United States District Court, E.D. Virginia, Richmond Division
HANNAH LAUCK JUDGE
matter comes before the Court on two motions: (1) Defendants
Lead Express, Inc. and Takehisa Naito's (the
"Defendants") Motion to Dismiss Second Amended
Complaint for Lack of Subject-Matter Jurisdiction, Personal
Jurisdiction and Improper Venue, or, Alternatively, to
Transfer Venue (the "Motion to Dismiss"), (ECF No.
26); and, (2) Plaintiffs Felix Gillison, Jr. and Dawn
Mays-Johnson's (the "Plaintiffs") Motion for
Permission to Take Jurisdiction-Related Discovery, (ECF No.
31). As the basis for the Motion to Dismiss, the Defendants
invoke Federal Rules of Civil Procedure 12(b)(1), 12(b)(2),
and 12(b)(3). The Plaintiffs bring the Motion for
Permission to Take Jurisdiction-Related Discovery pursuant to
case law that permits limited discovery in response to Rule
12(b)(2) motions. The Plaintiffs have responded to the Motion
to Dismiss, (ECF No. 30), and the Defendants have replied,
(ECF No. 35). The Defendants have responded to the Motion for
Permission to Take Jurisdiction-Related Discovery, (ECF No.
36), and the Plaintiffs have replied, (ECF No. 39).
Court dispenses with oral argument because the materials
before it adequately present the facts and legal contentions,
and argument would not aid the decisional process.
Accordingly, the matters are ripe for disposition. The Court
exercises jurisdiction pursuant to 28U.S.C.
§1331. For the reasons that follow, the Court
will: (1) grant the Motion to Dismiss; and, (2) deny the
Motion for Permission to Take Jurisdiction-Related Discovery
Procedural and Factual Background A. Procedural
Plaintiffs assert two related class claims against the
Defendants: (1) a violation of 15 U.S.C. § 1681b(f)
("Count One"); and, (2) a violation of 15 U.S.C.
§ 1681q ("Count Two"). The Plaintiffs allege that
the Defendants' violations entitle each consumer to
statutory damages under § 1681n(a) between $100 and $1,
the Plaintiffs filed their Second Amended Complaint, the
Defendants moved to dismiss it under three separate theories:
(1) lack of subject-matter jurisdiction because the
Plaintiffs do not have standing to bring this lawsuit; (2)
lack of personal jurisdiction; and, (3) improper venue.
Alternatively, the Defendants request that the Court transfer
venue to the United States District Court for the Central
District of California.
briefing on the Motion to Dismiss concluded, the Plaintiffs
filed the Motion for Permission to Take Jurisdiction-Related
Discovery. The Plaintiffs request that, in the event the
Court finds that the Plaintiffs have not established personal
jurisdiction, the Court permit the parties to conduct
discovery for 90 days. The Plaintiffs have responded to the
Motion to Dismiss, and the Defendants have responded to the
Motion for Permission to Take Jurisdiction-Related Discovery.
Both parties have filed their respective reply briefs.
case arises out of a purported "sham business
operation" orchestrated by Lead Express and its
principal and alter ego, Takehisa Naito. (Second Am.
Compl. ¶¶ 2, 40.) Lead Express obtains millions of
consumer reports on consumers with whom it has no
relationship. According to the Plaintiffs, because Lead
Express has no relationship with these consumers, it obtains
reports without a permissible purpose, in violation of 15
U.S.C. § 1681b(f). The Plaintiffs also assert that Lead
Express obtained the consumer reports under false pretenses,
by alleging that it was the "end user" of the
reports. (Id. ¶ 16.)
Plaintiffs represent some of the thousands of consumers whose
consumer reports Lead Express obtained from Clarity Service,
Inc. ("Clarity"), "a nontraditional
consumer-reporting agency that specializes in assembling
subprime consumer data." (Id. ¶ 12.)
"Unlike traditional consumer-reporting agencies, most of
Clarity's major customers did not buy its data to
determine if a loan applicant would pay his or her
bills." (Id. ¶ 13.) Rather, companies like
Lead Express secretly purchase Clarity's consumer reports
for the purpose of targeting vulnerable customers who may
have interest in high-interest loans. By using Clarity, the
Defendants could bypass Experian's more stringent
credentialing and conceal the role of La Posta Tribal Lending
Enterprise ("La Posta Lending") in offering
these loans. Such practices also make it more difficult for
consumers to know who obtained their report.
