Opposition Brief — Korotki v. Attorney Services Corp.

No. 97-1478

Supreme Court, U.».

a ae ee ae

APR 9 1998

In The

nk

Supreme Court of the United States

+

October Term, 1997

ABRAHAM PAUL KOROTKI,

Petitioner,

VS.

ATTORNEY SERVICES CORPORATION, et ai.,

Respondents.

On Petition for Writ of Certiorari to the

United States Court of Appeals for the Fourth Circuit

RESPONDENTS?’ BRIEF IN OPPOSITION

S. TODD WILLSON

TERRI L. GOLDBERG

JULIE SEILER-MORRIS

ECCLESTON AND WOLF, P.C.

7th Floor - Scarlett Place

729 East Pratt Street

Baltimore, Maryland 21202

(410) 752-7474

Attorneys for Respondents

Thomas, Ronald & Cooper and

Daniel V. Schmitt

BENJAMIN LIPSITZ

Counsel of Record

100 Church Lane

Baltimore, Maryland 21208

(410) 484-3050

JOEL C. RICHMOND

OFFICE OF JOEL C. RICHMOND

522 Equitable Building

10 North Charles Street

Baltimore, Maryland 21202

(410) 685-2225

Attorneys for Respondent

Attorney Services Corporation

145810 (800) 274-3321 * (800) 359-6859 E nrgetst

A DIVISION OF COUNSEL PRESS -

rvices, inc.

= : ° 4

a - i %

*

~

> ¢

i 3 . > ¢

>

: 7 - :

; = F

q

.

8

°

4

- : i

;

+ €

:

j

- vg

e .

‘

t ©

.

;

a

li¢

<=

i

STATEMENT PURSUANT TO RULE 29.6

Respondent Thomas, Ronald & Cooper, P.A., has no parent

companies or nonwholly owned subsidiaries. Respondent

Attorney Services Corporation has no parent companies or

nonwholly owned subsidiaries.

il

TABLE OF CONTENTS

Page

Statement Pursuant to Rule 29.6 .................:. i

po Pe Pe eer ey ree ti

Rene OE CIS oon inch cine r Oe ili

fe ee re re Fae ere l

Reasons for Demying the Writ... 6.2. ccc sctecccss 1]

I. This Court Should Not Grant Certiorari Because

The Petitioner Has Misrepresented An

Inconsistency With Other Circuits, Where None

OR ye ee fT ne ee 1]

II. This Court Should Not Grant Certiorari Because

The Petitioner Has Merely Asserted That The

Lower Courts Made Erroneous Factual Findings

And Misapplied The Proper Rule Of Law. .... 13

Ill. Certiorari Should Be Denied Because The

Decision Below Was A Plainly Correct Application

Of The Fcra And Applicable Law Regarding

Permissible Purposes For Which A Credit Report

og Eee er epee Pee 17

A. The Courts Below Correctly Concluded That

Plaintiff Has The Burden Of Proof. ..... 17

B. Defendants Met The Requirements Of The

Fair Credit Reporting Act. ............. 20

Cai i a las a ee 23

iil

Contents

Page

TABLE OF CITATIONS

Cases Cited:

Angelozzi Brothers, Inc. v. APK Development, Circuit

Court for Baltimore County, case no.: 94-CV-3226

eee ade in Nba Gk seu bes oe bed a whe 8,9

Celotex Corp. v. Catrett, 477 U.S. at 322 ........... 20

Crowther v. Hirschman, 174 Md. 100, 197 A. 868 (1938)

EE EE ORE Se Sar in ey ere een RES EEE 17

Hansen v. Morgan, 582 F.2d 1214 (9th Cir. 1978) ... 21

Kiley v. First National Bank of Md., 102 Md. App. 317,

ee ae Oe Re eck ca eee y sees: 15

Mone v. Dranow, 945 F.2d 306 (9th Cir. 1991) ...... 21, 22

Pyles v. Goeller, 109 Md. App. 71, 674 A.2d 35 (1969)

Laude eer EEe toed bk kee ewes s 6 6080) Kee ke be 16

Roseman v. Retail Credit Co., Inc., 428 F. Supp. 643

aed a eae Ss ee nay 18

Sergeant Co. v. Pickett, 285 Md. 186, 401 A.2d 651

I ages a Os 17

Stewart v. Credit Bureau, Inc., 734 F.2d 47 (D.C. Cir.

DU eer ey ecwe ie ee aha on ee 18, 20

iv

Contents

Page

Yohay v. City of Alexandria Employees Credit Union, Inc.,

Dae Fie Sere NUE Rae SED ho chaos Oc RRR RRR 20, 21

Zeller v. Samia, 758 F. Supp. 775 (D. Mass. 1991)... 14, 15

Statutes Cited:

io Spee ae SR a OO i ees had oo ee ERRORS l

Be ese SPR: 3a Vas 0a ee hee cee bes 10, 21, 22

DD Tetere 0: SRN 56s 0 oak hs Nee eee 12, 16, 19

SD Ae Se OD oo ins eke nk oc RS 10, 14

Rie Soe Ba eS eer ee eres eres 12

LF eo POURS bc kbs coe sews ints eves ri Fa. 39

EERE oie | rere peer er ee ere re: 18

Me RS Be es 18

Ee ahs ee EE See eas evs eh eeeeKk es 18

Pe See NE os io ho Rea ee ee 20

Se Ste ED GA ek CdS RAL Ve es ae ees 20

Md. Comm. Law Code Ann. § 14-1201, et seg. ..... l

Contents

Page

Rule Cited:

septate Cent Bille 10 6 a ee eS 13

Other Authorities Cited:

Maryland Law Encyclopedia, Vol. 5A, Ch. 9, § 252 . 16

Restatement (Second) of Contracts, P<: Be ae 15

l

STATEMENT OF THE CASE

There is no cause for this Court’s review of Petitioner's

factual contentions, which have been rejected by the United

States District Court for the District of Maryland in a

comprehensive opinion and by the United States Court of

Appeals for the Fourth Circuit.

