Helms v. Consumerinfo.Com, Inc.

• Decision Date: 14 February 2005
• Docket Number: No. CV 03 HS 1439 M.,CV 03 HS 1439 M.
• Citation: 436 F.Supp.2d 1220
• Parties: Ronald W. HELMS, individually and on behalf of all persons similarly situated, Plaintiff, v. CONSUMERINFO.COM, INC., a corporation, Defendant.
• Court: U.S. District Court — Northern District of Alabama

436 F.Supp.2d 1220

Ronald W. HELMS, individually and on behalf of all persons similarly situated, Plaintiff, v. CONSUMERINFO.COM, INC., a corporation, Defendant.

No. CV 03 HS 1439 M.

United States District Court, N.D. Alabama, Middle Division.

February 14, 2005.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

John G. Dana, Lowe Grammas Hitson & Dana LLP, Birmingham, AL, Peter A. Grammas, E. Clayton Lowe, Jr., William J. Trussell, Trussell & Funderburg, Pell City, AL, for Plaintiff.

Amy Payne, Jones Day, Dallas, TX, Jerome R. Doak, S. Andrew Kelly, Samuel H. Franklin, Lightfoot Franklin & White LLC, Birmingham, AL, for Defendant.

MEMORANDUM OF DECISION AND ORDER

HOPKINS, District Judge.

Introduction

The instant case calls upon the court to interpret and apply provisions of the Credit Repair Organization Act (hereafter "CROA"). The cornerstone of the parties' dispute is whether Consumerinfo.com, Inc., (hereafter "Defendant") qualifies as a "credit repair organization" as defined in the CROA. Within the Eleventh Circuit there is no published case law addressing application of the CROA, much less this specific issue. Although other federal courts have entertained suits based on the CROA, a large body of case law does not exist. Eugene J. Kelley, Jr., John L. Ropiquet & Andrea J. Durkin, The Credit Repair Organization Act: "The Next Big Thing?,"57 CONSUMER FIN. L.Q. REP. 49, 50 (2003). Accordingly, whether Defendant qualifies as a credit repair organization is an issue of first impression for this court.

Procedural Background

On June 17, 2003, pursuant to 15 U.S.C. § 1679g which allows for private causes of action, Ronald W. Helms (hereafter "Plaintiff') filed a putative class action for damages alleging Defendant violated § 1679b(b) of the CROA (Count One). Plaintiff also brought claims for unjust enrichment (Count Two), constructive trust (Count Three), and conspiracy (Count Four). Defendant answered on July 31, 2003, denying liability and asserting affirmative defenses. Nearly a year after the original complaint was filed, Plaintiff filed his first amended complaint. Plaintiffs amended complaint added to Count One violations of § 1679b(a)(3), § 1679b(a)(4), § 1679c, § 1679d, and § 1679e(b) and (c). Counts Two, Three, and Four were realleged and unamended.¹ Defendant answered, denied liability, asserted affirmative defenses, and contended that the CROA does not apply to it.

Defendant then moved to sequence the proceedings and requested that the court delay the previously scheduled hearing on class certification until it had ruled on both parties' summary judgment motions. By its November 22, 2004, order the court granted Defendant's motion and scheduled oral argument on summary judgment for February 7, 2005.² Now remaining before the court are Plaintiffs Count One for violations of the CROA and Count Two for unjust enrichment.³ The court has before it both parties' motions for summary judgment and accompanying evidentiary submissions therewith. In addition, the Court has received and reviewed the Plaintiffs opposition to Defendant's cross-motion for summary judgment and Defendant's reply thereto. Both motions are under submission.

Undisputed Factual Background⁴

In 1995, Edward Ojdana founded ConsumerInfo.com, Inc., the Defendant in this case. (Pl.Ex. B at 19). Defendant is a corporation which provides consumers with information allowing them to read, understand, and monitor their credit history. (Pl.Ex. C at 97; Def.App. I, Tab 1, ¶ 2). Mr. Odjana is the president of Defendant and oversees all the general operations of the corporation. (Def.App. 1, Tab 1, ¶ 1). Through websites, television, and radio, Defendant markets its products, which include: 1) credit reports, 2) credit scores, and 3) the "CreditCheck" credit monitoring service. (Pl.Ex. C at 28; Def. App. I, Tab 1, ¶ 8). More than three million consumers have purchased Defendant's services and products. (Pl.Ex. C at 280). These sales have generated approximately three hundred million dollars in revenue for Defendant. (Pl.Ex. B at 218).

Defendant offers its customers two varieties of credit reports: a single bureau report and a three bureau report. (Def.App. I, Tab 1, ¶10). A visitor to one of the Defendant's websites can purchase a single bureau report for $9.95. The report can be delivered by mail or viewed on line and is typically available the instant the customer enters his credit card information. (Def.App. I, Tab 1, ¶ 10). A three bureau report contains information from each of the three principle credit bureaus. The three bureau report costs customers $34.95 and is also viewable online or can be delivered by mail. (Def.App. 1, Tab I, ¶10, 11).

