Whether Willful is a Jury Question, Not SJ Issue

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Whether Willful is a Jury Question, Not SJ Issue

Postby Administrator » Mon Sep 29, 2014 11:21 pm

.S. District Court Denies Motion for Summary Judgment in FACTA Case.

A U.S. District Court for the Central District of California recently denied a motion for summary judgment in a Fair and Accurate Credit Transactions Act (FACTA) case on grounds that the “willfulness” of the defendant’s conduct is a question for the jury and cannot be decided on summary judgment. Edwards v. Toys “R” Us, et al., 527 F.Supp.2d 1197 (2007). In this case, the plaintiffs alleged that the defendant, Toys “R” Us, willfully violated FACTA by printing more than the last five digits of consumers’ credit card numbers on its customer receipts. The defendant argued that willfulness cannot be imputed to Toys “R” Us because the decision to include more than the last five digits of consumers’ credit card numbers on customer receipts was made and implemented by an independent contractor employed by the defendant to implement upgrades to its cash register software. The defendant asserted that a corporation’s scienter depends on the mental state of its directors and officers, and that a corporation cannot be found to have acted willfully if the actions in question were those of an unauthorized third party. The court noted, however, that corporations can be vicariously liable for FACTA violations committed by their employees, and that without vicarious liability it would be very difficult to hold a corporation liable under the statute. Given the facts of the case, the court held that a reasonable jury could find that the independent contractor was acting as an agent for the defendant for vicarious liability purposes. The defendant also asserted that its violation was inadvertent—i.e., not willful—and that, once discovered, it was remedied immediately. The court, citing Safeco Ins. Co. of America v. Burr, noted that, with regard to FACTA violations, willfulness covers not only knowing violations, but reckless ones as well. The court further noted that a company subject to FACTA acts in reckless disregard of the statute if the company creates an “unjustifiable risk” that it will violate the statute. Based on this standard, and reasoning that willfulness under FACTA is generally a question of fact for the jury, the court concluded that triable issues of fact remain, and that this issue cannot be decided on summary judgment.


Willfulness under the FCRA is generally a question of fact for the jury. See Guimond v. Trans Union Credit Information Co., 45 F.3d 1329, 1333 (9th Cir.1995) (“The reasonableness of the procedures and whether the [insurance] agency followed them will be jury questions in the overwhelming majority of cases,” citing Cahlin v. General Motors Acceptance Corp., 936 F.2d 1151, 1156 (11th Cir.1991)); Lenox v. Equifax Information Services LLC, No. 05-01501-AA, 2007 WL 1406914, *6 (D.Or. May 7, 2007) (“the determination as to whether defendant's action or inaction rises to the level of willfulness so as to violate the statutory obligations of the FCRA is also a question of fact”); Cairns v. GMAC Mortgage Corp., No. CV 04-01840 PHX(SMM), 2007 WL 735564, *8 (D.Ariz. Mar.5, 2007) (“in this case, like in the overwhelming number of cases in which state of mind is dispositive, the issue of punitive damages is best left for the trier of fact to determine”); Centuori v. Experian Information Solutions, Inc., 431 F.Supp.2d 1002, 1007 (D.Ariz.2006) (declining to enter summary judgment on the issue of willfulness in a case involving the reasonableness of consumer protection procedures). To determine that willfulness does not present a jury question in this case, the court would have to conclude that no reasonable jury could find that Toys' conduct created a “risk [of violation] substantially greater than that which is necessary to make [its] conduct negligent.” See Safeco, 127 S.Ct. at 2215. FN45 This it cannot do.

FN45. Toys argues that under Safeco, summary judgment can properly be entered on the issue of willfulness. This, of course, is true in cases where no reasonable jury could find willfulness based on the facts presented. The cases Toys on which Toys relies, however, do not support the entry of summary judgment here. In Murray v. GMAC Mortgage Corp., 2007 WL 2317194, *3 (N.D.Ill., July 23, 2007), the court affirmed the entry of summary judgment in defendant's favor, concluding that defendant's interpretation of the FCRA could not be considered reckless. The reasonableness of a defendant's legal interpretation of an ambiguous statute does not turn on the inferences that can be drawn from undisputed facts to the same extent that the reckless nature of a clear statutory violation does, and consequently does not control the outcome here. A second case cited by Toys- Gorman v. Wolpoff & Abramson, LLP, 435 F.Supp.2d 1004 (N.D.Cal.2006)-does not address whether willfulness can be decided at the summary judgment stage, as the court there concluded that plaintiff had not adduced evidence raising triable issues of fact as to whether a credit charge was disputed, or whether a credit reporting agency's investigation of the matter was unreasonable. See id. at 1009. In the final case on which Toys relies, the court found that summary judgment on willfulness was appropriate but provided no substantive discussion of its reasoning in this regard. It merely noted that “[p]laintiff ha[d] ... not come forward with evidence sufficient to permit a reasonable trier of fact to find that defendant's reporting of the obsolete account was willful.” See Batdorf v. Trans Union, No. C-00-00501 CRB, 2002 WL 1034048, *5 (N.D.Cal. May 15, 2002). In none of these cases was the court presented with evidence from which reasonable jurors could draw conflicting inferences regarding defendant's intent in violating the FCRA.

