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Cortez v. Trans Union

August 13, 2010


On Appeal from the United States District Court for the Eastern District of Pennsylvania (Civ. No. 05-cv-5684) District Judge: Hon. John P. Fullam.

The opinion of the court was delivered by: McKEE, Chief Judge.


Argued: June 11, 2009

Before: McKEE, Chief Judge, HARDIMAN and VAN ANTWERPEN, Circuit Judges.


Sandra Cortez appeals the district court's order remitting a jury's punitive damages award of $750,000 to $100,000 on claims she brought under the Fair Credit Reporting Act ("FCRA"), codified at 15 U.S.C. §§ 1681-1681x.*fn1 In its cross-appeal, Trans Union, LLC appeals the district court's order denying its motion for judgment as a matter of law and rejecting Trans Union's challenge to the jury's compensatory damages award of $50,000. For the reasons that follow, we will affirm the district court's orders.*fn2


A. Factual History

This dispute began when Cortez encountered problems with a credit report that Trans Union sent to a car dealership where she was trying to purchase a car. It stemmed from a Trans Union product called "OFAC Advisor" that confused Cortez's identity with the identity of someone with a similar name who was on a list compiled by the Treasury Department's Office of Foreign Assets Control ("OFAC").

We will discuss the OFAC List and Trans Union's related product in greater detail below. We note now that OFAC administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals against threats to the national security, foreign policy, or economy of the United States. Those sanctions are aimed at specific regimes, individuals thought to be terrorists, international narcotics traffickers, as well as persons involved in activities related to the proliferation of "weapons of mass destruction." (visited on June 17, 2010).

OFAC maintains and publishes a list:

[a]s part of its enforcement efforts, OFAC publishes a list of individuals and companies owned or controlled by, or acting for or on behalf of, targeted countries. It also lists individuals, groups, and entities, such as terrorists and narcotics traffickers designated under programs that are not country-specific. Collectively, such individuals and companies are called "Specially Designated Nationals" or "SDNs." Their assets are blocked and U.S. persons are generally prohibited from dealing with them. ml#17 (visited on June 17, 2010). The persons and organizations in OFAC's Specially Designated Nationals & Blocked Persons List ("SDN List") are so designated pursuant to a patchwork of federal laws, regulations, and executive orders. See, e.g., 31 C.F.R. §§ 536.101-36.901 (Narcotics Trafficking Sanctions Regulations) & 594.101-94.901 (Global Terrorism Sanctions); Exec. Order No. 13,399, 71 Fed. Reg. 25,059 (April 25, 2006) (Blocking Property of Additional Persons in Connection With the National Emergency With Respect to Syria).*fn3 Individuals and businesses in the United States are generally prohibited from conducting any business with anyone named on OFAC's SDN List. See, e.g., 31 C.F.R. § 536.201 ("[N]o property or interests in property of a specially designated narcotics trafficker that are in the United States . . . may be transferred, paid, exported, withdrawn or otherwise dealt in.").*fn4 Trans Union describes its product, the OFAC Advisor, which is also discussed in greater detail below, as a "screening solution that provides credit grantors with a simple, automatic method for use in complying with new federal regulations as set forth in the USA PATRIOT Act." J.A. 808.

Sandra Cortez was born in 1944 in Chicago. She was living in Colorado when, in March of 2005, she decided to buy a new car. Before visiting a car dealer, she decided to check her credit report to learn her credit score. Her score was approximately 760, which is a very good credit rating. J.A. 80; see also J.A. 526-27 (listing Cortez's score as 761 in the credit report obtained by the dealership);*fn5 (visited on June 17, 2010). The credit report that Cortez downloaded before going to the car dealership was compiled and furnished by Trans Union, one of the three major companies providing credit reports in the United States. That report contained no information about OFAC's SDN List and did not suggest that Cortez was a "Specially Designated National" or SDN, nor did it contain any information that would suggest that she was suspected of being associated with anyone who was an SDN.*fn6

Cortez planned to finance her car purchase through the dealership. Armed with knowledge of her strong credit score and a copy of her credit report, Cortez went to John Elway Subaru a car dealership in Colorado, to purchase a car. She arrived at the dealership at approximately 1:00 pm and was ready to proceed with a purchase about thirty minutes later. She began completing the required paper work and furnishing the information required to obtain a car loan through the dealership. The dealership's finance manager, Tyler Sullivan, used the information Cortez provided to obtain Cortez's credit report.

