Court Opinion

ID: 812992
Source: CourtListenerOpinion
Date Created: 2012-12-03 19:48:11+00
Date Added: 2024-06-11T09:54:26.744647
License: Public Domain

UNPUBLISHED

                  UNITED STATES COURT OF APPEALS
                      FOR THE FOURTH CIRCUIT

                               No. 11-1564

DONNA K. SOUTTER, For herself and on behalf of all similarly
situated individuals; TONY LEE WEBB,

                Plaintiffs – Appellees,

           v.

EQUIFAX INFORMATION SERVICES, LLC,

                Defendant – Appellant.

------------------------------------

CHAMBER OF COMMERCE OF THE UNITED            STATES   OF   AMERICA;
CONSUMER DATA INDUSTRY ASSOCIATION,

                Amici Supporting Appellant,

VIRGINIA   POVERTY  LAW   CENTER;  VIRGINIA   TRIAL   LAWYERS
ASSOCIATION; RAPPAHANNOCK LEGAL SERVICES, INC.; LEGAL AID
JUSTICE CENTER; NATIONAL ASSOCIATION OF CONSUMER ADVOCATES,

                Amici Supporting Appellees.

Appeal from the United States District Court for the Eastern
District of Virginia, at Richmond.   Robert E. Payne, Senior
District Judge. (3:10-cv-00107-REP)

Argued:   September 19, 2012             Decided:     December 3, 2012

Before GREGORY, SHEDD, and AGEE, Circuit Judges.
Reversed and remanded by unpublished opinion. Judge Shedd wrote
the opinion, in which Judge Agee joined. Judge Gregory wrote a
dissenting opinion.

ARGUED: Paul D. Clement, BANCROFT, PLLC, Washington, D.C., for
Appellant.  Deepak Gupta, Washington, D.C., for Appellees.   ON
BRIEF: Jeffrey S. Bucholtz, KING & SPALDING LLP, Washington,
D.C.; Barry Goheen, Merritt E. McAlister, KING & SPALDING LLP,
Atlanta, Georgia, for Appellant.     L. Steven Emmert, SYKES,
BOURDON, AHERN & LEVY, PC, Virginia Beach, Virginia; Leonard A.
Bennett, CONSUMER LITIGATION ASSOCIATES, PC, Newport News,
Virginia; Stuart T. Rossman, NATIONAL CONSUMER LAW CENTER,
Boston, Massachusetts, for Appellees.    Robin S. Conrad, Kate
Comerford Todd, NATIONAL CHAMBER LITIGATION CENTER, INC.,
Washington, D.C.; John H. Beisner, Jessica Davidson Miller,
Geoffrey Wyatt, SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP,
Washington, D.C., for Chamber of Commerce of the United States
of America, Amicus Supporting Appellant.   Brad D. Weiss, Emily
D. Barnes, CHARAPP & WEISS, LLP, McLean, Virginia, for Consumer
Data Industry Association, Amicus Supporting Appellant.  Thomas
D. Domonoske, Harrisonburg, Virginia, for Amici Supporting
Appellees.

Unpublished opinions are not binding precedent in this circuit.

                                2
SHEDD, Circuit Judge:

       Equifax       Information       Services,         a    credit     reporting       agency

(CRA), appeals the district court’s certification of a class of

Virginia residents            with    potentially            inaccurate    Virginia       court

judgments on their credit reports.                       Because the certified class

does   not      satisfy      the    requirements         of     Federal    Rule    of     Civil

Procedure 23, we reverse.

                                             I.

                                             A.

       On   June     22,    2007,     the   Virginia          Credit    Union     filed       suit

against Donna Soutter in the Richmond General District Court to

recover     a   $15,000      credit     card       debt.        After    Soutter        and    the

Credit Union agreed to a payment plan, the Credit Union agreed

to dismiss the suit.               Unfortunately, the Credit Union’s attorney

failed to inform the District Court, and a default judgment was

entered against Soutter.              At Soutter’s request, the Credit Union

moved to set aside the judgment, and on March 20, 2008, the

District Court entered an order that noted Soutter’s case was

“set aside and dismissed without prejudice.”                        (J.A. 430).

