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Firneno v. Nationwide Marketing Services, Inc.

United States District Court, E.D. Michigan, Southern Division

January 10, 2017





         Plaintiffs Jody Firneno and Christopher Franke allege that Defendants Nationwide Marketing Services, Inc. ("Natimark"), Leon Saja, and other corporate officers of Natimark (collectively, "Defendants") violated the Fair Credit Reporting Act, 15 U.S.C. § 1681b, by selling and/or providing consumer lists to third parties containing their private financial information. Compl., ECF No. 1. Before the Court are Defendants' motion to dismiss and Plaintiffs' renewed motion to enforce discovery. On December 6, 2016, the Court held a hearing on both motions. For the following reasons, the Court will deny Defendants' motion, grant Plaintiffs' motion, impose sanctions, and appoint a Discovery Master.


         I. Non-Economic Damages

         In their complaint, Plaintiffs allege that they and the class members "have suffered an unwarranted invasion of privacy and violation of their rights under the FCRA." See Compl. ¶¶ 39, 46, 56, 70, 79, ECF No. 1. They later stipulated to the with-prejudice dismissal of "actual and non-economic damages arising out of emotional and mental distress, including but not limited to: worry, anxiety, fear of identity theft, embarrassment, humiliation and mortification, among others." See ECF Nos. 51, 72. On September 27, 2016, Defendants filed a motion to dismiss the case under Rule 12(b)(1) for lack of subject matter jurisdiction in light of the Supreme Court's recent decision in Spokeo v. Robins, 136 S.Ct. 1540 (2016). ECF No. 66.

         II. Discovery Issues

         On November 6, 2015, the Court appointed Daniel Sharkey as Discovery Master. He submitted a Report and Recommendation regarding the Plaintiffs' motions to compel discovery, Plaintiffs timely objected to the Report, and the Court issued an order rejecting Plaintiffs' objections and adopting the Report. Pursuant to that order, Defendants had 14 days to produce specified documents and answers to interrogatories. See Order 4, ECF No. 50; Report 11-12, ECF No. 39. They failed to comply.

         Three weeks after the order issued, Plaintiffs filed a motion to enforce disclosure of the discovery required by the Court's order, and for appropriate discretionary relief under Civil Rule 37(b)(2). ECF No. 52. On July 14, 2016, the Court found that Defendants failure to comply with the Court's Order was not substantially justified, and ordered Defendants to pay the Plaintiffs' reasonable expenses, including attorney fees, incurred in filing the motion. The Court also stated that "any further failure to cooperate with the progression of the case or to comply with an order of the Court will be treated as conduct tantamount to bad faith, and will result in harsher sanctions under Civil Rule 37, up to and including the Court's issuance of a default judgment against the Defendants." Order 2, ECF No. 56.

         On September 14, 2016, Plaintiffs filed a renewed motion to enforce discovery, and for Rule 37(b) sanctions due to Defendants' alleged continued noncompliance with the Court's orders. Mot., ECF No. 63.


         A party may seek dismissal of an action by challenging subject matter jurisdiction under Rule 12(b)(1), at which point the plaintiff bears the burden of proving jurisdiction. Madison-Hughes v. Shalala, 80 F.3d 1121, 1130 (6th Cir. 1996). A challenge to standing addresses a court's subject matter jurisdiction. Kepley v. Lanz, 715 F.3d 969, 972 (6th Cir. 2013). A district court may "resolve factual disputes when necessary to resolve challenges to subject matter jurisdiction." Id. Rule 12(b)(1) motions fall into two general categories: facial attacks and factual attacks. United States v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994). A facial attack goes to whether the plaintiff has properly alleged a basis for subject matter jurisdiction, and the trial court takes the allegations of the complaint as true. Ohio Nat'l Life Ins. Co. v. United States, 922 F.2d 320, 325 (6th Cir. 1990). A factual attack challenges the factual existence of subject matter jurisdiction. No presumption of truth applies to the factual allegations, and the court can weigh the evidence to determine its power to hear the case. Ritchie, 15 F.3d at 598.


         I. Defendants' Motion to Dismiss

         Defendants argue that Plaintiffs lack standing in light of the Supreme Court's recent decision in Spokeo Inc. v. Robins, 136 S.Ct. 1540 (2016), a case that addressed a standing issue relevant to the instant matter - namely, whether Plaintiffs have clearly alleged facts to show that they have suffered a concrete "injury in fact." Mot. Dism., ECF No. 66.

         Article III standing "is a doctrine rooted in the traditional understanding of a case or controversy." Spokeo, 136 S.Ct. at 1547. As the party invoking federal jurisdiction, a plaintiff must clearly allege facts demonstrating that he has "(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision." Id. (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)).

         Injury in fact, the "first and foremost" of standing's three elements, is a "constitutional requirement . . . that Congress cannot erase . . . by statutorily granting the right to sue to a plaintiff who would not otherwise have standing." Id. at 1547-48 (citations and internal quotation marks omitted). A plaintiff must establish an injury in fact by showing that he suffered "'an invasion of a legally protected interest' that is 'concrete and particularized' and 'actual or imminent, not conjectural or hypothetical.'" Id. at 1548 (quoting Lujan, 504 U.S. at 560). "Particularization is necessary to establish injury in fact, but it is not sufficient. An injury must also be 'concrete, '" which is to say the injury "must actually exist." Id.

         In Beaudry v. TeleCheck Servs., Inc., 579 F.3d 702 (6th Cir. 2009), the Sixth Circuit reasoned that "Congress has the power to create new legal rights, [including] right[s] of action whose only injury-in-fact involves the violation of that statutory right, " and thus held that the Fair Credit Reporting Act (FCRA) "permits a recovery when there are no identifiable or measurable actual damages." 579 F.3d at 705-06. But in Spokeo, the Supreme Court clarified that although

Congress may elevat[e] to the status of legally cognizable injuries concrete, de facto injuries that were previously inadequate in law . . . Congress' role in identifying and elevating intangible harms does not mean that a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right. Article III standing requires a concrete injury even in the context of a statutory violation. For that reason, [a plaintiff] could not, for example, allege a bare procedural violation, divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III.

Spokeo, 136 S.Ct. at 1549 (citations and internal quotation marks omitted). Since "[a] violation of one of the FCRA's procedural requirements may result in no harm, " id. at 1550, courts must determine whether Plaintiffs suffered actual harm apart from the alleged statutory violation, or "whether the particular procedural violations alleged in this case entail a degree of risk sufficient to meet the concreteness requirement." Id.

         Defendants argue that Plaintiffs cannot articulate the sufficient degree of risk to meet the concreteness requirement of Article III standing. In support, Defendants note that Plaintiffs merely "allege that they received three advertisements in the mail, which they may have shown to their spouses and attorneys, " and point to Plaintiffs' with-prejudice dismissal of "any claims for damages that could be arguably connected to alleged injuries arising from the generally alleged 'invasion of privacy.'" Mot. Dism. 8-9, ECF No. 66 (citing Firneno Dep. 11:27-29, ECF No. 66-3 and Franke Dep. 37, ECF No. 66-4).

         Plaintiffs contend that the Defendants caused concrete and particularized harm by illegally accessing Plaintiffs' consumer reports and invading their privacy by actually obtaining "private financial information, including credit and FICO scores, the amount of debt, and addresses and the last four digits of ...

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