United States District Court, E.D. Michigan, Southern Division
STEVEN WHALEN, MAGISTRATE
OPINION AND ORDER DENYING MOTION TO DISMISS ,
GRANTING RENEWED MOTION TO ENFORCE DISCOVERY , IMPOSING
RULE 37 SANCTIONS, AND APPOINTING DISCOVERY MASTER
HONORABLE STEPHEN J. MURPHY, III JUDGE
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.
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.
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.
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.
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.
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.
Defendants' Motion to Dismiss
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.
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
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.
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."
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).
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 ...