Credit Bureau Servs., Inc. v. Experian Info. Solutions, Inc.

• Decision Date: 07 December 2012
• Docket Number: Case No. 12-61360-CIV-ROSENBAUM/SELTZER
• Parties: CREDIT BUREAU SERVICES, INC., a Florida corporation, Plaintiff, v. EXPERIAN INFORMATION SOLUTIONS, INC., an Ohio corporation, and CORELOGIC, INC., a Delaware corporation, Defendants.
• Court: U.S. District Court — Southern District of Florida

CREDIT BUREAU SERVICES, INC., a Florida corporation, Plaintiff,

v. EXPERIAN INFORMATION SOLUTIONS, INC., an Ohio corporation,and CORELOGIC, INC., a Delaware corporation, Defendants.

Case No. 12-61360-CIV-ROSENBAUM/SELTZER

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF FLORIDA

Date: December 7, 2012

ORDER ON DEFENDANTS' JOINT MOTION TO DISMISS

AND JOINT MOTION TO TRANSFER VENUE

This matter is before the Court on Defendants Experian Information Solutions, Inc., and CoreLogic, Inc.'s Joint Motion to Dismiss [D.E. 20], Joint Motion to Transfer Venue [D.E. 29], and Joint Motion to Consider Joint Motion to Transfer Venue Before Joint Motion to Dismiss [D.E. 30]. The Court has reviewed all supporting and opposing filings and the record and has heard argument on all three motions. After careful consideration, the Court now denies the Joint Motion to Consider Joint Motion to Transfer Venue Before Joint Motion to Dismiss [D.E. 30] and grants the Joint Motion to Dismiss [D.E. 20] and the Joint Motion to Transfer Venue [D.E. 30], for the reasons set forth below.

I. Background

A. Consumer Credit Reports and the Mortgage Industry

Experian Information Solutions, Inc. ("Experian"), is a "consumer reporting agency thatcompiles and maintains files on consumers on a nationwide basis," as those terms are defined by Section 603(p) of the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. § 1681a. D.E. 1 at ¶ 6. The other two companies that engage in this same activity include only Equifax, Inc. ("Equifax"), and TransUnion, LLC ("TransUnion"). Id.

Experian, Equifax, and TransUnion, which are sometimes referred to as "repositories," supply consumer credit information to end users, such as banks, and to companies that resell the information to end users. See id. at ¶ 35. More specifically, consumer reporting agencies ("CRAs") purchase the credit information from the repositories, assemble or evaluate the information, and furnish it to end users. Id. at ¶ 28 (quoting 15 U.S.C. § 1681a(f)). Credit-report resellers are CRAs that "assemble and merge information contained in the database of another consumer reporting agency or multiple consumer reporting agencies . . . for purposes of furnishing such information to any third party" but "do[] not maintain a database of the assembled or merged information from which the new consumer reports are produced." Id. at ¶ 32 (quoting 15 U.S.C. § 1681a(u)).

CRA resellers can sell information obtained from a single repository or from multiple repositories. "[T]ri-merged credit reports" are specialized credit reports that include consumer credit data from all three repositories and that are sold at retail to qualified end users by CRA resellers. Id. at ¶ 37.

In the mid-1990s, government-sponsored entities ("GSEs"), including the Federal National Mortgage Administration, the Federal Home Loan Mortgage Corporation, and agencies of the United States Department of Housing and Urban Development, introduced automated underwriting of the residential-real-estate-lending market. Id. at ¶ 41. The GSEs' underwriting standards require the use of tri-merge credit reports where feasible. Id.

B. The Events at Issue in This Case

This matter arises out of a dispute between Defendant Experian and Plaintiff Credit Bureau Services, Inc. ("CBS"), a former customer of Experian's and a CRA reseller of information obtained and maintained by Experian and its two competitor repositories. Because tri-merged credit reports are, more or less, necessary for underwriting in residential real estate, CBS asserts, each of the three repositories whose information is required for the creation of a tri-merged credit report enjoys what is effectively monopoly market power. See D.E. 1 at ¶¶ 41-42, 66 -67. In order to maintain this alleged monopoly, CBS avers, Experian has engaged in conduct to discourage others either from becoming repositories or from lobbying the GSEs to relax the tri-merged credit report requirements. See id. at ¶¶ 44 - 66.

Essentially, CBS complains that in order to preserve its alleged monopoly position, Experian conspired with Defendant CoreLogic, Inc. ("CoreLogic"), a CRA reseller that competes with CBS, to knock out of the market approximately 87% of other CRAs that were previously in the business of selling tri-merged credit reports, thereby eliminating CoreLogic's competition. As a payoff for this alleged plan, CoreLogic would neither attempt to enter the repository market nor try to convince the GSEs to dilute their tri-merged credit report requirement, and Experian would maintain its purported monopoly position in the tri-merged credit report supply market.

