Reseller: TrueCredit/TrueLink, TU's Reseller: Hopkins

David A. Szwak

Reseller: TrueCredit/TrueLink, TU's Reseller: Hopkins

Postby David A. Szwak » Wed Jan 11, 2006 4:02 pm

Not Reported in F.Supp.2d, 2004 WL 1854191 (D.Minn.)

United States District Court,
D. Minnesota.
Kevin HOPKINS and Rodney M. Clarkson, Plaintiffs,
TRANS UNION, L.L.C., and TrueLink, Inc., Defendants.
No. 03-5433 ADM/RLE.
Aug. 19, 2004.



*1 On June 25, 2004, oral argument before the undersigned United States District Judge was heard on the Motion for Summary Judgment [Docket No. 23] of Defendants Trans Union, L.L.C. ("Trans Union") and TrueLink, Inc. ("TrueLink") (collectively, "Defendants"). In its four count Second Amended Complaint [Docket No. 28], Plaintiff alleges causes of action based on violations of the Fair Credit Reporting Act, Minnesota Statute § 13C.01, the Minnesota Consumer Fraud Act, and the Minnesota Deceptive Trade Practices Act. For the reasons set forth below, Defendants' Summary Judgment Motion is granted.


FN1. For purposes of the instant Motion, the facts are viewed in the light most favorable to Plaintiff, the nonmovant. See Ludwig v.. Anderson, 54 F.3d 465, 470 (8th Cir.1995).

This action arises from the purchase of credit reports on-line by Plaintiffs in May and June 2003. Each Plaintiff utilized the Trans Union website to purchase copies of his credit report. Believing they were purchasing a credit report from Trans Union, Plaintiffs Hopkins and Clarkson paid $9.95 for a copy of their credit reports. Hopkins Aff. ¶¶ 3-4; Goolsby Aff. Ex. B. In actuality, Plaintiffs purchased their credit reports from TrueLink via a product named TrueCredit, which can be accessed through Trans Union's website, as well as many other websites. Metzger Decl. ¶ 7. Plaintiffs were connected to, where they were required to accept a service agreement that stated that TrueCredit was provided by TrueLink (the "Service Agreement"). Id. ¶ 11. Additionally, the Service Agreement contained a forum selection clause, which provided that "any and all disputes arising under this Agreement or out of TrueLink's provision of services to you, if submitted to a court of law, shall be submitted to the state and federal courts of New Castle County, Delaware, USA." Id. ¶ 12. The Service Agreement also stated that one can obtain a credit report directly from the credit reporting agencies, and, under certain circumstances, one can obtain a free copy of his credit report from a credit reporting agency. Id. ¶ 15. Last, the Service Agreement stated, in capital letters, that one is not required to purchase his credit report from TrueLink in order to dispute inaccurate information within the report. Id. ¶ 16. [FN2] The Service Agreement, it should be noted, mentions both TrueLink and Trans Union multiple times within the agreement. Id. Ex. A.

FN2. The Service Agreement also linked to a privacy statement, which reiterated that the TrueCredit site was offered by TrueLink. Id. at ¶ 18. The privacy statement also stated that, to furnish the information in the reports, information on the customer would be shared with one of the
three national credit reporting companies. Id.