Plaintiffs allege that Clarity obtained their consumer
reports from Experian and sold them to Lead Express, who
would "purportedly" utilize the
information to evaluate consumers for loans. (Id.
¶ 15.) In accordance with this practice, Lead Express
executed an "end user" agreement with Clarity, in
which Lead Express represented that it constituted the
"end user" of the consumer reports. (Id.
¶ 16.) Lead Express then obtained consumer reports from
Clarity, including more than 30, 000 consumer reports on
Virginia consumers during a five-year period. The purpose of
obtaining these reports was to target Virginia consumers for
high-interest loans. Lead Express obtained Gillison's
consumer report on January 17, 2014, and Mays-Johnson's
report on May 8, 2015, in order to market high-interest loans
spite of Lead Express's certification that it was the
"end user" of the consumer reports, Lead Express
never provided a "firm offer of credit" to the
Plaintiffs, and the Plaintiffs never applied for credit with
Lead Express or authorized Lead Express to pull their
reports. (Id. ¶ 23.) Rather, Lead
Express purchased the consumer data "in order to obtain
leads on potential consumers who may be interested in
high-interest loans"-data an affiliate company would use
to offer loans to consumers. (Id. ¶¶
25-26.) Accordingly, the Plaintiffs contend, Lead Express
"lacked a permissible purpose to obtain [the]
Plaintiffs' consumer reports." (Id.
¶¶ 23, 27.)
Analysis: Motion to Dismiss
Defendants bring the Motion to Dismiss under three theories:
(1) the Plaintiffs lack standing to bring this lawsuit
following the Supreme Court of the United States'
decision in Spokeo; (2) the Court lacks personal
jurisdiction over the Defendants; and, (3) venue in this
Court is improper. Alternatively, the Defendants request that
the Court transfer venue to the United States District Court
for the Central District of California. In the event the
Court finds dismissal appropriate for lack of personal
jurisdiction, the Plaintiffs have asked that the Court permit
the parties to conduct discovery for 90 days. For the reasons
that follow, the Court will grant the Motion to Dismiss for
lack of personal jurisdiction. The Court will deny the Motion
for Permission to Take Jurisdiction-Related Discovery without
prejudice, and order the parties to submit supplemental
briefing regarding the jurisdictional discovery request.
The Court Will Deny the Motion to Dismiss for Lack of
Defendants anchor their subject-matter jurisdiction argument
in the contention that the Plaintiffs lack standing under
Article III of the Constitution of the United
States. In Spokeo, the Supreme Court
discussed the manner in which a plaintiff must allege
"injury in fact" in order to establish standing for
what courts call a "statutory violation" resulting
in an "informational injury." Relying on
Spokeo, the Defendants contend that the
Plaintiffs' allegations in the Second Amended Complaint
fail to set forth any "concrete" injury in fact
caused by the alleged statutory violation. The Plaintiffs
dispute that assertion, arguing that, even after
Spokeo, an "informational injury" may be
both particularized and concrete.
Court offers background regarding Article III standing, and
what could constitute an injury in fact under
Spokeo, to explain why it finds that the Plaintiffs
have standing to bring this suit.
The Three-Part Test Used to Evaluate Article III
district courts are courts of limited subject-matter
jurisdiction. United States ex ret Vuyyuru v.
Jadhav, 555 F.3d 337, 347 (4th Cir. 2009) (citing
Exxon Mobile Corp. v. Allapattah Servs., Inc., 545
U.S. 546, 552 (2005)). This Court must, as a result,
determine whether it has jurisdiction over the claims at
issue. See Steel Co. v. Citizens for a Better Env
't, 523 U.S. 83, 94-95 (1998) ("The requirement
that jurisdiction be established as a threshold matter
'spring[s] from the nature and limits of the judicial
power of the United States' and is 'inflexible and
without exception.'") (quoting Mansfield, C.
