[00:00:12] Speaker 02:
Good morning, and welcome to the Ninth Circuit.

[00:00:16] Speaker 02:
We'll hear argument first this morning in Bultemeier against CenturyLink.

[00:00:22] Speaker 02:
Mr. Hacker.

[00:00:32] Speaker 03:
Good morning, Your Honors.

[00:00:34] Speaker 03:
May it please the Court, John Hacker for Appellant CenturyLink.

[00:00:37] Speaker 03:
I'd like to try to reserve four minutes for rebuttal, if possible.

[00:00:41] Speaker 02:
Just keep an eye on the clock.

[00:00:42] Speaker 03:
Will do.

[00:00:43] Speaker 03:
Thank you, Your Honor.

[00:00:44] Speaker 03:
Under the U.S.

[00:00:44] Speaker 03:
Supreme Court's decision in Safeco, a defendant cannot be held liable for a, quote, willful FICRA violation as a matter of law if its conduct is consistent with an objectively reasonable interpretation of the statute.

[00:00:58] Speaker 03:
That standard is purely objective.

[00:01:01] Speaker 03:
The defendant's state of mind is wholly irrelevant.

[00:01:04] Speaker 03:
As Your Honors are aware, courts look to three factors to determine whether the objective reasonableness standard has been satisfied.

[00:01:10] Speaker 03:
All three are easily satisfied here.

[00:01:13] Speaker 03:
First,

[00:01:16] Speaker 03:
Century Licks interpretation has a, quote, foundation in the statutory text.

[00:01:21] Speaker 03:
Under FICRA, credit reports are permissibly ordered when, quote, there's a legitimate business need in connection with a business transaction initiated by the customer, and it is perfectly, excuse me, reasonable, if not outright correct, Your Honors, to say that a business transaction here were initiated by the customer

[00:01:41] Speaker 03:
Well, by the time CenturyLink ordered and obtained the credit reports, there was a five-step process, literally denoted five steps in the process for submitting an order.

[00:01:54] Speaker 03:
First, you choose your services.

[00:01:55] Speaker 03:
You don't just visit the website.

[00:01:56] Speaker 03:
You go there, you choose your services.

[00:01:59] Speaker 03:
You then customize the services that you want.

[00:02:02] Speaker 03:
Then you add them to your shopping cart.

[00:02:05] Speaker 03:
And then at step four, very importantly, you provide your customer information, billing information,

[00:02:10] Speaker 03:
And very importantly, you agreed to the terms and conditions of the prospective sale.

[00:02:15] Speaker 04:
And then finally, at step five, you check out the terms and conditions, advise them that a credit report was going to be pulled.

[00:02:24] Speaker 03:
It says the precise language of that is

[00:02:29] Speaker 03:
A credit check is required to complete all online orders.

[00:02:32] Speaker 04:
Okay.

[00:02:33] Speaker 04:
Did it tell them that it would be completed at this step?

[00:02:36] Speaker 04:
By pushing this, a credit check will be pulled now?

[00:02:39] Speaker 03:
It did not add that.

[00:02:40] Speaker 03:
So the disclosure is a separate question, not at issue here, whether that disclosure was sufficient.

[00:02:47] Speaker 03:
The issue here

[00:02:49] Speaker 03:
as the plaintiffs articulated below, is whether at that moment when the credit report is pulled after agreeing to the terms and condition, the customer has initiated a transaction.

[00:03:00] Speaker 03:
And the question then is, not only is that the correct interpretation of the statute, but whether it's reasonable.

[00:03:06] Speaker 04:
I'm not terribly adept at navigating the web.

[00:03:11] Speaker 04:
I'm an old guy, and so I've got my limitations.

[00:03:14] Speaker 04:
But when I see those terms and conditions, and I have been involved in a number of cases in which the terms and conditions were at issue, and when I see the terms and conditions, I ask myself, okay, did I want to pursue this with these folks to the next step or don't I?

[00:03:31] Speaker 04:
Because this is strictly a contract of adhesion, and either I do or I don't, so I push the button or I don't.

[00:03:36] Speaker 04:
So nobody's going to read the terms and conditions.

[00:03:39] Speaker 04:
We appreciate that you've disclosed all of this in the terms and conditions, and you get the benefit of that.

[00:03:44] Speaker 04:
But it didn't tell them that the credit check, that by pushing the terms and conditions, that the credit check would be pulled then.

[00:03:50] Speaker 04:
And so the question is, when you've initiated the business transaction, I think you're still in play.

[00:03:58] Speaker 03:
Well, the problem is, well, first two answers.

[00:04:01] Speaker 03:
One is sort of a meta answer, which is we don't have the burden here of establishing that we're correct.

[00:04:05] Speaker 03:
The question is whether it's reasonable to construe initiated by the customer as

[00:04:10] Speaker 03:
a situation like this, when we submit, you're in the midst of a transaction.

[00:04:14] Speaker 03:
And the second point, more technical and legal and equally important, is the buyer in a situation like this is the party that accepts the offer.

[00:04:25] Speaker 03:
When you submit, you're completing the transaction.

[00:04:28] Speaker 03:
You're not initiating a transaction.

[00:04:29] Speaker 03:
There's essentially nothing left to do at that point.

[00:04:31] Speaker 03:
You submit, the contract is complete, and the seller has a duty to deliver the goods pursuant to the contract that's been completed by the fact that you accepted.

[00:04:40] Speaker 04:
Was it at step three that Ms.

[00:04:43] Speaker 04:
Bultmeyer would have been informed as to what the likely fees were going to be?

[00:04:48] Speaker 03:
So no, this is what's so important about it.

[00:04:50] Speaker 03:
It's after step four and that's the reason, and this is not disputed, the reason that we requested

[00:04:55] Speaker 03:
a credit report at that stage was twofold.

[00:04:59] Speaker 03:
One was to prevent identity theft.

[00:05:00] Speaker 03:
Again, nobody disagrees with that, and that's a salutary objective.

[00:05:03] Speaker 03:
But also, too, we couldn't provide a final price until we had the credit report, because that would determine whether or not we needed to charge a deposit, because this is a sort of a delayed delivery, a delayed payment.

[00:05:17] Speaker 04:
Right.

