Illinois law: Zahran: Fraud, Libel, Slander, etc.

David A. Szwak

Illinois law: Zahran: Fraud, Libel, Slander, etc.

Postby David A. Szwak » Sun Nov 13, 2005 12:27 pm

Zahran v. Transunion Corp.,
Not Reported in F.Supp.2d, 2003 WL 1733561, N.D.Ill., Mar 31, 2003

This case is now before the Court upon defendant Trans Union's motion for summary judgment pursuant to Federal Rule of Civil Procedure 56. For the reasons set forth below, defendant's motion for summary judgment is granted as to all Counts of the complaint.

Pursuant to Local Rule 56, all facts contained herein are either undisputed and supported by accompanying documents or deemed admitted through a failure to properly respond to the allegation by the opposing party. [FN1]

FN1. In Malec v. Sanford, 191 F.R.D. 581 (N.D.Ill.2000), the Seventh Circuit discussed the proper method of establishing facts through the record--in accordance with the Federal Rules of Civil Procedure, the Local Rules, and the common law. Malec, 191 F.R.D. at 582-84. Many of the individually numbered factual assertions set forth by the plaintiffs do not conform with such requirements. Several paragraphs do not cite supporting documents (e.g. ¶¶ 1-3, 5, 11, 20, 25, 26, 34, 37, 48, 101, 105, 113, 123, 129, 148, 154, 156, 160-62, 174, 178-81, 199, 202, 215-18, 234, 238, 241, 242, 245, and 254). An equal number are irrelevant to the claims of the complaint (e.g. ¶¶ 3, 9, 18, 20, 21, 22, 24, 28, 29, 30, 31, 43, 44, 46, 47, 52, 84, 86, 94, 97-101, 125, 127, 139, 146, 149, 163-70, 172-75, 177, 203-08, 212, 222-25, 230-33, 255, 256, and [sic] 248-49). Other properly cited paragraphs were considered in reaching the determination of the Court.

Trans Union is a consumer reporting agency ("CRA") as that term is defined in the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. § 1681a. Plaintiffs Robin and Karen Zahran ("Zahrans"), who live in Oak Brook, Illinois, own approximately one thousand acres of property in Denmark, Wisconsin, including parcels used for farming as well as rental properties. Over the course of several years, the Zahrans have been involved in a number of lawsuits. A variety of tax liens and releases of tax liens have been recorded in their names in Illinois. The Zahrans have also been involved in numerous disputes with various creditors.
Beginning in February, 2000, the Zahrans commenced a series of disputes regarding information contained in their Trans Union credit reports. At that time, their reports included tax liens, civil judgments, a foreclosure judgment, a paid collection account, and accounts showing late payments to various creditors. Trans Union timely investigated each of the Zahrans claims and corrected or voluntarily changed a number of them. Not all of the Zahrans disputed accounts are the subject of this action. Discovery revealed that most of the disputed adverse credit references were accurately reported at all times by Trans Union. The errors in reporting, if any, were attributable to the errors of third parties such as the Court of Brown County.
The following items are the only ones in which some of the account information was not correct, as originally reported by Trans Union:

Civil Judgment, docket Accurate but for judgment ¶¶ 19-22
# 94LM3466 (El-Masry amount: $18,956 listed
Judgment instead of the correct amount
of $11,974
Civil Judgment, docket This judgment was entered, ¶¶ 23, 24
# 98C1221 (Wegner but the later reports did not
Implement Judgment) show that it had been vacated
on 9/10/1998
Denmark State Bank Accurate as to all terms ¶¶ 28-36
# 1505917915 except for the monthly
payment amount

