[00:00:12] Speaker 04:
Good morning, and welcome to the Ninth Circuit.

[00:00:16] Speaker 04:
We'll hear argument first this morning in Bultemeier against CenturyLink. Mr. Hacker.

[00:00:33] Speaker 01:
Good morning, Your Honors. May it please the Court. John Hacker for Appellant CenturyLink. I'd like to try to reserve four minutes for rebuttal, if possible.

[00:00:41] Speaker 04:
Just keep an eye on the clock.

[00:00:42] Speaker 01:
Will do. Thank you, Your Honor. Under the U.S. 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. That standard is purely objective. The defendant's state of mind is wholly irrelevant. As Your Honors are aware, courts look to three factors to determine whether the objective reasonableness standard has been satisfied. All three are easily satisfied here.

[00:01:13] Speaker 01:
First, CenturyLink's interpretation has a, quote, foundation in the statutory text. Under FCRA, 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 reasonable, if not outright correct, Your Honors, to say that a business transaction here were initiated by the customer 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 01:
First, you choose your services. You don't just visit the website. You go there, you choose your services. You then customize the services that you want. Then you add them to your shopping cart. And then at step four, very importantly, you provide your customer information, billing information, And very importantly, you agree to the terms and conditions of the prospective sale. And then finally at step five, you check out where you have an opportunity.

[00:02:19] Speaker 03:
Did the terms and conditions advise them that a credit report was going to be pulled?

[00:02:24] Speaker 01:
It says the precise language of that is...

[00:02:29] Speaker 01:
A credit check is required to complete all online orders.

[00:02:32] Speaker 03:
Okay. Did it tell them that it would be completed at this step? By pushing this, a credit check will be pulled now?

[00:02:39] Speaker 01:
It did not add that. So the disclosure is a separate question, not at issue here, whether that disclosure was sufficient. The issue here... 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. And the question then is, not only is that the correct interpretation of the statute, but whether it's reasonable.

[00:03:07] Speaker 03:
I'm not terribly adept at navigating the web. I'm an old guy, and so I've got my limitations. 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, you know, I ask myself, okay, did I want to pursue this with these folks to the next step, or don't I? 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. So nobody's going to read the terms and conditions.

[00:03:39] Speaker 03:
We appreciate that you've disclosed all of this in the terms and conditions, and you get the benefit of that. But it didn't tell them that by pushing the terms and conditions that the credit check would be pulled then.

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

[00:03:58] Speaker 01:
Well, the problem is, well, first, two answers. One is sort of a meta answer, which is we don't have the burden here of establishing that we're correct. The question is whether it's reasonable to construe initiated by the customer as correct. A situation like this, when we submit, you're in the midst of a transaction. 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. When you submit, you're completing the transaction. You're not initiating a transaction.

[00:04:29] Speaker 01:
There's essentially nothing left to do at that point. 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 the offer.

[00:04:40] Speaker 03:
Was it at step three that Ms. Boltmeyer would have been informed as to what the likely fees were going to be?

[00:04:48] Speaker 01:
So, no, this is what's so important about it. It's after step four, and that's the reason, and this is not disputed, the reason that we requested A credit report at that stage was twofold. One was to prevent identity theft. Again, nobody disagrees with that, and that's a salutary objective. 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 03:
Right. So it's hard to say that when you press the terms and conditions button that you've accepted the offer. I thought that's what you just argued to me.

[00:05:23] Speaker 01:
No, no, you accept the offer. My point is you accept the offer at step five after that. Right. That's completing the transaction. But you don't even know what the offer is at this point.

[00:05:35] Speaker 01:
I understand that, but you've initiated a transaction when the order is.

[00:05:39] Speaker 03:
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.

[00:05:48] Speaker 03:
and you don't have an answer yet.

[00:05:50] Speaker 01:
Right, 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. It's not just coming on a car lot, as in that case, and saying, you know, what are the prices? There's a much more detailed bespoke process here that enables the transaction to be completed at the end of the process. 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? You're going through this whole process 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

[00:06:25] Speaker 03:
I don't know what the terms and conditions get you. It just doesn't feel like that's, at the margins, a particularly significant step. It's something that everybody has to do in every website you go to.

[00:06:37] Speaker 01:
You don't have to accept that the terms and conditions are you know, a critical red line. What I think is the ultimate, it's, they're all steps in a spectrum, in a process that has been initiated by the customer. Surely by the time, the last thing left to do is to complete the transaction. This is my point. The submitting that they rely on. But you don't have, she doesn't have a price yet.

