Holmes v. Telecheck Intern., Inc.

556 F.Supp.2d 819

Patricia HOLMES v. TELECHECK INTERNATIONAL, INC. and Telecheck Services, Inc.

No. 3:05-0633.

United States District Court, M.D. Tennessee, Nashville Division.

January 10, 2008.

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Martin D. Holmes, Stewart, Estes & Donnell, PLC, Nashville, TN, Van Bunch, Bonnet, Fairbourn, Friedman & Balint, Signal Mountain, TN, for Patricia Holmes.

David R. Esquivel, Stephen J. Jasper, Wallace Wordsworth Dietz, Bass, Berry & Sims, Gregory S. Reynolds, Steven Allen Riley, Riley, William L. Campbell, Jr., Warnock & Jacobson, PLC, Nashville, TN, for Telecheck International, Inc., Telecheck Services, Inc.

MEMORANDUM

TODD J. CAMPBELL, District Judge.

Pending before the Court are the parties' renewed cross-motions for summary judgment (Docket Nos. 329 and 349) to which responses and replies have been filed. Defendants seek oral argument on their summary judgment motion. (Docket No. 347).

Also pending before the Court are a number of motions filed by Defendants related to the admissibility of certain evidence submitted by Plaintiff in support of her pending motion for summary judgment: Renewed Motion to Strike and/or Exclude Third Party Checkwriter Affidavits (Docket No. 342); Renewed Motion to Strike and/or Exclude Documents from the Houston Better Business Bureau (Docket No. 343); Renewed Motion to Strike and/or Exclude Plaintiffs Supplemental Affidavit and Second Supplemental Affidavit (Docket No. 344); Renewed Motion to Strike and/or Exclude the Affidavit of Julia Trotman (Docket No. 345); and Renewed Motion to Strike and/or Exclude Expert's Supplemental Report (Docket No. 346). Plaintiff opposes these motions.

I. Introduction

This case centers around six checks written by Plaintiff Patricia Holmes and presented by her as payment to four merchants during the period of August 2003 to June 2005. Five of the checks were declined by the merchants at the point of sale upon the recommendation of TeleCheck. With regard to the other check, TeleCheck initially issued a code requiring the merchant to whom Holmes had presented the check to contact TeleCheck to provide additional information regarding the transaction. The merchant ultimately accepted the check.

As a result of TeleCheck's issuance of those recommendations and as a result of TeleCheck's subsequent conduct as Holmes sought additional information from TeleCheck, Holmes brings this action against Defendants TeleCheck International, Inc. and TeleCheck Services, Inc. (collectively referred to as "TeleCheck" unless otherwise indicated), alleging various violations under the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. § 1681, et seq. Plaintiff alleges that TeleCheck violated the FCRA when it (1) failed to follow reasonable procedures to assure maximum possible accuracy of the information contained in Holmes' file; (2) failed to respond to Holmes' requests for a file disclosure and for a copy of the report forming the basis for denying Holmes' checks; (3) failed to investigate/reinvestigate based on a dispute; (4) failed to provide adequate staffing and training to comply with the FCRA; (5) improperly requested, required, or otherwise obtained information from Holmes, namely her social security number; (6) wrongfully disseminated reports, file material and/or other information about Holmes to unauthorized or improper persons, parties, or entities; and (7) failed to include a "Summary of Rights" notice.

Plaintiff has filed a motion for summary judgment on the issue of liability only regarding the first, second, and third alleged violations identified above. Plaintiff asks the Court to find that TeleCheck willfully or negligently violated the FCRA as to those specific claims. Plaintiff seeks actual damages for emotional distress and humiliation. She also seeks statutory and punitive damages for pain and suffering, mental anguish, emotional distress, embarrassment, indignity, humiliation, and loss of enjoyment of life. Plaintiff also seeks a declaratory judgment and permanent injunction against Defendants.

TeleCheck has filed a cross-motion for summary judgment on each of Holmes' claims as to liability and damages. Defendants also have filed a number of motions, all opposed by Plaintiff, regarding the admissibility of evidence offered by Plaintiff in support of her summary judgment motion.

The Court finds that oral argument is not necessary to the Court's resolution of the parties' motions.