The Wegner judgment:
On April 6, 1998, a default judgment against Robin Zahran and in favor of Wegner Implement, Inc., was entered in Small Claims Court in Brown County, Wisconsin. This judgment was reported to Trans Union. Subsequently, the judgment was vacated on September 1, 1998 on the Zahrans' motion. The order vacating the judgment was not reported to Trans Union by the court or the Zahrans. As a result, prior to the Zahrans' dispute of this item in February, 2000, Trans Union did not report that this judgment had been vacated. Though Trans Union, which obtains public record information from third party vendors, requests information on vacated judgments, it did not receive notice of the September 1998 order vacating the Wegner judgment until February 2000. (Trans Union's Statement of Facts, hereinafter "Facts," ¶ 75.)
The El-Masry judgment:
*2 In 1998, Robin Zahran was a defendant and counter-plaintiff in a lawsuit filed by Youseff El-Masry in the Circuit Court of Kane County, Illinois (Case No. 94 LM 3466). A judgment in favor of El-Masry, for $11,974.47, was entered against Robin Zahran on March 23, 1998. Zahran's 1999 appeal of some order was ultimately dismissed for lack of appellate jurisdiction. Robin Zahran never paid the judgment. Though the Zahrans claimed that this judgment should not be reported at all, as it was not final, they are incorrect and the only inaccuracy in reporting was that the judgment amount was incorrectly listed as $18,956. This was changed to reflect the correct amount within a short time. Otherwise, all information related to this item was at all times accurate.
Denmark State Bank:
Denmark State Bank held a series of mortgage notes on a portion of Zahrans' Wisconsin property. At various times Denmark State Bank reported that the loan terms called for monthly payments of $1,100. In fact, during the early years of this loan the Zahrans were required to pay $1,100 per month. At some point, the term of this loan was converted to a single annual payment. Nonetheless, Denmark State Bank or its computer services vendor (Metavante) periodically reinserted $1,100 as an amount in the field reporting monthly payment terms on the computer tapes sent to Trans Union. Denmark State Bank reported the $1,100 monthly payment term concerning the loan to Trans Union in 1997, 1998, 1999, and 2000. Apart from this term, all other information concerning this account was accurate as reported.
Plaintiffs filed this action in the Circuit Court of Cook County on February 9, 2001, and it was removed to the United States District Court for the Northern District of Illinois on March 9, 2001. The Defendant filed the current motion for summary judgment of the complaint in its entirety on April 26, 2002.
Count III--Fraud and Conspiracy
Count III of the Complaint purports to allege "Fraud and Conspiracy by Trans Union [sic] and Equifax." (Complaint at ¶¶ 26-30.) To prove a civil conspiracy to defraud claim under Illinois law, a plaintiff must establish two necessary elements: (1) an overt act of fraud in furtherance of the conspiracy, and (2) actual damages resulting from the conspiracy. Caplan v. International Fidelity Insurance Co., 885 F.Supp. 175, 179 (N.D.Ill.1995). Conspiracy to commit fraud is a combination of two or more persons to accomplish by concerted action an unlawful purpose or a lawful purpose by unlawful means. Damato v. Merrill Lynch, Pierce. Fenner & Smith, Inc., 878 F.Supp. 1156, 1162 (N.D.Ill.1995). It is a necessary element that the defendant must conceal, misrepresent, or wrongfully induce the plaintiff in an action for conspiracy to defraud. Commercial Products Corp. v. Briegel, 242 N.E.2d 317, 322 (III.App.Ct.3d Dist.1968).
Beyond the vague, conclusory allegations in their Complaint, Zahrans offer nothing in support of their claims of a conspiracy, a claim upon which they have the burden of proof. There is no alleged agreement, no violations of the FCRA, and no other alleged acts that would constitute an overt act in furtherance of the conspiracy to defraud. The Zahrans complaint cannot withstand the initial inquiry concerning overt acts in furtherance a conspiracy. Thus, the Court need not consider whether damages resulted from the alleged conspiracy to defraud.
*9 Additionally, Count III alleges violations of Illinois state law and jurisdiction in Federal District Court was proper under supplemental jurisdiction. Since the federal law claims have been dismissed before trial, it is appropriate to dismiss the state law claims for a lack of subject matter jurisdiction in this court.
The Court grants defendants' motion for summary judgment as to Count III alleging a conspiracy to defraud.