[00:05:17] Speaker 04:
So it's hard to say that when you press the terms and conditions button that you've accepted the offer.

[00:05:21] Speaker 04:
I thought that's what you just argued to me.

[00:05:23] Speaker 03:
No, no, you accept the offer.

[00:05:26] Speaker 03:
My point is you accept the offer at step five after that.

[00:05:30] Speaker 03:
That's completing the transaction.

[00:05:32] Speaker 03:
But you don't even know what the offer is at this point.

[00:05:35] Speaker 03:
I understand that, but you've initiated the transaction when the order is.

[00:05:39] Speaker 04:
But if you don't, how can you initiate, how can you have a, if initiating a business transaction just means coming in and asking price and you don't have an answer yet,

[00:05:50] Speaker 03:
I understand that, but that's what's so different between our facts and the coffee letter, the FTC coffee letter that they rely on.

[00:05:56] Speaker 03:
It's not just coming on a car lot, as in that case, and saying, you know, what are the prices?

[00:06:00] Speaker 03:
There's a much more detailed bespoke process here that enables the transaction to be completed at the end of the process.

[00:06:07] Speaker 03:
Our submission is that the process has been initiated by the consumer because you're doing much more than just saying, what's the price?

[00:06:14] Speaker 03:
You're going through this whole process

[00:06:16] Speaker 03:
where you've identified the services that you want, you've had them customized, you've agreed to the terms and conditions that we talked about, and the only thing left for you to do is to complete the transaction.

[00:06:25] Speaker 04:
I don't know what the terms and conditions get you.

[00:06:28] Speaker 04:
I mean, it just doesn't feel like that's, you know, at the margins, a particularly significant step.

[00:06:33] Speaker 04:
It's something that everybody has to do in every website you go to.

[00:06:37] Speaker 03:
And you don't have to accept that the terms and conditions are a critical red line.

[00:06:41] Speaker 03:
What I think is the ultimate, they're all steps in a spectrum, in a process that has been initiated by the customer.

[00:06:48] Speaker 03:
Surely by the time the last thing left to do is to complete the transaction.

[00:06:53] Speaker 03:
This is my point.

[00:06:55] Speaker 03:
The submitting that they rely on.

[00:06:57] Speaker 00:
But she doesn't have a price yet.

[00:06:59] Speaker 00:
She doesn't know how much it's going to cost.

[00:07:01] Speaker 00:
How much could the deposit be?

[00:07:03] Speaker 00:
I mean, how much impact

[00:07:05] Speaker 00:
You say you need the credit report to know whether to charge a deposit.

[00:07:09] Speaker 00:
How much are we talking about?

[00:07:10] Speaker 03:
I don't know the answer to that.

[00:07:11] Speaker 03:
I don't know the record has an answer to it, but it definitely was material.

[00:07:14] Speaker 03:
That's the whole problem is you don't want as a seller, in this circumstance, the last thing you want is for a consumer to think, we hear all kinds of complaints about hidden fees, is to think that she's going to pay whatever it is, $1,000 a month, and then get a bill later or get after submitting what she thinks is

[00:07:33] Speaker 03:
the complete transaction for the services to suddenly get a charge for 1,100 because there's a $100 deposit.

[00:07:40] Speaker 03:
The deposit is a material amount to somebody looking for this, and that's the reason that we were requesting at this time.

[00:07:45] Speaker 03:
But I want to emphasize, it's not just about the terms and conditions.

[00:07:48] Speaker 03:
It's a five-step process, and when the credit report is ordered, it's at the very last step where the last thing that has to happen is completing the process.

[00:07:58] Speaker 02:
The customer- If we think of the transaction,

[00:08:02] Speaker 02:
narrowly as like the actual formation of a contract to purchase the service, then it seems like the transaction has not been initiated by step four because she hasn't clicked, you know, I accept.

[00:08:16] Speaker 02:
So I take it you want us to think of or at least to accept that one could reasonably read the transaction to be something broader.

[00:08:26] Speaker 02:
What is that something broader?

[00:08:28] Speaker 02:
How do you define transaction and why is that a reasonable

[00:08:31] Speaker 03:
So two points, I would say, if I could just resist the premise a little bit, which is even if you look at it as a... It's meant to be helpful, but... Well, no, no, but even if you look at it as the contract part, it's not initiating to accept it.

[00:08:45] Speaker 03:
That's completing the transaction.

[00:08:47] Speaker 03:
But that relates to the second point, which is this is not a, I don't know, walk in and buy milk off the shelf and it's kind of a one act transaction.

[00:08:56] Speaker 03:
This is clearly an integrated, a transaction that's a process.

[00:09:01] Speaker 03:
Again, unlike in the coffee letter when you show up on the car lot and just say, what are your prices?

[00:09:08] Speaker 03:
Analogies I know are a little bit risky, but if you go onto the car lot, you look around all the vehicles, you select your vehicle, you sit down with the dealer, you choose all the customized features, all the floor mats and the

[00:09:21] Speaker 03:
The racing stripes and all that then you get sent to the finance department and you have a whole discussion with the finance department and they do whatever they do to come up with a final price and then you look at the price.

[00:09:32] Speaker 04:
Yeah, that's not been my experience.

[00:09:34] Speaker 04:
I mean, you may get sent over to the finance department, but usually you've got a bottom line by the time you're going over there.

[00:09:39] Speaker 04:
They may be talking about whether you're getting 0% on this vehicle on this day, or whether you're going to get 3% or something else, whether you're going to get 36 months or 60 months.

[00:09:49] Speaker 04:
But usually, if you're dealing with your salesmen, they have worked out and told you what the dealer prep is going to cost.

[00:09:54] Speaker 04:
and what the racing stripes will cost, and if you want the upgraded radio, and they've given you a bottom line.

[00:09:59] Speaker 04:
But to that point, why would you ever go over to the finance department?

[00:10:02] Speaker 04:
You have no clue how much this feels, and you're always surprised at what the bottom line is.

[00:10:06] Speaker 03:
And this is why analogies are a little risky, but I think there's plenty of experiences among people where the bottom line changes at the financing stage, because that's what financing's all about.

[00:10:17] Speaker 04:
You're not offering a box of Tide laundry soap at $12.99.

