Archive for June, 2014

Reseller Liability, Part III: motion to dismiss held premature in Dively v. Trans Union

June 6, 2014 2 comments

We continue our series on whether a reseller – a type of consumer reporting agency that obtains information from the credit bureaus and merges it into a single report – can be liable under 15 USC 1681e(b) (requiring it to “follow reasonable procedures to assure maximum possible accuracy”) if one of the bureaus reports inaccurate information which is contradicted by or inconsistent with what the other bureaus are reporting.

In the past two posts, I have discussed cases in which a court held that a reseller was not liable in these sorts of situations.  Going forward, I will be discussing cases that came out the other way.  I am not taking this approach intentionally; I am just taking the cases in chronological order.

The next case in the series is Dively v. Trans Union LLC, No. 11-cv-3607, 2012 U.S. Dist. LEXIS 9314 (E.D. Pa. Jan. 26, 2012), in which plaintiff claimed that:  i) Trans Union reported two tax liens that belonged to one of plaintiff’s relatives as if they belonged to him; and ii) a reseller, DataQuick, included that information on a tri-merge report without questioning why Trans Union was reporting the liens when the other two bureaus were not. 

DataQuick filed a motion to dismiss and asked the court to conclude that a reseller is not required to reconcile inconsistent information which it receives from the credit bureaus.  DataQuick’s position (drawn from its briefs) was that:  i) because Congress exempted resellers from the duty to reinvestigate at 15 USC 1681e(b), it intended to exempt them from any initial investigation requirement under 1681e(b); ii) DataQuick was entitled to rely on Trans Union’s report, because the costs of checking it would be “astronomical”; iii) plaintiff’s claim that because one credit bureau was reporting something that the others were not, it was reporting inaccurately, is speculation; and iv) no reasonable procedure would have caught Trans Union’s alleged error.  In response, plaintiff argued essentially that:  a) Third Circuit case law indicates that if a report is allegedly inaccurate, a plaintiff need not prove much to make a valid claim under 1681e(b); and b) DataQuick’s “scattershot” arguments about costs, speculation, and reasonable procedures are inappropriate at the motion to dismiss stage because they are undeveloped and unsupported by any factual evidence.

The Eastern District of Pennsylvania agreed with plaintiff and denied DataQuick’s motion to dismiss.  It began by noting that:  i) while it is true that Congress exempted resellers from the reinvestigation duty under 1681i, Congress did not exempt resellers from the “reasonable procedures” duty under 1681e(b), and ii) under Third Circuit case law, it is easy for a plaintiff to survive a motion to dismiss a claim under 1681e(b).  However, the court pointed out that this conclusion was non-binding dicta, saying that “Much of this discussion is largely moot, at any rate, because in order to accept DataQuick’s position at this stage of the case, the Court would need to make several factual assumptions before any discovery has even been accomplished.”  Id. at *12.  The court went on to hold that:  i) DataQuick was not entitled to assume that Trans Union was an inherently reliable source; and ii) DataQuick’s arguments about the costs of reviewing Trans Union’s report and the likely outcome of doing so were “premature” at the motion to dismiss stage.  Id. at **12-13.

The decision in Dively is obviously a good one for plaintiffs that wish to sue resellers, and not a good one for resellers that do not wish to be sued.  But in reading the decision and the briefs from my perspective as a defense lawyer, I think that DataQuick missed two opportunities that might have led to a different outcome.

First, DataQuick’s argument regarding 1681i and 1681e(b) seemed to ask the court to give resellers a “get out of jail free” card, on the basis that because resellers are not required to reinvestigate under 1681i, they are likewise not required to investigate under 1681e(b).  I think that courts are wary of this argument because they do not want to give resellers a free pass on liability under a statute that does not explicitly exempt them.  A better approach might be to note that while resellers can be and have been liable under 1681e(b) for garbling the bureaus’ data (which is something that they as resellers can control), they should not be liable under 1681e(b) for correctly telling an end user what each bureau is reporting (which is ultimately what the end user wants to know and what the FCRA’s definition of “reseller” anticipates that a reseller will do).

Second, DataQuick’s argument that it was entitled to rely on Trans Union’s report was a non-starter.  The Dively court rejected it for the same reasons that the Perez court rejected it – the case law says that consumer reporting agencies are entitled to rely on court dockets, not on the bureaus.  And when DataQuick suggested that the costs of checking Trans Union’s report would be “astronomical,” that was a signal to the court that discovery was needed, and the motion to dismiss should be denied – how can the court know what something costs, when all it has to go on is the plaintiff’s complaint and then DataQuick’s allegation about costs?

Categories: 1681e(b), reseller