Plaintiffs navigated to the order form page, which stated: "TrueCredit-- Brought to you by Trans Union." Goolsby Aff. ¶ 2, Ex. A. Additionally, the Trans Union logo appears on the order form. Id. However, the page also indicates that "TrueCredit is a product of TrueLink, a Trans Union company." Id. Each Plaintiff received an on-line receipt, both of which displayed the Trans Union logo. Id. ¶ 3, Ex. B.
Although Plaintiffs apparently believed that they were purchasing credit reports from Trans Union, the purchases were made through TrueCredit, a product of TrueLink. Many of the major issues in this case revolve around the relationship between the two Defendants, Trans Union and TrueLink. Trans Union is a Delaware limited liability company with its principal place of business in Illinois, while TrueLink is a business corporation incorporated in Delaware and headquartered in California. Kuzara Decl. ¶ 2; Metzger Decl. ¶ 2. In November of 2002, Trans Union acquired a majority of TrueLink's voting stock. Metzger Decl. ¶ 2. Prior to this time, Trans Union had no ownership interest in TrueLink. Id. TrueCredit was a product of TrueLink prior to Trans Union's acquisition of an interest in the company. Id. ¶ 6. However, before Trans Union acquired a portion of TrueLink, Experian was the exclusive provider of data for TrueLink's TrueCredit credit report service. Id. At the present time, Trans Union owns 81 percent of TrueLink's voting stock. Id. ¶ 2. At the time of the acquisition, TrueLink released a press release setting forth the many benefits that Trans Union would receive from the acquisition. Goolsby Aff. ¶ 4, Ex. C. The press release also referred to the acquisition as a "merger." Id.
*2 TrueLink has a five member board of directors. Metzger Decl. ¶ 3. One director represents the minority shareholders in TrueLink. Id. TrueLink cannot enter agreements with Trans Union without a majority vote of the board, as well as the vote of the director representing the minority shareholders. Id. The current director representing the minority shareholders is not employed by Trans Union or any of its affiliates. Id.
On January 9, 2004, Defendants served their first Motion for Summary Judgment [Docket No. 11]. It was at this time that Plaintiffs first learned that their purchases were from TrueLink, not Trans Union. See Pl's Mem. at 4. Therefore, Plaintiffs moved to amend their initial Complaint [Docket No. 1] to add TrueLink as a defendant. Additionally, by letter to the Court dated June 24, 2004, Plaintiffs have voluntarily dropped their claim based on Minn.Stat. § 13C.01(1). This claim is therefore dismissed.

B. Fair Credit Reporting Act
*3 Plaintiffs allege that Defendants violated the Fair Credit Reporting Act ("FCRA") in two ways. First, Plaintiffs claim that Defendants violated the FCRA by charging Plaintiffs $9.95 for their credit reports, which exceeds the cap of $9.00 set by the Federal Trade Commission. Second Am. Compl. at 43. To prove a violation of the FCRA, Plaintiffs must show that Defendants were a consumer reporting agency and that Plaintiffs purchased a consumer disclosure at a cost greater than $9.00. 15 U.S.C. § 1681(j); 67 Fed.Reg. 77282 (Dec. 17, 2002). Plaintiffs argue that they either purchased their reports from Trans Union, a credit reporting agency, or, in the alternative, from Trans Union's alter ego TrueLink. Second, Plaintiffs argue that Defendant Trans Union supplied and Defendant TrueLink received credit reports without a permissible purpose in violation of 15 U.S.C. §§ 1681b(a) and 1681b(f). In response to these allegations, Defendants argue that the credit reports were purchased from TrueLink, which is not a consumer reporting agency; that the reports purchased were not consumer disclosures governed by the FCRA; that TrueLink is not the alter ego of Trans Union; and that the exchange of credit information between Trans Union and TrueLink was not impermissible.
1. Consumer Reporting Agency
To prevail in the FCRA claim, Plaintiffs must show that they purchased their credit reports from a credit reporting agency. 15 U.S.C. § 1681(j). It is undisputed that Trans Union is a credit reporting agency. Kuzara Decl. ¶ 3. However, Defendants contend that Plaintiffs made their purchases from TrueLink, which, they argue, is not a credit reporting agency. Metzger Decl. ¶ 10.
The undisputed facts show that Plaintiffs indeed purchased their credit reports through TrueLink, despite their claim that they believed the purchases to be from Trans Union. Although Plaintiffs initially consulted the Trans Union website, they navigated to TrueCredit, a service offered by TrueLink. Although the Trans Union logo may have appeared at various points in the website, the Service Agreement makes clear that the purchase is being made from TrueLink. It clearly states: "Welcome to the TrueCredit website ... provided by TrueLink, Inc." Id. at 11. Despite Plaintiffs' protestations that the Service Agreement occasoinally refers to Trans Union, the Service Agreement makes clear that the purchase is ultimately being made from TrueLink. Id.
Because Plaintiffs purchased their credit reports from TrueLink, they must show that TrueLink is a consumer reporting agency for purposes of the FCRA. The FCRA defines a consumer reporting agency as an entity that "regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties." 15 U.S.C. § 1681a(f). No evidence has been proffered to support the contention that TrueLink assembles or evaluates consumer credit information. Rather, TrueLink acquires that information from sources such as Trans Union, and then repackages and enhances the information for the use of the consumer. Metzger Decl. ¶ 9. Therefore, Plaintiffs have not demonstrated that TrueLink is, for purposes of the FCRA, a consumer reporting agency.
*4 Because Plaintiffs purchased their credit reports from TrueLink, and TrueLink is not a credit reporting agency, Defendants' Motion for Summary Judgment must be granted. [FN4]