J.A. 468. It was a Trans Union credit report because the dealership subscribed to Trans Union's credit reporting services, including the OFAC Advisor. Unlike the credit report Cortez had downloaded before going to the dealership, the Trans Union credit report that the dealership obtained contained what Sullivan later referred to as an "advisor alert," which was an alert from the OFAC Advisor. J.A. 471.

This was the first time that Sullivan had ever seen such an alert. Id. He called the regional finance director to determine how he should respond. J.A. 472-73. He then went to OFAC's SDN List on the Treasury Department's website "to check [Cortez's] name against the actual list." J.A. 473. In searching the list, he first "look[ed] for a matching name" and if there was a match, he planned to check birth dates. J.A. 474.*fn7

Sullivan then returned to Cortez and started asking her questions including whether she had "always lived in the United States, if [she] had ever lived outside of the country" and other "really strange questions." J.A. 83. He then showed Cortez the credit report Trans Union had provided to the dealership. When she looked at it, she saw that "it had all of these OFAC Alerts, talk alerts." Id. Cortez was very confused, she explained to Sullivan that she had "never been out of the country and that [she] was born in Chicago." Id. Sullivan responded by telling Cortez that "he was going to have to check with the FBI . . . [t]o see if [she] was this person" in the OFAC alert on her credit report. J.A. 84. As this was occurring, Cortez was waiting in the salesperson's office, and the dealership had her car keys. Id. Finally, at about 5:00 pm, Cortez said she had to leave, but someone asked her to wait.*fn8 J.A. 84-85. When she asked what the person was going to do, again she was told that the FBI would be called. At this point, hours had passed and the dealership was holding Cortez's down payment on the car. Id.

A short time later, Cortez finally left the dealership. She called the dealership that same evening and was told that they had determined that she "probably" was not the person in the OFAC alert, and that she could pick up the car. J.A. 85. That evening, she did go back to the dealership and she eventually got the car.*fn9 Before leaving the dealership with her new car, she asked for a copy of the credit report that the dealership had received from Trans Union. The dealership provided a copy, and pointed out the OFAC and HAWK alerts on the report.*fn10

That credit report was a two-page document entitled: "TRANSUNION CREDIT REPORT." J.A. 526-27. It contained identifying information about Cortez including her name, Social Security number, birth date, current and former addresses, telephone number, and employer. A number of sections appeared directly below that information in the same font and style. The first such section was labeled: "SPECIAL MESSAGES." That "SPECIAL MESSAGES" section contained the OFAC and HAWK alerts. It was followed by: "MODEL PROFILE," which contained several numbers including Cortez's FICO credit score. The report then contained the following four sections: "CREDIT SUMMARY", "TRADES", "INQUIRIES", and "END OF CREDIT REPORT - (follow "Consumer Support" hyperlink; then follow "Get answers to your questions" hyperlink under "Related Topics"; then search "Answers" for key words "Hawk alert"; then follow "What is a HAWK alert?" hyperlink) (last visited June 1, 2010). As the above citation shows, getting information other than sales information is cumbersome at best on Trans Union's website.


The "SPECIAL MESSAGES" section on the first page stated: "HAWK ALERT:

INPUT ISSUED: 1959-60; STATE: CA; (EST. AGE OBTAINED 00 TO ) . . . HAWK ALERT: FILE ISSUED: 1959-60; STATE CA; (EST. AGE OBTAINED TO )." This was followed by eight entries titled: "OFAC ADVISOR ALERT -- INPUT NAME MATCHES NAME ON THE OFAC DATABASE." The information in those eight entries was similar to the information in OFAC's SDN List, including the name: "Cortes Quintero, Sandra." J.A. 526-27.

That report is not visually the same as the report Trans Union provides to consumers. It also does not have the same exact content. The report that was sent to the dealership contained no additional information about the significance of the OFAC alerts and no information about how to follow up or contact anyone regarding any OFAC alerts that may appear.