The captioned appeal arises from the District Court’s grant

of summary judgment in favor of Defendants/Respondents

Attorney Services Corporation (“ASC”), the law firm of Thomas,

Ronald & Cooper, P.A. (“TRC”), and Daniel Schmitt, Esquire

(“Schmitt”), an attorney at TRC (collectively, the “Defendants”),

with respect to claims asserted by Plaintiff/Petitioner Abraham

Paul Korotki (“Korotki”) for alleged violation of the Fair Credit

Reporting Act (the “FCRA”) and the Maryland Consumer Credit

Reporting Agencies Act (the “CCRAA”) and alleged invasion

of privacy. 15 U.S.C. § 1681, et seg.; Md. Comm. Law Code

Ann. § 14-1201, et seq. The proceedings below commenced

with the filing of Korotki’s Complaint against ASC on May 9,

1994, wherein Korotki alleged that ASC obtained his “consumer

credit report” without his permission and without a permissible

purpose. J.A. 4, 18. Korotki sought damages of $275,000. J.A.

22-33. The District Court entered summary judgment based

upon the undisputed evidence, stipulations of fact, extensive

memoranda of facts and law submitted by all parties and

proceedings on the record, including a lengthy hearing before

the Honorable Frank A. Kaufman on December 29, 1995. The

Fourth Circuit Court of Appeals affirmed the decision of the

District Court on December 5, 1997.

At his deposition, Korotki testified that he entered into an

oral contract with Angelozzi Brothers, Inc. (“Angelozzi”), a

utility contracting company in Baltimore, for contracting work

at Old Court Village (“OCV”). J.A. 497-498. OCV is a single

2

family housing subdivision located on land owned by Korotki

and under development by Korotki and Korotki’s company,

APK Development Corp. (“APK”). J.A. 497-98. On or about

October 17, 1991, Korotki entered into a Public Works

Agreement (“PWA”) with Baltimore County for the construction

of public improvements at OCV. J.A. 495, 697-705. These

improvements included the water and sewer mains, sanitary

sewer connections, water services, storm water management

facilities, roads and street lights. J.A. 698. In connection with

the PWA, Korotki himself stated that he was acting both for his

own personal benefit, and for the benefit of APK. J.A. 670-72,

697. Baltimore County bid the utility work required under the

PWA and Angelozzi was awarded the contract as the low bidder.

J.A. 495-96, 671, 811. Korotki agreed to pay the cost of

Angelozzi’s work under the PWA. J.A. 700.

The PWA called for Angelozzi to dig the utility trenches

for the installation of the mains at OCV. J.A. 809, 1001. In a

conversation on April 19, 1993, Korotki told Angelozzi

(through its President, Frank Angelozzi) that Korotki wanted

full compaction of the soil that was being used to refill in the

utility trenches at OCV. J.A. 497. Angelozzi agreed to provide

full trench compaction at OCV and quoted Korotki a cost

estimate of $12,000. /d. Korotki testified under oath that his

agreement with Angelozzi was “clear” that Korotki wanted

Angelozzi to perform trench compaction at OCV “whether it

was in the PWA or not.” J.A. 49%. Korotki agreed to pay

Angelozzi $12,000 for compactica, separate and apart from

the PWA, provided that Angelozzi was not required to provide

trench compaction under the PWA. /d. Korotki offered to pay

Angelozzi for the compaction work from his own personal assets

by offering to give Angelozzi his 1976 Cadillac El Dorado,

titled in his name, instead of cash. J.A. 498, 710-11, 817.

Angelozzi claims to have performed trench compaction at OCV

in full pursuant to his oral contract with Korotki. J.A. 812,

817.

3

Angelozzi completed the trench compaction at OCV for

one-half of the original cost estimate and submitted an invoice

to Korotki for $6,000. J.A. 715. Angelozzi made repeated

demands for payment and even indicated that it would be forced

to pursue a mechanic’s lien if not paid. J.A. 817. Korotki refused

to pay Angelozzi’s invoice, claiming that Angelozzi did not

perform the work and that compaction was required under the

PWA, in any event. J.A. 499, 819. Before Angelozzi began the

compaction work, however, Korotki, Frank Angelozzi and three

Baltimore County Department of Public Works inspectors met

at OCV and reviewed the matter. J.A. 817. The County

inspectors concluded that Angelozzi was correct in asserting

that it was not required to perform full trench compaction under

the PWA. J.A. 818. Thus, a dispute arose between Korotki and

Angelozzi: Angelozzi contended that full trench compaction

was not required under the PWA; Korotki contended that trench

compaction was required of Angelozzi under the PWA and that

Angelozzi had failed to provide it. J.A. 499, 817,

On September 22, 1993, unable to obtain payment for its

services as promised from Korotki, Angelozzi sought a

mechanic’s lien against OCV, Korotki’s development property.

J.A. 253, 391, 812. Angelozzi attempted to serve a notice of

mechanic's lien on Korotki by certified mail, but the envelope

was returned unclaimed. J.A. 559-60, 647. Angelozzi then

turned the matter over to its regular attorneys, TRC and Schmitt,

to pursue collection of the alleged debt. J.A. 253, 391. TRC

and Schmitt confirmed that Korotki was the record owner of

OCV and hired ASC to post the notice of the mechanic’s lien at

the development project. J.A. 551-555, 641-46. ASC had

provided private process service for Schmitt and TRC for a

number of years. J.A. 397.

