Opposition Brief — State Farm Farm Mutual Mutual Automobile Automobile Insurance Insurance Insurance Co. Co. v. Willes (No. 06-101)

Nos. o) 06-84, AO} i)

IN THE

Supreme Court of the United States

HARTFORD FiRE INSURANCE CO.,

‘ Petitioner,

v.

JASON RAY REYNOLDS,

Respondent.

SAFECO INSURANCE CO. OF AMERICA, ET AL.,

Petitioners,

v.

CHARLES BURR, ET AL.,

Respondents.

GEICO GENERAL INSURANCE CO., ET AL.,

Petitioners,

v.

AJENE EDO,

Respondent.

STATE FARM MUTUAL AUTOMOBILE INSURANCE CO., ET AL.,

Petitioners,

v.

JULIE WILLES,

Respondent.

On Petitions for Wnts of Certiorani to the United States

Court of Appeals for the Ninth Circuit

RESPONDENTS’ BRIEF IN OPPOSITION

SCOTT L. NELSON SCOTT A. SHORR

PUBLIC CITIZEN Counsel of Record

LITIGATION GROUP N. ROBERT STOLL

1600 20th Street, N.W. STEVE D. LARSON

Washington, D.C. 20009 STOLL STOLL BERNE LOKTING

(202) 588-1000 & SHLACHTER, P.C.

209 Southwest Oak Street

Suite 500

Portland, Oregon 97204

1303} 227-1600

Attorneys for Respondents

August 2006

BEST AVAILABLE COPY

QUESTIONS PRESENTED

1. Whether petitioners have presented compelling rea-

sons for this Court to review the meaning of the term “will-

ful” in one subsection of the Fair Credit Reporting Act

(“FCRA”) in cases that are premature for review because

(a) these cases are still at an interlocutory stage and were re-

manded for further proceedings following a reversal of sum-

mary judgment, (b) no court has ever examined the evidence

of willfulness or applied any “willful” standard to the facts,

and (c) there is no factual record of the “advice of counsel”

defense that petitioners now raise on remand to refute a find-

ing of willfulness?

2. Assuming that this Court should review at this inter-

locutory stage in the absence of a complete factual record,

whether petitioners have presented compelling reasons for

review in the absence of a true circuit split over the meaning

of a “willful” violation for the particular subsection 15

U.S.C. § 1681n (a)(1)(A) of the FCRA that 1s at issue?

3. Whether GEICO, State Farm and Hartford Fire pre-

sent compelling reasons to review the Ninth Circuit’s inter-

pretation of the definition of an “adverse action” and the no-

tice requirements under the FCRA when petitioners fail to

identify any conflicts among the circuits over those issues or

demonstrate that the Ninth Circuit’s analysis of the statutory

definition is either incorrect or raises issues of national im-

portance?

ii

PARTIES TO THE COMBINED OPPOSITION

For the Court’s convenience, respondents Jason Rey-

nolds, Charles Burr, Shannon Massey, Ajene Edo and Julie

Willes file this joint opposition to the petitions for writs of

certiorari filed respectively by Hartford Fire Insurance Com-

pany (“Hartford Fire”) (No. 06-82); Safeco Insurance Com-

pany of America, American States Insurance Company,

Safeco Insurance Company of Illinois, and Safeco Insurance

Company of Oregon (collectively, “Safeco”) (No. 06-84);

GEICO General Insurance Company, GEICO Indemnity, and

Government Employees Insurance Company (collectively,

“GEICO”) (No. 06-100); and State Farm Mutual Automobile

Insurance Company and State Farm Fire and Casualty Com-

pany (collectively, “State Farm”) (No. 06-101). Respondent

Reynolds is the respondent in No. 06-82; respondents Burr

and Massey are respondents in No. 06-84; respondent Edo is

the respondent in No. 06-100; and respondent Willes is the

respondent in No. 06-101. Because petitioners filed separate

petitions that raise overlapping issues largely arising out of a

single Ninth Circuit opinion, respondents file a single com-

bined opposition.

ill

TABLE OF CONTENTS

CUTIES THING PRESEN Do eiccvcicevsecersssvneseonssssvenvereesesssoeepeesis i

PARTIES TO THE COMBINED OPPOSITION ................. il

Fe A NE I vetrtinsciesnistecsisinipetnianitiatnniiciecienion Vv

FETE vicisadpciubudidssinskekcidunminiaoibeibedsaddoscubapeibamtenien |

eae re Ae II CN icine snes susiipnnteiapaesnstvrnigdasvest 3

I. RESPONDENTS’ CLAIMS OF ADVERSE

PCT IOS UNDER FIRE FORA, ovvcesiscccecccecnersnnseceveassovsonses 3

Il. THE NINTH CIRCUIT’S STATEMENTS

WEEE SE! FO WILL EULESS cevccncecscesescecesecenees 5

III. PETITIONS’ MISSTATEMENTS AND

SIGNIFICANT OMISSIONS. .....0:cccccessnsococsrccvcsovevessrsevenve 6

REASONS FOR DENYING THE WRIT .....00..... ee eceeeeeeeee 8

I. THE PETITIONS ARE PREMATURE BECAUSE

THEY ARISE OUT OF SUMMARY JUDGMENT,

ARE BASED ON INCOMPLETE RECORD, AND

THE FACTS ON WILLFULNESS HAVE NOT

BEEN REVIEWED BY A LOWER COURT................... 8

A. No Court Has Examined the Summary Judg-

a a IT 8

B. There is No Factual Record of an Advice of

OE MGT TOL CO ORE TR AMT ETE 10

C. Recent Developments Since the Filing of the

Petitions Confirm That the Facts of this Case

Should Be Fully Developed and Not Subject to

Piecemeal Review by This Court............:.ccccceseeeeees 11

If. THERE IS NO CONFLICT ON THE MEANING

Ce ee re INN iiss siidnicsinsarcaieicnstinchcanecileivalinsaeisrntinis 1]

A. The Ninth Circuit’s Statutory Interpretation is

Firmly Grounded in the Statutory Language............ I

cod

1V

B. There is No Circuit Conflict with Respect to 15

Ste Aics B 2D MT ND ses diesimeesisstncnsdennisteebnenie 15

1. The other circuits do not address the particu-

lar language of Section 1681n(a)(1)(A).............. 15

2. The Ninth Circuit’s definition of willful is

consistent with other circuits’ definitions........... 18

C. The State Farm Petitioners Did Not Raise the

“Willfulness” Issue Below and Cannot for the

First Time Before This Cowtt..........cccccccsessssessseseacess 19

D. The Ninth Circuit Did Not Resolve Any Advice

OF CORE DCT OIE oases cscrsvecseninsstenccsreasinniveroneens 20

Ii] THIS CASE LIKELY WILL NOT HAVE WIDE-

SPREAD IMPACT IN LIGHT OF DECISIONS

HOLDING THAT A RECENT FCRA AMEND-

MENT HAS PROSPECTIVELY ELIMINATED

THRE CLAIMS. ASSERTED HERE ...0600<cecscseccreonsenosseoess 25

TV. PETITIONERS’ REMAINING CHALLENGES

TO THE NINTH CIRCUIT’S RULING ON “AD-

VERSE ACTION” UNDER THE FCRA DO NOT

Ge TN II kciteuietcnctenssetdnciegcplciinndieasaaail 27

A. State Farm Misinterprets the Statute... eee 28

B. The GEICO Petitioners Misstate the Ninth

INE FI ovinsies.chitvereternntneas meee 29

C. The Ninth Circuit’s Opinion Does Not Impose

New Notice Requirements Under the FCRA............. 30

ast NUTT cswriincs caikcicientscebsiéasmidaisaaibioniaciabpadiaaicoaienian 30

TABLE OF AUTHORITIES

Page(s)

Cases: ‘

Adickes v. S.H. Kress & Co.

Ee: BE 0 Fe esetintt vars cettnnsnsubeisescoosowovedinessnemnntons 20

Arriola v. Safeco

1993 WL, 530480 (9D Cir. 1993) ........-cvscevereecscerveveveroee 16

Ashby v. Farmers Group, Inc

No. 04-80084 (9th Cir. Aug. 4, 2005) ...... cece eeeeteeees 7

Ausherman v. Bank of America Corp.

FB Ore OPE GE. BED cececcsncncseenenveriseservecinsenetoonnn 16

Bagby v. Experian Info. Solutions

162 Fed. Appx. 600 (7th Cir. 2006).......... eee eeeeeeeeeeees 16

Bakker v. McKinnon

Re Fame RT LOE, BS IED on ceseccocevececessecssoverniarorsnerse 15

Barnette v. Brook Road

429 F. Supp. 2d 74] (E.D. Va. 2006) .............seccsccsseeesses 26

Bonner v. CorTrust Ban

2006 WL 1980183 (N.D. Ind. July 12, 2006)................ 26

Bonner v. Home] 23 Corp.

2006 WL 1518974 ( D. Ind. May 25, 2006)................ 26

Bryan v. United States

a ii siksclenedicesiyasieotesenboonanitiniveuranapei 18

Casella v. Equifax Credit Info. Svc’s

56 F.3d 469 (2d Cir. 1995),

cert. denied, 517 U.S. 1150 (1996)..........ccccrccssssevserereeees 17

Cavin v. Home Loan Ctr

2006 WL 1313191 (N.D. Il. May 10, 2006)..........0...2.. 26

Connecticut Nat'l Bank vy. Germain

I aa 13

vi

Cornist v. B.J.T. Auto Sales, Inc.

