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Clark v. Experian Information Solutions

April 10, 2006

EVELYN CLARK AND BRADLEY ELDRED, PLAINTIFFS,
v.
EXPERIAN INFORMATION SOLUTIONS, INC., AND CONSUMERINFO.COM, DEFENDANTS.



The opinion of the court was delivered by: James F. Holderman, District Judge

MEMORANDUM OPINION AND ORDER

On January 9, 2006, defendant Consumerinfo.com, Inc. ("Consumer"), filed the pending objections (Dkt. No. 238), to Magistrate Judge Brown's memorandum opinion and order of January 6, 2006. (Dkt. No. 240). Consumer supplemented these objections on March 8, 2006. (Dkt. No. 251). For the reasons set forth below, this court denies Consumers' objections to Judge Brown's decision of January 6, 2006.

BACKGROUND

Plaintiffs Evelyn Clark and Bradley Eldred (collectively "plaintiffs"), filed a second amended class action complaint on June 1, 2005 against defendants Experian Information Solutions, Inc. and Consumer (collectively "defendants"), alleging a violation of the Illinois Consumer Fraud Deceptive Practices Act, 815 ILCS 505/1 et seq., negligent misrepresentation and unjust enrichment. Clark v. Experian Infor. Inc., 233 F.R.D. 508, 509 (N.D. Ill. 2005) (Holderman, J). The plaintiffs alleged in their complaint that the defendants have lured customers onto various websites with a promise of a free credit report, but in reality the consumers are unknowingly enrolled in an automatically renewing credit monitoring service costing either $79.95 a year or $10.95 a month. Id. at 510. On December 15, 2005, this court denied the plaintiffs' motion for class certification and on January 31, 2006 the Seventh Circuit denied the plaintiffs' petition for permission to appeal the class certification decision pursuant to Rule 23(f) of the Federal Rules of Civil Procedure. In re: Clark, No. 05-8038 (7th Cir. Jan. 31, 2006); (Dkt. No. 246).

In addition to the plaintiffs' complaint, the Federal Trade Commission ("FTC"), had been engaged in an investigation into comparable allegations made by consumers against the defendants' websites. In August 2005, the FTC "announced a settlement with [Consumer] and entered into a Stipulated Final Judgment and Order for Preliminary Injunction regarding conduct that is substantially similar to the subject of the plaintiffs' complaint." Clark v. Experian Info. Solutions, Inc., No. 03 C 7882, 2006 WL 626820, at *1 (N.D. Ill. Jan. 6, 2006) (Brown, J). According to Judge Brown's January 6, 2006 opinion, the plaintiffs seek through discovery all documents produced by [Consumer] to the FTC in connection with the investigation that led to the filing of the FTC's complaint. Id. Consumer objected to the production of any of these documents, whether pre-existing documents produced to the FTC or documents created in connection with the FTC settlement negotiations, because the documents were irrelevant and therefore unlikely to lead to discoverable evidence and because they were protected under Rule 408. Id. at *1.

A. Judge Brown's January 6, 2006 Order

Judge Brown held in her January 6, 2006 decision that the "[d]efendants are simply wrong in asserting that Rule 408 makes information relating to settlement negotiations off limits for discovery. ... [T]he exclusion in Rule 408 is quite narrow, covering only: (a) evidence of offers or acceptances of valuable consideration for the purpose of proving liability for or invalidity of a claim or its amount; and (b) evidence of conduct or statements made in compromise negotiations." Id. at *3. Rejecting the defendants' "unsustainable blanket approach," Judge Brown subdivided the contested documents into three categories to facilitate her analysis: (1) communications between the FTC and [Consumer] which Rule 408 suggests should be subdivided between documents that contain discussions of attempts to compromise, and those that do not; (2) business records that existed prior to the commencement of the FTC's investigation, but were furnished to the FTC following the instigation of the investigation; and (3) documents, including data compilations, prepared by the defendants especially in response to requests by the FTC for information. Id. Judge Brown also noted that her decision "relates solely to discovery; decisions about admissibility of evidence are the prerogative of the judge presiding at trial." Id. at *6.

Judge Brown held that only documents in Category 1 are protected from discovery under Rule 408. Id. at *6. "Category 1 includes documents that actually reflect [Consumer] and the FTC's negotiations, that is, offers, counteroffers, acceptances, drafts of the proposed agreed orders." Id. Category 2 documents were not protected under Rule 408. The fact that the documents might provide insight into the settlement negotiations or exchanged during a settlement negotiation process is not sufficient to prevent the future discovery of the document during discovery. Id. at *4. As for Category 3 documents, Judge Brown held that those documents were voluntarily produced during the negotiation process and this waived any type of privilege that the defendants might expected with these documents. Id. at *4-*6.

Consumer seeks this court to set aside Judge Brown's January 6, 2006 order or, in the alternative, to modify her order so as to prevent the discovery of all documents exchanged between FTC and Consumer once the parties began settlement discussions in August 2002. Consumer argues that Judge Brown's holding that Rule 408 applies to only evidence of offers or acceptances of valuable consideration for the purpose of proving liability for or invalidity of a claim or its amount and evidence of conduct or statements made in compromise negotiations is contrary to law. The plaintiffs argue that Judge Brown is correct and should be affirmed.

STANDARD OF REVIEW

As a nondispositive matter, this court's review of Judge Brown's decision is governed by Rule 72(a) and 28 U.S.C. § 636(b)(1). See Weeks v. Samsung Heavy Indus. Co., Ltd., 126 F.3d 926, 943 (7th Cir. 1997). A party may serve and file objections to a magistrate judge's order within 10 days of being served with a copy of the order. Fed. R. Civ. P. 72(a). This court must modify or set aside any portion of the magistrate judge's order found to be clearly erroneous or contrary to law. Id. "A finding is clearly erroneous when although there is evidence to support it, the reviewing court on the entire evidence is left with the definite and firm conviction that a mistake has been committed." Fid. Nat'l Title Ins. Co. of New York v. Intercounty Nat'l Title Ins. Co., No. 00 C 5658, 2002 WL 1433584, at *2 (N.D. Ill. July 2, 2002) (quoting United States v. United States Gypsum Co., 333 U.S. 364, 395 (1948)). This court's review is deferential and the court will only set aside and modify a decision that "contains some clearly apparent mistake." F.T.C. v. Pacific First Ben., LLC, 361 F. Supp. 2d 751, 754 (N.D. Ill. 2005) (citing Weeks, 126 F.3d at 943; Chavez v. Illinois State Police, 27 F. Supp. 2d 1053, 1066 (N.D. Ill. 1998)).

ANALYSIS

A. Time Period For Filing Of Objections

This court must first consider whether Consumer has complied with the ten day filing requirement set forth in Rule 72(a). Judge Brown's initial order granting the plaintiffs' motion to compel was dated on December 13, 2005 and was entered on the court's docket on December 14, 2005. (Dkt. No. 228). The parties received notice of the order on December 14, 2005 via the court's electronic filing system CM-ECF. Consumer did not file its initial objections until January 9, 2006 beyond the ten day period set forth in Rule 72(a). (Dkt. No. 238); see Lerro v. Quaker Oats Co., ...


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