Times, December 6, 2007
CONSUMER WINS FIGHT FOR CREDIT REPORT ACCURACY
In the first known punitive-damages verdict against Equifax, an Orlando jury Nov. 30th awarded a Florida woman $219,000 in actual damages and $2.7 million in punitive damages for negligent and willful violations of the Fair Credit Reporting Act (FCRA). The Orlando Sentinel reported that Equifax would not comment on the case and that an appeal was expected.
In addition to being the largest-ever award against Equifax, the case was significant because prior to trial, State Circuit Court Judge George A. Sprinkel IV “struck” Equifax’s “answer,” essentially meaning that Equifax was deemed in violation of the FCRA.
Judge Sprinkel’s order was prompted by what he deemed Equifax’s repeated failure to disclose internal documents as required by court discovery rules and his previous orders. His ruling meant the jury’s main job was to decide if plaintiff Angela Williams, a medical-transcription worker, was entitled actual damages for negligent FCRA violations, or punitive damages for willful violations, or both.
Angela Williams or her mother first disputed inaccuracies on her Equifax report in 1994 when she discovered they contained highly derogatory collections and charge-offs. It turned out that the bad debts belonged to Angelina Williams, whose Social Security number (SSN) was identical to Angela’s, except the final two digits were flipped (“21” vs. “12”). With geographic location and so many identifiers in common, Equifax’s partial matching algorithms assumed the SSN digits were transposed, and that there was only one SSN and one Ms. Williams. Equifax not only mixed Angelina’s data into Angela Williams’ file, it also created “multiple” files. In one key instance, Angelina’s identifiers overrode and supplanted Angela Williams’, meaning her “base” file had morphed into Angelina’s.
Angela Williams disputed several times between 1995 and 2002. In some instances, Equifax would delete the disputed accounts. In other instances, Equifax would tell her that the disputed accounts would remain on her report because it had “verified” them with the credit grantor, even though the accounts truly belonged to Angelina. Throughout the period, as Angelina kept generating bad debts, Equifax continued adding them to Angela’s reports. Angela’s FICO score tumbled into the 500s – well below the commonly used sub-prime score of 620. She was denied credit on several occasions, and was even shown the door at one retailer after an employee viewed her dismal Equifax report. At trial, Angela testified about the stress and frustration of the prolonged ordeal. After more than four days of testimony, the jury deliberated only a few hours before returning its verdict.
Williams’ expert, Evan Hendricks (of Privacy Times) testified that mixed files were a leading cause of inaccuracy and figured prominently in separate enforcement actions against Equifax by State Attorneys General and the Federal Trade Commission in the early 1990s. Equifax was put on notice long ago that it needed to make changes to improve prevention of mixed files, and to improve its methods for reinvestigating disputes arising from mixed files, he said.
Typically, a verdict must first determine if an FCRA defendant like Equifax is liable for violating the Act before it decides on damages. A finding of a negligent violation entitles a plaintiff to “actual damages,” including out-of-pocket losses, credit denials, loss of time, and harm to quality-of-life, like emotional distress. A “willful” violation, recently defined by the U.S. Supreme Court as “reckless disregard” for a consumer’s FCRA rights, entitles a plaintiff to punitive damages, which are designed to punish a defendant and deter future violations. Punitive awards are somewhat rare in FCRA cases, with the largest being a $5 million award against TransUnion in 2002. The judge in that case reduced the punitive award to $1.2 million. (See Privacy Times, Aug. 5, 2002, Vol. 22 No. 15; and Jan. 31, 2003, Vol. 23 No. 3.)
Judge Sprinkel issued his order Nov. 19th after Equifax had failed for nearly a year to hand over internal documents known as “Frozen Data Scans.” The scans are monthly snapshots showing what consumer data were in Equifax’s database at the time of the snapshot. Judge Sprinkel said the scans were “very useful in determining what was on the credit report at that time as well as which information is being reported by Equifax to third parties regarding plaintiff.”
“Frozen scans are at the heart of plaintiff’s case. [They] can be used to help show, among many other things, that Equifax violated 15. U.S.C. Sect. 1681(b) by not following reasonable procedures to assure maximum possible accuracy. They can also show that Angela Williams’ credit information was given to creditors or prospective creditors of Angelina Williams on many occasions,” he wrote.