FE Fe Ble CE i AED sinivesarciceininitnsnnecumnntabioi 27

Cousin v. Trans Union Corp )

OR FFI GE Sets BED eicnitetnciesccecintniniininsnintseoiinmiin 17

Critikon, Inc. v. Becton Dickinson Vascular Access,

Inc., 120 F.3d 1253 (Fed Cir. 1997),

curt damiad, S25 US. YETTA) rveicaicccccssvtertersseencsnseinns 23

Crowder v. PMI Mortgage Ins. Co.

2006 WL 1528608 (M.D. Ala. May 26, 2006)............... 26

Cushman v. Trans Union Corp. _

SED Fe Ce Oe Ce LIFT wictntittithicencrstteseoniien 18, 19

Dalton v. Capital Assoc. Indus., Inc.

257 F306 SOF CAG CAz, 2ODN) na cceevrecincoceontionevesiaveee 16, 17

Department of Housing and Urban Dev. v. Rucker

FE Ss RA I teiihcici in ssciinhasiatcnlglidincianiatiicndeaaihanntsica 13

Duncan v. Handmaker

SE Fe Ge FI einiitacisctiemecintcinicsiametiinaiaa 15

Flores v. Carnival Cruise Lines

ET Fe ee es FD vecitottsicnscesacdvtinnibtetantantes 24

Harris v. Fletcher Chrysler Prods.

2006 WL 279030 (S.D. Ind. Feb. 2, 2006) ............ eee 26

Hazen Paper Co. v. Biggins

FE eG Cea ceciiinivsinisiccasieniiniceimaioaiasasanin 14

Kawahaauhau v. Geige

Fae Sas EE CAR crescccvinnirconiccnaiaie aiinndavevniipntpinnenintenti 14

McLaughlin v. Richland Shoe

I a: BAe Ce iertvtstnubibeniiadiniaianinninavetmalaaniaainas 14

Mick v. Level Propane Gasses, Inc.

1999 WL 33453772 (S.D. Ohio 1999) 20... eeseeeeseeee 24

Murray v. GMAC Mortg. Corp. |

BSA FSG DAG CID Cae, DOD) occcrcvevesscccsnsscarsdneravevens i

Vii

Murray v. Household Bank (SB)

386 F. Supp. 2d 993 (N.D. Hl. 2005)........c.cccccsoreverescers 26

Northrop v. Simsbury, Inc.

FZ Pot. Apt. 44 GE Cir, ZOD} J ocesecsasivstecnsisarevaienccnesiee 17

Philbin v. Trans Union Corp.

FG Pb FSF 1 OG Cie, TID ercscrssenccerccstonvetieneviienaiecamicns 19

Phillips v. Grendahl

51S FSG 30F (COC, BOGE) orinticicictticcicempninion 15,19

Phillips v. New Century Fin. Corp.

2006 WL 517653 (C.D. Cal. Mar. 1, 2006)............:c00 26

Pinner v. Schmidt

805 F.2d 1258 (Sth Cir. 1986),

cert. denied, 483 U.S. 1022 (1987)..........ccssecceee 17, 18,19

Professional Real Estate Investors v. Columbia

Pictures Ass'n

SN Te. OP cist isciicisiccnivechcciovmiticeoneauanmal 23

Putkowski v. Irwin Home Equity Corp.

423 F Supp. 2d 1053 (N.D. Cal. 2006)..............escossssssess 25

Rausch v. Hartford Fin. Svcs Group, Inc.

2003 WL 22722061 (D. Or. Jul. 31, 2003),

rev'd, 435 F.3d 1081 (9" Cir. 2006) ......cccescsesseceeseesees 5,9

Razilov v. Nationwide Mut. Ins. Co.

2004 WL 3090083 (D. Or. 2004) ........ccccseccoscesscsessovascees 10

Reich v. Gateway Press

SS Fe COR Ge FE veritciriorncennonanade 24

Reynolds v. Hartford Fin. Servs. Group

435 F356 FOGT (OG Cir, 2006)... ccnncivesecseesverscccerense passim

Ruffin-Thompkins v. Experian Info. Solutions

RIS FO GOS CHOSE, FID nnsesnissitvivesnsitacdonilaterminceted 16

Sapia v. Regency Motors of Metairie, Inc.

SITET Oe TOT CC. FOG fctitisntcunsnena 17

vill

Stavroff v. Gurley Leep Dodge

413 F. Supp. 2d 962 (N.D. Ind. 2006) .......... eee eee 26

Stevenson v. TRW, Inc.

Pe ieee 2Oe COUe CAF. B9IS) an cecscoccnreccscecvessseeres 16, 17, 24

Trans World Airlines, Inc. v. Thurston

Re 14, 22

United Dominion Indus. Inc. v. United States

ic cscecenesonsvsvervesesenovvessorseseouses 13

United States v. Illinois Cent. R.R. Co.

sn sassanesessvesvcorsescereseeseneseveensesees 14

United States v. Mathes

151 F.3d 251 (Sth Cir. 1998),

cert denied, 525 U.S. 1059 (1998)... ee eeeeceeseeeees 21

United States v. Rice

Be ET COU CIT. 2000) cocenesccscvccseesesesZonsovevessesenesees 10

Virginia Military Inst. v. United States

SS g

Wantz v. Experian Info. Solutions

Bete Be CF CET. 2004) ..cccceccseserccceceresseresserreee 16,17

White v. E-Loan, Inc.

409 F. Supp. 2d 1183 (N.D. Cal. 2006) ........... eee eeeeeee: 26

Whitfield v. City of Knoxville

Pe Ie COED CAP, 19GS) 2. 0ccereceescoccesecrsseosrsoesceecscere 24

Yohay v. City of Alexandria Employees Credit

Union, 827 F.2d 967 (4th Cir. 1987) .........0cccsssccsscooerees 15

Zamora v. Valley Fed. Sav. & Loan Ass'n of Grand

Junction, 811 F.2d 1368 (10th Cir. 1987)... eee eee 15

Statutes and Rules:

svc cndcervecevesscevorevesesersvessesncsssocvosacesosee 4

Bo We-©.8 IGS Ta 1 MB )L1)..........cccrcccscccessscccssensesceses passim

RO ahs & FO ee ivnernsnsceninseiiidesebeissntetsanealadmeaibamienaanan 4

RP SE a Rare Wy Be ei insccssisrvitinceasecmsaninibiiddadanainiaaiiaad passim

BD Waite SF Peer esivccsdiseseonennnseliineeitnmmcanaiaeiacemanae passim

TF CEA. & BE I iicsscinviiriciansisucsindeuniesammuetoned passim

BD Si Siew’ ED iiesticscbivssicibistccaicaisiiaiinaeiatasamiai passim

E> Cities: 2 PRUNE A ocevsinenintssbennbiinstpdariantbatpeammaiibmamall 12, 17

Sar Srl tas 25 PUNT veturnsiiensithciinsipstiheieanibdamnnaadia cae ce Oe

FF Shales Wh CIID si-crsdessschastsenstacneninsicieiaainihiaiainiiena been 12

SF Cita BOT i cocsnstcitesotusiostnanienenaciesinetiaiiada aman 16

FP eeptie EAT ccstncnsicnivcimoidemiaeitiidindudeiaeaaaaaian passim

FO Pas Sek FSAI cxcssinvesisnovbevesinsioainiiaiemaliet casual 1,8

Other:

H.R. 19410, 91st Cong., Sec. 62 (1970) ..........ceescecssceeseeees 14

Robert L. Stern, et al., Supreme Court Practice

EGE, BOE onnitsicininncatinnratlladanidaduade ae 8

INTRODUCTION

The respondents in these cases are individual consumers

of automobile and property/casualty insurance who suffered

“adverse actions” under the FCRA when the petitioners,

various insurance companies, charged them more for insur-

ance or denied them insurance based in part on their credit

information. The Ninth Circuit held that petitioners’ actions

were “adverse actions” within the meaning of FCRA and re-

manded for further consideration the arguments of certain

petitioners that their actions could not be found “willful.”

The principal argument in these four petitions is that the

Ninth Circuit erred in interpreting “willful” to include either

knowing or reckless disregard for consumers’ nghts under

the FCRA. Petitioners claim the Ninth Circuit’s holding con-

flicts with the definition of willfulness determined by other

circuits. This issue does not merit review for several reasons.

First, review of the willfulness issue by this Court would

be premature. These cases arise on summary judgment and

the Safeco petition involves a Fed. R. Civ. P. 54(b) interlocu-

tory appeal. Neither the tnal court nor the Ninth Circuit has

yet examined the evidence to determine whether petitioners

acted willfully, either knowingly or recklessly. The Ninth

Circuit remanded the case so the district court could examine

the evidence. Further, contrary to petitioners’ contentions

that they have been prevented from or prejudiced in raising

the advice of counsel defense, the Ninth Circuit was not pre-

sented with an advice of counsel defense, nor did it resolve

whether petitioners are entitled to such a defense. The Ninth

Circuit’s statements concerning the defense are dicta. Fol-

lowing remand, petitioners GEICO and Safeco have raised

this defense in the trial courts. It would be premature to grant

certiorari when there is no factual record on advice of coun-

sel and the larger factual issue of willfulness is unresolved.