[00:06:59] Speaker 02:
She doesn't know how much it's going to cost. How much could the deposit be? I mean, how much impact You say you need the credit report to know whether to charge a deposit. How much are we talking about?

[00:07:10] Speaker 01:
I don't know the answer to that, and I don't know if the record has an answer to it, but it definitely was material. That's the whole problem is you don't want, as a seller, you know, in this circumstance, the last thing you want is for a consumer to think. We hear all kinds of complaints about hidden fees, right? 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 the complete transaction for the services to suddenly get a charge for $1,100 because there's a $100 deposit. The deposit is a material amount to somebody looking for this, and that's the reason that we were requesting it at this time.

[00:07:45] Speaker 01:
But I want to emphasize, It's not just about the terms and conditions. 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. If we think of the transaction process,

[00:08:02] Speaker 04:
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. 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 04:
What is that something broader? How do you define transaction and why is that a reasonable Reading.

[00:08:32] Speaker 01:
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. Even if you look at it as the contract part, it's not initiating to accept it. That's completing the transaction. 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. This is clearly an integrated, a transaction that's a process.

[00:09:01] Speaker 01:
Again, unlike in the coffee letter when you show up on the car lot, right, and just say, what are your prices? This would be, and analogies I know are a little bit risky, but if you go onto the car lot, you select your, you look around all the vehicles, you select your vehicle, you sit down with the dealer, you choose all the customized features, all the particular, you know, the floor mats and 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 03:
Yeah, that's not been my experience. 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. 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. But usually if you're dealing with your salesman, they have worked out and told you what the dealer prep is going to cost. and what the racing stripes will cost, and if you want the upgraded radio, and they've given you a bottom line. But to that point, why would you ever go over to the finance department?

[00:10:02] Speaker 03:
You have no clue how much this feels, and you're always surprised at what the bottom line is.

[00:10:06] Speaker 01:
Right, 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 is all about.

[00:10:17] Speaker 03:
You're not offering a box of Tide laundry soap at $12.99. You know...

[00:10:23] Speaker 03:
People can do some comparison shopping between Target and Kmart if they want to, but, you know, at least they've got a price that they're starting with. They've got no clue what things are going to be valued here, and it's going to change depending on their credit. Why would they complete a transaction? Why would they even initiate the transaction until they know what the price is going to be?

[00:10:48] Speaker 01:
But again, this is, I mean, I don't mean to be just repeating myself and hectoring, but they may or may not want to complete the transaction. But I think that presupposes that the transaction has been initiated. That's our submission. This is a process unlike purchasing.

[00:11:01] Speaker 03:
And I appreciate the value of the English that you've offered there and the difference between initiating and completing. 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 01:
So two points on the coffee letter. One I've already made, which is it's fundamentally different factually. But second, it's a non-binding letter, both the letter itself and the later document that it's been submitted to. And Safeco itself, the court said, when the FTC –

[00:11:31] Speaker 03:
Well, they put the disclosure down at the bottom, but then they've repeated the coffee letter repeatedly in that 40-year report. It's been reified.

[00:11:39] Speaker 01:
But every single time they repeat it, they say these are not whatever it is, the official views of the FTC kind of thing. So it's just not regulatory. It's not a promulgated regulation with any sort of status of law.

[00:11:52] Speaker 04:
Do you think there is such a thing as authoritative guidance from the FTC? in a post-Loper-Bright world?

[00:11:58] Speaker 01:
I think that's, I mean, all these principles were developed before Loper-Bright. 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. 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. So there is such a thing as authoritative guidance, but it wouldn't be the coffee letter by any stretch. Is this a question of law or of fact? I think this is a question of law, whether or not the statute can be understood reasonably.

[00:12:32] Speaker 01:
Again, this question here is not who's right or who's wrong. 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. And no court has said to the contrary. 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 appellate precedent on point. So I think all of those factors together make clear that this, as a matter of law, can't be treated as a willful violation.

[00:13:02] Speaker 01:
And I'll just say one word to sort of preserve the opportunity of rebuttal if needed. The second question, which is that we have a class-wide judgment that includes at least half the class 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. There's just no showing of injury by any of them, by at least half. 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.

[00:13:38] Speaker 02:
It was disputed in the sense that the district court said, your client came up with the list. 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. So how is that anybody's problem other than your client?

