District Court Sanctions Attorney For Frivolous Pleadings In Credit Reporting Case

This is a case in which a lawyer was sanctioned on the basis of Rule 11 and Section 1927 for pursuing baseless litigation against Trans Union, a credit reporting company. The gist of the case was the credit reporting bureaus violated the Fair Credit Reporting Act by providing a copy of plaintiff’s credit report to a debt collection law firm without a permissible purpose. Most of the defendants settled the allegations but Trans Union fought, eventually obtaining summary judgment.

The lawyer in this case erred by pursuing claims against the wrong defendant (Trans Union was not a proper defendant) and pursuing claims that were not factually supported long after he received warnings from Trans Union’s attorneys.

Plaintiff appealed to the Sixth Circuit, but it also affirmed the grant of summary judgment against Plaintiff. Trans Union moved to reopen the case to obtain costs and sanctions.

The court explained that the Rule 11 sanctions were proper because the plaintiff’s counsel continued pursuing baseless claims long after it was apparent that the claims lacked merit.

Miller’s original complaint alleged that Trans Union provided Wites & Kapetan with a copy of Miller’s credit report through an undetermined third party. The only support Miller provided for this allegation was the letter Wites & Kapetan sent to her in 2011. The letter contains a footnote that explicitly states that Wites & Kapetan do not have her credit report. (Doc. 1-1.) This singular letter served as the basis of Miller’s complaint. No further investigation seems to have taken place and no other evidence was presented to support the claims against Trans Union. Miller, without any substantive evidence to support the allegation, elected to believe Trans Union had disclosed her credit report in violation of FCRA. Miller and her counsel have thus failed to demonstrate that her claim would likely have evidentiary support after further discovery.

Miller ultimately dropped her original claim against Trans Union, and filed an amended complaint alleging a new claim against Trans Union based on a report that she ordered six months after she brought this lawsuit. Miller’s new claim alleged that Trans Union violated the FCRA by failing to disclose promotional inquiries on a consumer disclosure. (Doc. 41.) Miller’s claim was again factually unsupported. The service agreement that Miller entered into (Doc. 106-4) and the URLs on the report that she received (Doc. 41-1) both show the report was produced by TUI. Thus, Miller either failed to recognize or deliberately ignored the fact that Trans Union and TUI are separate legal entities. Miller then failed to recognize that what she had requested was not a consumer disclosure covered by § 1681g of the FCRA. These are significant investigatory failures on the part of Miller’s counsel.

Miller also filed three motions against Trans Union that were found to lack any evidentiary support or Plaintiff was found to lack the grounds to object. Plaintiff’s Motion For Sanctions Against Trans Union For Spoliation of Evidence (Doc. 74) and Plaintiff’s Motion To Show Cause Why Trans Union Should Not be Held in Contempt (Doc. 86) were found to lack evidentiary support and were summarily denied. Plaintiff’s Motion to Strike the Deposition of Michelle Simms (Doc. 95) was denied because the Court ordered Simms to testify about TUI documents and procedures at Plaintiff’s request; Plaintiff, therefore, had no grounds to strike the same testimony. (Doc. 101.)

Additionally, Miller and her counsel were put on notice by Trans Union that there was no factual basis for the claims made against the company. Trans Union contacted Miller’s counsel in June 2013 (Doc. 106-1), February 2014 (Doc. 106-3), and August 2014 (Doc. 106-4) and informed them that the claims in the complaint and the amended complaint were meritless. While the Court would not expect plaintiff’s counsel to blindly accept a defendant’s assessment of plaintiff’s case, the Court would expect such repeated assertions to prompt an investigation into the facts underlying plaintiff’s claims. Miller deserves some credit for ultimately dropping her original claim against Trans Union, but she then replaced it with a claim equally without merit. Miller never agreed to dismiss that claim against Trans Union nor sought leave to add TUI as a defendant—even though Trans Union notified her counsel that TUI was the proper defendant.

The primary goal of Rule 11 sanctions is to deter baseless accusations that lack factual support. Yet there is also a duty on the party seeking sanctions to mitigate their damages and avoid unnecessary filings. Trans Union arguably met this obligation by sending Miller three separate letters detailing the distinct lack of factual support for their claim and warning of Rule 11 sanctions. On the other hand, Trans Union moved for reconsideration of the Court’s order granting Miller leave to amend, but did not move to dismiss the Amended Complaint. (Doc. 46.) In the order denying the motion for reconsideration, the Court stated that “Trans Union remains free to file a motion to dismiss the Amended Complaint should it believe such a motion is appropriate.” (Doc. 58.) All considered, the Court finds that Trans Union pursued a resolution of this case in a reasonable manner. It would be inaccurate to suggest that Trans Union sat on its hands and accrued defense costs while it built a case for Rule 11 sanctions; it tried to reason with Miller’s counsel, but to no avail.

The court also found that the attorney violated Section 1927 by needlessly multiplying the proceedings.Source:

Comment: the case is a reminder that, in federal court, a letter from opposing counsel that a claim is baseless, must be taken seriously.

Source: Miller v. EXPERIAN INFORMATION SOLUTIONS INC., Dist. Court, SD Ohio 2016 – Google Scholar

Edward X. Clinton, Jr.

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