U.D. Registry, Inc. v. State

• Decision Date: 30 October 2006
• Docket Number: No. B186012.,No. B179653.,B179653.,B186012.
• Citation: 144 Cal.App.4th 405,50 Cal.Rptr.3d 647
• Court: California Court of Appeals Court of Appeals
• Parties: The U.D. REGISTRY, INC., Plaintiff and Appellant, v. The STATE of California et al., Defendants and Appellants. The U.D. Registry, Inc., Plaintiff and Respondent, v. The State of California et al., Defendants and Appellants.

50 Cal.Rptr.3d 647

144 Cal.App.4th 405

The U.D. REGISTRY, INC., Plaintiff and Appellant, v. The STATE of California et al., Defendants and Appellants.

The U.D. Registry, Inc., Plaintiff and Respondent, v. The State of California et al., Defendants and Appellants.

No. B179653.

No. B186012.

Court of Appeal, Second District, Division 5.

October 30, 2006.

Certified for Partial Publication.^*

As Modified October 30, 2006.

Jocobson, Russell, Saltz & Fingerman, Michael J. Saltz, Keri Rochelle Montrose, and Mark E. Fingerman, Los Angeles, for

Plaintiff and Appellant and Plaintiff and Respondent.

Bill Lockyer, Attorney General, Albert N. Shelden, Senior Assistant Attorney General, Ronald A. Reiter, Supervising Deputy Attorney General, Susan Henrichsen, and Robyn C. Smith, Deputy Attorneys General, for Defendants and Appellants.

TURNER, P.J.

I. INTRODUCTION

Plaintiff, the U.D. Registry, Inc., and defendants, the State of California and Attorney General Bill Lockyer, appeal from a September 9, 2004 judgment. Defendants separately appeal from an April 13, 2005 post-judgment order awarding plaintiff attorney fees. Plaintiff is a credit reporting agency that provides consumer credit reports to landowners who rent and lease apartments and property managers. Plaintiff sought declaratory relief and to enjoin enforcement of California Civil Code¹ section 1785.11.2 on federal and state constitutional free speech grounds. Section 1785.11.2 is known as the "security freeze" law; it allows California consumers to prevent the dissemination of their credit reports. Plaintiff argues section 1785.11.2 violates its First Amendment right to disseminate consumer credit reports containing truthful, lawfully obtained information; much of it secured from federal and state court records. The trial court ruled the security freeze law was unconstitutional with respect to information included in the consumer credit reports that is culled from public records. The trial court's injunction only enjoined defendants from disclosing information contained in "and/or" obtained from matters of public record. Otherwise, apart from public record information, section 1785.11.2 remained in full force and effect. We conclude that section 1785.11.2 is unconstitutional as applied to plaintiff who, the agreed facts prove, provides credit reports drawn in material part from public records including court documents. And we find section 1785.11.2 cannot be judicially reformed. In this regard, plaintiff is entitled to prevail on its constitutional claims on an as applied basis. But we do not believe section 1785.11.2 is invalid in its entirety and thus part company with plaintiff in this regard. We reverse the judgment and direct entry of an injunction against defendants insofar as they attempt to enforce section 1785.11.2 against plaintiff. We also reverse the judgment insofar as it barred enforcement of section 1785.11.2 against any other party. In the unpublished portion of the opinion, we affirm the attorney fee award.

II. BACKGROUND

A. Plaintiffs Declaratory and Injunctive Relief Action

Plaintiff is a credit reporting agency that issues consumer credit reports within the meaning of section 1785.3, subdivisions (c)² and (d)³ of the California Consumer Credit Reporting Agencies Act (the act). (§ 1785.2 et seq.) Plaintiff collects credit-related public record information about individuals including unlawful detainer, foreclosure, bankruptcy, and tax lien data. Plaintiff sells consumer credit reports to its members—landowners, property managers, and others. Plaintiffs members consider the reports in deciding whether to lease real property to prospective tenants. The members agree in advance not to use the reports for any other purpose nor to disclose the information contained therein to others. Plaintiffs database includes records "on tens of millions of prospective tenants" in California and several other states. Plaintiff also resells credit reports from the three major credit reporting agencies in the United States— Trans Union, Experian, and Equinox; those reports include identifying information and employment and credit histories. The stipulated facts stated: "In order to assist landlords, property [managers] and others determining the eligibility of a consumer for hiring real property, [plaintiff] maintains a database of various real estate related public records. These public records consist of: unlawful detainer court cases, judicial foreclosure cases, non-judicial foreclosures, federal bankruptcy cases, federal and state tax liens from the County Recorder's office, criminal court matters and other federal and state civil court cases related to real estate issues. [Plaintiff] maintains these public records on tens of millions of prospective tenants throughout the state of California and several other states." The stipulated facts also state: "In addition ..., such reports also include identification information; a record of inquiries (all who have asked for the consumer's report in the last year, or last two years if for employment purposes); a summary of the information contained in credit reports obtained by [plaintiff] from Trans Union, Experian, and/or Equifax; and an unabridged report on all reported credit activity. Credit reports obtained from Trans Union, Experian, and/or Equifax typically include identification and employment information and credit history, including creditor's name, payment history and nature and limit of credit."