II. Overview of Facts¹

A. Defendants' Business

TeleCheck represents on its website that it is the "world's leading check acceptance company, providing electronic check conversion, check guarantee, check verification, and collection services to retail, financial institutions, and other industry clients." (Docket No. 157, Plf.'s App., Tab 23 at 1-2). According to Plaintiff, TeleCheck International, Inc. and TeleCheck Services, Inc. are "consumer reporting agencies" under the FCRA that provide "consumer reports"² to merchants. On its website, TeleCheck represents that its check verification service "helps merchants separate good check writers from bad ones," that its databases and risk management systems "identify not only bad check writing risks, but also good ones," and that it can predict "with unmatched accuracy the probability of a check being good." (Docket No. 157 at pp. 1-1). TeleCheck processes approximately 1.2 million check requests each day.

TeleCheck merchants run customers' checks through either a terminal or the cash register to send data to TeleCheck regarding the transaction. TeleCheck's computer system then processes the transaction by running that data through risk models, which draw from hundreds of variables to assess the riskiness of that transaction. According to TeleCheck, the risk models for each merchant are particular to that merchant and are based on the particular merchant's loss experience. TeleCheck typically does not have access to information concerning bank account balances.

Based on the results of the risk model for that particular merchant, TeleCheck then issues one of four numeric codes to the merchant via the terminal or cash register. TeleCheck characterizes these codes as "recommendations" to the merchant as to how to handle the transaction. After receiving one of TeleCheck's numeric codes, the merchant may choose to accept the check, reject the check, or provide additional information to TeleCheck. According to TeleCheck, the decision of check acceptance resides with the merchant, and merchants sometimes choose not to follow TeleCheck's recommendation.³

"Code 0" indicates that the merchant should call TeleCheck to provide additional information. TeleCheck claims that a "Code 0" is not a recommendation to accept or decline a check; however, in TeleCheck internal documents, a "Code 0" is referred to as a decline. (Plf.'s App., Tab 2, TC002617).

"Code 1" is an approval code; according to TeleCheck, it is a recommendation to the merchant to accept the check.

"Code 3" is a decline code; according to TeleCheck, it is a recommendation to the merchant to decline the check based on an assessment of the risk of the transaction. When TeleCheck issues a "Code 3," TeleCheck instructs the merchant to provide the checkwriter with a "courtesy card." The "courtesy card" provides TeleCheck's contact information, including a toll-free number, and lists the specific identifying information TeleCheck requires to answer the checkwriter's questions.

"Code 4" is a decline code; according to TeleCheck, it is a recommendation to decline the check based on what the TeleCheck system suggests is an outstanding unpaid check or information that the specific bank account is closed. This case does not involve any "Code 4s."

TeleCheck collects information based on three unique identifiers: bank account number, driver's license number, and/or Social Security number. TeleCheck does not identify checkwriters by name, address, or telephone number because those identifiers may not be unique to that checkwriter. Plaintiff disputes that TeleCheck utilizes Social Security numbers in connection with its check verification and guarantee services and insists that TeleCheck collects consumers' Social Security numbers for improper purposes in violation of the FCRA.

B. TeleCheck's Recommendations Regarding Holmes' Checks

Holmes' claims are based on six check transactions. Five of the transactions involved "Code 3" recommendations. The other transaction involved a "Code 0." With regard to the "Code 0," TeleCheck ultimately recommended that Holmes' check be accepted, and the merchant accepted the check. The six check transactions were as follows:

Check 1: On August 22, 2003, at 10 p.m. Holmes presented a check for $489.58 with her 8-digit Tennessee driver's license number to Hecht's at the Cool Springs Galleria in Franklin, Tennessee.

TeleCheck issued a "Code 3" based, in part, on the number of checks Holmes had written (the "check velocity") in the preceding days and the fact that Holmes' check was for an amount six times the average check presented to that Hecht's location. Holmes admits that, in the two days before the presentment of the Hecht's checks, she had written numerous checks, including three to TeleCheck merchants, two of which were presented to and accepted by Hecht's within the previous hour.

The "Code 3" decline was also based, in part, on a personal check written by Holmes to Swim `N Sport that had been returned for non-sufficient funds in March 2003.

Hecht's declined the $489.58 check.⁴ The Hecht's clerk provided Holmes with TeleCheck's phone number. Holmes immediately left the store and called the number. After going through TeleCheck's IVR system and providing the requested information, Holmes was unable to reach a live operator and hung up out of frustration. Holmes returned to Hecht's the following day and purchased the goods after Hecht's offered her (and sh...