Schmitt provided ASC with written instructions of how to

post OCV, but when reviewing Schmitt's letter, ASC thought

4

the notice was to be posted at Korotki’s residence. J.A. 110,

132, 641-46. On September 30, 1993, ASC tried unsuccessfully

to personally serve the notice of mechanic’s lien on Korotki at

his house. J.A. 357, 374-75. ASC’s process server claims to

have spoken with Korotki and requested that he accept court

documents, which Korotki refused. /d. The process server claims

to have been cautioned by Korotki that she was trespassing and

ordered off of the premises. Jd. The process server’s access to

Korotki’s house was barred by a locked iron gate that blocked

the sole entrance to the house across a bridge. J.A. 357, 482,

730. “No Trespassing” and “Beware of Dog” signs were posted

on the iron gate surrounding Korotki’s house. J.A. 379. Unable

to serve Korotki personally, the process server posted the notice

on the iron gate surrounding Korotki’s house. J.A. 357, 381,

727. Korotki later removed the envelope containing the notice

of mechanic’s lien and gave it to his attorney, apparently within

90 days after the completion of work by Angelozzi. J.A. 485-

87.

When Schmitt learned that Korotki’s residence had been

posted rather than OCV, Schmitt directed ASC immediately to

post the notice at OCV and obtain personal service of the notice

on Korotki. J.A. 572. The statement in Korotki’s Petition that

Schmitt conceded that the time for serving the notice had long

expired under Maryland law does not correctly reflect the record

of the case. Petition, p. 6. Schmitt testified in deposition that he

believed, based on Maryland law, that the Court would consider

all efforts to serve notice on Korotki, including efforts

undertaken more than 90 days after Angelozzi’s completion of

work at OCV based on the particular facts of this case. J.A.

573-75, 627-28. Schmitt referred Korotki’s counsel to a

Maryland Court of Special Appeals case that supported Schmitt’s

belief and produced a copy of the opinion from his file at his

deposition. J.A. 627-28.

5

Similarly, the statement in Korotki’s Petition implying that

APK was the owner of record of OCV in 1993 does not correctly

reflect the record of the case. Petition, p. 6. Korotki himself

testified under oath in deposition that he owned OCV

continuously, in fee, from 1976 to August 25, 1995, the date

of his deposition. J.A. 436-37. In addition, Schmitt confirmed

that Korotki was the owner of record of the real estate on which

OCV is situated from several official sources, including the

recorded property deed, the development plan for OCV on

record with the County and the County tax rolls. J.A. 551-55.

Further, the statement in Korotki’s Petition that the evidence

shows that there was never a need to serve Korotki does not

correctly reflect the record nor Maryland law. Petition, p. 4.

Korotki testified that he owned the OCV property. J.A. 436-

37. Maryland law requires service of the notice of intent to lien

on the property owner. Md. Rule Prop. Code Annot. § 9-104.

On October 8, 1993, after Schmitt advised ASC that the

wrong property had been posted, ASC immediately posted the

mechanic’s lien notice at OCV and attempted personal service

on Korotki at his residence. J.A. 357. As before, the process

server could not gain access to Korotki’s house, so she posted

another copy of the notice on Korotki’s gate. J.A. 378, 382. A

few days later, ASC returned to Korotki’s residence and left a

note requesting that Korotki call ASC to arrange for delivery of

a court document at his convenience. J.A. 358, 383. When ASC

returned a few days later to re-attempt service, the note had

been removed. J.A. 358. A similar note was left in its place by

ASC. J.A. 358. Eventually, Korotki called ASC and was told

that ASC had an important court document for him. J.A. 776.

Korotki said he would make arrangements to pick it up, but he

never did. /d.

ASC also attempted service at an office where Korotki

previously had conducted his law practice, but found only a

,

6

building advertised for sale with no one present. J.A. 358.

Korotki’s house and office having proved impossible locations

for personal service of the notice of mechanic’s lien, ASC

increased its efforts to serve Korotki at OCV. J.A. 378. Near

around-the-clock efforts were undertaken by ASC to serve

Korotki. J.A. 359, 377-78. Between October 30 and December

20, 1993, ASC made twenty-three separate attempts to serve

Korotki. J.A. 59, 121, 377-78. All efforts were unsuccessful.

In October of 1993, ASC was running out of places to

attempt service on Korotki. ASC asked Schmitt to review his

file for an alternative address, but Schmitt’s file reflected no

further information. J.A. 732. ASC and/or Schmitt obtained

Korotki’s motor vehicle report, report of judgments,

development plan for OCV and tax bill, but they contained no

new information. J.A. 585, 597, 655-59, 743. Under the

circumstances, ASC told Schmitt, “we have no place to go from

here [to serve Korotki],” “we are . . . at ground zero.” J.A. 742-

43. Schmitt told ASC to obtain any available information that

offered the slightest glimmer of hope of locating a serviceable

address for Korotki. J.A. 732. On October 25, 1993, ASC

obtained APK’s corporate information report from the State

Department and Korotki’s credit report from Equifax Credit

Information Services. J.A. 523 735-38, 825, 827. ASC is

licensed by the State of Maryland as a collection agency and is

permitted to access credit reports. J.A. 747. ASC recalls that

Schmitt specifically requested that ASC obtain Korotki’s credit

report; Schmitt does not recall specifically one way or the other.

