new class definition, and we granted Equifax’s petition for
permission to appeal.
II.
A.
On appeal, Equifax contests the district court’s
certification of the class. We review a class certification
order for abuse of discretion. Gunnells v. Healthplan Services,
Inc., 348 F.3d 417, 424 (4th Cir. 2003). Under Rule 23(a), a
party moving for class certification must meet the following
four prerequisites: (1) the class is so numerous that joinder is
impossible; (2) there are questions of law or fact common to the
class; (3) the claims or defenses of the class representative
are typical of the claims or defenses of the class; and (4) the
representative will adequately protect the class interests.
Fed. R. Civ. P. 23(a). These requirements are referred to as
numerosity, commonality, typicality, and adequacy of
representation. Rule 23(b) further requires that the class meet
one of three additional requirements. As relevant here, Rule
23(b)(3) provides for class certification if the court
8
determines that common questions of law or fact predominate over
any questions affecting only individuals and that a class action
is superior to other available litigation methods.
Importantly, the Supreme Court recently reminded courts
that “[a] party seeking class certification must affirmatively
demonstrate his compliance with the Rule.” Wal-Mart Stores,
Inc. v. Dukes, 131 S.Ct. 2541, 2551 (2011). In determining if a
party has met this burden, “sometimes it may be necessary for
the court to probe behind the pleadings before coming to rest on
the certification question.” Id. (internal quotation marks
omitted). The district court must perform a “rigorous
analysis,” id. (internal quotation marks omitted), to ensure
that a class certification is appropriate, because class actions
remain “an exception to the usual rule that litigation is
conducted by and on behalf of the individual named parties
only,” Califano v. Yamasaki, 442 U.S. 682, 700-01 (1979).
B.
On appeal, Equifax contends that Soutter cannot satisfy the
typicality or adequacy standards in Rule 23(a) or the
predominance and superiority standards in Rule 23(b)(3). We
agree with Equifax that Soutter failed to show typicality under
Rule 23(a)(3) and, accordingly, that the district court abused
its discretion in certifying the proposed class.
9
Soutter’s action arises under the FCRA. That statute
provides, in relevant part:
Whenever a consumer reporting agency prepares a
consumer report it shall follow reasonable procedures
to assure maximum possible accuracy of the information
concerning the individual about whom the report
relates.
15 U.S.C. § 1681e(b). A CRA violates § 1681e(b) if (1) the
credit report contains inaccurate information; and (2) the CRA
did not follow reasonable procedures to assure maximum possible
accuracy. Dalton v. Capital Associated Indus., 257 F.3d 409,
415 (4th Cir. 2001). Soutter has claimed only statutory
damages, which are authorized by 15 U.S.C. § 1681n(a)(1)(A) for
willful violations and range from $100 to $1,000.
Typicality “goes to the heart of a representative[’s]
ability to represent a class.” Deiter v. Microsoft Corp., 436
F.3d 461, 466 (4th Cir. 2006). Thus, Soutter’s “interest in
prosecuting [her] own case must simultaneously tend to advance
the interests of the absent class members.” Id. Typicality
“tend[s] to merge” with commonality, insofar as both “serve as
guideposts for determining whether under the particular
circumstances maintenance of a class action is economical and
whether the named plaintiff’s claim and the class claims are so
interrelated that the interests of the class members will be
fairly and adequately protected in their absence.” General
Tele. Co. of Southwest v. Falcon, 457 U.S. 147, 158 n.13 (1982).
10
Thus, “[t]he essence of the typicality requirement is captured
by the notion that ‘as goes the claim of the named plaintiff, so
go the claims of the class.’” Deiter, 436 F.3d at 466 (quoting
Broussard v. Meineke Discount Muffler Shops, Inc., 155 F.3d 331,
340 (4th Cir. 1998)). While Soutter’s claim need not be
“perfectly identical” to the claims of the class she seeks to
represent, typicality is lacking where “the variation in claims
strikes at the heart of the respective causes of action.” Id.
at 467.
To determine if Soutter has shown typicality, we compare
her claims and Equifax’s defenses to her claims with those of
purported class members by reviewing the elements of Soutter’s
prima facie case and the fact supporting those elements and
examining “the extent” to which those facts “would also prove
the claims of the absent class members.” Id.In this case, Soutter’s claim under § 1681e(b) requires her
to prove that (1) her credit report was inaccurate; (2)
Equifax’s unreasonable procedures caused the inaccuracy; and (3)
Equifax’s behavior was willful. Facts supporting Soutter’s
claim include that her report was inaccurate because her
judgment had been dismissed and that she sent letters to Equifax
informing them of the possible inaccuracy before it occurred.