       After      this       order,     Soutter          sent     notice     to     Equifax,

requesting       that      Equifax    remove       the       judgment    from     her    credit

report.         At    that    time,     Equifax       informed          Soutter    that       the

judgment was not yet on her file.                    On December 20, 2008, Soutter

                                               3
sent   an    additional       letter    to   Equifax,    claiming      that   she    was

denied credit because of the judgment.                   She included a copy of

the District Court order dismissing the action against her with

this letter.         In response, Equifax removed the judgment from her

report.

       Although it is not required to do so, Equifax chooses to

record court judgments on consumer credit reports.                       Equifax has

never directly collected these judgments itself, instead relying

on vendors to provide the information.                        Since February 2007,

LexisNexis     has     been    Equifax’s     vendor     for    collecting     Virginia

court records.          Virginia’s court system is comprised of more

than 250 individual circuit and general district courts.                            Each

county and independent city has a general district court with

jurisdiction over small claims—those less than $25,000.                          There

are    120   circuit    courts     of     general    jurisdiction.        The    court

records are managed by the Office of Executive Secretary of the

Supreme      Court     of     Virginia,      which    operates     a    shared      case

management system for the state’s courts.                       The clerk of each

local court uses a uniform system for recording judgments, and

the judgment sheet available in the case management system lists

only the most recent case disposition.                   For example, if a case

is vacated and then later dismissed, the system would record the

case simply as dismissed.

                                             4
      LexisNexis    used       several   different   collection         methods      for

capturing the court records.              It used in-person review for all

circuit courts through independent contractors.                 These in-person

reviews have some variety as well-some clerks provide a weekly

summary printout to the reviewer, some let the reviewer peruse

paper records, and some permit the reviewer use of the computer

and case management system.              For the general district courts,

the Supreme Court provided LexisNexis with bulk data feeds until

May   2009.      LexisNexis       then   used    independent    contractors           to

verify the bulk feeds in person.               In May 2009, the Supreme Court

stopped     providing      these    feeds.         LexisNexis      then       used    a

“webscrape” program to grab the data from the Court’s website.

This practice ended in December 2009 when the Virginia Supreme

Court    enacted   new    security       measures,   including     a     challenge-

response test, that limited the ability of automated programs to

access     the   public    records.        LexisNexis   thus      had    to    switch

exclusively to in-person review from December 2009 to February

2010 for general district court records.                LexisNexis admittedly

had difficulty performing its task of collecting records from

time to time.

                                          B.

      On   February      17,    2010,    Soutter   filed   this    civil       action

against Equifax in the Eastern District of Virginia, alleging

that Equifax violated the Fair Credit Reporting Act (FCRA) by

                                          5
using unreasonable procedures in reporting judgments from the

Virginia court system.               In her initial class complaint, Soutter

sought to represent a class of “[a]ll consumers for whom Equifax

furnished a consumer report which reported a judgment that was

either set aside, vacated or dismissed with prejudice.”                                 (J.A.

14).     Nine days later, Soutter filed an amended class complaint

narrowing the proposed class to all consumers in Virginia “about

whom Equifax furnished a consumer report to a third party that

showed a civil judgment in the General District Court for the

City of Richmond at any time on or after February 17, 2008”

when, as of the date of the report, the judgment had been set

aside.        (J.A.    25).          During      discovery,     Soutter       changed     her

proposed      class    for     the    second         time,   amending    it     to    include

judgments      from    all     Virginia       trial     courts.       (J.A.     450).      In

moving to certify the class, she changed the class definition

for the third time, while also “suggest[ing]” that persons with

actual damages of more than $1,000 should be excluded.                                  (J.A.

216).       Soutter offered a fourth change to the class definition

in    her   reply     brief    to    the    certification         motion,     leading    the

district       court    to     begin       the       subsequent    hearing       on     class

certification by noting “this giving me a dartboard to throw at

doesn’t help me much.            I want to know what the class is now that

you    think    ought     to    be     certified.”            (J.A.     624).         Soutter

                                                 6
confirmed that the class she sought to certify was the class

defined in her reply brief.