Plaintiffs website advertised that customers were provided an "Eviction/Tenancy Report" which contains: an "Eviction Case Search"; a "Foreclosure Search" which includes judicial foreclosure of mortgages and liens and trustee and bank foreclosures; a "Bankruptcy Search" which consists of bankruptcy petitions filed in federal court; information as to whether the applicant has been an "Arrieta Claimant" or previously involved with one; a "residence history" which involves a person who has been evicted; tenant history supplied by prior landlords; existing arrest warrants; whether an applicant has a history as a vexatious litigant; a full unabridged report of all reported credit history; compilation of all reported civil judgments; a complete list of all tax liens; reported collection agency activity; and out of state credit history. Also, the website explains a detailed demographic profile presumably for rental applicants will be prepared which includes: addresses; past addresses; social security numbers; verification of social security numbers; employers; wage and occupation; age; and birth dates. According to the stipulated facts, in order to change its computer system so as to comply with section 1785.11.2, plaintiff would incur in excess of $50,000 in costs.

Plaintiff commenced this declaratory and injunctive relief action against defendants on December 19, 2002. Plaintiff sought an injunction against enforcement of section 1785.11.2. Plaintiff also requested a declaration that: "[section 1785.11.2] violates the First and Fourteenth Amendments of the [United States Constitution] and Article 1, Sections 2 [free speech] and 7 [equal protection] of the California Constitution and [is], therefore, null and void; plaintiff is not required to comply with its terms and provisions"; and the "State of California, and Attorney General, Bill Lockyer[,] be enjoined from enforcing [section 1785.11.2] against [p]laintiff and others similarly situated." As can be noted, the complaint seeks a generalized determination section 1785.11.2 is unconstitutional (a facial challenge) and a request defendants be enjoined from enforcing section 1785.11.2 against plaintiff (an as applied challenge).

After the trial based on the foregoing stipulated facts, the trial court ruled: "1. The operation of California Civil Code Section 1785.11.2 (`Freeze Statute') is permanently enjoined to the extent that the Freeze Statute seeks to prevent the dissemination and reporting by consumer credit reporting agencies of any information contained in and/or obtained from matters of public record, and to the extent that it seeks to preclude [p]laintiff from disseminating and reporting information contained in the public record; [¶] 2. Defendants and all persons in active concert and participation with them be, and hereby are, permanently enjoined from enforcing the Freeze Statute to the extent that the Freeze Statute seeks to prevent the dissemination and reporting by consumer credit reporting agencies of any information contained in and/or obtained from matters of public record, and to the extent that the Freeze Statute seeks to preclude [p]laintiff from disseminating and reporting information contained in the public record; [¶] 3. The Freeze Statute violates both the First Amendment to the United States Constitution and Article I Section 2 of the California Constitution and is generally overbroad and violates equal protection to the extent that the Freeze Statute seeks to prevent the dissemination and reporting by consumer credit reporting agencies of information contained in and/or obtained from matters of public record, and to the extent that the Freeze Statute seeks to preclude [p]laintiff from reporting information contained in the public record; [¶] 4. Plaintiff is not required to comply with the Freeze Statute to the extent that the Freeze Statute seeks to preclude [p]laintiff from reporting any information contained in and/or obtained from matters of public record. [¶] Objections overruled." As can be noted, the trial court made two determinations. The trial court ordered defendants not to enforce section 1785.11.2. But the judgment also enjoined enforcement of section 1785.11.2 against plaintiff. As will be noted, we uphold the injunction against the enforcement of section 1785.11.2 as to plaintiff. But as to the generalized injunction against enforcement of section 1785.11.2 as to anybody else, we reverse the injunctive order.

B. The...