Seeking a different result, Toys notes that Judge Klausner of this district recently entered summary judgment for defendant in an analogous case. See Najarian v. Charlotte Russe, Inc., No. CV 07-00501 RGK (CTx) (C.D.Cal. Aug. 16, 2007) (Docket No. 108). In Najarian, Judge Klausner found there were no triable issues of fact regarding plaintiff's claim that Charlotte Russe willfully violated FACTA by printing a card expiration date on a customer receipt. The defendant had purchased*1211 a software upgrade to suppress portions of the credit card numbers that appeared on its receipts, but did not know that the upgrade did not suppress card expiration dates. Judge Klausner appeared to reach two conclusions: (1) that defendant was not aware that the software upgrade did not bring it into compliance with FACTA (and thus did not knowingly violate the law), and (2) that defendant made a diligent and good faith effort to fix the problem once informed of it. The court respectfully disagrees with the reasoning in Najarian.FN46

FN46. Toys cites a series of cases from this district in which courts have denied class certification in FACTA cases analogous to this one. See Marian Evans v. U-Haul Co. of California, No. CV 07-02097 JFW (JCx) (Aug. 14, 2007); Torossian v. Vitamin Shoppe Indus., No. CV 07-00523 ODW (SSx) (Aug. 9, 2007); Papazian v. Burberry Limited, CV 07-01479GPS(RZx), 2007 WL 4812280 (C.D.Cal. Aug. 3, 2007); Najarian v. Charlotte Russe, Inc., No. CV 07-00501 RGK (CTx), 2007 U.S. Dist. LEXIS 59879 (C.D.Cal. June 12, 2007); Soualian v. Int'l Coffee & Tea LLC, No. CV 07-00502 RGK (JCx), 2007 U. S Dist. LEXIS 44208 (C.D.Cal. June 11, 2007); Najarian v. Avis Rent A Car Sys., No. CV 07-00588 RGK (Ex), 2007 WL 4682071, 2007 U.S. Dist. LEXIS 59932 (C.D.Cal. June 11, 2007); Spikings v. Cost Plus, Inc., No. CV 06-08125 JFW (AJWx), 2007 U.S. Dist. LEXIS 44214 (C.D.Cal. May 25, 2007). These cases do not foreclose the individual plaintiffs from pursuing FACTA claims; rather, they merely deny class certification. See, e.g., Spikings, 2007 U.S. Dist. LEXIS 44214 at *15 (“any individual who feels that his rights under FACTA have been violated but who has not suffered any actual harm can, as Plaintiff has, file a lawsuit to recover statutory damages and, if successful, attorney's fees”). To the extent that the decisions refer to defendants' good faith remedial action once notified of a FACTA violation, they find that the good faith nature of the remedial action bears on class certification, not on the merits of the claim. See id. at *14 (“Defendant's immediate action to comply with FACTA's requirements once becoming aware of Plaintiff's Complaint also supports denial of class certification in this case”).

Edwards v. Toys ""R'' Us
527 F.Supp.2d 1197
November 05, 2007


Federal District Court: FCRA Willfulness Involves Jury Questions.

A U.S. District Court for the District of Oklahoma stated that a determination of whether the insurer willfully violated FCRA’s adverse action requirement “involve[s] at least some matters triable as of right to a jury.” In re Farmers Insurance Co., Inc. FCRA Litigation, 2008 WL 687085, No. CIV-03-158-F (W.D. Okla. Mar. 10, 2008). In this case, the court had already decided that the notice provided by the insurer did not comply with the FCRA adverse action requirement, but noted that other issues remained in the case, including whether the insurer acted willfully. The court acknowledged the holding in the Supreme Court’s Safeco case that a defendant cannot be liable for a willful violation of FCRA (which triggers statutory damages of $100-$1000) per violation) if its erroneous interpretation of FCRA was not objectively unreasonable. But the district court, following the lead of the U.S. Court of Appeals for the Third Circuit in Whitfield v. Radian Guaranty, Inc., 501 F.3d 262, 270-71 (3rd Cir. 2007) cert. pending, 76 U.S.L.W. 3374 (2007), indicated its tentative conclusion that there must be evidence in the record to support its claim that it reasonably believed it was in compliance and that some issues related to willfulness must be decided by a jury.
David A. Szwak
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