FN4. To prove the alleged violation of the FCRA, Plaintiffs must also demonstrate that they purchased a "consumer disclosure" as defined by 15 U.S.C. § 1681g. That section details what disclosures must be made to a consumer, such as all the information in the particular file and the sources of that information. 15 U.S.C. § 1681g. Defendants argue that
the enhanced presentation product is not a "consumer disclosure." This appears to be a close question. However, as Plaintiffs have failed to show that TrueLink is a credit reporting agency or an alter ego of Trans Union, this issue is not reached in the instant case.

2. Alter Ego Allegations
Plaintiffs alternatively argue that if they purchased their credit reports from TrueLink, Defendants are still liable under the FCRA because TrueLink is an alter ego of Trans Union, and therefore Trans Union is vicariously liable for TrueLink's actions. In the Eighth Circuit, state law governs piercing of the corporate veil. Stoebner v. Lingenfelter, 115 F.3d 576, 579 (8th Cir.1997). To pierce the corporate veil under Minnesota law, [FN5] one must "1) analyze whether the corporation functioned as the mere instrumentality of the principals a party is attempting to reach by piercing the corporate veil, and 2) determine whether injustice or fundamental unfairness would occur if the corporate veil were left intact." Id. (citing Victoria Elevator Co. v. Meriden Grain Co., 283 N.W.2d 509, 512 (Minn.1979)). Victoria Elevator sets forth a number of factors to consider in determining whether the first prong of the corporate veil test has been satisfied, including: "insufficient capitalization for purposes of corporate undertaking, failure to observe corporate formalities, nonpayment of dividends, insolvency of debtor corporation at time of transaction in question, siphoning of funds by dominant shareholder, nonfunctioning of other officers and directors, absence of corporate records, and existence of corporation as merely facade for individual dealings." 283 N.W.2d at 512.

FN5. Plaintiffs argue that the alter ego argument should be analyzed under Delaware law. Plaintiffs cite two Minnesota cases for the proposition that matters of corporate governance are determined by the laws of the state of incorporation. The two cases Plaintiffs cite, however, are limited in their holdings and do not address piercing of the corporate veil. In any event, there is little meaningful difference between the Minnesota and Delaware alter ego tests, and the result in the instant case would not change. See Glover v. Standard Fed. Bank, No. 97-2068, 2001 WL 1640097, *4 (D.Minn. Nov. 9, 2001) (citing Outokumpu Eng'g Enters., Inc. v. Kvaerner Enviropower, Inc., 685 A.2d 724, 729 (Del.Super.1996)) ("Under Delaware law, there is a presumption of corporate separateness which can only be overcome upon a showing that: (1) the parent exercises exclusive control over the subsidiary to the point that the subsidiary has no independent significance, and (2) that the corporate structure causes fraud or similar injustice").