J.A. 393, 732, 944.

ASC’s purpose for accessing the reports was to obtain a

new address to serve Korotki with the mechanic’s lien notice

since ASC’s repeated service attempts had failed up to that point.

J.A. 760. The statement repeated throughout Korotki’s Petition,

that ASC admitted that it did not need the credit report to locate

7

a service address for Korotki, does not correctly reflect the

record of the case. The record is replete with evidence that ASC

made multiple unsuccessful attempts at service at each address

that ASC had for Korotki, but that Korotki’s house was gated,

his office was vacant, Korotki could not be located at OCV and

he did not respond to requests to accept service. J.A. 356-86.

ASC’s inability to serve Korotki after multiple attempts is the

basis for ASC’s belief that it needed a serviceable address for

Korotki. J.A. 738, 748. ASC had used credit reports to obtain

alternative addresses for service of process in the past and,

therefore, knew that such reports contained useful information

in regard to service. J.A. 719-20, 735-37. The record reflects

that ASC anticipated finding information in Korotki’s credit

report to assist with service, such as the name of a business

where Korotki was an officer. J.A. 744. ASC would then check

the telephone book for a business address at which to serve

Korotki. J.A. 744. ASC even could have derived helpful

information from an abbreviated business name. J.A. 744. If

that information was not contained in the report, then ASC

could contact companies listed in the credit report that recently

inquired into Korotki’s credit history and request an address

from that source. J.A. 524-25, 744-45. One of ASC’s employees

is very familiar with whom to contact in that regard. /d.

ASC reviewed the addresses for Korotki contained in the

corporate information report and credit report and ascertained

that the reports contained no new addresses where service mi ght

be attempted. J.A. 742-44, 748. A few days later, ASC sent

both reports to Schmitt by facsimile and made no further use of

the reports and, in fact, destroyed them. J.A. 752, 944, 1207-

10. Schmitt made no use of the credit report. J.A. 396. Neither

party further disseminated the information contained in the

report. J.A. 594, 511. Korotki’s counsel admitted at the motions

hearing in the trial court that he had “{n]o evidence on that

point” to contradict the Defendants’ assertion. J.A. 268.

8

Personal service on Korotki of the notice of mechanic’s

lien never was effectuated and on January 3 or 4, 1994, Schmitt

advised ASC to discontinue its efforts to serve Korotki, which

by then had become futile. J.A. 595-96. Unable to complete

service of the mechanic’s lien notice, Angelozzi filed a breach

of contract action against APK in state district court to recover

its $6,000 fee for trench compaction at OCV. (Angelozzi

Brothers, Inc. v. APK Development, Circuit Court for Baltimore

County, case no.: 94-CV-3226.) J.A. 712-14. Korotki,

individually, and APK filed counter-claims against Angelozzi

for alleged negligence, third-party beneficiary, breach of

contract, and misrepresentation regarding the PWA and

Angelozzi’s alleged failure to provide trench compaction. J.A.

668-96. Korotki and APK sought over $2 million in damages

from Angelozzi and transferred the case to the circuit court. /d.

Korotki aileged in that case that he entered into the PWA “acting

on his own behalf and on behalf of A.P.K. [Development].”

J.A. 670. Korotki and APK also alleged claims against

Baltimore County, various employees of the Department of

Public Works of Baltimore County, other contractors at OCV

and the bonding company for the PWA. J.A. 668-96. Korotki

claimed that he personally, as well as APK, suffered millions of

dollars in damages from Angelozzi’s alleged negligence and

breach of contract at OCV. /d.

The statements throughout Korotki’s Petition that Angelozzi

“failed to perform the required compaction,” that “Angelozzi

was already paid in full to perform this compaction,” that

Angelozzi “never established any collectible debt... ,” and

“frivolous claims by a contractor who has already been paid for

work never performed” grossly misstate the record and are

disingenuous, at best. Petition, pp. 6, 16, 20. Angelozzi

Brothers, Inc. v. APK Development was tried for seven days in

August of 1996 and the jury returned a verdict in favor of —

9

Angelozzi on all claims and against Korotki and APK on all counter-

claims. '

In November of 1993, while refinancing his residence, Korotki

authorized the mortgage company to obtain his credit report and

in that way learned of ASC’s prior credit inquiry, which was

indicated on the report. J.A. 472-73. Although Korotki initially

testified in deposition that the mortgage company “demanded an

explanation” of the ASC inquiry, Korotki later acknowledged that

the mortgage broker was his son. J.A. 472-76. Korotki testified

that he sustained no out-of-pocket damages from ASC’s credit

inquiry, save a few long distance phone calls. J.A. 440-42, 452-

53. Korotki believed, however, that two credit card issuers turned

down his applications due to the reference to ASC’s inquiry on his

credit report. J.A. 453. Korotki was not informed by the credit

card companies of the reason for the rejection of his applications

and obtained several credit cards a few months later. J.A. 449-51.

At the conclusion of discovery, ASC filed a motion for

summary judgment. J.A. 48-71. Based upon Korotki’s own sworn

testimony evidencing the oral contract between Korotki and/or his

company and Angelozzi, as well as other facts in the record, the

District Court found that Angelozzi had reason to believe that a

business relationship existed between Angelozzi and Korotki and/

or APK. J.A. 1340, 1343. On the same bases, the District Court

concluded that Angelozzi was entitled to attempt to collect the

debt arising from Korotki’s admitted refusal to pay the fee charged

under the oral contract, and to retain counsel to assist Angelozzi

with collection. J.A. 1343. Citing the statutory provision expressly

authorizing the furnishing of a consumer report “. . . in connection

with a credit transaction involving the consumer on whom the

information is to be furnished and involving . . . collection of an

1. The verdict in Angelozzi Brothers, Inc. v. APK Development

was not part of the record before the District Court on summary

judgment, as the case was pending when the District Court ruled.

