9th Circuit Reverses $140M Jury Verdict in FCRA Class Action Because Company Established Safe Harbor Defense
The U.S. Court of Appeals for the Ninth Circuit has reversed a $140 million jury verdict in a FCRA class action against a telecommunications company, holding that the company should have been granted judgment as a matter of law on its safe harbor defense, given that its interpretation of the statute was not objectively unreasonable.
As background, the named plaintiff in the class action visited the company’s website to view the costs of its services. The plaintiff completed four of the five steps (including providing her personal information) required to sign up for the company’s services but did not click on the “Submit Order” button to complete the fifth step. Subsequently, the plaintiff discovered that an affiliate of the company obtained a so-called “hard” pull of her credit information, which it performed automatically for prospective customers who completed step four.
The plaintiff sued the company in Arizona federal court, alleging that it obtained her credit information without a proper purpose in violation of FCRA. Following motions practice, the district court certified a class of approximately 56,000 members, and the case proceeded to trial. The jury returned a verdict in favor of the plaintiff and awarded each class member $500 in statutory damages and $2,000 in punitive damages, for a total of more than $140 million. The company appealed.
The Ninth Circuit reversed. The court agreed with the company that its interpretation that it had a proper purpose under FCRA because a consumer initiated a business transaction by completing step four on the website was not objectively unreasonable. Thus, the court held that the company qualified for the safe harbor set forth by the U.S. Supreme Court. Under the safe harbor, a person’s reading of FCRA is not objectively unreasonable if: (1) the person’s reading of FCRA has “a foundation in the statutory text”; (2) “no court of appeals ha[s] spoken on the issue”; and (3) “no authoritative guidance” existed that “might have warned [the person] away from the view it took.”
The Ninth Circuit held that the company had established each of these elements. First, the court held that the company’s view that it had a proper purpose under FCRA to obtain prospective customers’ credit because they initiated business transactions by completing four steps on the website was reasonable. Second, the court observed that no court of appeals has addressed this legal issue. Third, the court determined that the existing FTC guidance on FCRA — even if authoritative — was not specific enough to the instant facts as to dissuade the company from its view.