[00:13:55] Speaker 01:
Because we didn't have the information. That's not accurate. But who did? TransUnion. TransUnion is the company that had it. They were required by law to keep it. That's your vendor. So who else is going to get that? They subpoenaed TransUnion and then didn't pursue the subpoena. It was their burden of proof to establish whether or not a credit report was pulled. They asked the correct party, the only party with the information. Well, that can't be right. Your client was the one that pulled the reports.

[00:14:24] Speaker 01:
So how could your client be ignorant of what reports it had pulled and had? Because it had no statutory duty to maintain them. Its systems didn't maintain those records. It didn't need to. There's no reason for them to do that. It wasn't important to know whether or not they'd pulled the records. Why would they? That's not their job. It's the credit reporting agency's legal job to maintain those records. TransUnion had them. They correctly pursued it and then withdrew the subpoena.

[00:14:47] Speaker 04:
But if the class is defined as people who had credit reports pulled, isn't it?

[00:14:53] Speaker 01:
That's right.

[00:14:54] Speaker 04:
Okay, so I mean, 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 01:
And that's precisely the problem is the thing, right? The court said, And it sort of kept saying in the process, we don't need to find out who those are because I've defined the class this way, but that's exactly what was going on in Ramirez. In Ramirez, there was 9,000 members of the class that were defined a particular way, but it turned out 6,000 of them didn't have a claim or there wasn't proof that they had a claim because they couldn't show that they fit that class definition of having had their reports distributed. It's the exact same situation here. The class is defined one way, but that doesn't tell you who fits that class definition and who actually has a claim under that class definition.

[00:15:40] Speaker 01:
And that's what's missing here. 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.

[00:16:05] Speaker 04:
All right. We've taken you past your time. We'll give you two minutes for rebuttal.

[00:16:08] Speaker 01:
Thank you, Your Honors.

[00:16:17] Speaker 04:
Mr. Thompson.

[00:16:19] Speaker 00:
Good morning, Your Honors. May it please the Court. My name is Russell Thompson, and I represent Ms. Bultemeier in the class.

[00:16:26] Speaker 00:
After a decade of litigation and a four-day jury trial, A jury found that CenturyLink willfully violated the Fair Credit Reporting Act by impermissibly pulling credit reports.

[00:16:37] Speaker 02:
Well, but that is apparently a question of law. 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. 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?

[00:16:57] Speaker 02:
I've been mystified throughout my review of this case as to what we're dealing with here.

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

[00:17:05] Speaker 00:
So what is not a question of law is whether CenturyLink pulled their credit reports, with the jury expressly found they did, question one of the verdict form, pulled the credit reports on Ms. Voltenmeier in the class.

[00:17:18] Speaker 00:
The other question was whether they did so willfully, which we think is a question of fact for the jury. CenturyLink agreed, presented it to the jury. 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 04:
Why is that an affirmative defense?

[00:17:38] Speaker 04:
Willfulness is an element of the cause of action. Stavko says that objective reasonableness negates willfulness. That's not an affirmative defense. That just negates one of the elements of the claim, doesn't it?

[00:17:50] Speaker 00:
Well, numerous courts have called the defense, CenturyLink itself called it a defense in its opening brief.

[00:17:56] Speaker 02:
It's a defense, but that doesn't mean it's something that's affirmative like a statute of limitations defense that you're Pulling in from the outside, they're denying the allegation of the complaint.

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

[00:18:08] Speaker 02:
And saying that I didn't do it is a defense. But that doesn't make it an affirmative defense that puts the burden on the defendant.

[00:18:14] Speaker 00:
Well, even a statute of limitation defense is a defense that has to be proven based on the facts of the case. And likewise, their safe, reasonable interpretation defense has elements to it. They got to one point to the less than pellucid statutory text, which they haven't done here.

[00:18:30] Speaker 02:
The court has described this in those terms. You didn't make up that phrase yourself. No, the Supreme Court gave it to me. So that's not really a factual issue. 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 00:
Well, of course, but they have to tell us that. We would have taken discovery on the defense. Discovery about what? It's a question of law. Sure, but they have to point to what the text is that they're saying is vague. We could get an expert.

[00:19:01] Speaker 02:
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 00:
No, I'm saying which portion of it. Because even now, they're saying it's initiate. That's the only thing they've argued. I don't think initiate is vague whatsoever. I think they're misdefining business transaction as any transaction.