J.A. 187-89.

In the aftermath of her visit to the car dealership, Cortez contacted Trans Union a total of four times in an effort to correct her credit report. J.A. 199. She first telephoned Trans Union on March 31, 2005, soon after she purchased the car.

J.A. 93. On that day, she spoke with Trans Union's customer service representatives who told Cortez that there were no OFAC alerts on her credit report. J.A. 207. Cortez responded by faxing a copy of the report she had obtained from the dealership along with a letter that summarized her experience there. J.A. 93. In that letter, she told the customer service representative that she had spent a total of six and a half hours in the dealership, that she was told the FBI would have to be contacted, and that she was asked not to leave while the dealership looked into the issue. J.A. 94-95; J.A. 533.

On April 6, 2005, not having received any response to her letter, Cortez sent another letter to Trans Union. J.A. 96; J.A. 219; J.A. 534. In that letter, she again explained that there were "several terrorist alerts" on her credit report and she asked for "a response from [the] company regarding these alerts." J.A. 96-97. Cortez received a generic written response to that letter. The letter she received was dated April 18, 2005, and was unsigned. It stated:

After reviewing your correspondence, we were unable to determine the nature of your request. To investigate information contained in your credit report, please list the account name and number, and specify why you are disputing it (for example, "this is not my account", "I have never paid late", "I have paid this account in full", etc.). Unless you provide us this information, your request will be considered frivolous under the federal Fair Credit Reporting Act, and we will be unable to initiate an investigation.

J.A. 537. By letter dated April 24, 2005, Cortez responded to Trans Union's April 18, 2005 letter. J.A. 99. She included copies of her prior correspondence and explained, "[w]ith this letter, this makes my fourth request to have this incorrect information removed from my credit report. If you look at the credit report enclosed you will notice 10 Hawk and OFAC Advisor alerts. . . . I am disputing these alerts because they do not belong to me. The name is different, the birthdate is different and I do not have a passport. I want these alerts removed from my account." J.A. 539. Cortez also notified Trans Union a second time that it had the wrong employer listed for her. Id. Cortez received a response from Trans Union dated May 10, 2005. Under the heading "Re: Dispute Status - No Hawk Alerts or OFAC Advisor Alerts," the letter stated, "[b]ased on the information provided to TransUnion, our records show that the information you disputed does not currently appear on your TransUnion credit report." J.A. 545.*fn11

Based on this letter, Cortez believed that Trans Union had removed the HAWK and OFAC alerts from her credit report.

J.A. 102.

On June 3, 2005, Cortez returned to the dealership and asked for another credit report in order to confirm that the alerts had in fact been removed. Despite Trans Union's representation to the contrary, the credit report the dealership furnished to Cortez still had OFAC alerts. J.A. 103. There were, however, some changes from the report that had initially been sent to the dealership the day Cortez went to buy a car. The June 3, 2005 report no longer had the phrase: "HAWK ALERT." Instead, the report now stated: "HIGH RISK FRAUD ALERT: CLEAR FOR ALL SEARCHES PERFORMED." J.A. 546. It still stated: "OFAC NAME SCREEN ALERT - INPUT NAME MATCHES NAME ON THE OFAC DATABASE." Id. It then had four entries with information from OFAC's SDN List (as opposed to eight in the original credit report furnished by the dealership).

Cortez next went online to the Treasury Department website to determine whether her name actually appeared on OFAC's SDN List. She discovered a similar name and emailed the Treasury Department to ask how she might correct the error and remedy her situation. J.A. 104-05. The Treasury Department referred her to information on its website, which she later testified stated the following:

If credit bureaus choose to place OFAC information on their credit reports [sic] they should consider the following guidelines. The text on the report should explain that the individual's information is similar to the information of an individual on OFAC's SDN list. It should not state . . . that the information matches, or that the credit applicant is, in fact, the individual on the SDN list unless the credit bureau has already verified that the person is indeed on the SDN [list].

J.A. 106-07.