& L.M. Ry. Co. v. Swan, 111 U.S. 379, 382 (1884)).
"The objection that a federal court lacks subject-matter
jurisdiction ... may be raised by a party, or by a court on
its own initiative, at any stage in the litigation"
Arbaugh v. Y&H Corp., 546 U.S. 500, 506
(2006) (citing Fed.R.Civ.P. 12(b)(1)).
United States Constitution limits federal court jurisdiction
to "Cases" and "Controversies." U.S.
Const, art. Ill. § 2, cl. 1. As the Supreme Court has
explained, an "essential and unchanging part of the
case-or-controversy requirement" is that a plaintiff
must establish Article III standing to sue. Lujan,
504 U.S. at 560. In Spokeo, the Supreme Court
reiterated that, in order to establish standing, a plaintiff
must have: "(1) suffered an injury in fact, (2) that is
fairly traceable to the challenged conduct of the
defendant; and[J (3) that is likely to be redressed
by a favorable judicial decision." 136 S.Ct. at 1547
(citing Lujan, 504 U.S. at 560-61).
party invoking federal jurisdiction, the Plaintiffs bear the
burden of properly alleging standing. Lujan, 504
U.S. at 560; see also Balzer & Assoc, Inc. v. Union
Bank & Trust, 3:09cv273, 2009 WL 1675707, at *2
(E.D. Va. June 15, 2009) ("On a motion to dismiss
pursuant to Rule 12(b)(1), the party asserting jurisdiction
has the burden of proving subject matter jurisdiction."
(citing Richmond, Fredericksburg & Potomac R.R. v.
United States, 945 F.2d 764, 768 (4th Cir. 1991)).
"Where, as here, a case is at the pleading stage, the
plaintiff must 'clearly ... allege facts
demonstrating' each element." Spokeo, 136
S.Ct. at 1547 (quoting Worth v. Seldin, 422 U.S.
490, 518 (1975)).
issue of subject-matter jurisdiction, the parties here
dispute only whether, post-Spokeo, the Plaintiffs
allege an injury in fact. In a different context, this Court
already has found that Spokeo refined, but did not
redefine, the injury-in-fact analysis. See, e.g., Clark
v. Trans Union, LLC, No. 3:15cv391, 2016 WL 7197391
(E.D. Va. Dec. 9, 2016) (finding that plaintiff alleged
standing on 15 U.S.C. § 1681g(a)(2)
claim). The Plaintiffs present an even stronger
argument for establishing standing on their §§
1681b(f) and 1681 q claims. As other courts in the Eastern
District of Virginia have explained, not only has Congress
defined the invasion of one's privacy as an injury in
fact, but courts traditionally have recognized statutory
violations rooted in privacy invasions as a basis for suit.
See, e.g., Thomas v. FTS USA, LLC, 193 F.Supp.3d.
623, 637 (E.D. Va. 2016) (finding that plaintiff asserted
standing under §§ 1681b(b)(2) and
1681b(b)(3)); see also Gambles v.
SterlingInfosystems, Inc., No. 15 CIV. 9746, 2017 WL
589130, at *10 (S.D.N.Y. Feb. 13, 2017) (finding that
plaintiff asserted standing under 15 U.S.C. §§
1681c(a) & 1681e(b)). Thus, the Plaintiffs'
claims survive Spokeo.
Standard to Demonstrate an Injury in Fact
In Spokeo, the plaintiff, Thomas Robins, brought suit under
the FCRA against Spokeo, a company that operates a people
search engine. 136 S.Ct. at 1544, 1554. Robins invoked 15
U.S.C. § 1681(e), alleging that Spokeo failed to
"follow reasonable procedures to assure maximum accuracy
of consumer reports" when, while he was out of work, it
incorrectly profiled his age, marital status, education
degree, and employment status. Id While ruling, the
Supreme Court confirmed that, in order to establish an injury
in fact, a plaintiff must demonstrate that he or she 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). The
Supreme Court found that the United States Court of Appeals
for the Ninth Circuit improperly "elided" the
concreteness requirement. Id Because the Ninth
Circuit addressed only the "particularization"
aspect of the test, the Supreme Court remanded the case for
further proceedings. Id. at 1550. In so finding, the
Spokeo court defined both terms with specificity.