10

account of the consumer” (15 U.S.C. § 1681(b)), the District

Court correctly ruled that ASC had a permissible purpose under

the FCRA to obtain Korotki’s credit report. J.A. 1338-39.

The statement in Korotki’s Petition implying that the District

Court entered summary judgment in spite of factual questions

raised by the record does not correctly reflect the record of the

case. Petition, p. 7. The Judge’s statements were made within

the first few moments of a motions nearing that lasted more

than four hours, during which the Court painstakingly resolved

each and every fact issue by party stipulation or by ordering

the filing of various memoranda setting forth the evidence and

discovery documents. J.A. 251-3, 263-64, 268, 291-96.

Further, during the six months between the hearing and the

entry of summary judgment in favor of the Defendants on June

12, 1996, the District Court provided all parties with numerous

opportunities to supplement the factual record of the case. J.A.

344-51, 1332-33.

Korotki appealed the District Court’s grant of summary

judgment to the United States Court of Appeals for the Fourth

Circuit, which affirmed the District Court’s holding that

Korotki’s credit report was obtained for a permissible purpose

under the FCRA. The Court of Appeals affirmed the District

Court’s holding that Angelozzi’s attempt to collect an account

owed by the consumer under § 1681(b)(3)(A) was a permissible

purpose for obtaining the report and that the Defendants’ efforts

to obtain an alternate address at which to serve Korotki was a

“legitimate business need” for the information in connection

with a business transaction involving Korotki. J.A. 1342-43.

The Court of Appeals, like the District Court, noted that the

facts admitted by Korotki established a business relationship

between the parties which gave rise to the permissible purpose

for obtaining his credit report. Petition, A-5.

1]

REASONS FOR DENYING THE WRIT

I.

THIS COURT SHOULD NOT GRANT CERTIORARI

BECAUSE THE PETITIONER HAS MISREPRESENTED

AN INCONSISTENCY WITH OTHER CIRCUITS,

WHERE NONE EXISTS.

Korotki’s contention that certiorari should be granted

because the Fourth Circuit Court of Appeals “ignored the

opinions of all other circuits” is plainly incorrect. Petition, p.

11. Both the District Court and the Court of Appeals examined

and relied upon the decisions of numerous circuits, including

those that the Petitioner relies upon, in determining that the

Defendants were entitled to summary judgment in this case.

Korotki attempts to demonstrate that the Court of Appeals

diverged from the opinions of the other Courts of Appeal in

regard to two determinations that the Court made. First, Korotki

alleges that the Court of Appeals reversed the burden under the

FCRA by requiring consumers to prove a bad faith misuse of

their credit report in order to recover damages under the FCRA.

Second, Korotki alleges that the Court of Appeals diverged from

the opinions of the other Courts of Appeals in adopting a broad

reading of “a legitimate business need” for the procurement of

consumer reports under § 1681b(3)(E) of the FCRA.

The Court of Appeals applied existing law regarding the

FCRA, as interpreted by other Circuits, in determining that

Korotki’s consumer report was obtained for a permissible

purpose. The District Court did not reverse the burden of proof

regarding permissible purposes for which a credit report may

be obtained, as discussed below in Section III (A). The District

Court properly applied the rule that the plaintiff bears the burden

12

of proof to the FCRA. Korotki made his “reversal of burden”

argument at the District Court level and the Court of Appeals

level, with no success. Without citing any law for his contention

that the Defendants beer the burden of proving a permissible

purpose, Korotki now asserts that the courts below improperly

shifted the burden. This unsupported assertion does not give

rise to a compelling reason for granting a Writ of Certiorari in

this case.

Korotki’s second alleged inconsistency with other Circuits

relates to the definition of a “legitimate business need” under

§ 1681b(3)(E) of the FCRA. Section 1681b(3)(E) authorizes a

person to obtain a consumer's credit report when that person

“has a legitimate business need for the information in connection

with a business transaction involving the consumer.” As noted

in the District Court’s opinion, courts have interpreted

§ 1681b(3)(E) in different ways. Some courts have adopted a

restrictive approach, concluding that the business need exception

is satisfied when it relates to one of the other specifically

enumerated transactions in §§ 1681b(3)(A)-(D). J.A. 1341-42.

Other courts have adopted a less restrictive interpretation of

that section, concluding that the business need exception is a

basis distinct from the enumerated transactions. /d.

Korotki argues that the Circuit Court applied a broad

interpretation of § 1681b(3), contrary to the rulings of the other

Circuits. Despite Korotki’s assertions, neither the District Court

or the Court of Appeals adopted the broad interpretation of

legitimate business need. The courts below found it unnecessary

to address the Fourth Circuit’s interpretation of § 1681b(3)(E)

because it was irrelevant to the decision in this case. As stated

in the District Court’s Opinion,

even under the narrowest interpretation of

§ 1681b(3)(E), Defendants in this case had a

13

permissible purpose to obtain Korotki’s consumer

report because the business transaction involved here

related to § 1681b(3)(A), one of the other purposes

specifically enumerated by § 1681b(3), which

authorizes a person attempting to collect an account

of a consumer to obtain the consumer's credit report.

J.A. 1342 (emphasis added). The Court of Appeals affirmed

that Angelozzi, through his attorney, was seeking to collect an

account owed by Korotki, which is a permissible purpose.