Plaintiffs cite two facts in support of the first prong of the corporate veil test. First, they reference the merger between Trans Union and TrueLink as evidence that TrueLink is merely a means by which Trans Union reaches consumers with its products. Second, Plaintiffs cite Defendants' admission that TrueLink is a means by which consumers purchase data ultimately supplied by Trans Union. Plaintiffs do not proffer any evidence in support of any of the factors set forth by Victoria Elevator. While the Victoria Elevator list of factors is not exhaustive, it does provide guidance as to the sort of considerations a court should analyze in making an alter ego determination. The Victoria Elevator list demonstrates that one must make strong showing that one company is under the complete control of another. For example, in Snyder Elec. Co. v. Fleming, the Minnesota Supreme Court analyzed the use of a company's dividends, the use of directors' meetings, the proper maintenance of notes of the directors' meetings, and the stated capital of the company in determining whether or not the corporate veil should be pierced. 305 N.W.2d 863, 868 (Minn.1981).
Plaintiffs' evidence does not rise anywhere near this level. Although the evidence cited by Plaintiffs might demonstrate that a close relationship existed between the two companies, it does not suggest that TrueLink is not operating independently of Trans Union. Furthermore, Plaintiffs do not cite evidence regarding corporate governance, as Victoria Elevator and subsequent cases suggest must be evaluated, in attempting to pierce the corporate veil. Defendants cite the existence of a minority director with veto power at TrueLink, separate headquarters, management, directors, and books, as well as its observance of all corporate filings as required by Delaware law, as evidence of an identity distinct from Trans Union. In totality, there is little evidence to suggest that TrueLink is a sham company, or under the complete control of Trans Union. As a result, Plaintiffs are not entitled to pierce the corporate veil and hold Trans Union accountable for the actions of TrueLink.
*5 In support of the second prong of the corporate veil test, Plaintiffs argue that a fundamental injustice or unfairness would result by immunizing Trans Union from the actions of TrueLink. To prove this element, "proof of strict common law fraud is not required, but, rather, evidence that the corporate entity has been operated as a constructive fraud or in an unjust manner must be presented." West Concord Conservation Club v. Chilson, 306 N.W.2d 893, 898 n. 3 (Minn.1981). Even if Plaintiffs could satisfy the first prong of the corporate veil test, it is not clear that a fundamental injustice has been done here. Defendant TrueLink offers certain services which provide credit information to consumers. However, Plaintiffs were not foreclosed from seeking credit reports directly from Trans Union or any of the other national credit reporting agencies. It appears, in fact, that a myriad of choices face a consumer interested in discovering his credit report. The choice of one over another does not result in fundamental unfairness. Nor do Plaintiffs present any evidence to suggest that TrueLink has been operated as a constructive fraud or in an unjust manner.
3. Impermissible Purpose Allegations
Plaintiffs also argue that Defendants violated the FCRA when Trans Union impermissibly furnished Plaintiffs' credit information to TrueLink. Plaintiffs claim that this violates 15 U.S.C. §§ 1681b(a) and 1681b(f), which limit the use of consumer reports to specified purposes and forbid other, impermissible uses. Defendants argue that Trans Union furnished a report to TrueLink "in accordance with the written instructions of the consumer," as allowed by 15 U.S.C. § 1681b(a)(2), and further, TrueLink had a legitimate business need for the information, as permitted in 15 U.S .C. § 1681b(a)(3)(F)(i). Defendants argue the Service Agreement agreed to by Plaintiffs allowed Trans Union to transmit credit report information to TrueLink.