       During this hearing, Equifax attacked Soutter’s ability to

ascertain the size and scope of the class.            In response, Soutter

explained that, by ordering judgment disposition data from the

Virginia Supreme Court, the class could be readily ascertained.

Unfortunately, Soutter’s efforts were counterproductive in that

the data she ordered did not even contain her own name.

       Despite the ever-evolving class definition, on March 30,

2011, the district court granted Soutter’s motion and certified

the following class:

       All natural persons, for whom Equifax’s records note
       that a credit report was furnished to a third party
       who requested the credit report in connection with an
       application for credit on or after February 17, 2008
       to February 17, 2010, other than for an employment
       purpose, at a time when any Virginia General District
       Court or Circuit Court judgment that had been
       satisfied, appealed, or vacated in the court file more
       than 30 days earlier was reported in Equifax’s file as
       remaining   unpaid,  which   persons  suffered   actual
       damages of less than $1,000 as a result of a report by
       Equifax that did not accurately report that the
       judgment had been satisfied, appealed, or vacated.

(J.A. 717-18).

       Equifax filed a petition for permission to appeal under

Rule   23(f)   raising,   among    other    issues,   the    difficulty   with

ascertaining the class given the exclusion of individuals with

actual   damages   claims   of    greater   than   $1,000.      In   response,

during a status conference, Soutter requested that the class

                                      7
definition be amended again—marking at least the fifth proposed

change to the class definition.              The district court agreed and

amended    the   class    definition     by    deleting       the       reference   to

persons who suffered actual damages.             The parties informed us of

this new class definition, and we granted Equifax’s petition for

permission to appeal.

                                       II.

                                       A.

     On     appeal,      Equifax   contests           the     district          court’s

certification of the class.             We review a class certification

order for abuse of discretion.          Gunnells v. Healthplan Services,

Inc., 348 F.3d 417, 424 (4th Cir. 2003).                    Under Rule 23(a), a

party moving for class certification must meet the following

four prerequisites: (1) the class is so numerous that joinder is

impossible; (2) there are questions of law or fact common to the

class; (3) the claims or defenses of the class representative

are typical of the claims or defenses of the class; and (4) the

representative     will    adequately       protect    the        class    interests.

Fed. R. Civ. P. 23(a).          These requirements are referred to as

numerosity,      commonality,      typicality,              and      adequacy        of

representation.       Rule 23(b) further requires that the class meet

one of three additional requirements.                 As relevant here, Rule

23(b)(3)    provides      for   class        certification         if     the    court

                                        8
determines that common questions of law or fact predominate over

any questions affecting only individuals and that a class action

is superior to other available litigation methods.

     Importantly,         the   Supreme     Court       recently      reminded       courts

that “[a] party seeking class certification must affirmatively

demonstrate his compliance with the Rule.”                            Wal-Mart Stores,

Inc. v. Dukes, 131 S.Ct. 2541, 2551 (2011).                      In determining if a

party has met this burden, “sometimes it may be necessary for

the court to probe behind the pleadings before coming to rest on

the certification question.”                Id.        (internal quotation marks

omitted).         The     district       court     must        perform    a    “rigorous

analysis,”     id.   (internal       quotation         marks    omitted),      to    ensure

that a class certification is appropriate, because class actions

remain   “an    exception       to   the    usual       rule    that     litigation      is

conducted    by     and   on    behalf     of    the    individual       named      parties

only,” Califano v. Yamasaki, 442 U.S. 682, 700-01 (1979).

                                           B.

     On appeal, Equifax contends that Soutter cannot satisfy the

typicality     or       adequacy     standards          in     Rule    23(a)        or   the

predominance and superiority standards in Rule 23(b)(3).                                 We

agree with Equifax that Soutter failed to show typicality under

Rule 23(a)(3) and, accordingly, that the district court abused

its discretion in certifying the proposed class.

                                            9
      Soutter’s       action    arises      under      the    FCRA.         That   statute

provides, in relevant part:

      Whenever a consumer reporting agency prepares a
      consumer report it shall follow reasonable procedures
      to assure maximum possible accuracy of the information
      concerning the individual about whom the report
      relates.