[00:10:23] Speaker 04:
People can do some comparison shopping between Target and Kmart if they want to, but at least they've got a price that they're starting with.

[00:10:34] Speaker 04:
They've got no clue what things are going to be valued here, and it's going to change depending on their credit.

[00:10:40] Speaker 04:
report.

[00:10:41] Speaker 04:
Why would they complete a transaction?

[00:10:43] Speaker 04:
Why would they even initiate the transaction until they know what the price is going to be?

[00:10:48] Speaker 03:
But again, I don't mean to be just repeating myself and hectoring, but they may or may not want to complete the transaction.

[00:10:54] Speaker 03:
But I think that presupposes that the transaction has been initiated.

[00:10:57] Speaker 03:
That's our submission.

[00:10:58] Speaker 03:
This is a process, unlike purchasing.

[00:11:01] Speaker 04:
And I appreciate the value of the English that you've offered there and the difference between initiating and completing.

[00:11:07] Speaker 04:
But it seems to me that once we go to the coffee letter that you're in trouble because the FTC has taken a slightly different view on this thing.

[00:11:16] Speaker 03:
So two points on the coffee letter.

[00:11:18] Speaker 03:
One I've already made, which is it's fundamentally different factually.

[00:11:20] Speaker 03:
But second, it's a non-binding letter, both the letter itself and the later document that it's been submitted to.

[00:11:27] Speaker 03:
And Safeco itself, the court said, when the FTC

[00:11:31] Speaker 04:
Well, they put the disclosure down at the bottom, but then they've repeated the coffee letter repeatedly in that 40-year report.

[00:11:37] Speaker 04:
It appears that it's been reified.

[00:11:39] Speaker 03:
But every single time they repeat it, they say these are not whatever it is, the official views of the FTC, you know, kind of thing.

[00:11:44] Speaker 03:
So it's just not, it's not regulatory, you know, it's not a promulgated regulation with any sort of status of law.

[00:11:51] Speaker 02:
Do you think there is such a thing as authoritative guidance from the FTC?

[00:11:57] Speaker 02:
in a post-Loper-Bright world?

[00:11:58] Speaker 03:
I think that's, I mean, all these principles were developed before Loper-Bright.

[00:12:03] Speaker 03:
I take the point that after that, there's, you know, prior in a Chevron world and even a Skidmore world, there might be, it might have more status.

[00:12:12] Speaker 03:
After that, I think there would be, you know, if it's duly promulgated and it's within their authority, sure, that would be, that would still be authoritative.

[00:12:19] Speaker 03:
So there is such a thing as authoritative guidance, but it wouldn't be the coffee letter by any stretch.

[00:12:23] Speaker 03:
Is this a question of law or of fact

[00:12:26] Speaker 03:
I think this is a question of law, whether or not the statute can be understood reasonably.

[00:12:32] Speaker 03:
Again, this question here is not who's right or who's wrong.

[00:12:34] Speaker 03:
It's whether this interpretation was a reasonable understanding of the language as a matter of law, whether it encompasses these facts, which are not disputed.

[00:12:42] Speaker 03:
And no court has said to the contrary.

[00:12:44] Speaker 03:
And this court said, I think it was in Marino, that when there's not an appellate, when the statute itself doesn't explicitly answer the question, you're very likely not to have liability for a willful violation because there's no

[00:12:56] Speaker 03:
Appellate precedent point so I think all of those factors together make clear that this is a matter of law can't be treated as a willful violation and I'll just say one word to sort of preserve the opportunity of rebuttal if needed.

[00:13:06] Speaker 03:
The second question, which is that we have a class wide judgment right of that includes at least half the class.

[00:13:14] Speaker 03:
that the court sort of later defined as the class, which is everybody that appeared on this abandoned cart, this modified abandoned cart report, didn't prove that they had a credit report pulled.

[00:13:24] Speaker 03:
There's just no showing of injury by any of them, by at least half.

[00:13:27] Speaker 03:
We don't know who or exactly how many, but it's not disputed that half of the people who were on the abandoned cart report didn't have credit reports pulled because our system didn't work that way.

[00:13:37] Speaker 00:
I think it was disputed in the sense that the district court said, your client came up with the list.

[00:13:44] Speaker 00:
Your client has the information and your client didn't provide information that took out the names that didn't have a credit report pulled.

[00:13:52] Speaker 00:
So how is that anybody's problem other than your client?

[00:13:55] Speaker 03:
Because we didn't have the information.

[00:13:56] Speaker 03:
That's not accurate.

[00:13:58] Speaker 03:
It didn't exist.

[00:14:01] Speaker 03:
TransUnion is the company that had it.

[00:14:03] Speaker 03:
They were required by law to keep it.

[00:14:04] Speaker 03:
That's your vendor.

[00:14:05] Speaker 03:
So who else is going to get that?

[00:14:08] Speaker 03:
They subpoenaed TransUnion and then didn't pursue the subpoena.

[00:14:12] Speaker 03:
It was their burden of proof to establish whether or not a credit report was pulled.

[00:14:16] Speaker 03:
They asked the correct party, the only party with the information.

[00:14:20] Speaker 00:
That can't be right.

[00:14:21] Speaker 00:
Your client was the one that pulled the reports.

[00:14:24] Speaker 00:
So how can your client be ignorant of what reports it had pulled and had?

[00:14:28] Speaker 03:
Because it had no statutory duty to maintain them.

[00:14:30] Speaker 03:
Its systems didn't maintain those records.

[00:14:32] Speaker 03:
It didn't need to.

[00:14:33] Speaker 03:
There's no reason for them to do that.

[00:14:34] Speaker 03:
It wasn't important to know whether or not they pulled the records.

[00:14:37] Speaker 03:
Why would they?

[00:14:37] Speaker 03:
That's not their job.

[00:14:38] Speaker 03:
It's the credit reporting agency's legal job to maintain those records.

[00:14:43] Speaker 03:
TransUn had them.

[00:14:44] Speaker 03:
They correctly pursued it and then withdrew the subpoena.

[00:14:47] Speaker 02:
But if the class is defined as people who had credit reports pulled, isn't it?

[00:14:53] Speaker 03:
That's right.