for an injury to be "particularized, " the Court
found that it "'must affect the plaintiff in a
personal and individual way."' Id. at 1548
(citing Lujan, 504 U.S. at 560 n.1). Thus, an
"undifferentiated, generalized grievance" that all
citizens share would not qualify as particularized. Lance
v. Coffinan, 549 U.S. 437, 442 (2007). "[T]he fact
that an injury may be suffered by a large number of people,
" however, "does not of itself make that injury a
nonjusticiable generalized grievance." Spokeo,
136 S.Ct. at 1548 n.7. The proper inquiry is whether
"each individual suffers a particularized harm."
the Spokeo Court stated that for an injury to be
"concrete, " it must be "de facto, "
meaning that it must be "real, " and not
"abstract." Spokeo, 136 S.Ct. at 1548.
That said, an injury need not be "tangible" in
order to be "concrete." Id. at 1549. An
intangible injury may qualify as an injury in fact.
Id. In evaluating whether an intangible injury
satisfies the "concreteness" requirement, the
Supreme Court reiterated two important considerations: (1)
history, which may reveal "whether an alleged intangible
harm has a close relationship to a harm that has
traditionally been regarded as providing a basis for a
lawsuit in English or American courts"; and, (2) the
judgment of Congress, which "'has the power to
define injuries and articulate chains of causation that will
give rise to a case or controversy where none existed
before.'" Id. (quoting Lujan,
504 U.S. at 580 (Kennedy, J., concurring in part and
concurring in judgment)).
Yost-Spokeo, the Plaintiffs Retain Standing to
Pursue Their Claims Under 15 U.S.C.
Â§Â§ 1681b(f) and 1681q
the Court must determine whether, by alleging violations of
15 U.S.C. §§ 1681b(f) and 1681q, the Plaintiffs
demonstrate an "invasion of a legally and protected
interest' that is 'concrete and
particularized."' Spokeo, 136 S.Ct. at 1548
(quoting Lujan, 504 U.S. at 560). At the core of the
Plaintiffs' claims lies an invasion of privacy caused by
an impermissible procurement of their consumer reports.
Guided by Spokeo*s refined injury-in-fact
requirement, the Court must consider: (1) the history of this
alleged harm to determine if it has a close relationship to a
harm that has traditionally provided a basis for suit; and,
(2) the judgment of Congress. Applying either of the two
considerations set forth in Spokeo, this Court
concludes that the Plaintiffs have standing.
Plaintiffs can establish standing on Spokeo's
first inquiry, which asks whether they allege a harm closely
related to a harm that has traditionally provided a basis for
suit. A significant history exists, including at common law,
of lawsuits based on the unauthorized disclosure of a
person's private information. The Supreme Court has
described private information as information not freely
available to the public or information that is intended for
or restricted to particular people. See U.S. Dep 't
of Justice v. Reporters Comm. for Freedom of Press, 489
U.S. 749, 763 (1989). The Supreme Court has noted that the
"common law and literal understandings of privacy
encompass" protection of a person's private
explained in this District, "it has long been the case
that an unauthorized dissemination of one's personal
information, even without a showing of actual damages, is an
invasion of one's privacy that constitutes a concrete
injury sufficient to confer standing to sue."
Thomas, 193 F.Supp.3d at 636 (citing Samuel D.
Warren & Louis D. Brandeis, The Right to
Privacy, 4 Harv. L. Rev. 193 (1890)). As a result,
"it is well-settled that Congress may create a statutory
right to privacy in certain information that strengthens or
replaces the common law, and citizens whose statutory right
to informational privacy has been invaded may bring suit
under the statute to vindicate that right." Id.