As earlier cases revealed, “the scans help form the pieces of a puzzle and Equifax doesn’t want the puzzle solved. The motion (in the Robinson case) pointed out that Equifax does not want to look for the scans because then it can deny actual knowledge of what it did wrong,” Judge Sprinkel wrote.
He noted that Equifax’s Annette Simpson testified that the scans could have been produced six months earlier. “This is remarkable given the Court’s admonishment to Equifax’s counsel on August 23rd (2007) that it have a witness who could testify why the missing scans were not produced. After she testified she had no such knowledge, Equifax has filed an affidavit by her purportedly giving an explanation which contradicts her testimony and suggests an indifference to this Court’s order,” he wrote. He noted that the scans weren’t produced until he got involved a second time.
Noting discrepancies between its attorney’s statements to the court and the deposition testimony of its corporate witness, Judge Sprinkel wrote, “Equifax apparently lied to its counsel, Mr. Haskins, who advised the Court on August 23, 2007 that after Ms. Simpson’s deposition on August 9, 2007, Equifax went back and looked and could find no more scans. Again, the withheld scans were received two days later on August 25, 2007 after the Court expressed skepticism as to why there was no explanation for the scans that were not produced during certain time periods and ordered that plaintiff be allowed another deposition to see if there was a good explanation.”
Judge Sprinkel pointed out that this summer, Equifax’s conduct was harshly criticized in one case (Faile) and sanctioned in another (Robinson) – both in U.S. District Court for the Eastern District of Virginia. In one case, the “Senior U.S. District Judge was so outraged by Equifax’s (conduct) that he required a representative of the CEO to be present in the Court as well Equifax’s General Counsel, Kent E. Mast. More importantly, after being admonished for the impropriety and inappropriateness of Equifax’s discovery conduct, Equifax’s general counsel reassured Judge Payne that there would be no such conduct in the future. It is clear from the Order that Judge Payne was going to enter harsh sanctions against Equifax had it not settled the case … Unfortunately, Equifax’s conduct has not stopped. It continued in this case. It represents a pattern of flouting discovery orders. Equifax had a legal obligation to produce all the scans,” he wrote.
“Much of Equifax’s argument is based on the implication that it was okay to violate the Order so long as plaintiff did not discover it and notify Equifax,” he continued. “That is wrong on the facts and the law. Once the Court ordered Equifax to produce all of the frozen scans, Equifax was required to do so. Plaintiff did not, and indeed could not, alter that legal obligation. Equifax is a large sophisticated corporation with extensive experience in litigation. When it is ordered by this Court to produce documents relevant to a consumer’s claim, it can choose to obey the order or not to obey it. Here it chose not to obey it. It withheld more than 70 scans.”
Equifax cited Kozel v. Ostendorf (629 So. 2d 817 [Fla. 1993]), setting forth six factors that must be met before a court could strike a litigant’s pleadings. Judge Sprinkel said the case didn’t apply because it dealt with discovery violations by the attorney, not the client.
“Yet if the Kozel factors are considered, they support striking Equifax’s answer. In regard to the first factor, the evidence shows that the disobedience was willful, deliberate or contumacious rather than act of neglect or inexperience. For the second factor, Equifax has been previously sanctioned for the same type of misconduct in the Robinson case. For the third factor, Equifax was personally involved in the act of disobedience. On the fourth factor, the delay prejudiced plaintiff through lost evidence and an inability to fully prepare her case. As to the fifth factor, Equifax has not offered reasonable justification for the withholding of the scans. Finally, on the sixth factor, the failure to comply created significant problems with judicial administration.”
“The striking of Equifax’s answer is justified. Although it is a severe sanction, Equifax can still defend the case on the issues of the actual damages suffered by plaintiff and the amount, if any, of punitive damages,” he concluded. (Williams was represented by Robert Sola of Portland, Ore. and Steven M. Fahlgren of Hilliard, Fla. Lead counsel for Equifax was S. Stewart Haskins II of Atlanta’s King & Spalding.) (Angela Williams v. Equifax Information Solutions, LLC: Circuit Ct. or 9th Judicial Circuit, Orange County, Florida – No. 48-2003-CA-9035-O; order dated Nov. 17, 2007; jury verdict, Nov. 30, 2007.)