Alert

Eighth Circuit Upholds Sanctions Against Defendant in FCRA Lawsuit for Demanding “Too Much” in Discovery

September 25, 2024

Recently, the U.S. Circuit Court of Appeals for the Eighth Circuit affirmed a discovery ruling, including an award of $93,243.50 in attorneys’ fees, against a defendant in a lawsuit arising under the Fair Credit Reporting Act (FCRA). The court found that the defendant “crossed the line when it demanded mostly irrelevant information” from the consumer’s law firm.

Case Background

Surprised by the erroneous reporting of an auto loan as being “discharged through bankruptcy,” a consumer couple eventually filed suit in Indiana, alleging that the credit reporting agency (CRA) violated the FCRA by ignoring their prior disputes. After the matter was removed to federal court, the CRA issued multiple subpoenas against the consumer’s law firm. According to the court, “[t]he requests reached far and wide, from the assistance the firm had provided to the [consumers] to how it structured its business. [The subpoenas] even asked about the assistance provided to other clients.”

Rather than answer, the law firm requested that a federal court in Missouri quash the subpoenas as being “not relevant.” The lower court agreed and “awarded $93,243.50 in attorney fees and costs.” An appeal followed.

Court’s Analysis

Noting that “broad discovery” is the “norm” in most lawsuits, the court cautioned that the information and documents sought “must still be probative” of some claim or defense in the action. Taking the position that the subpoenas did seek relevant information, the CRA argued that, as one of its defenses, “it had no duty to investigate or respond because the [the consumers] did not notif[y] [it] directly, or indirectly through a reseller.” In other words, the CRA argued that receiving disputes from a consumer’s law firm did not qualify as receiving a dispute “directly” from the consumer, as required for liability to attach under the FCRA.

The Eighth Circuit found the CRA’s reading of the FCRA to be unnatural. Looking to the plain meaning of the statute’s language and observing “basic agency law,” the court found that “a letter from a lawyer is good enough.”

Turning to the subpoenas, the Eighth Circuit observed that “[t]he lesson here is that [the CRA] should not have cast its discovery net so wide.” Finding that “the subpoenas posed an ‘undue burden’ precisely because much of the requested information was irrelevant[,]” the court affirmed the lower court’s ruling, including the award of attorney’s fees as a sanction.

Key Takeaway

The Eighth Circuit considers the question: “How much is too much in discovery?” At times, it may be tempting to seek expansive discovery exploring the relationship between a consumer and their attorney, but the opinion in Stecklein & Rapp Chartered v. Experian Info. Sols., Inc. outlines the risks of such tactics. As with everything in an FCRA lawsuit, defense strategies should be deliberate and measured.

This item also appeared in the ABA Business Law Section’s September 2024 in Brief: Business Regulation & Regulated Industries.