This second fact bears upon whether Equifax’s behavior was
willful. Soutter’s facts would also include the manner in which
11
LexisNexis procured judgment data for general district courts in
2008.
This evidence, however, illustrates that Soutter’s claim is
not typical. As in Deiter, Soutter’s claim is “typical” only on
an “unacceptably general level.” Deiter, 436 F.3d at 467. That
is, Soutter is an Equifax customer whose report was inaccurate
because Equifax incorrectly reported a judgment that had later
been dismissed. On “a more directly relevant level,” her claim
has “meaningful differences” from the class she seeks to
represent. Id. LexisNexis used in-person review for the
circuit court records while employing at least three different
means of collecting general district court records during the
class period. Proof that Equifax’s behavior was unreasonable
because of the manner in which LexisNexis collected data from
the Richmond General District Court in Soutter’s case does not
“advance” the claim of a class member whose judgment was from a
circuit court in 2010. Soutter’s claim simply varies from any
potential class plaintiff with a circuit court judgment, and
from many potential plaintiffs with general district court
judgments, depending on the date of the judgment.
In addition, to recover statutory damages, Soutter must
show willfulness. Proof that Equifax’s conduct was willful
toward Soutter because she sent letters in advance informing
Equifax that the case against her was dismissed will not advance
12
the claims of other class members. These problems are
exacerbated because Soutter is claiming only statutory damages,
which typically require an individualized inquiry. See
Stillmock v. Weis Markets, Inc., 385 Fed. App’x 267, 277 (4th
Cir. 2010), (Wilkinson, J. concurring) (noting “because
statutory damages are intended to address harms that are small
or difficult to quantify, evidence about particular class
members is highly relevant to a jury charged with this task”).
In certifying the class, the district court concluded that
Soutter was typical of the class she seeks to represent because
she was “challenging Equifax’s alleged uniform failure to
establish or to follow reasonable procedures.” (J.A. 698).
This analysis is conducted at the same “general level” we
rejected in Deiter. Wal-Mart clarified, in examining
commonality under Rule 23(a)(2), that “the members of a proposed
class do not establish that ‘their claims can productively be
litigated at once,’ merely by alleging a violation of the same
legal provision by the same defendant.” M.D. ex rel.
Stukenberg v. Perry, 675 F.3d 832, 840 (5th Cir. 2012) (quoting
Wal-Mart, 131 S.Ct. at 2551). Likewise, Soutter cannot satisfy
typicality simply by asserting a violation of § 1681e(b) by
Equifax.
In sum, if the district court had performed the rigorous
analysis Wal-Mart dictates, it would have concluded a
13
“substantial gap” exists between Soutter’s proof and that of
class members. Deiter, 436 F.3d at 468.
III.
For the foregoing reasons, we reverse the district court’s
order granting class certification and remand for further
proceedings. *
REVERSED AND REMANDED
*
Because we conclude that Soutter failed to satisfy Rule
23(a)(3)’s typicality requirement, we have not addressed
Equifax’s additional arguments on appeal. If, on remand, the
district court is presented with a renewed request for
certification, any proposed class is subject to the “rigorous
analysis” under all four Rule 23(a) factors.
14
GREGORY, Circuit Judge, dissenting:
I disagree with the majority’s holding that the district
court abused its discretion in certifying Soutter’s class.
While the majority correctly recites the standard guiding this
Court’s typicality analysis under Federal Rule of Civil
Procedure 23, its application impermissibly narrows the class
representative’s claim and greatly impedes the future of class
actions against Credit Reporting Agencies (CRAs) under the
pertinent provisions of the Fair Credit Reporting Act (FCRA).
Therefore, I respectfully dissent.
The typicality requirement of Rule 23(a)(3), as underscored
by the majority, is not satisfied where “the variation in claims
strikes at the heart of the respective causes of action.”
Deiter v. Microsoft Corp., 436 F.3d 461, 466 (4th Cir. 2006).
At the “heart” of § 1681e(b) are two requirements: (1) that the
credit report is inaccurate; and (2) that the CRA did not employ
reasonable procedures to ensure maximum possible accuracy of the
credit reports it furnished. Dalton v. Capital Associated
Indus., 257 F.3d 409, 415 (4th Cir. 2001). For Soutter, so long
as proving these elements for her claim advances the claims of
other class members, she is a typical class representative. See
Deiter, 436 F.3d at 466 (“The essence of the typicality
requirement is captured by the notion that ‘as goes the claim of
the named plaintiff, so go the claims of the class.’”) (quoting
15
Broussard v. Meineke Disc. Muffler Shops, Inc., 155 F.3d 331,
340 (4th Cir. 1998)).