This is particularly so in a case involving an abstract con-

cept: the meaning of “willfulness.” Willfulness is a fact-

bound determination not readily explained by labels such as

“reckless disregard” or “conscious disregard.” This Court

will provide little useful guidance to the lower courts, attor-

neys, or those regulated by the FCRA if it attempts to apply

such labels without a concrete evidentiary record and lower

court factual findings. The meaning of a knowing or reckless

violation only becomes clear against a well developed record

that has been reviewed by a fact-finder and includes any evi-

dence of advice of counsel on which the petitioners may wish

to rely. The Ninth Circuit simply remanded the case to the

district court to review the facts and provide that record.

Second, there is no square circuit conflict. The FCRA has

several different liability sections and subsections. The statu-

tory subsection at issue here, 15 U.S.C. § 1681n (a)(1)(A),

merely requires proof of a “willful” violation. The immedi-

ately following FCRA subsections expressly require proof of

both a willful and knowing violation or solely refer to a

knowing violation without reference to willfulness. 15 U.S.C.

§§ 1681n(a)(1)(B), 1681n(b), and 1681q. Thus, the FCRA’s

text makes clear that a willful violation is something Jess than

a willful and knowing violation. The claimed circuit split is

not a conflict over the interpretation of the text of the particu-

lar statutory subsection at issue here. Rather, the cases on

which petitioners rely either interpret different statutory sub-

sections, focus on the proof required to establish punitive

damages, which are not at issue here, or fail to interpret the

particular language of section 1681n(a)(1)(A).

Third, although petitioners assert that the Ninth Circuit’s

decision will expose them to a flood of litigation over the

type of conduct at issue here, there is a serious question

whether ihere is any remaining civil remedy for such viola-

tions. In the last two years, eleven different courts, including

the Seventh Circuit, have concluded that the 2003 Fair and

Accurate Credit Transaction Act (FACTA), which amended

the FCRA, eliminated subsection 1681n claims filed after the

passage of that Act for violations of section 1681m (the stat-

ute at issue here) postdating FACTA. Contrary to petitioners’

unsupported speculation that there has been an explosion in

private litigation under the FCRA as a result of the Ninth

Circuit’s ruling, nearly every court to review the issue has

concluded that FACTA prospectively eliminated the civil

claims asserted here. The Ninth Circuit’s ruling may thus

have significance only for the finite class of pre-FACTA

claims, obviating the importance of review by this Court.

Finally, petitioners State Farm, GEICO and Hartford Fire

raise issues regarding the Ninth Circuit’s interpretation of the

definition of “adverse action” under the FCRA and its con-

struction of FCRA’s notice requirements. These petitioners

do not even contend that the Ninth Circuit’s routine statutory

interpretations conflict with any other circuit precedent or

precedent of this Court. The Ninth Circuit’s interpretation of

the statute is straightforward and correct.

STATEMENT OF THE CASE

I. RESPONDENTS’ CLAIMS OF ADVERSE AC-

TION UNDER THE FCRA

This case involves interpretation of two subsections of

the FCRA: 15 U.S.C. §1681n(a)(1)(A), one of the FCRA’s

several remedy sections, and 15 U.S.C.§ 1681la(k)(1)(B)(i),

the definition of an “adverse action” under the FCRA. Re-

spondents assert claims under subsection 1681n(a)(1)(A) for

petitioners’ failure to give adequate notice that they took “‘ad-

verse actions” against the consumers, a violation of section

15 U.S.C. § 1681m (a). The insurance companies both denied

insurance and increased premiums, “adverse actions” under

the FCRA, based on review of the consumers’ credit infor-

mation (typically “credit scores” or “insurance scores” based

on confidential financial, banking and eredit information.)

The FCRA, at its core, is a notice statute. Reynolds v.

Hartford Fin. Servs. Group, 435 F.3d, 1081, 1085 (9th Cir.

4

2006).' The FCRA gives insurance companies and other us-

ers the privilege to review confidential financial information

of individual consumers. See 15 U.S.C. § 1681b(a)(3) (au-

thorizing credit bureaus to provide confidential consumer

credit information to insurers and others). Insurance compa-

nies use that information to price insurance premiums and

decide whether to offer coverage. If an insurance company

takes an adverse action, such as denying insurance or increas-

ing a premium based on a review of a consumers’ credit in-

formation (see 15 U.S.C. § 1681a(k)(1)(B)(i)), it must give

notice that it took such action. 15 U.S.C. § 1681m.

This notice serves an important purpose by allowing con-

sumers to check their credit files to confirm that the credit

information consulted was accurate. See Reynolds, 435 F.3d

at 1085; see also 15 U.S.C. § 1681 (the FCRA is designed to

ensure “[a]ccuracy and fairness of credit reporting.”). For

instance, if an insurance company offers John Allen Smith a

higher premium because his credit score is low, he can check

whether the credit information consulted was accurate. If he

discovers that the insurance company mistakenly reviewed

the file of John Alan Smith or another consumer with a

slightly different social security number, he can inform the

credit bureau and, ultimately, the insurer that the insurer mis-

takenly increased his charge based on someone else’s less

favorable credit information. Or the consumer may discover

that the insurer based his premium on an accurate identity,

but used inaccurate financial information that lowered his

credit rating and resulted in an increased charge.

In the trial court, petitioners sought summary judgment

on the ground that they had not taken “adverse action”

' Because Reynolds, the published Ninth Circuit opinion at issue, is

reproduced with different pagination in each petitioner’s appendix, we

cite the reported opinion for simplicity Reynolds directly addressed the

Hartford Fire and GEICO cases. The State Farm and Safeco cases were

separately decided by short, unpublished memoranda citing Reynolds.

against respondents. Petitioners argued that when a first-time

applicant for insurance is charged a higher premium because

of his credit score, his premium has not been “increased”;

thus, they never have to give notice of an adverse action in

such circumstances and can, with impunity, use inaccurate

credit information to make first-time applicants pay more for

insurance. Petitioners argued that they only “increase” a pre-

mium based on credit information if they first charge a con-

sumer a premium and later, after reviewing credit informa-

tion, increase the charge (perhaps on a renewal application).

The district court initially accepted petitioners’ argument,

but the Ninth Circuit, relying on the statute’s plain meaning,

rejected it, holding that “whenever because of his credit in-

formation a company charges a consumer a higher initial rate

than it would otherwise have charged, it has increased the

charge within the meaning of FCRA.” Reynolds, 435 F.3d at

1092. The Ninth Circuit pointed out that petitioners’ position

would eviscerate the statute’s purpose of providing even ini-

tial applicants for insurance the proper notice when they are

charged more based on their credit information. /d. at 1092-

92; 15 U.S.C. § 1681a(k)(1)(B)(i) (providing that an adverse

action includes “any increase in any charge for * * * any in-

surance, existing or applied for”) (emphasis added). The

Ninth Circuit’s straightforward statutory construction en-

sures, as the statute provides, that consumers (including first-

‘time applicants) who are charged more for insurance based

on their credit file receive proper notice.

Il. THE NINTH CIRCUIT’S STATEMENTS WITH

RESPECT TO WILLFULNESS

Except for State Farm, petitioners also argued in the al-

ternative that, as a matter of law, they did not “willfully” vio-

late the statute under 15 U.S.C. § 1681n(a)(1)(A). Because

the district court mistakenly agreed with petitioners’ primary

argument, it never reached the issue of defendants willfulness

under subsection 1681n(a)(1)(A) or examined any evidence

of willfulness. See e.g., Rausch v. Hartford Fin. Svcs Group,

Inc., 2003 WL 22722061, *2, n. 1 (D. Or. Jul. 31, 2003) (the

“Court does not reach the additional arguments in support of

Defendants’ Motion for Summary Judgment”), rev’d on

other grounds, 435 F.3d 1081 (9" Cir. 2006).

The Ninth Circuit also did not consider the evidence of

willfulness. Rather, it remanded for creation of a more com-

plete record. Reynolds, 435 F.3d at 1099 (“[B]ecause the par-

ties did not have an adequate opportunity to explore the 1s-

sues in the district court, we remand for further proceed-

ings.”) Preliminarily, however, the court interpreted the stat-

ute to mean that petitioners could be found willful if a fact-

finder eventually found either that petitioners knowingly or

recklessly ignored the notice requirements of the FCRA.

Il.PETITIONERS’ MISSTATEMENTS AND SIG-

NIFICANT OMISSIONS

Petitioners’ statements of the case contain significant

omissions and misstatements that create the mistaken impres-

sion that the Ninth Circuit decided more than it did and that

the records in these actions are more completely developed

than they are. Certain developments post-dating the petitions

also bear on the appropriateness of review.

Petitioners suggest either that they have been precluded

from raising an advice of counsel defense or that the Ninth

Circuit rejected this defense or ruled on it in ways that con-

flict with holdings of other circuits. However, in none of

these cases is there a developed record on advice of counsel,

and the Ninth Circuit did not rule on the defense. The Ninth

Circuit merely made observations about the possible rele-

vance of advice of counsel to willfulness and remanded for

further proceedings. Reynolds, 435 F.3d at 1099. Those

statements are dicta and not the source of any circuit conflict.

Indeed, for the last several years, petitioners made a tacti-

cal choice not to present a full-blown advice-of-counsel de-

fense because they did not want to share the actual advice

they received (which was almost certainly different from the

legal arguments they znade to the district court and Ninth

Circuit) and waive the attorney-client privilege as a result.

Only on remand some petitioners recently raised the advice

of counsel defense. The result may ultimately be a developed

factual record and legal rulings based on it, but until then this

case will not present any issues regarding advice of counsel

suitable for appellate review, let alone review in this Court.