In June of 2006, a landlord pulled Cortez's Trans Union credit report when she tried to rent an apartment. Cortez told him about the OFAC alerts before he reviewed the credit report, in an effort to explain and minimize their effect. That credit report, dated June 12, 2006, was substantially similar to the second report Cortez had received from the dealership more than a year earlier. J.A. 549-51. Although it did not contain any "HAWK ALERT" messages, it still stated, "OFAC NAME SCREEN ALERT -- INPUT NAME MATCHES NAME ON THE OFAC DATABASE". Id. It also still had four entries with information from OFAC's SDN List. Nevertheless, Cortez was able to rent the apartment. J.A. 112.

From the first day in Elway Subaru, when Cortez learned about the OFAC alerts on her credit report, Cortez spoke with her daughter, Anna Marie Schen, about her ordeal. J.A. 141. The OFAC alerts came up at least once during every communication between Cortez and Schen after the incident at Elway Subaru, and subsequent trial testimony established that the alerts often reduced Cortez to tears. The alerts also caused Cortez to lose weight and they interfered with her ability to sleep to such an extent that she resorted to medication. J.A. 142. According to Schen, the credit report issue "is the number one stressor in [Cortez's] life. . . . [T]his is a big stressor over the past two years." J.A. 143-44. It has been "very . . . devastating." J.A. 146.

B. The Significance of OFAC Alerts and the SDN List

The Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, better known as the USA PATRIOT Act, further codified the obligations of financial institutions in their dealings with individuals on OFAC's SDN List. 115 Stat. 272 (Oct. 26, 2001). Under the USA PATRIOT Act, the Treasury Department must "require financial institutions to implement . . . reasonable procedures for . . . consulting lists of known or suspected terrorists or terrorist organizations provided to the financial institution by any government agency to determine whether a person seeking to open an account appears on any such list." 31 U.S.C. § 5318(l)(2); see 31 C.F.R. § 103.121(b)(4) (The Customer Identification Program "must include procedures for determining whether the customer appears on any list of known or suspected terrorists or terrorist organizations issued by any Federal government agency."). "[T]ransactions are prohibited . . . if either such transactions are by, or on behalf of, or pursuant to the direction of any designated foreign country, or any national thereof." 31 C.F.R. § 500.201. In most cases, it is unlawful to extend credit to a person whose name is on OFAC's SDN List.*fn12

Depending on the applicable law, regulation, or executive order involved, failure to comply with these restrictions may result in civil as well as criminal penalties. Willful violations carry criminal penalties with fines ranging from $50,000*fn13 to $10,000,000*fn14 as well as imprisonment ranging from 5*fn15 , 10*fn16 to 30*fn17 years, or even life.*fn18 Civil penalties range from $10,000 to $1,000,000, or twice the amount of each underlying transaction per violation.*fn19

In a "Q&A" section included on its website, OFAC posts the following question: "What Is This OFAC Information On My Credit Report?" It then offers the following reply:

Credit bureaus and agencies in particular have adopted new measures to ensure compliance with OFAC regulations. Before issuing a credit report, they use special "interdiction" software developed by the private sector to determine if a credit applicant is on the SDN list. This software matches the credit applicant's name and other information to the individuals on the SDN list. If there is a potential match, the credit bureaus are placing a "red flag" or alert on the report. This does not necessarily mean that someone is illegally using your social security number or that you have bad credit. It is merely a reminder to the person checking your credit that he or she should verify whether you are the individual on the SDN list by comparing your information to the OFAC information. If you are not the individual on the SDN list, the person checking your credit should disregard the OFAC alert, and there is no need to contact OFAC. However, if the person checking your credit believes you are the person on the SDN list, then he or she should call the OFAC

Hotline to verify and report it. ml#consumer1 (visited on June 17, 2010). On that same website, OFAC also answers the question: "How Can I Get The OFAC Alert Off My Credit Report?" as follows:

A consumer has the right under the Fair Credit Reporting Act (FCRA), 15 U.S.C. 1681 et seq., to request the removal of incorrect information on his/her credit report. To accomplish this, consumers should contact the credit reporting agency or bureau that issued the credit report. For more information on consumers' rights under the FCRA, visit the Federal Trade Commission's w e b s i t e a t ...

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