Defendant also provides its customers with credit scores. Credit scores are calculated using different formulas, depending on which credit bureau does the scoring. Credit scores are one factor that credit grantors use in determining a consumer's credit worthiness. Because the information on an individual's credit report may vary between the three principle bureaus, a customer may purchase a score from each bureau to compare his ratings. Defendant calculates a customer's score using computer software licensed from its parent company, Experian, and a "Credit-Check" member may purchase multiple scores for five dollars each. (Def.App. I, Tab 1, ¶ 12-13).

Finally, Defendant offers its customers the "CreditCheck" service, which allows a computer to monitor a customer's credit reports daily and to alert the customer to any irregularities or problems. (Def.App. I, Tab 1, 1115). In order to check his report as it is monitored, a customer must use his password and access a secure portion of Defendant's website, wherein he can check for any alerts. When Plaintiff purchased "CreditCheck" the alerts were provided monthly. (Def.App. I, Tab 1, ¶ 15). With the purchase of "Credit-Check," each customer is entitled to unlimited credit reports from Experian, one of the major credit bureaus. (Def.App. I, Tab 1, ¶ 16).

Defendant owns multiple websites,⁵ all of which pertain to credit matters and allow site visitors to obtain information on their own credit or purchase one of Defendant's products. (Def.App. I, Tab 1, ¶ 7). When a customer visits one of Defendant's websites, all of the information on the initial "level" is free. (Def.App.I, Tab1, ¶ 28-33). The second "level" is for members only and can be accessed by any customer who purchases the "CreditCheck" service. (Def.App.I, Tab1, ¶ 37). When a customer chooses to enroll in the "CreditCheck" program he is subject to a free trial, during which he has access to all the materials on the website free of charge, and may cancel at no cost during the first thirty days. (Def.App. I, Tab 1, ¶ 18).

In order to market its products better, Defendant enters agreements with "partners," such as Yahoo! and Google. (Pl.Ex. C at 32). Defendant pays fees to its partners for certain key words. Whenever a site visitor runs a search containing those key words, Defendant's partner's website will list Defendant's website as a "sponsored result." (Pl.Ex. D at 33).

Defendant's website, among other things, provides visitors with advice on how to manage their credit. Specifically, Defendant's website advises consumers that they can "[a]ctively Monitor and Manage" their credit by paying bills on time and by keeping a close watch for inaccuracies in their credit history. (Pl.Ex. H at 1). Defendant's website promotes its product "CreditCheck" as a good way to keep track of one's credit history. (Pl.Ex. H at 1). For those customers who choose to purchase a membership, which includes the "CreditCheck" service, Defendant's website offers "expert" advice on how to dispute inaccuracies on a credit report. (Pl.Ex. N at 1). These customer service "experts" are not necessarily trained to know what kind of information creates a negative credit rating. In general, the "experts" are trained to know what a credit file is and who keeps track of the reports. They are also informed that customer information is very private and should be kept secure at all times. (Pl.Ex. C at 208). Because the majority of the customer interaction is automated, in most instances Defendant's representatives do not actually see any of the customer's credit information. (Def.App. I, Tab 1, ¶ 24). Defendant's website also advises against using so-called "credit repair" clinics and tells customers that an individual can accomplish anything a credit repair clinic can for free. (Pl.Ex. H at 1). In addition the website also warns that many "credit repair" clinics are frauds and are under investigation by the FTC. (Pl.Ex. H at 1).

Ronald Helms, the Plaintiff in this case, has a history degree from Livingston University.⁶ (Def.App. III, Tab 27 at 12). Plaintiff owned his own insurance business from 1979 until 1998, when his company was purchased by Union State Bank. (Def.App. III, Tab 27 at 22, 24). Even after Union State Bank purchased his insurance company, Plaintiff retained his position as president, which he currently still occupies. (Def.App. III, Tab 27 at 25). Plaintiff pays his credit card bills on time each month and does not carry a balance on any of his credit cards. (Def.App. III, Tab 27 at 36-37).

In 2002, Plaintiff became aware that there was a problem with his credit report involving an account with Cingular Wireless. (Def.App. III, Tab 27 at 37-40). In an attempt to remove the erroneous Cingular charge from his credit report, on February 28, 2003, Plaintiff visited Defendant's website ConsumerInfo.com and purchased the "CreditCheck" computer monitoring service. (Def.App. III, Tab 27 at 134; Tab 26, ¶ 3). In connection with his purchase, Plaintiff received a credit report and viewed it on Defendant's website. (Def.App. III, Tab 27 at 98, 115). Plaintiff also received an email confirming his purchase of "CreditCheck," and outlining the other benefits included with his purchase of a membership in Defendant...