The privacy policy within the Service Agreement expressly states: "When you order a credit report ... TrueCredit must share your name, address, and social security number with one or more of the major credit reporting agencies in order to obtain your requested credit report." Metzger Decl. ¶ 18. This language, with Plaintiffs' assent, gave permission to TrueLink to share information with Trans Union in order to gain access to Plaintiffs' credit reports. The Service Agreement, therefore, implicitly permits Trans Union share the information in the credit report with TrueLink. Furthermore, Trans Union could reasonably believe that TrueLink had a permissible business purpose-- supplying Plaintiffs with requested credit information contained within Plaintiffs' credit reports--for procuring Plaintiffs' credit reports. Therefore, Plaintiffs cannot show that Trans Union shared the Plaintiffs' credit reports with TrueLink for an impermissible purpose.
C. Minnesota Consumer Fraud and Deceptive Trade Practices Acts
*6 Plaintiffs also claim that Defendants violated the Minnesota Consumer Fraud Act and the Minnesota Deceptive Trade Practices Act. For the reasons set forth below, Defendants' Motion for Summary Judgment on these counts is also granted.
1. Minnesota Consumer Fraud Act
To show a violation of the Minnesota Consumer Fraud Act, Plaintiffs must demonstrate two elements: "(1) there must be an intentional misrepresentation relating to the sale of merchandise, and (2) the misrepresentation must have caused damage to the plaintiff." Wiegand v. Walser Automotive Groups, Inc., 670 N.W.2d 449, 452 (Minn.App.2003) (rev'd on other grounds ) (citing Group Health Plan, Inc. v. Philip Morris, Inc., 621 N.W.2d 2, 12 (Minn.2001)); see also Minn.Stat. § 325F.69. The alleged misrepresentations made by Defendants which led Plaintiffs to believe they were purchasing their credit reports from Trans Union rather than TrueLink is the essence of the alleged fruad. Plaintiffs spent a significant portion of their brief arguing that the Minnesota Supreme Court would ultimately reverse Wiegand, and hold that oral representations can contradict express contractual language. Plaintiffs were proven correct on this count. See Wiegand v. Walser Automotive Groups, Inc., 683 N.W.2d 807 (Minn.2004). However, even if the Court assumes, arguendo, that Plaintiffs can prove an intentional misrepresentation, Plaintiffs have not demonstrated how they have been harmed by the misrepresentation. Although Plaintiffs claim damage of a "middleman surcharge," Defendants note that the Service Agreement states that cheaper credit reports can be procured directly from Trans Union. Metzger Decl. ¶ 16. In any event, no matter who provided the credit report, Plaintiffs received precisely what was advertised and requested. Even if they believed the purchase was from Trans Union when, in reality, the transaction was with TrueLink, Plaintiffs have not demonstrated what damage has resulted from this misrepresentation. Without any evidence as to the second element of the Consumer Fraud Act claim, summary judgment must be granted for Defendants on this count.
2. Minnesota Deceptive Trade Practices Act
Plaintiffs additionally allege a violation of the Minnesota Deceptive Trade Practices Act. This Act only provides for injunctive relief. See Minn.Stat. § 325D.45; Dennis Simmons, D.D.S., P.A. v. Modern Aero, Inc., 603 N.W.2d 336, 339 (Minn.App.1999); Reno v. Supportkids, Inc., No. 01-2331, 2004 WL 828150, at *4 (D.Minn. Apr. 13, 2004). Even if Plaintiffs can demonstrate a violation of the Deceptive Trade Practices Act, it is not clear what, or whether, injunctive relief would be appropriate here. In Minnesota, to grant an injunction, one must balance certain factors. See Dahlberg Bros., Inc. v. Ford Motor Co., 137 N.W.2d 314, 321-22 (Minn.1965). These factors include: "(1) the relationship of the parties; (2) the relative harm to the parties if the injunction is or is not granted; (3) the likelihood of success on the merits; (4) public policies expressed in statutes; and (5) the administrative burdens in supervising and enforcing the decree." Id. A cursory examination reveals that Plaintiffs have not addressed any of these factors. For example, there is no argument that irreparable harm would result if injunctive relief is not granted. Plaintiffs are free from any further harm, if any, by simply not making any further purchases from Trans Union or TrueLink. Therefore, Defendants' Motion for Summary judgment is granted on this count.

*7 Based on the foregoing, and all the files, records and proceedings herein, IT IS HEREBY ORDERED that Defendants' Motion for Summary Judgment is GRANTED.
Hopkins v. Trans Union, L.L.C.
Not Reported in F.Supp.2d, 2004 WL 1854191 (D.Minn.)

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