Counts IV & V--Slander, Libel, and Negligence under Illinois State Law
Trans Union argues that it is afforded immunity from the Zahrans' defamation and negligence claims under two provisions of the FCRA-- §§ 1681h & 1681t. These two provisions concern actions taken at different stages of a consumer reporting agency's contact with a consumer. 1681h concerns actions taken prior to a complaint of false information being filed and 1681t concerns actions taken after such a complaint is filed. Aklagi v. Nationscredit Financial Services Corp., 196 F.Supp.2d 1186, 1195 (D.Kan.2002).
Section 1681h(e) of the FCRA provides:
(e) Limitation of liability
Except as provided in sections 1681n and 1681o of this title, no consumer may bring any action or proceeding in the nature of defamation, invasion of privacy, or negligence with respect to the reporting of information against any consumer reporting agency, any user of information, or any person who furnishes information to a consumer reporting agency, based on information disclosed pursuant to section 1681g, 1681h, or 1681m of this title, or based on information disclosed by a user of a consumer report to or for a consumer against whom the user has taken adverse action, based in whole or in part on the report 2 except as to false information furnished with malice or willful intent to injure such consumer.
15 U.S.C. § 1681h(e). This section pertains to actions of the consumer reporting agency prior to complaints of inaccurate information being made by the plaintiffs. Aklagi, 196 F.Supp.2d at 1195. To meet the very high standard of malice or willful injury, plaintiffs must be able to show that when the consumer reporting agency disclosed a report with knowledge that the statement was false or acted in reckless disregard of whether the statement was true or false. Cousin, 246 F.3d at 375; Dornhecker v. Ameritech Corp., 99 F.Supp.2d 918, 931 (N.D.Ill.2000). In other words, the standard requires the Zahrans prove that Trans Union took deliberate and purposeful actions to injure them in particular. The plaintiffs cannot meet this burden, as the record is void of any evidence or allegations demonstrating knowing or reckless conduct. See Casella, 56 F.3d at 476. Therefore, the Court grants qualified immunity to Trans Union concerning defamation and negligence claims for conduct occurring prior to complaints of inaccurate information contained in consumer credit reports by the Zahrans.
Section 1681t(b)(1)(F) of the FCRA provides:
*10 No requirement or prohibition may be imposed under the laws of any State--...
(1) With respect to any subject matter regulated under ...
(F) Section 1681s-2 of this title, relating to the responsibilities of persons who furnish information to consumer reporting agencies
15 U.S.C. § 1681t. Thus, Trans Union is afforded absolute immunity for all actions within "the subject matter regulated under § 1681s," state law defamation and negligence claims. Aklagis, 196 F.Supp. at 1184. Trans Union's action taken to reinvestigate items disputed by the Zahrans falls squarely within the above section as a responsibility under the FCRA. Id. Accordingly, the Court grants absolute immunity to Trans Union for all state law defamation or negligence action which arises out of conduct occurring after the Zahrans' notified Trans Union of reporting inaccuracies.
Additionally, Counts IV and V allege violations of Illinois state law and jurisdiction in Federal District Court was proper under supplemental jurisdiction. Since the federal law claims have been adjudicated in Defendant's favor, we decline to exercise jurisdiction over Plaintiffs' state claims. See 28 U.S.C. § 1367(c)(3) (stating that Court may decline to exercise jurisdiction over state claims if it has "dismissed all claims over which it [had] original jurisdiction.

David A. Szwak

Postby David A. Szwak » Sat Dec 03, 2005 11:13 am

Socorro v. IMI Data Search, Inc.,
Not Reported in F.Supp.2d, 2003 WL 1964269, N.D.Ill., Apr 28, 2003

Plaintiff Edward Socorro sued Hilton Hotels Corp., his former employer, and IMI Data Search, Inc., the company Hilton hired to perform a background check on him. The seven count complaint alleges violations of the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq., and Illinois common law. The case is before the Court on defendants' motions to dismiss Socorro's state law claims. For the reasons stated below, defendants' motions are granted in part and denied in part.

Socorro filed this lawsuit in Illinois state court; defendants removed the case to federal court after he amended his complaint to include a claim under the Fair Credit Reporting Act. Socorros's amended complaint contains seven counts: defamation by both Hilton and IMI; tortious interference with prospective economic advantage by IMI; infliction of emotional distress by Hilton and IMI; false light invasion of privacy by Hilton and IMI; negligence by Hilton; negligent hiring, retention and/or supervision by Hilton; and violations of the FCRA by both Hilton and IMI. Defendants have moved to dismiss the state law claims pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim.

