Volume 22 Number 15, August 5, 2002
(Excerpted From Page 3)
OREGON JURY, D.C. CIRCUIT CONTINUE
TRANS UNION'S LOSING STREAK
It was a tough couple of weeks for
Trans Union, one of the nation's "Big Three" credit bureaus. First,
it lost another challenge to the Federal Trade Commission's rules
restricting its sale of credit header data under the Gramm-Leach-Bliley
Then, on July 29, a federal jury in Oregon awarded
$5.3 million to Judy Thomas, a Klamath Falls woman whose Trans Union
credit report was regularly mixed with Judith Upton, a Washington
State resident. Upton's Social Security number was only one digit
different than Thomas' SSN. That, combined with three common letters
in the first name, was sufficient to cause a regular merging of
the two women's credit histories. Thomas repeatedly was frustrated
in her efforts to get Upton's data off of her credit report. .
It was the biggest award ever under the Fair Credit
Reporting Act; $300,000 was in compensatory damages; $5 million
was in punitive damages, intended to punish the Chicago-based credit
bureau for willfully violating the FCRA.
Trans Union assuredly will appeal the verdict. The
largest award previously, $4.4 million against Trans Union, came
from a federal jury in Mississippi in 1998. But the verdict was
vacated by a three-member panel of the U.S. Court of Appeals for
the Fifth Circuit, which ruled that a willful violation of the FCRA
required some form of concealment. Other courts have concluded that
a willful violation requires either reckless or conscious disregard
of the law. The Magistrate Judge in the Oregon case, John Jelderks,
adopted the conscious disregard standard in his instructions to
A key moment in the trial came when one of Thomas'
lawyers, Robert Sola, cross-examined Joni Payabyab, the TU manager
of consumer disputes. Payabyab testified that TU dispute handlers
received training on the FCRA and had to take an exam. But when
Sola read to her certain provisions of the FCRA, including ones
from the 1996 amendments, Payabyab appeared unfamiliar with them.
When asked directly by Sola, she effectively admitted that she was
unfamiliar with them.
Sola's litigation partner was Michael Baxter, the
lead attorney in the Jorgensen case, which
resulted in a $600,000 verdict against TRW. That verdict is the
largest FCRA award not to be reduced or vacated. TU was represented
by Donald Bradley of Crowell and Moring. (Editor's Note: Evan Hendricks
was an expert witness for the plaintiff.)
Back in Washington, the D.C. Circuit's July
16 opinion upheld broad FTC rules effectively barring Trans Union
from selling credit header data -- personal information on the top
of the credit report like name, address and Social
Security number. The appeals panel concluded that the FTC had broad
authority to define such key terms as "financial institution" and
"financial information" under the Gramm-Leach-Bliley Act, and that
the FTC was entitled to deference.
The FTC rules defined financial information
as any data provided by an individual in order to get a financial
service. The D.C. Circuit rejected TU's claim that the rules interfered
with its First Amendment right of commercial free speech. (TU
v. FTC: CA-D.C. -- No. 01-5202; July 16) (http://pacer.cadc.uscourts.gov/common/opinions/200207/01-5202a.txt.)
The decision was somewhat of a replay of the D.C.
Circuit's opinion in Trans Union I, in which
it upheld an FTC enforcement action under the FCRA to stop TU from
selling credit report data for non-credit marketing. In June, the
U.S. Supreme Court rejected TU's bid to overturn that decision.
(see Privacy Times, June 12; Vol. 22 No. 12)