The courts below relied on the decisions of other circuits

in their determination that a permissible purpose for obtaining

Korotki’s credit report existed. The result in the case below is

not in conflict with the decisions of other circuits; therefore,

this Court should deny the Petition for Writ of Certiorari.

II.

THIS COURT SHOULD NOT GRANT CERTIORARI

BECAUSE T”"*E PETITIONER HAS MERELY

ASSERTED THAT THE LOWER COURTS MADE

ERRONEOUS FACTUAL FINDINGS AND MISAPPLIED

THE PROPER RULE OF LAW.

Korotki’s true disagreement with the decisions of the District

Court and the Court of Appeals lies not in the interpretation of

§ 1681b(3)(E), but in the application of the statutory language

to the facts that Korotki himself admitted. Rule 10 of the

Supreme Court Rules specifically states that “a Petition for a

Writ of Certiorari is rarely granted when the asserted error

consists of erroneous factual findings or the misapplication of a

properly stated rule of law.” Although characterized as an

inconsistency among the circuits, the crux of Korotki’s argument

is that the courts below misapplied the law to the facts. Korotki

14

repeats throughout the Petition his insistence that there was no

business relationship, credit transaction or debt between Korotki

and Angelozzi, and no need for Defendants to obtain his credit

report.

Korotki’s own testimony proves his and APK’s business

relationship with Angelozzi. A party to a credit transaction has

a permissible purpose to obtain the other party’s credit report.

In Zeller v. Samia, 758 F. Supp. 775 (D. Mass. 1991), the

parties purchased a beach cottage, at which time plaintiff Zeller

gave defendant Samia a promissory note for the down payment.

Ten years later, Samia filed an action to partition the property,

the parties’ relationship having soured. When Samia re-

discovered the old, allegedly unpaid note, he demanded

payment. Zeller failed to pay and Samia reported a charge-off

to the credit bureau. /d. at 777. Samia made several credit bureau

inquiries, in response to which he received Zeller’s credit report.

Id. Zeller claimed that Samia used the report against him in the

partition action. /d. The Court held that Samia’s use of Zeller’s

credit report “to further assist him in the collection of the alleged

debt owed by the plaintiff’ was permissible under FCRA

§ 1681b(3)(A). /d. at 781 (emphasis added).

The collection of the alleged debt owed by Korotki to

Angelozzi arising out of the business relationship between

Angelozzi and Korotki and/or APK is based on Korotki’s own

undisputed testimony. Korotki testified in deposition that on

April 19, 1993, he told Angelozzi to perform full trench

compaction at his development project, OCV. J.A. 497. Korotki

explicitly agreed with Angelozzi that Angelozzi was to perform

trench compaction at OCV whether or not it was called for in

the PWA. J.A. 497-98. Korotki testified that Angelozzi quoted

him a price of $12,000 for the trench compaction, and Korotki

agreed to pay Angelozzi, provided that Angelozzi was not

required to provide trench compaction under an agreement that

15

Korotki had with the County, the PWA. /d. Korotki testified

that he offered to pay Angelozzi for the compaction from his

own personal assets by offering to give Angelozzi his 1976

Cadillac El Dorado, titled in his name, instead of cash. J.A.

498, 710-11, 817.

Angelozzi claimed to have performed the trench compaction

and sent an invoice demanding payment for its services. J.A.

816. Korotki stated, and it is undisputed, that he refused

Angelozzi’s demands for payment. J.A. 819. Based on this

testimony, and applying the reasoning of Zeller v. Samia, supra,

the Defendants had a permissible purpose to obtain Korotki's

credit report to collect Korotki’s “alleged debt” to Angelozzi.

Korotki’s argument below, that Angelozzi had no “existing

business relationship” with him nor APK after July 9, 1993, is

nonsense. Korotki’s Brief, p. 29. July 9, 1993, is the date on

which Angelozzi completed the trench compaction at OCV. J.A.

648. Korotki’s theory is that his business relationship with

Angelozzi ended when Angelozzi completed work on Korotki's

project and Korotki decided not to pay him. J.A. 318-20, 1006.

Korotki’s counsel admitted in argument on the Defendants’

motion for summary judgment that there had been a contract

and that there was a claim, but argued that contract was

“performed or breached” prior to the credit inquiry. /d.

According to Korotki, the uncured breach of contract terminated

the business relationship with Angelozzi. /d.

A contract is a set of promises, in this case, to perform

construction services and to pay. Kiley v. First National Bank

of Md., 102 Md. App. 317, 333, 649 A.2d 1145, 1152 (1994).

The business relationship that arises out of a contract does not

summarily end when one party decides to not to pay the other.

A contractual duty is discharged by nothing less than full

performance. Restatement (Second) of Contracts, § 235.

16

Maryland courts often rely on the Restatement (Second) of

Contracts. See Pyles v. Goeller, 109 Md. App. 71, 674 A.2d 35

(1969). Once a contract has been fully performed by one party,

it cannot be terminated by the other party. Maryland Law

Encyclopedia, Vol. 5A, Ch. 9, § 252. Yet that is precisely what

Korotki argued in this case: that as soon as Angelozzi completed

its work at OCV, the business relationship was over. J.A. 318-

20. The District Court correctly rejected this incorrect statement

of Maryland law and entered summary judgment for the

Defendants based on the undisputed evidence of a credit

transaction between Korotki and/or APK and Angelozzi. J.A.

1343.

The District Court applied the proper rule of law to the

facts of this case, holding that even under a restrictive

interpretation of § 1681b(3), the Defendants had a permissible

purpose for obtaining Korotki’s credit report because the

Defendants were attempting to collect an account. J.A. 1342.