Petitioners also create the mistaken impression that these

are certified class actions for punitive damages. Petitioners

are wrong on both counts. Class certification issues are still

before the trial court. In addition, respondents have stated on

the record several times that they are not pursuing claims for

punitive damages and have withdrawn those claims below or

dropped them from amended complaints. Respondents repeat

here that they are not seeking punitive damages. Respondents

only seek the statutory damages (between $100 and $1,000)

that Congress has provided for willful violations of the

FCRA under subsection 1681n(a)(1)(A).

This Court also should be aware of certain developments

that petitioners do not mention because they postdate the fil-

ing of the petitions. Most significantly, since the petitions

were filed, petitioner Hartford Fire and respondent Reynolds

have entered into a Memorandum of Understanding that set-

tles the putative class case. While Hartford Fire has yet to

withdraw its petition, it has agreed to do so once there is a

class settlement finally approved by the district court.’

? Other insurers have similarly settled the FCRA claims or chosen

not to seek review of the Ninth Circuit’s opinion. Nationwide Insurance

Company settled an identical and related case before the Ninth Circuit

even ruled on its case, for $280 per class member in statutory damages. In

another appeal from a related case that the Ninth Circuit decided with

these cases, Farmers Group Inc. chose not to seek certiorari from the

Ninth Circuit’s identical decision in their case. See Ashby v. Farmers

Group, Inc., No. 04-80084, Mem. Op. (9th Cir. Aug. 4, 2005).

REASONS FOR DENYIN. s THE WRIT

I. THE PETITIONS ARE PREMATURE BECAUSE

THEY ARISE OUT OF SUMMARY JUDGMENT,

ARE BASED ON AN INCOMPLETE RECORD,

AND THE FACTS ON WILLFULNESS HAVE

NOT BEEN REVIEWED BY A LOWER COURT.

A. No Court Has Examined the Summary Judg-

ment Facts on Willfulness.

It would be premature to address the meaning of willful-

ness in the current procedural context. These petitions arise

out of summary judgment proceedings and, in the case of the

Safeco appeal, a Fed. R. Civ. P. 54(b) judgment, and the dis-

position below was a remand for further proceedings in all

cases. This Court “generally await{s] final judgment in the

lower courts before exercising [its] certioran junsdiction.”

Virginia Military Inst. v. United States, 506 U.S. 946 (1993)

(Scalia, J., respecting the denial of certiorari). The Court or-

dinarily limits its review of cases in an interlocutory posture

to extraordinary circumstances, such as when it is necessary

to prevent great inconvenience in the conduct of further pro-

ceedings. Robert L. Stern, et al., Supreme Court Practice §

4.18, at 258 (8th ed. 2002) (citing cases). The mere an-

nouncement of an abstract standard for willfulness to be ap-

plied at some point in the future does not cause great incon-

venience or present extraordinary circumstances.

While Safeco, joined by all petitioners, contends that it

presents a question of “enormous practical significance,” it 1s

difficult to believe that regulated persons are waiting for ab-

stract guidance, without the benefit of how that guidance ap-

plies to any specific conduct, on whether they can be liable

for either consciously or recklessly ignoring the FCRA. One

would hope that corporations that enjoy the privilege of using

consumer’s personal banking information, credit information,

social security information and other private data are not

recklessly misusing such protected information in the hope

that recklessness will not suffice to make them liable under

the statute. These are certainly not the “extraordinary circum-

stances” that should lead this Court to give guidance prior to

a final resolution and in the absence of a well-developed re-

cord reviewed by the district court below.

Here, not only did this issue arise on summary judgment,

but the lower courts have never even applied the law to any

factual record. The district court decided these cases on alter-

native grounds and never considered the facts on willfulness.

See e.g., Rausch, 2003 WL 22722061 at *2. The Ninth Cir-

cuit also did not decide the willfulness issue, but simply an-

nounced a general standard for willfulness to be applied on

remand. Reynolds, 435 F.3d at 1099.

The meaning of the term “willful,” as petitioners them-

selves point out, is abstract. This Court would provide little

guidance to the lower courts if it simply announced an ab-

stract definition without any corresponding application of

that standard to a fully developed factual record. While the

Ninth Circuit did its best to guide the district court by an-

nouncing a standard that could be applied to the facts on re-

mand, the case will be in a better procedural posture, if still

not a good candidate for Supreme Court review, once the fac-

tual record is developed and the district court has the oppor-

tunity to apply the standard to the facts — including the as-

yet completely undeveloped record on what petitioners view

as the critical issue of advice of counsel.

Indeed, there are many possibilities for these cases on

remand. The <.strict court may ultimately conclude that

plaintiffs presented sufficient evidence that defendants

“knowingly” violated the FCRA, providing evidence that

goes beyond a reckless violation.’ Thus, petitioners’ request

> The Safeco petitioners boldly predict that had this case been heard

in other circuits, the decision granting summary judgment would be af-

firmed. Safeco Pet. 16. Because the courts below never examined the

evidence on willfulness under any standard, this is pure, and likely inac-

(Footnote continued)

10

for a higher standard of knowing and willful conduct may

ultimately be irrelevant if the court or a jury later concludes

that defendants acted both knowingly and recklessly.

In addition, these cases may resolve by settlement. As

noted above, petitioner Hartford Fire has already entered into

an initial settlement with a putative class and will withdraw

its petition once it is finally approved by the district court.

B. There is No Factual Record of an Advice of

Counsel Defense.

Petitioners make many misstatements about the status of

the advice of counsel defense. For instance, petitioner Safeco

states that “the Ninth Circuit’s refusal to recognize an advice

of counsel defense under § 616 rests on a presumption of bad

faith on the part of Jawyers and clients that is unprecedented

in the decisions of this Court.” Safeco Pet. 22.

No petitioner, however, properly raised the “advice of

counsel” defense in its summary judgment motions, and nei-

ther the district court nor the Ninth Circuit ruled on such a

defense. There is no factual record of any advice of counsel

defense.* Indeed, having prevailed on other arguments in the

trial court, petitioners did not want to raise the defense and

waive their attorney-client privilege unless and until they had

no other supportable defense. Far from “refusing to recog-

curate, speculation. While the district court did not reach the issue im

these cases, the same court held in the related Nationwide case that plain-

tiffs would survive summary judgment even under a “knowing” standard.

Razilov v. Nationwide Mut. Ins. Co., 2004 WL 3090083 (D. Or. 2004).

* In its summary judgment papers in the trial court, GEICO did say it

had consulted counsel, but it presented no evidence of what counsel ad-

vised, the timing of the consultation in relation to the conduct, or whether

GEICO followed the advice. A defendant is not entitled to an advice of

counsel defense “merely because he consulted an attorney in connection

with a particular transaction”; he must also show that he disclosed the

material facts to counsel and received advice on which he actually relied

in good faith. United States v. Rice, 449 F.3d 887, 896-97 (8th Cir. 2006).

1]

nize” an advice of counsel defense, the Ninth Circuit re-

manded the case so that petitioners could raise the defense on

remand. Reynolds, 435 F.3d at 1099. In fact, petitioners

Safeco and GEICO have now raised the defense on remand.

C. Recent Developments Since the Filing of the Peti-

tions Confirm That the Facts of This Case

Should Be Fully Developed and Not Subject to

Piecemeal Review by This Court.

Developments that have taken place since the Ninth Cir-

cuit ruled further confirm that it would be premature to re-

view these cases because of the uncertainties that exist pnor

to a full trial, complete factual record, and final dispositions

of these cases. Not only has Hartford Fire entered into a set-

tlement that, once approved, will moot its case before this

Court could decide it, but the Safeco petitioners have now,

for the first time, raised issues about whether two of the

Safeco companies are proper parties to the case. These de-

velopments illustrate that the very identities of the parties are

still in flux and highlight the substantial msks attendant to

granting a writ of certiorari at an interlocutory stage of any

case. This Court should not reach out to rule until it is clear

that its decision will bind the appropriate parties. Without a

settled record and final judgment, the landscape on remand

below is constantly changing. Indeed, the parties are continu-

ing to litigate class, discovery and other issues to this day.

Ii. THERE IS NO CONFLICT ON THE MEANING

OF WILLFULNESS.

Petitioners maintain that this case merits review because,

they claim, there is a circuit conflict regarding the meaning

of a willful violation under the FCRA. Despite the Ninth Cir-

cuit’s reference to a split of authority, a careful review of the

statute and case law reveals there is no well-developed circuit

conflict with respect to the definition of a willful violation for

the particular statutory subsection at issue here, 15 U.S.C. §

1681n(a)(1)(A). The cases that petitioners cite either (a) refer

12

ae

to the mens rea requirements for violations of sections

1681n(a)(1)(B) or 1681n(b), which both expressly require

proof of a “knowing” violation, (b) involve the issue of puni-

tive damages under section 15 U.S.C. §1681n(a)(2), or

(c) otherwise do not analyze the particular statutory language

at issue here. Moreover, the great majority of the cases peti-

tioners cite do not expressly address the issue of “reckless

disregard” at all, belying petitioners’ claims of a mature con-

flict among the circuits over that specific issue.