(citing 18 U.S.C. § 2707(c) (authorizing statutory
damages for violations of the Electronic Communications
Privacy Act of 1986)); 12 U.S.C. § 3417 (statutory
damages available under the Right to Financial Privacy Act);
18 U.S.C. § 2710(c)(1) (establishing a private right of
action under the Video Privacy Protection Act)); see also
Gambles, 2017 WL 589130, at *9 (same).
the Plaintiffs allege that the Defendants invaded their
statutory right to the confidentiality of their personal
information by obtaining their consumer reports without
authorization, see 15 U.S.C. § 1681b(f), and
under false pretenses, see Id. § 1681q. Such
unauthorized acquisitions of personal information would
constitute invasions of privacy that qualify as concrete
injuries sufficient to confer Article III standing. See
Thomas, 193 F.Supp.3d. at 637; Gambles, 2017 WL
589130, at *10.
addition to the history of claims rooted in the invasion of
privacy, the Plaintiffs can establish standing on
Spokeo's second consideration, which requires
courts to turn to the judgment of Congress. The purpose of
the FCRA indicates that Congress intended to identify and
permit relief at law for the harms that the Plaintiffs
allege. This Court looked to the underlying purpose of the
FCRA when finding standing in Clark, as did the
Honorable Robert E. Payne, United States District Judge, in
Thomas. "Congress enacted FCRA in 1970 out of
concerns about abuses in the consumer reporting
industry." Dalton v. Capital Associated Indus.,
Inc., 257 F.3d 409, 414 (4th Cir. 2001). Specifically,
Congress intended to address developments in "computer
technology [that] facilitated the storage and interchange of
information" and "open[ed] the possibility of a
nationwide data bank covering every citizen." S. Rep.
No. 517, 91st Cong., 1st Sess. 2 (1969) ("Senate
Report"). As remarked by one member of Congress,
"with the trend toward ... the establishment of all
sorts of computerized data banks, the individual is in great
danger of having his life and character reduced to impersonal
'blips' and key-punch holes in a stolid and
unthinking machine which can literally ruin his [or her]
reputation without cause, and make him [or her]
unemployable." 116 Cong. Rec. 36570 (1970).
of these "computerized data banks, " Congress
"found that in too many instances agencies were
reporting inaccurate information that was adversely affecting
the ability of individuals to obtain employment."
Dalton, 257 F.3d at 414. Congress, in turn, sought
"to prevent consumers from being unjustly damaged
because of inaccurate or arbitrary information, " and
"to prevent an undue invasion of the
individual's right of privacy in the collection and
dissemination of credit information." Senate Report
at 1 (emphasis added). Ultimately, the FCRA reflects
congressional recognition of the "need to insure that
consumer reporting agencies exercise their grave
responsibilities with fairness, impartiality, and a
respect for the consumer's right to privacy" 15
U.S.C. § 1681(a)(4) (emphasis added); see also
Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 52 (2007)
("Congress enacted FCRA in 1970 to ensure fair and
accurate credit reporting ... and protect consumer
privacy." (emphasis added)).
FCRA, Congress has specifically provided that a consumer has
protection from the unauthorized acquisition of his or her
consumer report by another. 15 U.S.C. § 1681b(f).
Congress has also prohibited the gathering of information
about a consumer under false pretenses. Id. §
1681 q. As such, in Congress's legislative judgment,
where consumer information is obtained in an unauthorized
manner, especially under false pretenses, the consumer
suffers the violation of his or her right to privacy. See
Spokeo, 136 S.Ct. at 1549 (noting the importance of
legislative judgment to the standing analysis); Havens
Realty Corp. v. Coleman, 455 U.S. 363, 373 (1982)
(same). Accordingly, a consumer who alleges that
a defendant has obtained his or her personal information
without authorization, like the Plaintiffs here, has alleged
a concrete informational injury. Having found that the
Plaintiffs have standing, the Court turns to the
Defendants' personal-jurisdiction challenge.
The Court Will Grant the Motion to Dismiss for Lack of
Court will grant the Motion to Dismiss because the Plaintiffs
cannot make a prima facie showing of personal jurisdiction.
The Plaintiffs allege that this Court has personal
jurisdiction over the Defendants because, by obtaining more
than 30, 000 consumer reports of Virginia residents without
authorization, the Defendants purposefully availed themselves
of the privilege of conducting activities in Virginia. The
Court cannot find that such contacts, even construed in the
light most favorable to the Plaintiffs, suffice to establish
specific personal jurisdiction.
The Plaintiffs Bear the Burden of Proving ...