The District Court's decision was based upon the evidence put

forward in the case — primarily Korotki’s own testimony

regarding the transaction with Angelozzi. The District Court

stated that

it is undisputed that Korotki offered to pay

Angelozzi for certain construction services.

Furthermore, Angelozzi had at least some reason to

believe Korotki and/or APK owed him a debt. Those

facts indicate a credit transaction and are sufficient

to create a permissible purpose under the FCRA.

J.A. 1345. The Court of Appeals noted that “[ojbviously, these

admitted facts created a business relationship between the parties,

and Angelozzi correctly believed this to be true.” Petition, A-5.

Korotki disagrees with the District Court’s reliance on his own

testimony; however, Korotki himself has articulated that a credit

se lt lds te ll

17

report may be obtained for purposes of collection of an account

of a customer. Petition, p. 10.

Since Korotki’s arguments are based on an alleged

misapplication of the law to the facts, he has failed to assert a

compelling reason for this Court to grant certiorari and his

request for a Writ of Certiorari should be denied.

CERTIORARI SHOULD BE DENIED BECAUSE THE

DECISION BELOW WAS A PLAINLY CORRECT

APPLICATION OF THE FCRA AND APPLICABLE LAW

REGARDING PERMISSIBLE PURPOSES FOR WHICH

A CREDIT REPORT MAY BE OBTAINED.

A. The Courts Below Correctly Concluded That Plaintiff

Has The Burden Of Proof.

Korotki’s statement that the District Court “reversed” the

burden of proof is wrong. Petition, p. 7. The District Court

correctly ruled that Korotki had the burden of proving the

elements of his claims, including that the Defendants obtained

his credit report for an impermissible purpose. J.A. 306. The

general rule is that the plaintiff has the burden of proof and

thus bears the risk of non-persuasion, absent an express provision

in the substantive law creating a legal presumption in favor of

the plaintiff. Sergeant Co. v. Pickett, 285 Md. 186, 203, 40!

A.2d 651, 660 (1979); Crowther v. Hirschman, 174 Md. 100,

109, 197 A. 868, 872 (1938). This is similarly the case under

the FCRA.

Although we are aware of no case directly addressing

who has the burden of proving reasonableness of

procedures, courts have generally assumed that

burden falls on the plaintiff.

18

Stewart v. Credit Bureau, Inc., 734 F.2d 47, 51, n.5 (D.C. Cir.

1984) (citations omitted). See also Roseman v. Retail Credit

Co., Inc., 428 F. Supp. 643, 646 (E.D. Pa. 1977) (the plaintiff

has the burden of proving the defendant violated the FCRA).

This issue was addressed in Stewart v. Credit Bureau, Inc.,

supra. The case involved a plaintiff’s claim of injury as a result

of admittedly inaccurate information in his credit report allegedly

due to the reporting agency’s failure to follow reasonable

procedures under the FCRA (15 U.S.C. § 168le). The Court

held:

[A] plaintiff cannot rest on a showing of mere

inaccuracy, shifting to the defendant the burden of

proof on the reasonableness of the procedures for

ensuring accuracy. There is no indication that

Congress meant to so shift the nominal plaintiff's

burden of proof as to requisite components of a claim

based on statutory violation.

Id. at 47. Clearly, if Congress had intended to shift the burden

of proof to the defendant, it could have done so.

Congress demonstrated that it “knew how” to shift

the burden from the plaintiff to the defendant by

explicitly doing so in two other sections of the

FCRA. See 15 U.S.C. §§1681d(c), m(c).

Stewart v. Credit Bureau, Inc., 734 F.2d at 51 n.5. In the FCRA

provisions of 15 U.S.C. §§ 1681d(c), m(c), Congress

demonstrated its intent to shift the burden of proof on an issue

to the defendant, with clear, explicit language, as follows:

No person may be held liable for any violation of

subsection (a) of (b) of this section if he shows by a

19

preponderance of the evidence that at the time of

the violation he maintained reasonable procedures

to assure compliance with subsection (a) or (b) of

this section. 15 U.S.C. §1681d(c)

No person shall be held liable for any violation of

this section if he shows by a preponderance of the

evidence that at the time of the violation he

maintained reasonable procedures to assure

compliance with the provisions of subsection (a) and

(b) of this section. 15 U.S.C. §1681m{(c).

Section 1681b(3), which Korotki argues reverses the burden

of proof, does not contain any provision even remotely similar

to the provisions contained in the above statutory sections

wherein Congress unambiguously shifted the burden of proof

to the defendant. J.A. 311-12, Petition, p. 7. Instead, § 1681b(3)

states:

Permissible purposes of consumer reports — A

consumer reporting agency may furnish a consumer

report under the following circumstances and no

other ...

Nowhere in this provision does Congress state an intent to shift

the burden of proof to the defendant, based on a plain reading

of the statute.? Accordingly, the burden of proof remains on

2. Likewise, the statutory sections that impose liability for a

violation of the FCRA contain no such language:

Civil Liability for Negligent Non-Compliance — Any

consumer reporting agency or user of information which

is negligent in failing to comply with any requirement

imposed under this subchapter with respect to any

consumer is liable to the consumer in an amount equal

to the sum of....

Se (Cont'd)

20

Korotki, who must present evidence from which the trier of

fact can infer that the defendant violated the FCRA provisions

on which his claim is predicated. Stewart v. Credit Bureau, Inc.,

734 F.2d at 51. Korotki’s failure to establish that the Defendants

obtained his credit report for an improper purpose under the

FCRA, an essential element of his case on which he bears the

burden of proof at trial, renders all other alleged facts immaterial.