A. The Ninth Circuit’s Statutory Interpretation Is

Firmly Grounded in the Statutory Language

Before turning to the claimed circuit conflict, respondents

briefly review the statutory language. The claimed conflict

largely disappears when it is understood that the FCRA has

several different remedial subsections under the FCRA.°

Respondents’ claims arise under 15 U.S.C. § 168In

(a)(1)(A), which provides that any person who “willfully

fails to comply with any requirement imposed under this title

with respect to any consumer is liable to that consumer in an

amount equal to the sum of — (1)({A) any actual damages

sustained by the consumer as a result of the failure or dam-

ages of not. less than $100 and not more than $1,000, which-

ever is greater.” In contrast to other FCRA sections, this sub-

section does not require proof of a knowing violation.

> Except for State Farm, petitioners conveniently refer either to the

entire section 616n of the original bill or to the codified section 1681n

without addressing the several subsections with different remedial provi-

sions and different language under 168In. Petitioners’ failure to engage

in statutory analysis at the textual level of each subsection is revealing.

State Farm incongruously argues that the term “willful” when used alone

must mean “willful and knowing” even when Congress clearly distin-

guished between those distinct terms by requiring proof of only a “will-

ful” violation for a claim under subsection 1681n(a)(1){A), but requinng

proof of both a “willful and knowing” violation in the immediately fol-

lowing remedial] subsections of the FCRA. See State Farm Pet. 26-28.

13

The very next subsection, 1681n(a)(1)(B), provides for

actual damages or at least $1,000 in statutory damages as

well as punitive damages for a violation that is not only

“willful” but also involves “obtaining a consumer report un-

der false pretenses or knowingly without a permissible pur-

pose” (emphasis added). Similarly, section 1681n(b) imposes

liability on “any person who obtains a consumer report from

a consumer reporting agency under false pretenses or know-

ingly without a permissible purpose” (emphasis added). In

addition, Congress provided criminal liability under section

1681q for “any person who knowingly and willfully obtains

information on a consumer * * * under false pretenses.” 15

U.S.C. § 1681q (emphasis added). The references to willful

and knowing violations would be superfluous if the defini-

tion of willful already required knowingly wrongful conduct.

Congress plainly understood that a merely willful viola-

tion requires something less than proof of a willful and

knowing violation because it expressly required proof of a

knowing violation or of both a “willful and knowing” viola-

tion in other civil and criminal subsections. When Congress

wanted to require proof of a knowing violation of FCRA, it

knew how to do so. See Connecticut Nat’l Bank v. Germain,

503 U.S. 249, 254 (1992) (stating that Congress “says in a

statute what it means and means in 2 statute what it says

there.”) With respect to section 168]n{a)(1)(A), it did not.

See United Dominion Indus. Inc. v. United States, 532 U.S.

822, 836 (2001) (noting the logic of investing significance in

a notable omission of words in determining Congressional

intent). Thus, the Ninth Circuit’s conclusion that a willful

violation does not require proof of a knowing violation is

fully consistent with standard statutory interpretation.

Petitioners contend that the legislative history demon-

strates that the Ninth Circuit’s definition of willfulness is in-

correct. But because the statutory text is clear, there is no

need to consult legislative history. Department of Housing

and Urban Dev. v. Rucker, 535 U.S. 125, 132-33 (2002).

14

Even if this Court were interested in legislative history, peti-

tioners fail to cite the most directly relevant indication in that

history of Congress’s understanding of the meaning of “will-

ful” conduct. In an early version of 15 U.S.C. 1681q, Con-

gress provided criminal liability for “whoever willfully vio-

lates any provision” of the FCRA. H.R. 19410, 91st Cong.,

Sec. 62 (1970). Congress eventually added a “knowing and

willful” criminal mens rea, indicating that Congress under-

stood “willful” to mean something less than “knowing and

willful” for purposes of this statute. The statute’s evolution

thus confirms the Ninth Circuit’s interpretation of the text.

Given the language and history of the statute, the Ninth

Circuit’s conclusion that “willfulness” under subsection

1681n(a)(1)(A) incorporates both knowing and reckless dis-

regard of a defendant’s legal obligations is fully consistent

with this Court’s construction of “willfulness” in statutes dat-

ing back to the 1930s. See Reynolds, 435 F.3d at 1098; see,

e.g., Trans World Airlines, Inc. v. Thurston, 469 U.S. 111,

128 (1985); Hazen Paper Co. v. Biggins, 507 U.S. 604, 614

(1993) (a willful violation of the Age Discrimination in Em-

ployment Act requires only a “reckless disregard for the mat-

ter of whether its conduct was prohibited”); McLaughlin v.

Richland Shoe, 486 U.S. 128, 133 (1988) (stating same

knowing or reckless standard); United States v. Illinois Cent.

R.R. Co., 303 U.S. 239, 242-43 (1938) (holding that civil de-

fendant’s conduct was “willful” because it showed disregard

for statute and indifference to its requirements). The standard

statutory definition for willful (where willful is not more spe-

cifically defined in the statute) has been settled in this Court

for decades and does not need revisiting.°

® State Farm mistakenly relies on Kawahaauhau v. Geiger, 523 U.S.

57, 60 (1998), in which this Court was interpreting the meaning of the

bankruptcy statutes that excepts “willful and malicious injury” from

bankruptcy discharge. The statute here does not require the additional

element of a “malicious” injury

15

B. There Is No Circuit Conflict with Respect to 15

U.S.C. § 1681n(a)(1)(A).

1. The other circuits do not address the par-

ticular language of Section 1681n(a)(1)(A).

Turning to the claimed circuit conflict, a close look at the

cited opinions reveals there is no direct conflict with respect

to the interpretation of the text of the particular statutory sub-

section, 15 U.S.C. § 1681n(a)(1)(A), at issue here. In Phillips

v. Grendahl, 312 F.3d 357, 365 (8th Cir. 2002), the only case

cited by petitioners that explicitly criticizes the use of a

“reckless disregard” standard under any subsection of the

FCRA, the Eighth Circuit noted that the plaintiff had not

clearly alleged which statutory subsection the defendant vio-

lated, but ultimately concluded that the plaintiff was alleging

a violation of section 1681n(a)(1)(B), which, as noted above,

expressly requires proof of obtaining a consumer report not

only “willfully,” but also “under false pretenses or knowingly

without a permissible purpose.”

Similarly, in Duncan v. Handmaker, 149 F.3d 424, 426

(6th Cir. 1998), the plaintiff “sought to hold defendants civ-

illy liable for procuring the [plaintiffs’] consumer reports un-

der false pretenses.” The Sixth Circuit noted that plaintiffs

invoked a prior version of the statute that provided civil li-

ability for violation of the criminal section, 1681q, “which

criminalizes the act of knowingly and willfully obtaining in-

formation under false pretenses.” 149 F.3d at 426, n 1. Sev-

eral other circuits -also specifically analyze 15 U.S.C. §

1681q, which “imposes criminal liability upon any person

who knowingly and willfully obtains information on a con-

sumer from a consumer reporting agency under false pre-

tenses.” Zamora v. Valley Fed. Sav. & Loan Ass'n of Grand

Junction, 811 F.2d 1368, 1370 (10th Cir. 1987). See also

Bakker v. McKinnon, 152 F.3d 1007, 1010 (8th Cir. 1998)

(analyzing a claim for a violation of section 1681(q)); Yohay

v. City of Alexandria Employees Credit Union, 827 F.2d 967,

971-72 (4th Cir. 1987) (analyzing knowing or false pretense

16

standard under section 1681q). ’ These circuits’ requirement

of proof of a knowing violation under a different statutory

subsection, 1681q, are consistent with the Ninth Circuit’s in-

terpretation of subsection 1681n(a)(1)(A).

The remaining cases relied upon by petitioners fail to in-

terpret the particular text of subsection 1681n(a)(1)(A) or

broadly refer to Section 1681n without any substantive tex-

tual analysis. See Dalton v. Capital Assoc. Indus., Inc., 257

F.3d 409, 417-418 (4th Cir. 2001) (citing generally section

1681n and 16810 and failing to address the specific statutory

language); Ausherman v. Bank of America Corp., 352 F.3d

896, 900 (4th Cir. 2003) (following Dalton without textual

analysis); Wantz v. Experian Info. Solutions, 386 F.3d 829,

833 (7th Cir. 2004) (citing generally section 1681n and stat-

ing only that proof of punitive damages requires proof of a

knowing and intentional violation); Ruffin-Thompkins v. Ex-

perian Info. Solutions, 422 F.3d 603, 610 (7th Cir. 2005) (cit-

ing Wantz and section 1681n generally); Bagby v. Experian

Info. Solutions, 162 Fed. Appx. 600, 605 (7th Cir. 2006)

(same); Stevenson v. TRW, Inc., 987 F.2d 288, 293-94 (Sth

Cir. 1993) (generally referring to “[s]ection 1681n [which]

authorizes the court to award actual damages, punitive dam-

ages and reasonable attorney fees * * *.””) Moreover, in none

cf these cases did the courts specifically address the question

of “reckless disregard” as an avenve of proving willfulness,

let alone reject it.

—— —

’ Petitioners also claim that the Ninth Circuit’s opinions conflict with

an unpublished Ninth Circuit opinion, Arriola v. Safeco, 1993 WL

530480 (9th Cir. 1993). Intra-circuit conflicts are generally not a ground

for certiorari, and because Arriola is non-precedential, there is no intra-

circuit conflict in any event. Moreover, petitioners made this same argu-

ment to no avail when requesting that the Ninth Circuit rehear these cases

en banc. Arriola involved the criminal liability section 1681q which re-

quires proof of both a willful and knowing violation. Arriola, 1993 WL

530480, *1. Likely recognizing the absence of any conflict, the Ninth

Circuit denied en banc rehearing in all cases.