[00:14:55] Speaker 02:
So I guess it seems like your objection, I'm not sure I understand your objection given that it would seem like definitionally everybody in the class.

[00:15:06] Speaker 03:
And that's precisely the problem is the thing.

[00:15:07] Speaker 03:
The court said, and it sort of kept saying in the process, we don't need to

[00:15:12] Speaker 03:
Find out who those are because I've defined the class this way, but that's exactly what was going on Ramirez right in Ramirez.

[00:15:18] Speaker 03:
There was 9000 members of the class that were defined a particular way, but it turned out 6000 of them didn't have a claim or there wasn't proof that they had a claim because they couldn't show that they were they fit that class definition of having had their reports distributed.

[00:15:31] Speaker 03:
It's the exact same situation here.

[00:15:33] Speaker 03:
The class is defined one way, but that doesn't tell you

[00:15:35] Speaker 03:
who fits that class definition and who actually has a claim under that class definition.

[00:15:40] Speaker 03:
And that's what's missing here.

[00:15:41] Speaker 03:
The court just at the end of the case said, I sort of declare them to be the 56,000 members on this abandoned cart report, which to be clear, Judge Clifton, was from the very, very beginning, we said was only a list of potential class members, not the class members, because we said over and over and over and over again, we didn't pull credit reports on everybody on the abandoned cart report.

[00:16:04] Speaker 02:
I'm sorry.

[00:16:05] Speaker 02:
I'm sorry.

[00:16:05] Speaker 02:
We've taken you past your time.

[00:16:06] Speaker 02:
We'll give you a 2 minutes.

[00:16:07] Speaker 03:
Thank you thank your honors.

[00:16:17] Speaker 02:
Mister Thompson.

[00:16:19] Speaker 01:
Good morning, your honors may please the court.

[00:16:21] Speaker 01:
My name is Russell Thompson and I

[00:16:30] Speaker 01:
A jury found that CenturyLink willfully violated the Fair Credit Reporting Act by impermissibly pulling credit reports.

[00:16:38] Speaker 00:
Well, but that is apparently a question of law.

[00:16:41] Speaker 00:
Indeed, your brief tells us it's a question of law, and we've just heard from your colleague that they think it's a question of law.

[00:16:48] Speaker 00:
So why are we dealing with a jury verdict and why are we dealing with arguments that said this has been waived because they didn't present evidence on some subject?

[00:16:56] Speaker 00:
I've been mystified throughout my review of this case as to what we're dealing with here.

[00:17:02] Speaker 01:
Sure, I'm happy to clarify that for you, Your Honor.

[00:17:05] Speaker 01:
So what is not a question of law is whether CenturyLink pulled their credit reports with the jury expressly found they did.

[00:17:12] Speaker 01:
Question one of the verdict form pulled the credit reports on Ms.

[00:17:15] Speaker 01:
Voltenmeier in the class.

[00:17:18] Speaker 01:
The other question was whether they did so willfully, which we think is a question of fact for the jury, Secretary Link agreed, presented it to the jury.

[00:17:27] Speaker 01:
What they're now arguing and what we agree is an issue of law is the affirmative defense that is the Safeco defense.

[00:17:34] Speaker 02:
Why is that an affirmative defense?

[00:17:38] Speaker 02:
Willfulness is an element of the cause of action.

[00:17:41] Speaker 02:
Safeco says that objective reasonableness negates willfulness.

[00:17:46] Speaker 02:
That's not an affirmative defense.

[00:17:47] Speaker 02:
That just negates one of the elements of the claim, doesn't it?

[00:17:50] Speaker 01:
Well, numerous courts have called it a defense.

[00:17:52] Speaker 01:
CenturyLink itself called it a defense in its opening brief.

[00:17:56] Speaker 00:
It's a defense, but that doesn't mean it's something that's affirmative, like a statute of limitations defense that you're

[00:18:02] Speaker 00:
Pulling in from the outside, they're denying the allegation of the complaint.

[00:18:05] Speaker 01:
But it is a defense because there's arguments to it.

[00:18:07] Speaker 00:
It's a defense in saying that I didn't do it as a defense, but that doesn't make it an affirmative defense that puts the burden on the defendant.

[00:18:14] Speaker 01:
Well, even a statute of limitation defense is a defense that has to be proven based on the facts of the case.

[00:18:19] Speaker 01:
And likewise, their Safeco reasonable interpretation defense has elements to it.

[00:18:24] Speaker 01:
They got to one point to the less than polluted statutory text, which they haven't done here.

[00:18:30] Speaker 00:
Well, the court has described in those terms that you didn't make up that phrase yourself that came from a court decision.

[00:18:38] Speaker 00:
So that's not really a factual issue.

[00:18:41] Speaker 00:
they're going to have to prove to this jury, it's pretty well established that this statute is not a model of clarity.

[00:18:47] Speaker 01:
Well, of course, but they have to tell us that.

[00:18:50] Speaker 01:
We would have taken discovery on the defense.

[00:18:53] Speaker 01:
Discovery about what?

[00:18:54] Speaker 01:
It's a question of law.

[00:18:56] Speaker 01:
Sure, but they have to point to what the text is that they're saying is vague.

[00:18:59] Speaker 01:
We would get an expert.

[00:19:01] Speaker 00:
You're telling you didn't know what the text of the statute was, that they have to identify the text of the statute to put that at issue?

[00:19:08] Speaker 01:
No, I'm saying which portion of it, because even now they're saying it's initiate.

[00:19:13] Speaker 01:
That's the only thing they've argued.

[00:19:15] Speaker 01:
I don't think initiate is vague whatsoever.

[00:19:18] Speaker 01:
I think they're misdefining business transaction as any transaction.

[00:19:21] Speaker 00:
Your case is arguing that there's a difference between initiate a transaction

[00:19:26] Speaker 00:
initiate a business transaction, and you have an elaborate explanation of why you think business, well, okay, we know what the issue was.

[00:19:35] Speaker 00:
I don't see how anything's being waived because they didn't argue that to the jury or somehow point to the words that you're telling us are important.

[00:19:42] Speaker 00:
I mean, we got all these obstacles before we get to what the case is really about, which is a question of law.