[00:19:21] Speaker 02:
You're arguing that there's a difference between initiate a transaction and initiate a business transaction. And you have an elaborate explanation of why you think business, well, okay, we know what the issue was. 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. 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 02:
Do they meet the standard of a Safeco defense?

[00:19:52] Speaker 00:
Sure. And they certainly don't here. As a matter of law, they don't make it. 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. The Supreme Court said they have to have adopted it.

[00:20:09] Speaker 03:
I just don't understand this line of argument at all. I gave your friend on the other side a pretty hard time. I've got a lot of questions here.

[00:20:20] Speaker 00:
Sure, sure. Then I'll move on.

[00:20:21] Speaker 03:
The questions are going to go both directions. Of course. Of course they've argued that this is initiating a transaction, and their argument is that that initiating has a variety of meanings. And one reasonable meaning is you've gone to a website and you've started the process. You've worked through four of five steps here. And that initiates a transaction. The transaction's not completed, but it is initiated. I think there's some problems with that theory, but it doesn't strike me as totally unreasonable.

[00:20:56] Speaker 00:
Sure, sure, I hear you. So what I'll say is, I'll say is, you know, I don't think the statutory text is less than pellucid, but if the court agrees, I understand that. 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... A consumer who doesn't know what the price is.

[00:21:20] Speaker 02:
Exactly. He identified one of the problems, which is that it doesn't... 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 unless they know the credit risk analysis that tells them whether to charge a deposit. 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 02:
Because otherwise, they're stuck with saying, here's the price. Oh, by the way, if we do the credit check and discover you've got this bad rating, then we're going to charge you an extra 100 bucks.

[00:22:06] Speaker 02:
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 00:
Sure. There's two problems with that. The first problem is CenturyLink's own problem. 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. So CenturyLink was not running this process on one system, but two separate systems. One was a legacy system and one was their own.

[00:22:36] Speaker 00:
On one entire system, no consumer ever got charged a deposit at step five. Not a one. It was a process that occurred behind the scenes after the consumer submitted an order.

[00:22:48] Speaker 02:
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 00:
not for CenturyLink 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- Sorry?

[00:23:11] Speaker 04:
Well, it isn't the basic problem here that, you know, you can conceptualize a transaction as just the formation of the contract, and that happens at step five, and I agree with you that that hasn't been initiated until step five. Or you can think of a transaction in kind of the way that the federal rules use, you know, same transaction or occurrence. Nobody would think that The different steps of the website were different transactions in that sense.

[00:23:39] Speaker 04:
So the transaction is the process of a person going to the website and investigating the service and then perhaps ultimately purchasing it. And that transaction was clearly initiated by the consumer. So why? If we have those two possible readings, why isn't there a range of reasonable ambiguity that their interpretation falls right inside of?

[00:24:03] Speaker 00:
And that comes to the second problem, is that, as one of your honors raised earlier, they weren't telling consumers this. They were telling consumers almost the exact opposite.

[00:24:17] Speaker 04:
Telling consumers, I mean... They don't have to tell consumers their interpretation of transaction.

[00:24:21] Speaker 00:
No, but they were telling consumers a credit check is required to complete online orders. So they were telling consumers that, which any understanding, I think, from that is, okay, well, if I submit an order, you're going to pull my credit, not when I click the next button.

[00:24:36] Speaker 04:
This isn't a misrepresentation claim.

[00:24:40] Speaker 04:
The question is, what was their position based on a reasonable reading of the statute? And I don't see why what they said about it Has any bearing on that?

[00:24:49] Speaker 00:
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. And CenturyLink knows that any business transaction with consumers on their website is just that. It's only hypothetical until a consumer clicks submit order at step five.

[00:25:12] Speaker 02:
That accepts your limitation of the word transaction. defining business transaction as only meaning that last, I accept this contract even though you may change the price on me. And I don't understand that. The question posed by Judge Miller is we use transactions in lots of ways. Most legal questions, there's a broader definition to decide what's related to or so forth.

[00:25:39] Speaker 02:
I don't have to decide what the best definition is. The question before us is whether the definition is 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 court. Circuit Court that's very close to this, or authoritative guidance if it still exists after Loper Bright, and I frankly haven't seen that either.

[00:26:11] Speaker 02:
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 00:
Well, certainly the coffee letter put them on notice.

[00:26:21] Speaker 02:
Stop right there, because the coffee letter itself says that it's not authoritative guidance.

[00:26:27] Speaker 00:
No, but it was adopted by the FTC at a 5-0. Stop right there.