Inhibiting Soutter’s ability to satisfy the second
requirement, the majority narrows the scope of the
reasonableness inquiry by creatively assessing the handful of
procedures employed by Equifax’s vendor, LexisNexis. The
majority asserts: “Proof that Equifax’s behavior was
unreasonable because of the manner in which LexisNexis collected
data from the Richmond General District Court in Soutter’s case
does not ‘advance’ the claim of a class member whose judgment
was from a circuit court in 2010.” This analysis, however,
misses the point; liability under 15 U.S.C. § 1681e(b) is not
limited to the actions of a CRA vendor. Rather, it reaches the
CRA itself. In fact, § 1681e(b) provides: “Whenever a consumer
reporting agency prepares a consumer report it shall follow
reasonable procedures to assure maximum possible accuracy of the
information concerning the individual about whom the report
relates.” (Emphasis added). The reasonableness of preparing a
consumer report extends beyond how a CRA vendor collects data;
included in the inquiry is the CRA’s reliance on the information
it receives.
Consistent with this understanding, we have held that where
a CRA “had no procedures governing the sources that a subvendor
could rely upon,” a court could determine that the CRA did not
16
employ reasonable procedures under § 1681e(b). Dalton, 257 F.3d
at 416–17. Likewise, a court could determine that Equifax’s
procedures were unreasonable because they fashioned an
inefficient system that failed to monitor, review, and correct
the prevalent errors caused by its vendor. Proving that these
procedures –- or lack thereof -- were unreasonable would not
only advance Soutter’s claim, but would advance the claims of
the entire class. Put differently, the district court would not
need to conduct mini-trials for each member of Soutter’s class.
This is the argument posited by Soutter in her Complaint
and argued in her brief. Additionally, in light of the facts
presented before it, this is the position the district court
relied on in exercising its discretion to certify the class.
See Soutter v. Equifax Info. Services, LLC, 3:10CV107, 2011 WL
1226025 (E.D. Va. Mar. 30, 2011) (“Equifax’s knowledge of the
allegedly unreasonable uniform procedures used by LexisNexis,
the actual vendor collecting the information, was the same for
Soutter, as for the class.”) (emphasis added). The majority,
however, evades this argument by misdirecting the inquiry into a
determination of what LexisNexis did.
In the same vein, the majority narrows its focus as to
whether the class can prove wilfullness by looking at the
individual circumstances surrounding Soutter. While
demonstrating that Soutter sent letters to Equifax would
17
certainly advance her individual claim, such specific proof is
not necessary to prove that Equifax acted willfuly to the entire
class. Instead, to prove willfulness under the FCRA, the class
would need to establish that Equifax acted either knowingly or
recklessly. See Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47,
59–60 (2007). Thus, if Equifax’s procedures -– or again, lack
thereof –- entailed “an unjustifiably high risk of harm that is
either known or so obvious that it should be known,” this
finding would advance the claims of the entire class. See id.
at 68 (quoting Farmer v. Brennan, 511 U.S. 825, 836 (1994)).
Ultimately, under the majority’s constricted analysis,
CRA’s are encouraged to hide behind the inconsistencies of their
vendors and, in turn, are shielded from significant liability --
even if they fail to assure maximum possible accuracy in their
credit reports. This is because, so long as vendors use varying
procedures, no plaintiff will be a typical class representative,
and consequently, no class will be certified. CRAs will remain
subject to only small individual claims, such as those covered
by Soutter’s class (between $100 and $1,000). Yet, because
potential plaintiffs might not be aware of their claims or are
otherwise unwilling to pursue such small amounts, it is likely
that these claims will go without redress. If we follow the
majority’s reasoning, little can be done to carry out the FCRA’s
purpose of eliminating CRA reports that “are systematically
18
biased against the consumer.” 115 Cong. Rec. 2410, 2412 (1969)
(statement of Sen. Proxmire); see also Saunders v. Branch
Banking & Trust Co. of Va., 526 F.3d 142, 147 (4th Cir. 2008)
(“To this end, FCRA requires CRAs to follow procedures in
reporting consumer credit information that . . . are ‘fair and
equitable to the consumer.’”) (citing 15 U.S.C. § 1681(b)). For
these reasons, I dissent.
19