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IN RE TRANS UNION CORP. PRIVACY LITIGATION

July 6, 2004.

IN RE TRANS UNION CORP. PRIVACY LITIGATION.


The opinion of the court was delivered by: ROBERT GETTLEMAN, District Judge

MEMORANDUM OPINION AND ORDER

In their seven count second amended consolidated putative class action complaint in this multi-district action, plaintiffs*fn1 on behalf of themselves and all others similarly situated, charge defendants Trans Union LLC, Acxiom Corp., and MCI WorldCom Communications, Inc. and MCI WorldCom, Inc.,*fn2 with various violations of the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. § 1681 et seq. (Counts I, II, V, VI), state law claims for invasion of privacy and misappropriation (Count III), unjust enrichment (Count IV) and violation of the California Business and Professional Code § 17200 (Count VII).

The consolidated complaint seeks certification of five separate named classes, some with subclasses: (1) an FCRA class, including four subclasses; (2) an FCRA firm offer class; (3) state law privacy classes, including nine separate subclasses; (4) state law unjust enrichment classes; and (5) a California unfair competition class. The complaint's single joint prayer for relief seeks: (1) an order enjoining defendants from disclosing consumer reports in the form of target marketing lists unless defendants have reason to believe that such person intends to use such list for a permissible purpose, misappropriating or invading plaintiffs' privacy rights, and requiring defendants to notify all plaintiffs of their right to be excluded from defendants' target marketing lists; (2) statutory damages under 15 U.S.C. § 1681n of not less than $100 and not greater than $1,000 for each instance of defendants' wilful failure to comply with the FCRA; (3) punitive damages; (4) nominal damages under 15 U.S.C. § 1681n for the members of the FCRA class whose consumer reports were disclosed between January 28, 1997, and October 1, 1977; and (5) disgorgement of profits. Trans Union has moved to dismiss all counts.*fn3 For the reasons set forth below, the motion is granted in part and denied in part.

  BACKGROUND/FACTS*fn4

  Defendant Trans Union is one of three major credit reporting agencies in the United States. Its core business is assembling and evaluating consumer credit information, including credit and payment patterns on consumers for the purpose of selling consumer reports to third parties. Typical buyers of such information are companies considering extending credit to particular consumers. The information provided by Trans Union is used to determine if the consumer is a good credit risk. Trans Union maintains a computer data base called "CRONUS" that contains consumer credit information that it uses to generate consumer reports. The data base includes the credit activity of every credit-active individual in the United States. Trans Union receives the information from credit grantors such as banks, mortgage companies, credit unions, automobile dealers, and collection agencies.

  Every credit-active person has a "record" in CRONUS, which includes the consumer's name and address. Additional consumer credit information is listed as a "tradeline." A tradeline is a segment of a credit report reflecting the credit relationship between a consumer and a creditor. Tradeline information includes the customer account number, telephone number, social security number, open date, the credit grantor's name, types of loans, credit limits, payment history, and dates the accounts are closed. Each consumer's file includes all tradelines for that consumer.

  In addition to selling consumer reports used by customers to help determine whether a consumer is eligible for personal, family or household credit or insurance, Trans Union has a division that distributes, sells, leases, and rents "target marketing" lists to third parties. This division uses data from CRONUS to compile these lists, which it then sells to its target marketing customers, including catalog companies, newspapers and magazines subscription vendors, firms using mail solicitation or telemarketing, as well as, target marketing brokers, managers, and wholesalers. The target marketers sell or advertise goods and services directed to consumers by mail or telephone. The consumers are picked by criteria including financial or credit related criteria. From its CRONUS data base, Trans Union creates a master file that includes a base list. Since December 1998, to be included within the master file, a consumer's CRONUS file must include two tradelines active within the last six months. The tradeline must not be a collection or public record, and any consumer with no activity in a 12 month period is dropped.

  There are two ways in which Trans Union's customers utilize the master file information. Some customers provide a list of consumers to Trans Union and purchase the master file credit or financial information regarding those consumers. Other customers get a list from Trans Union of the names and addresses of consumers who satisfy pre-selected criteria or indicators chosen by the customer. Some criteria or indicators available are: open automobile loans; open bank accounts; open department store cards; open mortgages; open student loans; and mail order buyers.

  The lists purchased by Trans Union's customers are simply collections of names and addresses. Because Trans Union has culled out names that do not satisfy the specified criteria, however, the customer knows additional information about each consumer on the list, including that each person on the list has at least two active credit accounts.

  Based on the information implicitly contained in the mailing list, the FTC in an enforcement action determined that the sale of the lists is a communication of "consumer reports" for a purpose that is not permissible under the FCRA. See final order In re Trans Union Corp., No. 9255 (Sept. 28, 1994). The District of Columbia Circuit reversed that decision, questioning the soundness of the FTC's position, but remanding for submission of further evidence. See FTC I, 81 F.3d 228. After the submission of further evidence, the FTC again held that the mailing lists are "consumer reports" under the FCRA and that the lists cannot be sold for target marketing purposes. Trans Union has been permanently enjoined from further sale of target marketing lists. That decision was affirmed on appeal. FTC II, 245 F.3d 809. After denial of rehearing, Trans Union's petition for writ of certiorari was denied. Trans Union, LLC v. FTC, 122 S.Ct. 2386 (June 10, 2002).*fn5

  DISCUSSION

  I. THE FEDERAL COUNTS

  Trans Union has moved to dismiss all counts of the second amended complaint.*fn6 With respect to the counts based on the FCRA (Counts I, II, V, VI) (the "federal counts"), Trans Union argues that the FTC proceedings require dismissal of all those counts for two reasons. First, until February 2000, when the FTC held for the second time that Trans Union's lists were credit reports, there had been no authoritative ruling from which Trans Union could have ascertained that its activities were unlawful. Next, Trans Union presents the related argument that the FTC proceedings demonstrate that the challenged conduct was not actually unlawful until February 2000 at the earliest, requiring dismissal of all claims predicated on conduct prior to that date. Finally, with respect to plaintiffs' claims that Trans Union willfully or negligently furnished information to unaffiliated third party vendors beyond that which is permitted by the FCRA in products used for firm offers of credit or insurance in violation of 15 U.S.C. § 1681b(c) (firm offer Counts V, VI), Trans Union argues the counts simply fail to allege that it disclosed unique identifiers or other information that identifies plaintiffs' relationships or experiences with respect to particular creditors. For the reasons set forth below, Trans Union's arguments for dismissal of the federal counts are rejected in their entirety.

  As noted, Trans Union's argument for dismissal of the federal counts is based predominately on the history of the FTC enforcement action against it. Specifically, Trans Union argues that it could not have "willfully" violated the FCRA because until at least February 2000 there was no "authoritative" ruling from which it could have determined that its activities were unlawful. Trans Union's argument relies, in large part, on the D.C. Circuit's opinion in FTC I, reversing the FTC's grant of summary judgment against Trans Union. According to Trans Union, the FTC I court's "outright reversal" of ...


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