17

Further, a number of the circuits that discuss a willful

violation of section 1681n, even if vaguely and without

analysis of the statutory language of the particular subsec-

tions, do so in the context of resolving a claim for punitive

damages under section 1681n(a)(2). The Fourth and Fifth

Circuits (and a number of later cases) expressly rely on an

earlier Fifth Circuit case, Pinner v. Schmidt, 805 F.2d 1258,

1263 (Sth Cir. 1986), cert. denied, 483 U.S. 1022 (1987). See

Dalton, 257 F.3d at 418 (quoting Pinner); Stevenson, 987

F.2d at 293-94 (quoting and relying on Pinner); Cousin v.

Trans Union Corp., 246 F.3d 359, 372 (Sth Cir. 2001) (quot-

ing Pinner in case involving jury award of $4.47 million for

willful violation). See also Northrop v. Simsbury, Inc., 12

Fed. Appx. 44, 50 (2d Cir. 2001) (failing to analyze statutory

text and reviewing claim for punitive damages based on will-

ful violation); Casella v. Equifax Credit Info. Svc’s, 56 F.3d

469, 476 (2d Cir. 1995) (same), cert. denied, 517 U.S. 1150

(1996); Sapia v. Regency Motors of Metairie, Inc., 276 F.3d

747, 753 (Sth Cir. 2002) (analyzing punitive damages);

Wantiz, 386 F.2d at 833 (same). In Pinner, the definition of

willfulness adopted by the court was based on the require-

ments for proof of punitive damages under section

1681n(a)(2). The court focused on whether the jury had suf-

ficient evidence to award punitive damages:

‘Willful’ is a word of many meanings — its construc-

tion often influenced by its context. But here, there is

simply nothing to even suggest that [defendants] will-

fully set out to do Pinner harm. There is no evidence

that they knowingly and intentionally committed an act

in conscious disregard for the nghts of others. The

jury’s award of punitive damages lacked any eviden-

tiary support whatsoever.

805 F.2d at 1263. Unlike Pinner and its progeny, the cases at

issue do not involve any claim for punitive damages as re-

spondests, plaintiffs below, seek only statutory damages.

18

We have no quarrel with Pinner. The meaning of willful

is often influenced by context. As State Farm argues, this

Court has examined statutory terms such as willful “both in

the immediate context in which it is used and the context of

provisions in which it is embedded.” See State Farm Pet. 24

(citing Bryan v. United States, 524 U.S. 184, 191 (1998)).

Indeed, in Bryan;this-Court noted that a willful mens rea

may include “careless disregard” for the rights of others. 524

U.S. at 191, n. 12. Here, Section 1681n(a)(1)(A)’s use of the

term “willful,” without reference to knowledge, means some-

thing less than a knowing violation in the context of the

“other provisions in which it is embedded,” which include

Congress’s express requirement of proof of a “knowing and

willful” violation under sections 1681q and 1681n(a){1)(B).

2. The Ninth Circuit’s definition of willful is

consistent with other circuits’ definitions.

The Ninth Circuit’s definition of a willful violation under

section 1681n(a)(1)(A) expressly relies upon and is entirely

consistent with the Third Circuit’s definition. Cushman v.

Trans Union Corp., 115 F.3d 220, 226-27 (3d Cir. 1997).* In

Cushman, the Third Circuit noted that plaintiff could prove

her FCRA violation if she proved either that the defendant

credit reporting agency took action “knowing that policy to

be in contravention of the rights possessed by consumers or

in reckless disregard of whether the policy contravened those

rights.” /d. at 227. This is the same standard expressly

adopted by the Ninth Circuit. Reynolds, 435 F.3d at 1097.

Petitioner Safeco incredibly tries to create a circuit conflict

out of whole cloth by claiming that even the Third Circuit’s

interpretation in “Cushman cannot plausibly be said to hold

that ‘reckless disregard’ satisfies the ‘willfulness’ standard

under § 616.” Safeco Pet. 17, n 7. On the contrary, the Third

® Cushman itself involves punitive damages and does not directly ad-

dress the specific issue in this case, liability under § 1681n(a)(1)(A).

19

Circuit’s express holding that proof of “reckless disregard”

satisfies the statute cannot be read any other way. Signifi-

cantly, in light of petitioners’ assertion of a raging conflict

over this issue, Cushman has not been rejected, criticized, or

even distinguished by any other court of appeals in a case

under section 1681n (a)(1)(A) in the nearly ten years since

the case was decided; indeed, the decision below and Phil-

lips, which addressed a claim under section 1681n(a)(1)(B),

appear to be the only appellate decisions ever to have dis-

cussed Cushman’s recklessness holding.

Moreover, the Third Circuit’s interchangeable use of the

terms “conscious disregard” and “reckless disregard” indi-

cates that the Circuits do not find these terms significantly

different. Cushman, 115 F.3d at 226-227 (citing Philbin v.

Trans Union Corp., 101 F.3d 957, 970 (3d Cir. 1996), and

Pinner, 805 F.2d at 1263). Similarly, the Ninth Circuit ex-

pressly held that the willfulness standard involves “‘a con-

scious disregard’ of the law, which means either ‘knowing

that policy {or action] to be in contravention of the nghts

possessed by consumers pursuant to the FCRA or in reckless

disregard of whether the policy [or action] contravened those

nghts.” Reynolds, 435 F.2d at 1098, quoting Cushman, 115

F.3d at 227. Except for Phillips, which involved subsection

168in(a)(1)(B), petitioners cite no court that has expressly

disagreed with the Ninth and Third Circuits and held that

“conscious disregard” and “reckless disregard” are mutually

exclusive under this statute, and thus opinions that merely

mention “conscious disregard” cannot be interpreted as con-

flicting with the decision below (or with Cushman).

C. The State Farm Petitioners Did Not Raise the

“Willfulness” Issue Below and Cannot for the

First Time Before This Court.

State Farm acknowledges that the willfulness issue was

not decided below in its case, but still contends that it may

raise that issue solely because the Ninth Circuit based its un-

published State Farm opinion on its resolution of other issues

20

in its published Reynolds opinion. State Farm Pet. 29 n.15.

State Farm contends that every issue raised in Reynolds, in-

cluding willfulness, is therefore a proper issue for review in

State Farm. That is not the law. State Farm argued to the

Ninth Circuit only that (1) State Farm Fire did not take an

“adverse action” against respondent Willes and (2) State

Farm Mutual did not reject Willes’s application because, ac-

cording to State Farm, she only applied to State Farm Fire.

See State Farm Appellees’ Br. 2 (issues Presented for Re-

view). State Farm did not argue willfuiness in its bref, and

its petition does not even claim it did,’ nor did the Ninth Cir-

cuit mention willfulness in its State Farm memorandum.

Having neither been raised nor decided below, the issue is

not properly before this Court in the State Farm petition. See

Adickes v. S.H. Kress & Co., 398 U.S. 144, 148, n. 2 (1970)

(“Where issues are neither raised before nor considered by

the Court of Appeals, this Court will not ordinarily consider

them.”’).

D. The Ninth Circuit Did Not Resolve Any Advice

of Counsel Defenses.

Having failed to create a credible circuit split on the defi-

nition of “willful” for the purposes of Section

1681n(a)(1)(B), petitioners try to redefine the Ninth Circuit’s

standard as a mere negligence standard through their discus-

sion of a red-herring issue —- the potential “advice of coun-

sel” defense for which there is no factual record.

Because the Ninth Circuit did not rule on the advice of

counsel defense, its observations about the subject are dicta

and could not form the basis for any claim of a circuit split.

Even as dicta, the Ninth Circuit’s observations are not “ex-

treme,” as petitioners suggest. The Ninth Circuit merely

stated that “neither a deliberate failure to determine the ex-

* State Farm belatedly raised the issue when seeking en banc rehear-

ing, which the court denied in State Farm without reaching this issue.

21

tent of its obligations nor reliance on creative lawyering that

provides indefensible answers will ordinarily be sufficient to

avoid a conclusion that a company acted with willful disre-

gard of FCRA’s requirement.” Reynolds, 435 F.3d at 1099.

The Ninth Circuit’s view is entirely consistent with the set-

tled principle that an advice of counsel defense cannot pre-

vail if the defendant did not honestly believe the advice re-

ceived was proper but instead had “reason to doubt” it.

United States v. Mathes, 151 F.3d 251, 255 (Sth Cir. 1998),

cert denied, 525 U.S. 1059 (1998) (citation omitted). A bla-

tant inconsistency between the purported advice and the clear

terms of a statute would clearly be a relevant consideration in

assessing such a defense. Petitioners pull out of context indi-

vidual words such as “unreasonable” to create the impression

that the Ninth Circuit adopted a negligence standard, when

the Ninth Circuit was only guiding the district court to look

at the extent of “the obviousness or unreasonableness of the

erroneous interpretation.” Reynolds, 435 F.3d at 1099. In-

deed, the Ninth Circuit expressly rejected a negligence stan-

dard. 435 F.3d at 1097-98 (citing McLauglin, 486 U.S. at 133

(noting that willful conduct is not merely negligent)).

Rather than credibly arguing that this dicta somehow cre-

ates a conflict in the law, petitioners favor sweeping state- -

ments of hyperbole that the Ninth Circuit has somehow pre-

judged the evidence. To that end, State Farm argues:

Under the Ninth Circuit’s decision, factors that nor-

mally favor a finding of an absence of willfulness

and/or recklessness as a matter of law are turned on

their heads, all in service of a jaundiced and unsup-

ported view of how business and companies formulate

their conduct in regulatory and compliance contexts and

how lawyers view their obligations to their clients and

the legal system.