[00:26:30] Speaker 02:
I mean, 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. I looked at the 40 years report. It does not say that.

[00:26:45] Speaker 00:
It's referenced multiple times in there to refer to it. It does not say that.

[00:26:50] Speaker 02:
Point me to something. it references lots of informal staff opinion, but by its own terms, it's a compilation by the staff.

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

[00:27:05] Speaker 02:
Why does that represent some formal adoption by the commission itself? 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... decision as to how this should be interpreted. But they didn't do that. They selectively chose which ones. They didn't do that. Point me to something in this 40 years report that comes even close to that.

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

[00:27:37] Speaker 02:
It's a question of law, and I have looked at the report. And I got to tell you, I don't see anything remotely like that. So how does this become the authoritative guidance that you claim that it is?

[00:27:48] Speaker 00:
I mean, I would just rest on our position that we've said and just, you know, have to respectfully disagree. But I would also say that it's not.

[00:27:54] Speaker 02:
You're respectfully disagreeing. I accept that. But you point me to nothing upon which to base the disagreement. How precise can that be?

[00:28:03] Speaker 00:
Well, I'm just pointing you to FTC 40 years that we disagree what it did. 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 02:
What's the source of that understanding?

[00:28:19] Speaker 00:
Just the website when discussing the report?

[00:28:20] Speaker 02:
Well, if you read the report under introduction, the very beginning, you don't have to read very far into it. 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. And it's described as an FTC staff summary of interpretations of the FCRA, per end quote, staff summary, close quote. 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 00:
Well, they said key interpretation. So they said these are the ones that we think are the most important.

[00:29:01] Speaker 02:
But we use the staff. We is not the commission.

[00:29:05] Speaker 00:
Well, and then they adopted it, though, five zero. But. But I understand your position, and I just have to respectfully disagree. But to step back, I think there's a misunderstanding of whose burden it is. The Supreme Court said, point to authoritative guidance allowing for more interpretations here. And here, I don't think, when we talked about transaction, if Congress wanted to use the broader... That's not how they described it in Safeco.

[00:29:34] Speaker 04:
In Safeco, the reason that Safeco won... was that there was no authoritative guidance. Not that it was able to point to authoritative guidance saying it was right, but the absence of authoritative guidance.

[00:29:46] Speaker 00:
In Safeco, the language says authoritative guidance that allows for more than one reasonable interpretation. I don't have that.

[00:29:53] Speaker 02:
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. That's a quote from Safeco.

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

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

[00:30:12] Speaker 02:
I've looked at what comes after that, and I don't see anything that helps you.

[00:30:16] Speaker 00:
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 02:
So business distinguishes it from a charity transaction.

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

[00:30:36] Speaker 02:
But this was a good transaction in terms of that distinction. The consumer was there to do business.

[00:30:41] Speaker 00:
At step five. So, my colleague misspoke, and he said, you click submit order, and that's completing the transaction. That is patently false. CenturyLink has no obligation to give services. They can still deny it. That's just submitting the application to CenturyLink at step five.

[00:30:58] Speaker 00:
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.

[00:31:11] Speaker 00:
And you can't look at Safeco's century-length interpretation and say, 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 pulled. Congress didn't want people to be surprised, like Ms. Baltimore and the class, to have their credit pulled. 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 pull, but only to complete this transaction.

[00:31:48] Speaker 00:
And as was stated earlier, these consumers are just price checking. You can't get to the price, their final price until step five. And then unfortunately for even half those consumers, or most of all those consumers, even at that page it says taxes, fees, et cetera, may vary.

[00:32:04] Speaker 03:
Okay, Council, with respect to the coffee letter, I heard you say just a minute ago that the Commission had approved it 5-0. What precisely did the Commission do?

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

[00:32:14] Speaker 03:
Yeah, right. What did the Commission do?

[00:32:17] Speaker 00:
Issued the agreed to issue FTC 40 years.

[00:32:20] Speaker 03:
So did the Commission itself actually vote to issue the report? That was my understanding, yeah. Is that in the Federal Register someplace?

[00:32:28] Speaker 03:
I can't point to it. What makes you think that they voted to issue it?

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

[00:32:37] Speaker 02:
Okay.

[00:32:39] Speaker 02:
I do want to ask a question on a different subject. We'll make you work a little over time.

[00:32:46] Speaker 02:
Your brief alleges economic injury to your client and to the class members. but I didn't clearly understand exactly what the injury was. Could you clarify that for me?