[00:19:49] Speaker 00:
Do they meet the standard of a safe co-defense?

[00:19:52] Speaker 01:
Sure, and they certainly don't here.

[00:19:54] Speaker 01:
As a matter of law, they don't make it.

[00:19:56] Speaker 01:
Again, they haven't shown, the last thing I'll say about the facts, they haven't pointed to what they've adopted as their reasonable interpretation because their interpretation has to be reasonable.

[00:20:06] Speaker 01:
The Supreme Court said they have to have adopted it.

[00:20:08] Speaker 04:
I just don't understand this line of argument at all.

[00:20:14] Speaker 04:
I gave your friend on the other side a pretty hard time.

[00:20:19] Speaker 04:
I've got a lot of questions here.

[00:20:20] Speaker 01:
Sure, sure.

[00:20:21] Speaker 01:
I'll move on to them.

[00:20:22] Speaker 04:
The questions are going both directions.

[00:20:24] Speaker 04:
Of course.

[00:20:25] Speaker 04:
Of course they've argued that this is initiating a transaction, and their argument is

[00:20:31] Speaker 04:
that initiating has a variety of meanings, and one reasonable meaning is you've gone to a website and you've started the process.

[00:20:38] Speaker 04:
You've worked through four of five steps here, and that initiates a transaction.

[00:20:45] Speaker 04:
The transaction's not completed, but it is initiated.

[00:20:48] Speaker 04:
I think there's some problems with that theory, but it doesn't strike me as totally unreasonable.

[00:20:56] Speaker 01:
Sure, sure, I hear you.

[00:20:58] Speaker 01:
So what I'll say is, I'll say is, you know, I don't think the statutory tax is less than polluted, but if the court agrees, I understand that.

[00:21:06] Speaker 01:
That said, I don't think it's a reasonable interpretation, one, for them to say a consumer who has not requested any services, has not agreed to pay anything, and has not submitted.

[00:21:18] Speaker 00:
Well, a consumer who doesn't know what the price is.

[00:21:20] Speaker 00:
Exactly.

[00:21:21] Speaker 00:
He identified one of the problems, which is that it doesn't

[00:21:26] Speaker 00:
appear to be a dispute that this is an effort to avoid identity theft, which is going to be a problem for both sides of this transaction if somebody else has stepped in and used your client's name, but they can't tell your client what she'll be charged.

[00:21:40] Speaker 00:
unless they know the credit risk analysis that tells them whether to charge a deposit.

[00:21:46] Speaker 00:
So that strikes me as a pretty reasonable thing to try to ascertain before your client is given a yes or no bottom line.

[00:21:54] Speaker 00:
Because otherwise, they're stuck with saying, here's a price.

[00:21:57] Speaker 00:
Oh, by the way, if we do the credit check and discovery, you've got this bad rating, then we're going to charge you an extra $100.

[00:22:06] Speaker 00:
What's illogical about trying to pin down what the credit risk is before you actually quote a price to the customer?

[00:22:14] Speaker 01:
Sure, there's two problems with that.

[00:22:16] Speaker 01:
The first problem is CenturyLink's own problem.

[00:22:18] Speaker 01:
CenturyLink had two separate systems at the time based on where the consumer was submitting the order from because of another company that they acquired.

[00:22:27] Speaker 01:
So CenturyLink was not running this process on one system, but two separate systems.

[00:22:33] Speaker 01:
One was a legacy system and one was their own.

[00:22:36] Speaker 01:
On one entire system, no consumer ever got charged a deposit at step five, not a one.

[00:22:43] Speaker 01:
It was a process that occurred behind the scenes after the consumer submitted an order.

[00:22:48] Speaker 00:
So CenturyLink's process- So the consumer finds out later what the price is really going to be, and that's a good thing?

[00:22:54] Speaker 01:
not for century link because it shows that they did not have a legitimate need for the information when they were pulling the credit report because they weren't even doing anything with that information until after somebody clicked to submit order the other problem.

[00:23:10] Speaker 01:
Sorry.

[00:23:11] Speaker 02:
It isn't the basic problem here that you can think that you can conceptualize a transaction as just the formation of the contract and that happens at step five and I agree with you that it hasn't been initiated until step five.

[00:23:24] Speaker 02:
Or you can think of a transaction in kind of the way that the federal rules use same transaction or occurrence.

[00:23:32] Speaker 02:
Nobody would think that

[00:23:33] Speaker 02:
The different steps of the website were different transactions in that sense.

[00:23:39] Speaker 02:
So the transaction is the process of a person going to the website and investigating the service and then perhaps ultimately purchasing it.

[00:23:48] Speaker 02:
And that transaction was clearly initiated by the consumer.

[00:23:54] Speaker 02:
So why?

[00:23:54] Speaker 02:
If we have those two possible readings, why isn't there a range of reasonable ambiguity that their interpretation falls right inside of?

[00:24:04] Speaker 01:
And that comes to the second problem is that, as one of your honors raised earlier, they weren't telling consumers this.

[00:24:12] Speaker 01:
They were telling consumers almost the exact opposite.

[00:24:17] Speaker 02:
Telling consumer, I mean, they don't have to tell consumers their interpretation of transaction.

[00:24:21] Speaker 01:
No, but they were telling consumers a credit check is required to complete online orders.

[00:24:27] Speaker 01:
So they were telling consumers that, which any understanding, I think, from that is, OK, well, if I submit an order, you're going to pull my credit, not when I click the next button.

[00:24:36] Speaker 02:
This isn't a misrepresentation claim.

[00:24:40] Speaker 02:
The question is, what was their position based on a reasonable reading of the statute?

[00:24:45] Speaker 02:
And I don't see why what they said about it.

[00:24:48] Speaker 02:
it has any bearing on that?

[00:24:49] Speaker 01:
Well, because what they've said in their opening brief is obviously a credit report must be obtained in connection with an actual customer initiated transaction, not one that is hypothetical or foreseeable.

[00:25:01] Speaker 01:
And CenturyLink knows that any business transaction with consumers on their website is just that.

[00:25:07] Speaker 01:
It's only hypothetical until a consumer clicks submit order at step five.

[00:25:12] Speaker 00:
That accepts your limitation of the word transaction.