Celotex Corp. v. Catrett, 477 U.S. at 322-23. Consequently,

the courts below correctly concluded that the Defendants were

entitled to judgment as a matter of law. /d.

B. Defendants Met The Requirements Of The Fair Credit

Reporting Act.

The FCRA was reviewed by the Fourth Circuit Court of

Appeals in Yohay v. City of Alexandria Employees Credit Union,

Inc., 827 F.2d 967 (4th Cir. 1987). In that case, Patricia Ryan

obtained the credit report of her ex-husband to compare the list

of his current credit card account numbers with the credit card

account numbers that she and her ex-husband previously had

established during their marriage. /d. at 972. Ryan did not

disclose this purpose to the credit bureau. /d. The District Court

held that Ryan had obtained Yohay’s credit report for a purpose

not permitted by the FCRA. /d. at 969. The Court of Appeals

reviewed the relevant provisions of the FCRA and agreed that

Ryan obtained the credit report under false pretenses. /d. at

(Cont'd)

Civil Liability for Willful Non-Compliance — Any

consumer reporting agency or user of information which

willfully fails to comply with any requirement imposed

under this subchapter with respect to any consumer is

liable to the consumer in an amount equal to the sum of

15 U.S.C. § 1681n, o.

21

972. In so ruling, the Court adopted the reasoning of Hansen

v. Morgan, 582 F.2d 1214 (9th Cir. 1978):

{t]he standard for determining when a consumer

report has been obtained under false pretenses will

usually be defined in relation to the permissible

purposes of consumer report which are enumerated

in 15 U.S.C. § 1681b,...

Yohay, 827 F.2d at 971-72. Thus, Korotki must prove that the

Defendants had an impermissible purpose to obtain his credit

report under the language of 15 U.S.C. § 1681b.

Korotki argues that the Defendants had an impermissible

purpose because he contends that the Defendants did not need

Korotki’s credit history. Petition, pp. 3-21. No facts are offered

in support of his oft repeated argument. The record shows clearly

that ASC intended to use the information that it expected to be

contained in Korotki’s credit report to locate a serviceable

address. J.A. 744. The need for this information arose from

ASC’s multiple unsuccessful attempts to serve Korotki at three

locations. J.A. 356-59, 760. ASC expected that the credit report

would contain helpful information regarding service based on

ASC’s familiarity with the contents of credit reports and ASC’s

past successes locating a serviceable address from information

contained in credit reports. J.A. 719-20, 735-37.

Korotki alleges that the District Court’s ruling allows

anyone asserting a monetary claim to obtain a consumer’s credit

report. Petition, p. 18. The District Court considered and rejected

that characterization, pointing out that “asserting a monetary

claim and collecting a debt are two different situations.” J.A.

1344. Korotki relies on Mone v. Dranow, 945 F.2d 306 (9th

Cir. 1991), in an attempt to show that the Defendants violated

the FCRA. Petition, p. 19. However, the District Court stated

Le]

oe]

that Mone was distinguishable because it was based in part on a

determination that no credit transaction took place, whereas in

this case the District Court held that the “facts indicate a credit

transaction.” J.A. 1345.

The fact that, upon reviewing the credit report, ASC

determined that it contained no useful information is irrelevant.

Korotki’s theory that a user only has a permissible purpose

under the FCRA if, after he receives and reviews the report, it

is determined that the report contains the specific permissible

information that the user needed. This interpretation is flawed

for several reasons. First, if the determination of a permissible

purpose only can be made in hindsight, the user cannot refrain

from obtaining a credit report for an improper purpose. Second,

the determination of whether the user has a permissible purpose

would be based entirely on matters outside of the user’s control,

namely, what information the credit reporting agency included

in the report. If Korotki’s statutory interpretation were applied,

liability would hinge on irrelevant facts, in this case whether

the information in Korotki’s credit report actually assisted ASC

to locate a serviceable address for Korotki.

There is no legal authority cited in support of Korotki’s

argument that, prior to obtaining Korotki’s credit report, the

Defendants were required to obtain report containing different

or less information.’ Petition, p. 15. No such authority exists.

Where a permissible purpose is present, the FCRA authorizes

the furnishing of a credit report without any further

qualification. 15 U.S.C. § 1681b. Korotki is thus challenging

settled law and sound application, and his effort to do so does

not call for this Court’s review.

3. Although there is no duty to do so, the record reflects that

the Defendants obtained and reviewed various other report on

Korotki, trying to locate a serviceable address, including a motor

vehicle report, a judgment report, tax records and land records. J.A.

394-95, 585, 655-59.

23

CONCLUSION

For the foregoing reasons, it is respectfully submitted that

this Court deny Korotki’s Petition for Writ of Certiorari in this

case.

Respectfully submitted,

S. TODD WILLSON

TERRI L. GOLDBERG

JULIE SEILER-MORRIS

ECCLESTON AND WOLF, P.C.

7th Floor - Scarlett Place

729 East Pratt Street

Baltimore, Maryland 21202

(410) 752-7474

Attorneys for Respondents

Thomas, Ronald & Cooper and

Daniel V. Schmitt

BENJAMIN LIPSITZ*

100 Church Lane

Baltimore, Maryland 21208

(410) 484-3050

JOEL C. RICHMOND

OFFICE OF JOEL C. RICHMOND

522 Equitable Building

10 North Charles Street

Baltimore, Maryland 21202

(410) 685-2225

Attorneys for Respondent

Attorney Services Corporation

* Counsel of Record