15 U.S.C. § 1681e(b).            A CRA violates § 1681e(b) if (1) the

credit report contains inaccurate information; and (2) the CRA

did not follow reasonable procedures to assure maximum possible

accuracy.      Dalton v. Capital Associated Indus., 257 F.3d 409,

415   (4th     Cir.    2001).        Soutter       has   claimed       only    statutory

damages, which are authorized by 15 U.S.C. § 1681n(a)(1)(A) for

willful violations and range from $100 to $1,000.

      Typicality       “goes    to    the    heart       of    a     representative[’s]

ability to represent a class.”                   Deiter v. Microsoft Corp., 436

F.3d 461, 466 (4th Cir. 2006).                    Thus, Soutter’s “interest in

prosecuting [her] own case must simultaneously tend to advance

the interests of the absent class members.”                           Id.      Typicality

“tend[s] to merge” with commonality, insofar as both “serve as

guideposts      for     determining         whether          under     the     particular

circumstances maintenance of a class action is economical and

whether the named plaintiff’s claim and the class claims are so

interrelated that the interests of the class members will be

fairly   and    adequately      protected         in   their       absence.”       General

Tele. Co. of Southwest v. Falcon, 457 U.S. 147, 158 n.13 (1982).

                                            10
Thus, “[t]he essence of the typicality requirement is captured

by the notion that ‘as goes the claim of the named plaintiff, so

go the claims of the class.’”                Deiter, 436 F.3d at 466 (quoting

Broussard v. Meineke Discount Muffler Shops, Inc., 155 F.3d 331,

340    (4th    Cir.    1998)).         While      Soutter’s       claim   need   not    be

“perfectly identical” to the claims of the class she seeks to

represent, typicality is lacking where “the variation in claims

strikes at the heart of the respective causes of action.”                              Id.

at 467.

       To determine if Soutter has shown typicality, we compare

her claims and Equifax’s defenses to her claims with those of

purported class members by reviewing the elements of Soutter’s

prima    facie    case    and    the    fact      supporting      those   elements     and

examining “the extent” to which those facts “would also prove

the claims of the absent class members.”                    Id.

       In this case, Soutter’s claim under § 1681e(b) requires her

to     prove    that     (1)    her     credit     report     was    inaccurate;       (2)

Equifax’s unreasonable procedures caused the inaccuracy; and (3)

Equifax’s      behavior        was    willful.       Facts     supporting    Soutter’s

claim     include      that     her    report      was   inaccurate       because      her

judgment had been dismissed and that she sent letters to Equifax

informing them of the possible inaccuracy before it occurred.

This    second    fact     bears      upon     whether   Equifax’s        behavior     was

willful.       Soutter’s facts would also include the manner in which

                                             11
LexisNexis procured judgment data for general district courts in

2008.

       This evidence, however, illustrates that Soutter’s claim is

not typical.     As in Deiter, Soutter’s claim is “typical” only on

an “unacceptably general level.”             Deiter, 436 F.3d at 467.             That

is, Soutter is an Equifax customer whose report was inaccurate

because Equifax incorrectly reported a judgment that had later

been dismissed.        On “a more directly relevant level,” her claim

has     “meaningful     differences”      from   the     class    she     seeks    to

represent.       Id.      LexisNexis      used   in-person       review    for     the

circuit court records while employing at least three different

means of collecting general district court records during the

class period.         Proof that Equifax’s behavior was unreasonable

because of the manner in which LexisNexis collected data from

the Richmond General District Court in Soutter’s case does not

“advance” the claim of a class member whose judgment was from a

circuit court in 2010.          Soutter’s claim simply varies from any

potential class plaintiff with a circuit court judgment, and

from    many   potential      plaintiffs      with   general     district     court

judgments, depending on the date of the judgment.

       In   addition,    to   recover   statutory      damages,     Soutter       must

show    willfulness.       Proof   that      Equifax’s   conduct     was    willful

toward Soutter because she sent letters in advance informing

Equifax that the case against her was dismissed will not advance

                                        12
the     claims     of     other       class      members.           These     problems      are

exacerbated because Soutter is claiming only statutory damages,

which     typically          require       an        individualized       inquiry.          See

Stillmock v. Weis Markets, Inc., 385 Fed. App’x 267, 277 (4th

Cir.     2010),     (Wilkinson,             J.        concurring)      (noting      “because

statutory damages are intended to address harms that are small

or     difficult    to        quantify,         evidence       about   particular        class

members is highly relevant to a jury charged with this task”).