1. The Relationship Between Defendants Experian and CoreLogic

In support of this theory, CBS traces the history of the relationship between Defendants Experian and CoreLogic. According to the Complaint, in 2003, CoreLogic's predecessor, First American, operated the Credit Information Group ("CIG"). Id. at ¶ 14. CIG consisted of several CRA resellers engaged in credit reporting. Id. In particular, CIG's mortgage credit-reportingbusiness, which consisted of First American Credco ("Credco"), a CRA retailer, was owned by First American Real Estate Solutions, LLC ("FARES"). Id.

On about June 5, 2003, CIG spun off some of its businesses, which became First Advantage Corporation ("First Advantage"), a diversified CRA reseller. Id. at ¶ 15. Almost two years later, on about March 22, 2005, First American initiated a transaction to transfer the rest of CIG to First Advantage, resulting in First American's obtaining of an 80% ownership interest in First Advantage. Id. at ¶ 16. In connection with this 2005 reorganization, First American soon thereafter acquired Experian Real Estate Services ("Experian Real Estate"), a mortgage CRA reseller and real-estate services company that had been wholly owned by Experian, to be organized as a subsidiary of Credco and owned by FARES. Id. at ¶ 17. At that point, Experian owned a 20% interest in FARES and enjoyed certain governance authority. Id. According to the Complaint, Experian agreed to refrain from competing with FARES in the retail mortgage credit-reporting business. Id. Experian later withdrew from FARES in December 2010. Id. at ¶ 18.

In the meantime, on about November 17, 2009, First American increased its ownership interest in First Advantage to 100% by acquiring the remaining outstanding equity in the company. Id. at ¶ 19. The following year, in 2010, First American obtained the outside interests (including Experian's) in FARES, and it consolidated its interests with First American's other information businesses into Defendant CoreLogic. Id.

At various times, individuals who held positions of leadership at Experian occupied official positions at CoreLogic and its predecessors and associated companies. In this regard, Experian Chief Executive Officer Donald A. Robert, who has served in that position since 2005, was previously employed from 1995 to 2001 as the president of Credco. Id. at ¶ 23. Similarly, during the eventsalleged in the Complaint, which began shortly after the 2005 reorganization, Daniel Hegarty served as an Experian executive with direct responsibility for Experian's relations with CBS, other mortgage CRAs, and other resellers. Id. at ¶ 24. Before joining Experian, Hegarty was employed by First American as the Vice President of Operations and Director of Mortgage Credit Reporting of First American Credco. Id.

2. The March 22, 2005, Investor Conference Call Presented Jointly by First American and First Advantage

On March 22, 2005, the president of First Advantage, Anand Nallathambi (now CEO of CoreLogic), and the CEO of First American, Parker Kennedy, appeared on an investor conference call to discuss the reorganization of the companies and plans for the transfer of First American's CIG to First Advantage. D.E. 1 at ¶ 20. A transcript of this conference call cited by CBS quotes Nallathambi and Kennedy as making the following remarks during the course of the conference call:

Nallathambi: Okay, we do have a very good relationship with Experian and they are a supplier and our partner. And there are times when we do decide that we need to compete and if there is an opportunity to partner, that would be our first option. We did partner with them in the (inaudible) Title Insurance venture. They are 50% owner of that venture with us. So I would say any opportunity we have, if it is not in their core business where they would compete with us, we would look to partner with them.

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Nallathambi: We do our thing and they do their thing. We don't necessarily, if we are going after a credit-based company, we just go after them, do the best that we can. And some we win; some we don't win. And the way we get together mostly on business ideas and innovative solutions and if it makes sense, then we get together.

Kennedy: . . . I might add that by contract, we have the exclusive right to acquire mortgage related companies and compete in that arena exclusively.

Analyst: . . . . I guess now that First Advantage is a different profile than FARES though. And I just think that you would be running into similar acquisitions that you both might want to do, but okay.

Kennedy: By and large, we don't bump into each other. We do have similar businesses to be sure, but we really haven't had any conflicts.

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Analyst: All right, the minority interest [in First American], is that the $85m you had last year in minority interest, can you break that out between sectors? . . . Is the majority of that other than the First Advantage portion, is the rest of that joint ventures [sic] with Experian?

Kennedy: Yes it is. Experian fundamentally owns 20% of mortgage information, property information, and credit. That's a little bit of an oversimplification, but that's fundamentally the case. So they own a big part of our Company.

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Nallathambi: . . . [T]alking about securing and integrity of data and privacy and the permissibility of its use is really

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