Sung Gon Kang v. Credit Bureau Connection, Inc.

SUNG GON KANG, Plaintiff, v. CREDIT BUREAU CONNECTION, INC. Defendant.

No. 1:18-cv-01359-AWI-SKO

United States District Court, E.D. California

March 4, 2022

ORDER ON PLAINTIFF'S MOTION FOR CLASS CERTIFICATION

(Doc. No. 111)

Plaintiff Sung Gon Kang alleges that Defendant Credit Bureau Connection, Inc. (“Credit Bureau”) caused him injury in its violation of several state and federal consumer credit reporting statutes. Kang now moves for class certification under Federal Rule of Civil Procedure 23(b)(3). Having reviewed and considered all the briefing and evidence submitted by the parties, the Court will GRANT in part Kang's motion.

BACKGROUND

Credit Bureau sells credit reports that help automobile dealers manage the regulatory compliance obligations that accompany every consumer car purchase. One of the obligations derives from a Treasury Department Office of Foreign Assets Control (“OFAC”) regulation that prohibits dealers from doing business with anyone designated as a “Specially Designated National” or “SDN” on OFAC's SDN list. Individuals on the SDN list consist of persons and companies owned or controlled by, or acting for or on behalf of, targeted countries, as well as persons and entities that are not country-specific, such as terrorists and drug traffickers. SDNs are prohibited from transacting business in the United States for national security reasons.

Credit Bureau's credit reports indicate whether a consumer is an “OFAC Hit, ” that is, someone with whom the automobile dealer might not want to do business with because of that person's match to the SDN list. To determine whether a consumer is an OFAC Hit, Credit Bureau uses a “similar name” algorithm script that runs the consumer's name against a copy of the SDN list downloaded on Credit Bureau's servers. Despite the availability of additional pieces of information identifying the consumer, such as date of birth and address, Credit Bureau runs only first and last names when checking whether a consumer matches with anyone on the SDN list.

In 488 credit reports containing an OFAC Hit that Credit Bureau sold to a third party between October 2016 and September 2019, 8 reports had an exact match between the name of the consumer applying for credit and the SDN considered a matching “Hit.” None of the reports had a match for name date of birth, and address. Credit Bureau is unaware of a single case in which its “similar name” algorithm script generated an OFAC Hit that correctly matched a consumer with an SDN.

Kang was a consumer whose name inaccurately came up as an OFAC Hit on a credit report sold by Credit Bureau to Norm Reeves Honda. The OFAC check matched Kang with a North Korean SDN named Song Nam Kang. After Norm Reeves Honda denied Kang credit in front of his father and sister, Kang felt embarrassed, ashamed, and angry. He later requested and received a copy of the credit report, at which time he learned that Credit Bureau's OFAC check incorrectly matched him with an SDN.

Kang filed this lawsuit on behalf of himself and a class of similarly situated consumers, pleading causes of action under the federal Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681 et seq., and California's Consumer Credit Reporting Agencies Act (“CCRAA”), Cal. Civil Code § 1785.1 et seq. Doc. No. 1. Specifically, on behalf of a putative class, Kang alleged that Credit Bureau failed to follow reasonable procedures to assure the maximum possible accuracy of the consumer information included in its OFAC Check documents, in violation of 15 U.S.C. § 1681e(b) and Cal. Civil Code § 1785.14(b); and failed to disclose upon request all information in consumer files, in violation of 15 U.S.C. § 1681g(a) and Cal. Civil Code §§ 1785.10 and 1785.15. On behalf of only himself, Kang alleged that Credit Bureau failed to reinvestigate the disputed OFAC-related information that it had prepared and sold to the dealership, in violation of 15 U.S.C. § 1681i.

Pursuant to Federal Rule of Civil Procedure 12(b)(6), Credit Bureau moved to dismiss all five claims on the ground that it was not subject to these provisions of the FCRA and CCRAA because it was not acting as a credit reporting agency under the factual allegations of the complaint. Doc. No. 10. The Court denied this motion. Doc. No. 20. Credit Bureau then moved for summary judgment, arguing that under the applicable statutes it was not acting as a consumer reporting agency and the OFAC check documents were not consumer reports. Doc. No. 81. Before that motion was taken under submission by the Court, Kang filed a motion for class certification. Doc. No. 84. The Court denied the latter motion, noting it could be re-noticed, if necessary, following the Court's resolution of Credit Bureau's summary judgment motion. Doc. No. 95. The Court later denied the summary judgment motion. Doc. No. 96. Thereafter, Kang has now re-noticed his class certification motion. Doc. No. 111.