       In certifying the class, the district court concluded that

Soutter was typical of the class she seeks to represent because

she     was   “challenging            Equifax’s           alleged   uniform      failure     to

establish     or    to       follow      reasonable         procedures.”       (J.A.     698).

This    analysis        is    conducted         at    the    same   “general       level”    we

rejected      in        Deiter.           Wal-Mart           clarified,     in     examining

commonality under Rule 23(a)(2), that “the members of a proposed

class do not establish that ‘their claims can productively be

litigated at once,’ merely by alleging a violation of the same

legal    provision           by    the    same       defendant.”            M.D.    ex     rel.

Stukenberg v. Perry, 675 F.3d 832, 840 (5th Cir. 2012) (quoting

Wal-Mart, 131 S.Ct. at 2551).                    Likewise, Soutter cannot satisfy

typicality       simply       by   asserting          a    violation   of   § 1681e(b)       by

Equifax.

       In sum, if the district court had performed the rigorous

analysis      Wal-Mart            dictates,          it     would    have     concluded       a

                                                 13
“substantial gap” exists between Soutter’s proof and that of

class members.      Deiter, 436 F.3d at 468.

                                   III.

     For the foregoing reasons, we reverse the district court’s

order    granting    class   certification   and   remand   for   further

proceedings. *

                                                   REVERSED AND REMANDED

     *
       Because we conclude that Soutter failed to satisfy Rule
23(a)(3)’s   typicality  requirement,   we   have  not  addressed
Equifax’s additional arguments on appeal.      If, on remand, the
district court is presented with a renewed request for
certification, any proposed class is subject to the “rigorous
analysis” under all four Rule 23(a) factors.

                                    14
GREGORY, Circuit Judge, dissenting:

     I disagree with the majority’s holding that the district

court     abused    its      discretion       in    certifying          Soutter’s        class.

While the majority correctly recites the standard guiding this

Court’s     typicality        analysis        under        Federal       Rule       of   Civil

Procedure 23, its application impermissibly narrows the class

representative’s claim and greatly impedes the future of class

actions     against      Credit    Reporting            Agencies     (CRAs)     under      the

pertinent provisions of the Fair Credit Reporting Act (FCRA).

Therefore, I respectfully dissent.

     The typicality requirement of Rule 23(a)(3), as underscored

by the majority, is not satisfied where “the variation in claims

strikes    at     the   heart     of    the    respective          causes      of    action.”

Deiter v. Microsoft Corp., 436 F.3d 461, 466 (4th Cir. 2006).

At the “heart” of § 1681e(b) are two requirements:                          (1) that the

credit report is inaccurate; and (2) that the CRA did not employ

reasonable procedures to ensure maximum possible accuracy of the

credit    reports       it   furnished.            Dalton    v.    Capital      Associated

Indus., 257 F.3d 409, 415 (4th Cir. 2001).                        For Soutter, so long

as proving these elements for her claim advances the claims of

other class members, she is a typical class representative.                                See

Deiter,     436    F.3d      at   466    (“The          essence    of    the    typicality

requirement is captured by the notion that ‘as goes the claim of

the named plaintiff, so go the claims of the class.’”) (quoting

                                                   15
Broussard v. Meineke Disc. Muffler Shops, Inc., 155 F.3d 331,

340 (4th Cir. 1998)).