[00:25:15] Speaker 00:
defining business transaction as only meaning that last, I accept this contract even though you may change the price on me.

[00:25:24] Speaker 00:
And I don't understand that.

[00:25:26] Speaker 00:
The question posed by Judge Miller is we use transactions in lots of ways.

[00:25:33] Speaker 00:
Most legal questions, there's a broader definition to decide what's related to or so forth.

[00:25:39] Speaker 00:
I don't have to decide what the best definition is.

[00:25:43] Speaker 00:
The question before us is whether the definition as understood by CenturyLink was unreasonable and was made unreasonable with guidance from either the language of the statute or court decisions and I haven't seen any court decision from our court certainly or any other

[00:26:02] Speaker 00:
Circuit Court that's very close to this, or authoritative guidance if it still exists after Lope or Bright, and I frankly haven't seen that either.

[00:26:11] Speaker 00:
So what exactly is supposed to put CenturyLink on notice that what it was doing was a violation of the Credit Reporting Act?

[00:26:19] Speaker 01:
Well, certainly the coffee letter put them on notice.

[00:26:21] Speaker 00:
Stop right there, because the coffee letter itself says that it's not authoritative guidance.

[00:26:27] Speaker 01:
No, but it was adopted by the FTC.

[00:26:29] Speaker 00:
Stop right there.

[00:26:31] Speaker 00:
This is a question of law and I was looking all through the briefs to find, I heard a statement that you had a witness that said it was adopted by the FTC.

[00:26:41] Speaker 00:
I looked at the 48 years report.

[00:26:43] Speaker 00:
It does not say that.

[00:26:45] Speaker 01:
It's referenced multiple times in there to refer to it.

[00:26:49] Speaker 00:
It does not say that.

[00:26:50] Speaker 00:
Point me to something.

[00:26:52] Speaker 00:
it references lots of informal staff opinion, but by its own terms, it's a compilation by the staff.

[00:27:01] Speaker 01:
Right, to advise the CFPB, who at the time was taking over advisory purposes.

[00:27:05] Speaker 00:
Why does that represent some formal adoption by the commission itself?

[00:27:10] Speaker 00:
I mean, on the face of it, it plainly can't, because I can't imagine the FTC says, okay, everything that a staff member has said for the past 40 years is suddenly our

[00:27:21] Speaker 00:
decision as to how this should be interpreted.

[00:27:24] Speaker 01:
But they didn't do that.

[00:27:25] Speaker 00:
They selectively chose which one.

[00:27:27] Speaker 00:
They didn't do that.

[00:27:29] Speaker 00:
Point me to something in this 40 years report that comes even close to that.

[00:27:34] Speaker 01:
I don't have the report in front of me, but they did choose not to.

[00:27:37] Speaker 00:
That's a question of law, and I have looked at the report.

[00:27:39] Speaker 00:
And I got to tell you, I don't see anything remotely like that.

[00:27:43] Speaker 00:
So how does this become the authoritative guidance that you claim that it is?

[00:27:48] Speaker 01:
I mean, I would just rest on our position that we've said and just, you know, have to respectfully disagree.

[00:27:53] Speaker 00:
But I would also say that it's not... Wait, you're respectfully disagreeing.

[00:27:56] Speaker 00:
I accept that, but you point me to nothing upon which to base the disagreement.

[00:28:01] Speaker 00:
How persuasive can that be?

[00:28:03] Speaker 01:
Well, I'm just pointing you to FTC 40 years that we disagree what it did.

[00:28:07] Speaker 01:
My understanding of the FTC 40 years is that the FTC chose which ones to include in the report and chose which ones not to include in the report.

[00:28:16] Speaker 00:
And what's the source of that understanding?

[00:28:18] Speaker 01:
Just the website when discussing the report.

[00:28:20] Speaker 00:
Well, if you read the report under introduction, the very beginning, you don't have to read very far into it.

[00:28:26] Speaker 00:
It says the staff seeks to share its extensive experience with the CFPB and the public through a summary of its, the staff, key interpretations of guidance.

[00:28:37] Speaker 00:
And it's described as an FTC staff summary of interpretations of the FCRA, per end quote, staff summary, close quote.

[00:28:47] Speaker 00:
I don't see anything there that suggests the commission itself has decided that everything our staff has said over the past 40 years reflected in this report is adopted by us.

[00:28:57] Speaker 01:
Well, they said key interpretation.

[00:28:58] Speaker 01:
So they said these are the ones that we think are the most important.

[00:29:02] Speaker 00:
We use the staff.

[00:29:04] Speaker 00:
We is not the commission.

[00:29:05] Speaker 01:
Well, and then they adopted it, though, five zero.

[00:29:08] Speaker 01:
But

[00:29:08] Speaker 01:
But I understand your position, and I just have to respectfully disagree.

[00:29:13] Speaker 01:
But to step back, I think there's a misunderstanding of whose burden it is.

[00:29:18] Speaker 01:
The Supreme Court said, point to authoritative guidance allowing for more interpretations here.

[00:29:24] Speaker 01:
And here, I don't think when we talked about transaction, if Congress wanted to use the broader phrase.

[00:29:30] Speaker 02:
That's not how they described it in Safeco.

[00:29:34] Speaker 02:
In Safeco, the reason that Safeco won

[00:29:37] Speaker 02:
was that there was no authoritative guidance.

[00:29:39] Speaker 02:
Not that it was able to point to authoritative guidance saying it was right, but the absence of authoritative guidance.

[00:29:46] Speaker 01:
In Safeco, the language says authoritative guidance that allows for more than one reasonable interpretation.

[00:29:51] Speaker 00:
I don't want to... This is not a case in which the business subject to the act had the benefit of guidance from the courts of appeals or the Federal Trade Commission that might have warned it away from the view it took.

[00:30:02] Speaker 00:
That's a quote from Safeco.

[00:30:04] Speaker 01:
Sure, sure, and it's at a later point of it.

[00:30:08] Speaker 00:
Well, a later point, it's in the second to last paragraph.

[00:30:12] Speaker 00:
I look at what comes after that, and I don't see anything that helps you.

[00:30:16] Speaker 01:
But either way, going back to transaction, Congress purposefully chose business transaction, not the broader transaction that's used in other statutes and rules.