[00:33:00] Speaker 00:
Mr. Sure. I think it was probably a little bit of trying to fit a square peg into a round hole. It's more of a financial economic injury, putting them at risk for, putting the sensitive data that CenturyLink didn't have into the, into their hands and putting them at risk for identity theft. We tried to introduce their, their data breach.

[00:33:21] Speaker 02:
Mr. But we've talked about identity theft as something that this whole thing is designed to avoid, to make sure they're dealing with the person who really is the person who she purports to be. 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. So I started looking, well, what is the actual loss?

[00:33:52] Speaker 02:
And there's several references to economic injury, but none of them 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 credit score. 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 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 02:
It was a mini check and they went on from there. So what exactly is the economic injury that's been proven here?

[00:34:50] Speaker 00:
So a couple things. So it does disclose on the credit report. There was no evidence introduced about utility pulls or anything in the record about it being a utility pull that doesn't affect scores. But even if it didn't affect scores, it's still on your credit report. And when credit, when lenders evaluate credit, they don't just get a score. They look at the credit report. They look at things on there. And that can influence if you have too many inquiries.

[00:35:14] Speaker 02:
Well, okay. What is there in the record that proves there actually was an economic injury suffered by a plaintiff or anybody else.

[00:35:23] Speaker 00:
Mr. We didn't allege. We only sought statutory damages. There was no evidence of putting that on.

[00:35:31] Speaker 02:
Mr. So, we have no record of an actual economic injury being suffered.

[00:35:36] Speaker 00:
No, it's the invasion of privacy and CenturyLink acquiring their sensitive PII, including complete social security numbers. 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. CenturyLink themselves obtained credit inquiries when they pulled reports, employment history, and things like that.

[00:36:06] Speaker 02:
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 00:
No out-of-pocket loss, that is correct. We don't know if their data was included in the 2018 data breach that CenturyLink had. We also attempted to introduce their 10-K file.

[00:36:25] Speaker 02:
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 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. 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 00:
Well, it's based on compensatory damages. And this court has said in Bateman versus American Multicinema that it presumes the statutory damages serve a compensatory function. And it said that it did so for two main reasons.

[00:37:13] Speaker 00:
First, because the FCRA provides the consumer the option of recovering either actual or statutory, but not both. It supports the presumption that they serve the same purpose. And second, the statute allows for punitive damages, quote, which further suggests the statutory damages provision has a compensatory, not punitive purpose.

[00:37:34] Speaker 04:
All right. Is there any further questions? Thank you, counsel. Thank you. Rebuttal?

[00:37:43] Speaker 01:
Thank you, Your Honor. Just a few quick points. One, to pick up on questions were asked in Judge Miller's earlier question on the process. 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. And that's clearly what the facts show, undisputed facts show, was going on here. The credit report was published.

[00:38:09] Speaker 01:
when it was pulled, but the very, very, very end of the process before it was completed after, in this sort of sense, it was initiated by the consumer. There are no appellate cases that contradict this or even suggest in any way that this is not a reasonable interpretation. The only cases that the plaintiff cite are completely off point. There are cases like the Baker case that says it's not a business transaction when you're doing like opposition research, you know, 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 01:
Do you have any cases that seem to support your view? They're not cases on this point on construing initiation. That's the thing. So everybody's sort of silent on this question. Right, which this court said in Marino counts in favor of the reasonableness of the interpretation.

[00:38:55] Speaker 03:
With respect to the coffee report, Are you aware that the commission itself voted on this?

[00:39:00] Speaker 01:
I wasn't aware of that in particular. I don't know that it was formally voted on. It's definitely not a regulation or something with the force of law, to go back to the Mead principle. And it says, the report itself says, it's not a binding authoritative statement. The report itself reports that. It's that particular commission's commentary at one point. But again, it's also factually off point. 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 01:
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. As to footnote of the reference to the hypothetical transaction, again, that would be a situation when you are contemplating someday maybe entering a transaction. You're not doing all the things that are required here to get to that to the very end. And then footnote 20, of course, if you look at that footnote, that clearly supports our position. It says the defendant's state of mind is not relevant, 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 01:
That's what lawyers do. The Shimon case in the Second Circuit squarely rejects that proposition. The only question is one of law, which is whether it's objectively reasonable, and on these undisputed facts, it clearly was at least objectively reasonable.

[00:40:19] Speaker 04:
Thank you. Thank you, counsel. We thank both counsel for their helpful arguments and the cases submitted.