     Inhibiting       Soutter’s           ability    to     satisfy       the        second

requirement,      the     majority           narrows       the     scope        of      the

reasonableness inquiry by creatively assessing the handful of

procedures     employed    by    Equifax’s          vendor,       LexisNexis.           The

majority      asserts:     “Proof           that     Equifax’s          behavior        was

unreasonable because of the manner in which LexisNexis collected

data from the Richmond General District Court in Soutter’s case

does not ‘advance’ the claim of a class member whose judgment

was from a circuit court in 2010.”                     This analysis, however,

misses the point; liability under 15 U.S.C. § 1681e(b) is not

limited to the actions of a CRA vendor.                    Rather, it reaches the

CRA itself.     In fact, § 1681e(b) provides:                 “Whenever a consumer

reporting    agency     prepares      a    consumer    report      it    shall       follow

reasonable procedures to assure maximum possible accuracy of the

information    concerning       the       individual      about    whom    the       report

relates.”     (Emphasis added).            The reasonableness of preparing a

consumer report extends beyond how a CRA vendor collects data;

included in the inquiry is the CRA’s reliance on the information

it receives.

     Consistent with this understanding, we have held that where

a CRA “had no procedures governing the sources that a subvendor

could rely upon,” a court could determine that the CRA did not

                                              16
employ reasonable procedures under § 1681e(b).                    Dalton, 257 F.3d

at 416–17.      Likewise, a court could determine that Equifax’s

procedures      were     unreasonable       because        they     fashioned     an

inefficient system that failed to monitor, review, and correct

the prevalent errors caused by its vendor.                   Proving that these

procedures –- or lack thereof -- were unreasonable would not

only advance Soutter’s claim, but would advance the claims of

the entire class.        Put differently, the district court would not

need to conduct mini-trials for each member of Soutter’s class.

     This is the argument posited by Soutter in her Complaint

and argued in her brief.           Additionally, in light of the facts

presented before it, this is the position the district court

relied on in exercising its discretion to certify the class.

See Soutter v. Equifax Info. Services, LLC, 3:10CV107, 2011 WL

1226025 (E.D. Va. Mar. 30, 2011) (“Equifax’s knowledge of the

allegedly    unreasonable       uniform    procedures      used    by   LexisNexis,

the actual vendor collecting the information, was the same for

Soutter, as for the class.”) (emphasis added).                      The majority,

however, evades this argument by misdirecting the inquiry into a

determination of what LexisNexis did.

     In the same vein, the majority narrows its focus as to

whether   the   class     can    prove    wilfullness       by    looking    at   the

individual      circumstances        surrounding           Soutter.           While

demonstrating     that     Soutter       sent    letters     to    Equifax    would

                                            17
certainly advance her individual claim, such specific proof is

not necessary to prove that Equifax acted willfuly to the entire

class.    Instead, to prove willfulness under the FCRA, the class

would need to establish that Equifax acted either knowingly or

recklessly.       See Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47,

59–60 (2007).       Thus, if Equifax’s procedures -– or again, lack

thereof –- entailed “an unjustifiably high risk of harm that is

either    known   or    so   obvious    that    it    should   be    known,”   this

finding would advance the claims of the entire class.                       See id.

at 68 (quoting Farmer v. Brennan, 511 U.S. 825, 836 (1994)).

      Ultimately,      under    the     majority’s      constricted     analysis,

CRA’s are encouraged to hide behind the inconsistencies of their

vendors and, in turn, are shielded from significant liability --

even if they fail to assure maximum possible accuracy in their

credit reports.        This is because, so long as vendors use varying

procedures, no plaintiff will be a typical class representative,

and consequently, no class will be certified.                  CRAs will remain

subject to only small individual claims, such as those covered

by   Soutter’s    class      (between    $100   and    $1,000).      Yet,   because

potential plaintiffs might not be aware of their claims or are

otherwise unwilling to pursue such small amounts, it is likely

that these claims will go without redress.                     If we follow the

majority’s reasoning, little can be done to carry out the FCRA’s

purpose    of   eliminating     CRA     reports      that   “are    systematically

                                           18
biased against the consumer.”            115 Cong. Rec. 2410, 2412 (1969)

(statement    of     Sen.    Proxmire);   see    also    Saunders   v.   Branch

Banking & Trust Co. of Va., 526 F.3d 142, 147 (4th Cir. 2008)

(“To   this   end,    FCRA    requires    CRAs   to     follow   procedures   in

reporting consumer credit information that . . . are ‘fair and

equitable to the consumer.’”) (citing 15 U.S.C. § 1681(b)).                   For

these reasons, I dissent.

                                          19