LEGAL STANDARD

A class action is a procedural mechanism that allows for representative litigation. Amchem Prods. v. Windsor, 521 U.S. 591, 613-19 (1997). This means that one or more class members may “litigate on behalf of many absent class members, and those class members are bound by the outcome of the representative's litigation.” 1 William Rubenstein, Newberg on Class Actions § 1:1 (5th ed. 2012) (citing Supreme Tribe of Ben Hur v. Cauble, 255 U.S. 356, 363 (1921)). “The class action is ‘an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.'” Comcast Corp. v. Behrend, 569 U.S. 27, 33 (2013) (quoting Califano v. Yamasaki, 442 U.S. 682, 700-01 (1979)).

Class actions are governed by Rule 23 of the Federal Rules of Civil Procedure, which imposes a two-step test for deciding whether a class may be certified. Under the first step, the court determines whether the moving party has established four perquisites:

(1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.

Fed. R. Civ. P. 23(a)(1)-(4). If the prerequisites of Rule 23(a) are met, the court considers whether the proposed class action meets at least one of the three provisions of Rule 23(b). Fed. R. Civ. P. 23(b). Relevant here, Rule 23(b) states that a class action may be maintained if “the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed.R.Civ.P. 23(b)(3).

A party moving to certify a class action bears the burden of affirmatively demonstrating compliance with Rule 23. Comcast, 569 U.S. at 33. “The Rule ‘does not set forth a mere pleading standard, '” but instead demands the moving party establish through evidentiary proof that the proposed class action satisfies the prerequisites of Rule 23(a) and one of the provisions of Rule 23(b). Id. (quoting Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011)). Courts generally require the moving party to demonstrate by a preponderance of the evidence that class certification is appropriate. 3 Newberg on Class Actions § 7:21 (citing cases, including Martin v. Sysco Corp., 325 F.R.D. 343, 354 (E.D. Cal. 2018) (“While Rule 23 does not specifically address the burden of proof to be applied, courts routinely employ the preponderance of the evidence standard.”)).

To ensure the moving party has “satisfied” its burden, the district court must conduct a “rigorous analysis.” Comcast, 569 U.S. at 33. Because the “class determination generally involves considerations that are enmeshed in the factual and legal issues comprising the plaintiff's cause of action, ” this rigorous analysis may include “prob[ing] behind the pleadings” and “overlap with the merits of the plaintiff's underlying claim.” Id. at 33-34. Yet, “‘[n]either the possibility that a plaintiff will be unable to prove his allegations, nor the possibility that the later course of the suit might unforeseeably prove the original decision to certify the class wrong, is a basis for declining to certify a class which apparently satisfies' Rule 23.” Sali v. Corona Reg'l Med. Ctr., 909 F.3d 996, 1004-05 (9th Cir. 2018) (quoting Blackie v. Barrack, 524 F.2d 891, 901 (9th Cir. 1975)). Ultimately, the decision to grant or deny a motion for class certification under Rule 23 is committed to the broad discretion of the trial court. Bateman v. Am. Multi-Cinema, Inc., 623 F.3d 708, 712 (9th Cir. 2010).

DISCUSSION

A. Class Definition

Before turning to the requirements of Rule 23(a) and (b)(3), an issue regarding the proposed class definitions must be resolved. Fed.R.Civ.P. 23(c)(1)(B) (“An order that certifies a class action must define the class . . . .”). District courts have discretion to modify class definitions where necessary. Nevarez v. Forty Niners Football Co., 326 F.R.D. 562, 575 (N.D. Cal. 2018); Campbell v. PricewaterhouseCoopers, LLP, 253 F.R.D. 586, 594 (E.D. Cal. 2008).

Kang seeks certification of the following classes:

All individuals about whom Defendant prepared a report that (1) included an OFAC “Hit;” (2) was published to a third party from October 2, 2013 to the date of judgment and (3) included a U.S. address (including U.S. Territories) for that individual.

All individuals about whom Defendant prepared a report that (1) included an OFAC “Hit;” (2) was published to a third party from October 2, 2011 to the date of judgment; and (3) included a U.S. address

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