State Farm Pet. 29. The purportedly skewed “factors” (actu-

ally standard and neutral tests for proving willful miscon-

duct) do not prejudge the conduct of petitioners or their at-

22

torneys because the Ninth Circuit did not reach the evidence,

much less find that petitioners acted willfully “as a matter of

law.” The court reached no conclusion as to how petitioners’

lawyers “view[ed] their obligations to their clients and the

legal system,” precisely because petitioners have not yet of-

fered any evidence of their lawyers’ advice. Indeed, for all

we know, their lawyers may have given proper direction on

how to follow the law, which petitioners disregarded.

The Ninth Circuit’s dicta concerning advice of counsel is

also not in conflict with Thurston, 469 U.S. at 128. In

Thurston, this Court concluded that the defendants had not

willfully violated the ADEA because defendants had offered

evidence that they had consulted with their attorneys in good

faith to determine if a retirement policy in a massive collec-

tive bargaining was proper. Thurston expressly held that “the

record makes clear that TWA officials acted reasonably and

in good faith in attempting to determine whether their plan

would violate the ADEA.” 469 U.S. at 129. Here, by con-

trast, there is no record of any petitioner’s consultations with

attorneys (whether in good faith or not), and the Ninth Cir-

cuit stated, consistently with Thurston, that “[a} company

will not have acted in reckless disregard of a consumers’

rights if it has diligently and in good faith attempted to fulfill

its statutory obligations and to determine the correct legal

meaning of the statute and has thereby come to a tenable, al-

beit erroneous interpretation of the statute.” 435 F.3d at 1099.

Petitioners also contend, without record support, that the

after-the-fact legal arguments they made to the district court

and the Ninth Circuit reflected the same legal advice on how

to comply with the FCRA that they received from counsel] at

the time of the conduct giving rise to the violations, and they

leap from that unfounded factual premise to the conclusion

that their reliance on counsel could not have been reckless or

even unreasonable simply because the district court later er-

roneously accepted their interpretation of “adverse action”

under FCRA (an interpretation held by the Ninth Circuit to

23

be contrary to the plain meaning of the Act). As support for

this argument, and to suggest a conflict with decisions of this

Court, petitioners cite Professional Real Estate Investors v.

Columbia Pictures Ass’n, 508 U.S. 49 (1993) (“PRET”),

which they say holds that a legal position accepted by a dis-

trict court cannot, as a matter of law, be unreasonable.

PREI, however, has no bearing on this case. PRE/ con-

cerns the “sham” exception to antitrust immunity and holds

only that judicial findings that a litigant has objectively rea-

sonable grounds for litigating preclude a finding that the liti-

gation was a sham. More generally, the PREJ Court ob-

served, in a footnote cited by petitioners, that a “winning

lawsuit” cannot be objectively unreasonable. /d. at 57 n.5.

But litigation in which a party’s arguments are rejected on

appeal can hardly be termed “winning.” Nowhere does PRE/

or any other case cited by petitioners hold that an after-the-

fact argument raised in litigation in defense to a statutory vio-

lation provides an absolute advice of counsel defense as long

as a district court initially (but erroneously) agrees with the

argument. Indeed, legal advice received after the conduct

cannot support a defense of lack of willfulness. Critikon, Inc.

v. Becton Dickinson Vascular Access, Inc., 120 F.3d 1253,

1259 (Fed Cir. 1997), cert denied, 523 U.S. 1071. (1998).

Petitioners also cannot cite a single case holding that a

defendant cannot be liable as a matter of law for a willful

violation on an issue of first impression, particularly where,

as here, the statute is unambiguous on its face, and there is

evidence that petitioners were instructed on how to comply

with the statute by specific FTC advisories, understood they

had to comply, and had notice from prior case law that dis-

cussed the issue without definitively deciding it.'°

'0 See e.g., FTC “Prescribed Notice of User Responsibilities,” 16

C.F.R. Pt. 601, App. C (stating in July 1997 that “adverse actions include

all business, credit, and employment actions affecting consumers that can

be considered to have a negative impact * * *”); March 1, 2000 letter

(Footnote continued)

24

_ In Reich v. Gateway Press, 13 F.3d 685, 701 (3d Cir.

1994), relied upon by petitioners, the Third Circuit affirmed

the district court’s conclusion that there was evidence that the

defendant reasonably believed it was complying with the law

and, therefore, was not willful. While the court noted that this

was an issue of first impression and considered that a factor

in determining willfulness, it did not hold that a defendant

can never willfully violate a statute unless that statute has

been previously interpreted. Such a sweeping conclusion

would give all regulated persons the right to violate any stat-

ute with impunity until it has first been interpreted by a court.

There is no case so holding and no conflict in either this

Court’s or the court of appeal’s case law on this point."

Finally, the evidence below, though not fully developed,

indicated that petitioners’ legal arguments in this litigation

were directly contrary to their understanding at the time of

their conduct. For instance, petitioner Hartford Fire argued to

from FTC’s Hannah Stires to James Ball (providing notice to insurance

companies in March 2000 that failing to offer best price or discount in

response to initial application for insurance was adverse action); FTC

Notice, “Consumer Reports: What Insurers Need to Know” (stating in

October 1998 that adverse action occurs when initial applicant denied

coverage at standard rates). See also Mick v. Level Propane Gasses, Inc.,

1999 WL 33453772 (S.D. Ohio 1999) (stating in the context of a class

action decision that offering an initial applicant less favorable credit

terms based on credit information may be adverse action under FCRA).

| Stevenson v. TRW, Inc., 987 F.2d at 296, notes that the defendant

did not have prior guidance that its notice of consumer nghts was defi-

cient, but it does not hold that the statute had to be interpreted by a court

first. In Flores v. Carnival Cruise Lines, 47 F.3d 1120, 1127 (11th Cir.

1995), the court exercised its discretion to deny punitive damages where

prior maritime law decisions provided no specific guidance to the defen-

dant. In Whitfield v. City of Knoxville, 756 F.2d 455, 463-64 (6th Cir.

1985), the court held that a defendants’ reliance on certain appellate rul-

ings was reasonable in light of a circuit-split that had not been resolved.

None of these fact-bound decisions holds that a defendant cannot, as a

matter of law, willfully violate a statute that has not been interpreted.

25

the district court and the Ninth Circuit that “an insurer does

not take ‘adverse action,’ ... when the insurer charges a spe-

cific insured an initial premium on a new policy that is higher

than the best rate available.” Hartford Resp. Br. 9. However,

at the time of the conduct at issue, Hartford Fire instructed its

agents that “(t]he FCRA, which is applicable in all states, re-

quires an adverse action notice for consumers not receiving

our best rate.”’” The record on review does not support peti-

tioners’ unsupported assumption that the after-the-fact legal

arguments that they made below necessarily reflected their

subjective understanding at the time they violated the FCRA.

Ii.THIS CASE LIKELY WILL NOT HAVE WIDE-

SPREAD IMPACT IN LIGHT OF DECISIONS

HOLDING THAT A RECENT FCRA AMEND-

MENT HAS PROSPECTIVELY ELIMINATED

THE CLAIMS ASSERTED HERE.

Contrary to petitioners’ predictions, there is substantial

doubt that these cases will have major ongoing impact in

light of recent decisions holding there is no longer a private

civil nght of action under section 1681n for violations of sec-

tion 1681m, the “adverse action” notice requirement. Peti-

tioners fail to inform this Court that at least eleven courts,

including the Seventh Circuit and several district courts

within the Ninth Circuit, have held that a 2003 amendment to

the FCRA, the Fair and Accurate Credit Transactions Act

(FACTA), eliminated private nghts of action for violations of

15 U.S.C. § 1681m that postdate FACTA. See 15 U.S.C.

1681m(h)(8)(A) (stating that section 1681n shall not apply to

violations of this section and providing exclusive enforce-

ment by federal agencies); Murray v. GMAC Mortg. Corp.,

434 F.3d 948, 950 (7th Cir. 2006); Putkowski v. Irwin Home

2 Attached to Appellants’ Response to Appellees’ Second Amended

Petition for Rehearing En Banc, Reynolds v. Hartford Fire, Ninth Circuit

Case No. 03-35695.

26

Equity Corp., 423 F.Supp. 2d 1053, 1061-62 (N.D. Cal.

2006); Phillips v. New Century Fin. Corp., 2006 WL 517653,

*3-4 (C.D. Cal. Mar. 1, 2006); White v. E-Loan, Inc., 409 F.

Supp. 2d 1183, 1187 (N.D. Cal. 2006); Harris v. Fletcher

Chrysler Prods., 2006 WL 279030, *3 (S.D. Ind. Feb. 2,

2006); Stavroff v. Gurley Leep Dodge, 413 F. Supp. 2d 962,

967 (N.D. Ind. 2006); Murray v. Household Bank (SB), 386

F. Supp. 2d 993, 999 (N.D. Ill. 2005); Bonner v. Home] 23

Corp., 2006 WL 1518974, *5 (N.D. Ind. May 25, 2006)

(“Bonner I’); Bonner v. CorTrust Bank, 2006 WL 1980183,

*3 (N.D. Ind. July 12, 2006) (“Bonner IT’); Crowder v. PMI

Mortgage Ins. Co., 2006 WL 1528608, *2-5 (M.D. Ala. May

26, 2006); Cavin v. Home Loan Ctr, 2006 WL 1313191

(N.D. Ill. May 10, 2006); but see Barnette v. Brook Road,

429 F. Supp. 2d 741, 748 (E.D. Va. 2006) (rejected in Bon-

ner I, Crowder, Bonner II, and Cavin).