[00:30:26] Speaker 00:
And CenturyLink... So business distinguishes it from a charity transaction.

[00:30:32] Speaker 01:
Correct, because that business modifies transaction, which requires service.

[00:30:36] Speaker 00:
But this was a business transaction in terms of that distinction.

[00:30:40] Speaker 00:
The consumer was there to do business.

[00:30:41] Speaker 01:
So my colleague misspoke and he said, you click submit order and that's completing the transaction.

[00:30:48] Speaker 01:
That is patently false.

[00:30:49] Speaker 01:
CenturyLink has no obligation to give services.

[00:30:52] Speaker 01:
They can still deny it.

[00:30:54] Speaker 01:
That's just submitting the application to CenturyLink at step five.

[00:30:58] Speaker 01:
And they've admitted we don't have to give services then we can still check that background report at a different deposit that is not completing the transaction that's initiating the business transaction.

[00:31:10] Speaker 01:
And you can't look at safe goes into century links interpretation and say.

[00:31:16] Speaker 01:
Listen, I think it was reasonable that the consumer understood, because that's what everything breaks down to, and the courts have said, the consumer has to understand they're initiating a business transaction such that they expect to have their credit polls.

[00:31:29] Speaker 01:
Congress didn't want people to be surprised, like Ms.

[00:31:32] Speaker 01:
Baltimore and the class, to have their credit poll.

[00:31:35] Speaker 01:
And who could ever reasonably expect to have their credit pulled when CenturyLink is telling you literally seconds before you click the next button, we need your credit pulled, but only to complete this transaction.

[00:31:48] Speaker 01:
And as was stated earlier, these consumers are just price checking.

[00:31:52] Speaker 01:
You can't get to the price, their final price until step five.

[00:31:56] Speaker 01:
And then unfortunately for even half those consumers,

[00:31:59] Speaker 01:
or most of all those consumers, even at that page, it says taxes, fees, et cetera, may vary.

[00:32:05] Speaker 04:
Okay, counsel, with respect to the coffee letter, I heard you say just a minute ago that the commission had approved it five zero.

[00:32:10] Speaker 04:
What precisely did the commission do?

[00:32:12] Speaker 01:
I was referring to the FTC 40 years.

[00:32:14] Speaker 04:
Yeah, right.

[00:32:15] Speaker 04:
What did the commission do?

[00:32:17] Speaker 01:
Agreed to issue FTC 40 years.

[00:32:20] Speaker 04:
So did the commission itself actually vote to issue the report?

[00:32:23] Speaker 04:
That was my understanding, yeah.

[00:32:25] Speaker 04:
Is that in the federal register someplace?

[00:32:28] Speaker 04:
I can't point to it.

[00:32:29] Speaker 04:
What makes you think that they voted to issue it?

[00:32:31] Speaker 01:
Yesterday, when I was re-reviewing it on the website, it said a 5-0 vote.

[00:32:37] Speaker 00:
OK.

[00:32:39] Speaker 00:
I do want to ask a question on a different subject.

[00:32:41] Speaker 00:
We'll make you work a little over time.

[00:32:46] Speaker 00:
Your brief alleges economic injury to your client and to the class members.

[00:32:54] Speaker 00:
but I didn't clearly understand exactly what the injury was.

[00:32:58] Speaker 00:
Could you clarify that for me?

[00:33:00] Speaker 01:
Sure.

[00:33:01] Speaker 01:
I think it was probably a little bit of trying to fit a square peg into a round hole.

[00:33:05] Speaker 01:
It's more of a financial economic injury, putting them at risk for putting the sensitive data that CenturyLink didn't have into their hands and putting them at risk for identity theft.

[00:33:19] Speaker 01:
We tried to introduce their data.

[00:33:21] Speaker 00:
Identity theft is something that this whole thing is designed to avoid, to make sure they're dealing with the person who really is the person who

[00:33:29] Speaker 00:
she reports to be.

[00:33:31] Speaker 00:
So, I mean, this becomes important because if we ever reach the issue of the measure for the punitive damage calculation and the appropriate ratio and so forth, Supreme Court talks about four times the actual loss.

[00:33:49] Speaker 00:
So I started looking, well, what is the actual loss?

[00:33:52] Speaker 00:
And there's several references to economic injury, but none of them

[00:33:56] Speaker 00:
told me what it was, and then when I looked at the record elsewhere, there was a reference from some witness, and again, I apologize for not recalling which one it was, there are too many names there, who said that, well, this kind of utility check doesn't affect the credit score.

[00:34:13] Speaker 00:
So I said, well, what is it then that actually might have caused an economic injury to the plaintiff or any other class members whose credit

[00:34:26] Speaker 00:
reports had been pulled, particularly given that I didn't see any evidence that the credit report information was ever used thereafter for any purpose or even seen by human beings for the most part.

[00:34:41] Speaker 00:
It was a mini-check and they went on from there.

[00:34:44] Speaker 00:
So what exactly is the economic injury that's been proven here?

[00:34:50] Speaker 01:
So a couple things.

[00:34:51] Speaker 01:
So it does disclose on the credit report.

[00:34:54] Speaker 01:
There was no evidence introduced about utility polls or anything in the record about it being a utility poll that doesn't affect scores.

[00:35:02] Speaker 01:
But even if it didn't affect scores, it's still on your credit report.

[00:35:05] Speaker 01:
And when lenders evaluate credit, they don't just get a score.

[00:35:09] Speaker 01:
They look at the credit report.

[00:35:11] Speaker 01:
They look at things on there.

[00:35:12] Speaker 01:
And that can influence if you have too many inquiries.

[00:35:15] Speaker 00:
Well, OK.

[00:35:16] Speaker 00:
What is there in the record that proves there actually was an

[00:35:19] Speaker 00:
economic injury suffered by plaintiff or anybody else.

[00:35:23] Speaker 01:
We didn't allege.

[00:35:24] Speaker 01:
We only saw statutory damages.

[00:35:27] Speaker 01:
There was no evidence of putting that on.

[00:35:32] Speaker 00:
We have no record of an actual economic injury being suffered.

