Judge Decides Sanctions Now Not Warranted in “Fanciful, Farfetched” FCRA Case

Yesterday a new Jersey District Court Judge determined that sanctions were not warranted in a Fair Credit Reporting Act (FCRA) case she had described in a previous opinion as “Fanciful” and “Farfetched.”

On June 22, 2016 insideARM reported on a New Jersey District Court Judge’s Opinion and Order to Show Cause why an attorney should not be sanctioned for failure to conduct a meaningful review and investigation of the alleged facts before filing a suit. In that June 21 opinion the Judge (The Honorable Renée Marie Bumb) dismissed a Fair Credit Reporting Act (FCRA) case and ordered the attorney to “show cause why he should not be sanctioned” for bringing the case.

The original case involved credit disputes filed by plaintiffs against Experian Information Solutions, Inc. (Experian), which had determined and reported that each Plaintiff had filed two chapter 13 bankruptcies in the District Court of NJ. Plaintiffs had disputed the bankruptcies, prompting Experian to reinvestigate. Experian sent an Automated Consumer Dispute Verification (ACDV) to Lexis Nexis, which is Experian’s public records vendor; Lexis Nexis subsequently confirmed the accuracy of the bankruptcy attributions. Experian then informed the plaintiffs of the dispute process results.

Experian had brought a motion for summary judgment.

Editor’s Note: A motion for summary judgment is based upon a claim by one party (or, in some cases, both parties) that contends that all necessary factual issues are settled or so one-sided they need not be tried. The summary judgment is appropriate when the court determines there no factual issues remaining to be tried, and therefore a cause of action or all causes of action in a complaint can be decided upon certain facts without trial.

The Court held oral argument on the motion on May 19, 2016.  As noted above, summary judgment was granted in favor of the Defendant on June 21, 2016.

Per Judge Bumb’s Opinion from yesterday:

“Upon oral argument and review of the record, the Court became concerned that the case had been pursued without any meaningful factual investigation by the Plaintiffs’ counsel.

This skepticism arose from Plaintiffs’ theory of the case, which revolved around Defendant Experian’s inability to discover and correct supposed inaccuracies on Plaintiffs’ credit reports resulting from an unidentified individual (or individuals) pursuing bankruptcies by impersonating Plaintiffs, including appearing on their behalf before the United States Bankruptcy Court for the District of New Jersey.

Despite a reinvestigation of the disputed credit report items by Defendant Experian, which confirmed Plaintiffs’ correct identifying information was attached to the bankruptcy petitions, Plaintiffs’ principal argument was that Defendant Experian should have identified the fraud because one Plaintiff’s name, Glenn, was misspelled “Glen” in some (but not all) filings associated with his bankruptcies. During discovery, Plaintiffs’ counsel does not appear to have sought any further information on these bankruptcies, nor sought to depose any potential witness. In support of the opposition to summary judgment, Plaintiffs provided no exhibits nor sworn statements underlying the serious arguments against Experian and some anonymous fraudster.

At oral argument, the Court challenged Plaintiffs’ counsel with regard to the investigation he undertook of his impersonator-based theory of the case. As Mr. Vullings (Plaintiff’s attorney)  remarked at that time, “In a very quick conversation with my client . . . I found out very quickly they were dealing with someone who was doing some sort of credit repair for them. Umm, in essence, what we’ve come to find out –again a very quick search –umm that this person they were dealing with was filing fraudulent bankruptcies . . . .” This answer, along with the remaining commentary offered by Mr. Vullings at oral argument, did not assuage the Court’s concern that a meaningful investigation had transpired prior to the lodging (and multiple-year litigation) of the causes of action in this case.”

On June 28, 2016, Mr. Vullings filed a comprehensive response to the Court’s order to show cause.

Judge Bumb has now determined:

“Mr. Vullings’ response, which outlines his investigation into the case, as well as his investigation into a now-identified Mr. Andrew Bartok, the alleged perpetrator of Plaintiffs’ identity theft, demonstrates that he engaged in a reasonable inquiry into the factual basis of the arguments he set forth at and prior to summary judgment.

An attorney in Mr. Vullings’ shoes, confronted with the information Plaintiffs provided to him, and having independently verified it with the Bartok Indictment and USPIS Press release, could reasonably have believed that Plaintiffs had fallen prey to Mr. Bartok and did not genuinely file the bankruptcies. As such, this Court will not impose sanctions based on the factual investigation Mr. Vullings conducted.”

However, Judge Bum also commented:

“Despite that determination, the Court feels compelled to note that none of the factual record regarding Mr. Vullings’ allegations was before the Court at summary judgment. In fact, Plaintiffs’ opposition at summary judgment made use of no exhibits whatsoever. Mr. Vullings did not refer to Mr. Bartok by name or with any specificity regarding his fraud, nor did he reference the indictment or press release he now relies upon. It is baffling why a lawyer, in possession of the astounding facts Mr. Vullings had in his back pocket, might decide to present no such facts in combatting summary judgment. Such strategy would seem to work an exemplary disservice to the ends the claims themselves purport to reach.”

insideARM Perspective

At the end of the day the summary judgment that was granted to the Defendant on June 21 still stands. The Plaintiff’s attorney is not sanctioned. Left open for debate is whether Judge Bumb would have granted the motion for Summary Judgment had the facts outlined in the Response to the Order to Show Cause been before the court at the time of the motion.

It is also interesting that Judge Bumb provided some commentary and direction to Experian in yesterday’s opinion. At the very end of the document Judge Bumb wrote:

“Additionally, as a postscript, this Court feels compelled to point out that it hopes Experian will reevaluate whether it can continue to report these bankruptcies as legitimately belonging to Plaintiffs. The sum and substance of Mr. Vullings’ response seems — in this Court’s mind, anyway — to mandate, at the minimum, a further investigation. Certainly the case as it stood at summary judgment, with no affirmative showing from Plaintiff and no genuinely disputed facts, required summary judgment be granted in Experian’s favor. It would be a mischaracterization to say that the showing Mr. Vullings has put forth in response to the Court’s order to show cause has not altered the landscape of information available to Experian. It is this Court’s desire that, in light of those revelations, Experian will attempt to get to the bottom of this.”