1. Defamation
Hilton argues that Socorro's defamation and false light claims should be dismissed because they "are not pled with the requisite specificity required under Illinois law," and because Socorro "has not alleged sufficient facts to state a claim." Hilton's Mot. to Dismiss at 3.
Under Illinois law, a statement is considered defamatory if it "tends to cause such harm to the reputation of another that it lowers that person in the eyes of the community or deters third persons from associating with him." Kolegas v. Heftel Broad. Corp ., 154 Ill.2d 1, 10, 607 N.E.2d 201, 206 (1992). The elements of a defamation claim are (1) a defamatory assertion of fact about the plaintiff; (2) publication to a third party; and (3) injury to the plaintiff's reputation. See Krasinski v. United Parcel Serv., Inc., 124 Ill.2d 483, 490, 530 N.E.2d 468, 471 (1988).
Defamatory statements fall into two categories--defamation per se and defamation per quod. A statement is defamatory per se if it is it is so obviously harmful to the plaintiff that injury to his reputation is presumed. Kolegas, 154 Ill.2d at 10, 607 N.E.2d at 206. Because the injury to reputation is apparent, the plaintiff need not plead or prove special damages. Van Horne v.. Muller, 185 Ill.2d 299, 307, 705 N.E.2d 898, 903 (1998). Statements that are defamatory per quod, on the other hand, are capable of an innocent construction and require extrinsic facts to explain the defamatory meaning. Kolegas, 154 Ill.2d at 10, 607 N.E.2d at 206. In an action for defamation per quod, a plaintiff must therefore plead and prove special damages--extrinsic facts that show "actual damage to his reputation and pecuniary loss resulting from the defamatory statement." Dornhecker v. Ameritech Corp., 99 F.Supp.2d 918, 933 (N.D.Ill.2000) (citing Bryson v. News America Publ'ns, Inc., 174 Ill.2d 77, 88, 672 N.E.2d 1207, 1214 (1996)). The plaintiff in a per quod action must comply with the heightened pleading standard of Federal Rule 9(g), requiring that special damages be "specifically stated." Muzikowski v. Paramount Pictures Corp., 322 F.3d 918, 927 (7th Cir.2003).
*3 Under Illinois law, words that "impute the commission of a criminal offense" are considered actionable per se. Bryson, 174 Ill.2d at 88, 672 N.E.2d at 1214. Because the allegedly defamatory statement--that Socorro was convicted of a crime and spent six months in jail--clearly falls within the category of per se defamation, Socorro need not allege special damages and is "entitled to the usual rules for notice pleading established by Rule 8." Muzikowski, 322 F.3d at 926.
Because Socorro's allegations provide adequate notice of his claim and its basis, dismissal is inappropriate. Without the benefit of discovery, it is not necessary for Socorro to state precisely who said what to whom. Wynne v. Stevenson, No. 02 C 5263, 2002 WL 31804497, at *2 (N.D.Ill.Dec. 13, 2002); cf. Conley, 355 U.S. at 47-48 ("[S]implified 'notice pleading' is made possible by the liberal opportunity for discovery and the other pretrial procedures established by the Rules to disclose more precisely the basis of both claim and defense....").
Hilton maintains that federal pleading rules require Socorro to "plead the precise language of the defamation." Hilton's Mot. to Dismiss at 3. It cites several decisions from this District that apply a haec verba pleading requirement in defamation actions. See, e.g., Silk v. City of Chicago, No. 95 C 0143, 1996 WL 312074 (N.D. Ill. June 4, 1996); Manion v. Lima Mem'l Hosp., No. 93 C 6138, 1994 WL 178316 (N.D.Ill. May 9, 1994). These cases all rely, however, on a district court decision, Vantassell-Matin v. Nelson, 741 F.Supp. 698, 707 (N.D.Ill.1990), which in turn cites another district court opinion, Seaphus v. Lilly, 691 F.Supp. 127 (N.D.Ill.1988) (citing an Eighth Circuit case), for the proposition that a plaintiff must recite the precise language alleged to be defamatory. We question whether theses cases are consistent with Rule 8 and the concept of notice pleading. But in any event, most courts that have applied this standard have found it satisfied relatively easily; an allegation is considered "specific enough" if it permits the defendant to understand the specific nature of the claim and form a responsive pleading. Wynne, 2002 WL 31804497, at *2; see, e.g., Cozzi v. Pepsi-Cola Gen. Bottlers Inc., No. 96 C 7228, 1997 WL 312048, at *5 (N.D. Ill. June 6, 1997) (stating that "courts in this district ... have held that the defamatory language need not be quoted verbatim"). As stated above, the Court finds that Socorro's allegations meet this requirement and thus satisfy Rule 8.
2. False Light Invasion of Privacy
To prevail on a claim of false light invasion of privacy, Socorro must show that (1) he was placed in a false light before the public as a result of the defendant's actions; (2) the false light would be highly offensive to a reasonable person; and (3) the defendant acted with actual malice, "that is, with knowledge that the statements were false or with reckless disregard for whether the statements were true or false." Kolegas, 154 Ill.2d at 17-18, 607 N.E.2d at 209-210. "Publicity" in the false light context involves more than relaying the statement to a third person; rather it means "communicating the matter to the public at large or to so many persons that the matter must be regarded as one of general knowledge ." Roehrborn v. Lambert, 277 Ill.App.3d 181, 184, 660 N.E.2d 180, 183 (1995).
*4 Hilton argues that Socorro has not adequately alleged that the false statements were communicated to the public. Socorro's complaint does, however, allege that Hilton repeated "to third persons not associated with Hilton the information provided by IMI" and "that Socorro was terminated by Hilton for falsification of his Application." Compl. ¶¶ 23-24. Under the liberal notice pleading regime of Rule 8, these statements are sufficient to allege the publicity element. Socorro may be able to demonstrate that the "third persons" he refers to are so numerous as to meet the publicity requirement, and he is entitled to attempt to prove his claim.
Hilton relies on decisions stating that false light claims cannot be maintained if the statement is not "publicized outside the workplace community to the public at large." Hilton's Mot. to Dismiss at 5 (quoting Jones v. Sabis Educ. Sys., Inc., No. 98 C 4252, 1999 WL 1206955 (N.D.Ill.Dec. 13, 1999)). These cases are inapposite, however, because contrary to Hilton's contentions, Socorro does allege that the statements were communicated to persons "not associated with Hilton"in other words, to persons outside the work environment.

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