[00:35:35] Speaker 01:
No, it's the invasion of privacy and CenturyLink acquiring their sensitive PII, including complete social security numbers.

[00:35:44] Speaker 01:
Even Judge Logan actually expressed surprise at learning that CenturyLink was able to obtain credit reports on consumers without even having their social security numbers and then acquiring complete unredacted social security numbers, credit inquiries.

[00:35:59] Speaker 01:
CenturyLink themselves obtained credit inquiries when they pulled the reports, employment history,

[00:36:04] Speaker 01:
and things like that.

[00:36:06] Speaker 00:
But we have no evidence or no factual conclusion that support there was an actual economic injury suffered by plaintiff or anybody else.

[00:36:14] Speaker 01:
No out-of-pocket loss, that is correct.

[00:36:16] Speaker 01:
We don't know if their data was part of, was included in the 2018 data breach that CenturyLink had.

[00:36:23] Speaker 01:
We also attempted to introduce their 10K file.

[00:36:25] Speaker 00:
You're offering me lots of speculation, but so far, my question was, is there any evidence in the record or was there any proof or conclusion that there was an economic injury suffered

[00:36:34] Speaker 00:
and the answer appears to be no, you're suggesting there might have been some other harm rippled through and certainly there was a statutory remedy, statutory damages available and the jury acted on that.

[00:36:48] Speaker 00:
But in terms of looking at punitive damages, that measure starts with a ratio based, as I understand it, on actual loss and so far I'm not hearing a whole lot of actual loss.

[00:36:59] Speaker 01:
Well, it's based on compensatory damages.

[00:37:01] Speaker 01:
And this court has said in Bateman versus American Multicinema that it presumes the statutory damages serve a compensatory function.

[00:37:10] Speaker 01:
And it said that it did so for two main reasons.

[00:37:13] Speaker 01:
First, because the FCRA provides the consumer the option of recovering either actual or statutory, but not both.

[00:37:21] Speaker 01:
It supports the presumption that they serve the same purpose.

[00:37:24] Speaker 01:
And second,

[00:37:25] Speaker 01:
The statute allows for punitive damages, quote, which further suggests the statutory damages provision has a compensatory, not punitive purpose.

[00:37:34] Speaker 02:
All right.

[00:37:37] Speaker 02:
Is there any further questions?

[00:37:38] Speaker 02:
Thank you, counsel.

[00:37:39] Speaker 02:
Thank you.

[00:37:40] Speaker 02:
Rebuttal.

[00:37:43] Speaker 03:
Thank you, Your Honor.

[00:37:44] Speaker 03:
Just a few quick points.

[00:37:46] Speaker 03:
One, to pick up on questions were asked in Judge Miller's earlier question on the process.

[00:37:51] Speaker 03:
Clearly, transaction can, not necessarily always or must, but can encompass the set of events that the federal rules refer to, an integrated or ongoing sort of process to reach a result.

[00:38:02] Speaker 03:
And that's clearly what the facts show, undisputed facts show was going on here.

[00:38:06] Speaker 03:
The credit report was pulled at the, when it was pulled, but the very, very, very end of the process before it was completed,

[00:38:13] Speaker 03:
after, in this sort of sense, it was initiated.

[00:38:17] Speaker 03:
by the consumer.

[00:38:18] Speaker 03:
There are no appellate cases that contradict this or even suggest in any way that this is not a reasonable interpretation.

[00:38:24] Speaker 03:
The only cases that the plaintiff cite are completely off point.

[00:38:28] Speaker 03:
There are cases like the Baker case that says it's not a business transaction.

[00:38:32] Speaker 03:
When you're doing opposition research on the plaintiff or the defendant in another case and you're pulling the credit report for that reason, that's not a business transaction.

[00:38:40] Speaker 03:
Do you have any cases that would support your view?

[00:38:44] Speaker 03:
They're not cases on this point on construing initiation.

[00:38:46] Speaker 03:
So everybody's sort of silent on this question.

[00:38:49] Speaker 03:
Right, which this court said in Marino, it counts in favor of the reasonableness of the interpretation.

[00:38:55] Speaker 04:
With respect to the coffee report, our

[00:38:57] Speaker 04:
Are you aware that the commission itself voted on this?

[00:39:00] Speaker 03:
You know, I wasn't aware of that in particular.

[00:39:02] Speaker 03:
I don't know that it was formally voted on.

[00:39:05] Speaker 03:
It's definitely not a regulation or something with the force of law to go back to the Mead principle.

[00:39:10] Speaker 03:
And it says, the report itself says it's not a binding authoritative statement.

[00:39:14] Speaker 03:
The report itself reports that.

[00:39:16] Speaker 03:
It's that particular commission's commentary at one point.

[00:39:20] Speaker 03:
But again, it's also factually off point.

[00:39:23] Speaker 03:
That's a situation where it would raise the question whether at the beginning of an ongoing process like this, that would qualify as initiation.

[00:39:31] Speaker 03:
I don't know, and this court doesn't need to decide the answer to that question because we're talking about the very end of the process right before it's completed.

[00:39:38] Speaker 03:
As to the reference to the hypothetical transaction, again, that would be a situation when you are contemplating someday maybe entering a transaction.

[00:39:47] Speaker 03:
You're not doing all the things that are required here to get to that

[00:39:50] Speaker 03:
to the very end.

[00:39:51] Speaker 03:
And then footnote 20, of course, if you look at that footnote, that clearly supports our position.

[00:39:55] Speaker 03:
It says the defendant's state of mind is not relevant.

[00:39:59] Speaker 03:
And no appellate court has said that you have to establish, show that you adopted, subjectively adopted a particular legal interpretation.

[00:40:06] Speaker 03:
That's what lawyers do.

[00:40:07] Speaker 03:
The Shimon case in the Second Circuit squarely rejects that proposition.

[00:40:11] Speaker 03:
The only question is one of law.

[00:40:13] Speaker 03:
which is whether it's objectively reasonable.

[00:40:14] Speaker 03:
And on these undisputed facts, it clearly was at least objectively reasonable.

[00:40:19] Speaker 02:
Thank you.

[00:40:19] Speaker 02:
Thank you, counsel.

[00:40:20] Speaker 02:
We thank both counsel for their helpful arguments and the cases submitted.