As the Seventh Circuit explained in Murray:

A recent amendment to the Act abolishes private reme-

dies for violations of the clear-disclosure requirement,

which in the future will be enforced administratively,

but that change does not apply to offers made before its

effective date and thus does not affect this litigation.

See 117 Stat.1952, adding 15 U.S.C. § 1681m (h)(8).

434 F.3d at 950. Respondents take no position about the cor-

rectness of these decisions, but they at least cast serious

doubt on petitioners’ assertion that the Ninth Circuit’s deci-

sion will unleash a flood of new litigation under the FCRA.

While petitioners fail to mention these cases, they pro-

vide vague, misleading and incomplete citations to recently

filed cases that are intended to give this Court the mistaken

impression that there has been an explosion of litigation un-

der section 1681n(a)(1)(A) as a result of the Ninth Circuit’s

ruling. Petitioners’ purported support for such groundless

claims is merely a reference to dockets of cases in which

plaintiffs purportedly included a claim under section 1681n

of the FCRA without identifying which subsection is at issue.

27

Safeco Pet. 13, n.5; Hartford Pet. 23. These references fail to

demonstrate any connection between the Ninth Circuit’s

opinion and the recently filed cases. Undoubtedly, there have

been many cases filed under the FCRA in federal courts for

over thirty years because the statute regulates many different

entities, including, most comprehensively, the credit bureaus

that provide credit information. Petitioners’ attempt to attrib-

ute an increase in litigation to the Ninth Circuit’s opinion is

pure speculation. As noted above, it is more likely that there

has been or will be a decline in the filing of these types of

cases because the courts have held that the claims at issue

here have been eliminated by the FACTA.

IV. PETITIONERS’ REMAINING CHALLENGES TO

THE NINTH CIRCUIT’S RULING ON “AD-

VERSE ACTION” UNDER THE FCRA DO NOT

MERIT REVIEW.

State Farm and GEICO also seek review of the Ninth

Circuit’s interpretation of “adverse action” under the FCRA.

Neither State Farm nor GEICO contends that the Ninth Cir-

cuit’s statutory interpretation conflicts with the law of this

Court or any other circuit. As the Ninth Circuit correctly

noted, no other circuit has addressed the definition of “ad-

verse action” under section 1681a(k)(1)(B){i). Reynolds, 435

F.3d at 1091. Moreover, the Ninth Circuit’s interpretation is

consistent with the Sixth Circuit’s interpretation of a similar

notice provision in the Truth in Lending Act (“TILA”). See

Cornist v. B.J.T. Auto Sales, Inc., 272 F.3d 322, 327 (6th Cir.

2001) (holding TILA’s notice requirements are triggered

when a credit customer is charged more than he otherwise

would have been if he had paid in cash). State Farm and

GEICO do not provide any “compelling reasons” for review.

Their arguments are solely directed at correction of a sup-

posed error and without merit in any event.

28

A. State Farm Misinterprets the Statute.

The FCRA provides that an insurance company must give

notice if it takes an adverse action against any consumer

“based in whole or part on any information contained in a

consumer report.” 15 U.S.C. § 1681m (a). The definition of

“adverse action” includes “an increase in any charge, or a

reduction or other unfavorable change in the terms of * * *

any insurance, existing or applied for in connection with the

underwriting of insurance” 15 U.S.C. § 1681 a(k)(1)(B) (em-

phasis added). Thus, the definition includes an increase in

either a renewal or an initial applicant’s charge for insurance.

Eviscerating FCRA’s purpose of providing notice when con-

sumers are charged more based on the review of their private

credit information, the district court held that an increase

could only occur if an applicant initially applied for insur-

ance, received a premium quote, and then that initial quote

was later increased based on the applicant’s credit informa-

tion. State Farm continues to assert this position on review.

As the FTC made clear in an amicus brief before the

Ninth Circuit on this narrow issue, “[t]his is absurd since it

assumes that an insurer would make a formal offer of insur-

ance to a consumer and then, after making that offer, would

evaluate the consumer’s insurability.” FTC Amicus Br. 14

(filed in Ninth Circuit in Willes v. State Farm, Case No. 03-

35848). The Ninth Circuit agreed and correctly held that an

increase occurs when the consumer is charged more for in-

surance “based in whole or part” on credit information — in

other words, the consumer is entitled to notice if she would

have received a lower rate if she had a better qualifying

credit score or other relevant credit information. Reynolds,

435 F.3d at 1093.'° This holding is not radical. Indeed, this is

'3 State Farm misleadingly states that the Ninth Circuit requires no-

tice to everyone who does not have “perfect credit.” State Farm Pet. 18.

That is not the standard. The insurance companies themselves set the

credit scores at which consumers will be charged more for insurance, and

(Footnote continued)

29

the understanding that petitioner Hartford Fire, and likely all

petitioners, had when it instructed its agents that “[t]he

FCRA, which is applicable in all states, requires an adverse

action notice for consumers not receiving our best rate.” See

footnote 12, supra. It is also the position that the FTC staff,

well before this lawsuit, had taken for years based on a plain

reading of the statute. See footnote 10, supra. A contrary rule

would permit insurance companies to increase rates charged

millions of consumers for insurance, perhaps based on inac-

curate information, without giving consumers any notice or

opportunity to confirm that their rates were being increased

based on accurate information. Reynolds, 435 F.3d at 1092."

B. The GEICO Petitioners Misstate the Ninth Cir-

cuit’s Holding.

In an attempt to make the Ninth Circuit’s straightforward

statutory interpretation appear extreme, the GEICO petition-

ers simply misrepresent it. The GEICO petitioners argue that

the Ninth Circuit’s ruling requires that insurance companies

give notice to consumers “even though their credit informa-

do not require a perfect score for the best-rate. Thus, if an insurance com-

pany charges anyone who has a credit score under 700 (on a scale of 850)

more for their insurance, only those consumers are entitled to notice.

'* State Farm also contends that the Ninth Circuit erred in holding

one of its companies, State Farm Mutual, could be liable under FCRA,

because, it asserts, respondent Willes only applied to State Farm Fire. In

Reynolds, the Ninth Circuit, relying on the plain language of FCRA mak-

ing “any person” who takes an adverse action liable for a failure to give

notice, 15 U.S.C. § 1681m (a), held that when an insured seeks insurance

from a family of companies, and when each of them might have offered

insurance depending on the applicant’s credit score, each company may

be liable for violating FCRA’s notice requirements if an adverse action

(premium increase or denial of insurance) is not disclosed. 435 F.3d at

1095-97. The court applied this ruling in State Farm, holding that be-

cause State Farm Mutual denied Ms. Willes a policy because her credit

score was not higher, it could be liable under FCRA. State Farm does not

contend that this common-sense, fact-bound ruling is in conflict with any

other appellate decisions. The issue plainly does not merit review.

30

tion had either no impact or a favorable impact on the rates or

terms provided.” GEICO Pet. 25. The Ninth Circuit actually

held just the opposite: that notice is only required if a “con-

sumer pays a higher rate because his credit rating is less than

the top potential score.” Reynolds, 435 F.3d at 1093. That is,

the consumer is only entitled to notice when his premium is

increased above what it would have otherwise been “based in

whole or in part” on a review of his credit information.” 15

U.S.C. § 1681 m(a). In any event, GEICO’s incorrect conten-

tion that Edo somehow benefited from GEICO’s review of

his credit information, which resulted in a higher charge, is

truly a quarrel with the Ninth Circuit’ application of law to

fact, and not an issue meriting review here.

C. The Ninth Circuit’s Opinion Does Not Impose

New Notice Requirements Under the FCRA.

Finally, Hartford Fire, in an argument presented as an af-

terthought, contends that the Ninth Circuit imposed new no-

tice requirements on insurers. It did not. The Ninth Circuit’s

ruling on the adequacy of Hartford’s notices was based sim-

ply on the fact that “[t]hey did not tell [the insured] that any

adverse action had been taken against him” and thus did not

comply with a bedrock requirement on the face of the statute.

Reynolds, 435 F.3d at 1095. The Ninth Circuit’s further de-

scriptions of the statutory notice requirements are dicta that

merely restate and explain in plain English the notice re-

quirements set forth in section 1681m(a) of the FCRA. Hart-

ford Fire does not contend, and cannot, that there is any cir-

cuit conflict on this issue, any conflict with the precedents of

this Court, or any other proper reasons why this is an issue

worthy of this Court’s review. In any event, because the

Hartford petitioners are settling, there is no need to resolve

the issue in this case.

CONCLUSION

For the reasons stated above, the Petitions for Writs of

Certiorari should be denied.

Date: August 2006

Respectfully submitted,

ScoTT A. SHORR

Counsel of Record

N. ROBERT STOLL

STEVE D. LARSON

STOLL STOLL BERNE LOKTING

& SHLACHTER, P.C.

209 Southwest Oak Street

Suite 500

Portland, Oregon 97204

(503) 227-1600

ScoTT L. NELSON

PUBLIC CITIZEN LITIGATION

GROUP

1600 20th Street, N.W.

Washington, D.C. 20009

(202) 588-1000

Attorneys for Respondents

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