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COUNTY VANLINES INC. v. EXPERIAN INFORMATION SOLUTIONS

April 30, 2004.

COUNTY VANLINES INC., Plaintiff, -against- EXPERIAN INFORMATION SOLUTIONS, INC. a/k/a EXPERIAN, Defendant


The opinion of the court was delivered by: WILLIAM CONNER, Senior District Judge

OPINION AND ORDER
Plaintiff County Vanlines, Inc. ("CVL") brought this commercial defamation action against defendant Experian Information Solutions, Inc. ("Experian") seeking $2,500,000 in compensatory damages and $5,000,000 in punitive damages.*fn1 Plaintiff now moves pursuant to FED. R. Civ. P. 56 for partial summary judgment dismissing defendant's affirmative defense of truth. Defendant cross moves pursuant to FED. R. Civ. P. 56 for summary judgment dismissing plaintiffs Complaint in its entirety. For the reasons set forth herein, we grant defendant's cross motion for summary judgment, and we deny as moot plaintiffs motion for partial summary judgment.*fn2

  BACKGROUND

  The record, which includes this Court's previous opinions in this case,*fn3 reveals the following undisputed facts.*fn4 Plaintiff is a moving and storage business located in Yonkers, New York. (PL Rule 56.1 Stmt. ¶ 1.) In April 2001, plaintiff applied at the Westchester County branch of the Bank of New York (the "bank") for a commercial loan to purchase a 52-foot trailer for its moving business. (Id. ¶ 3.) During the subsequent loan approval process, bank officials requested a copy of plaintiff's credit history from defendant, which is a credit reporting agency. (Id. ¶ 4.) Defendant erroneously sent to the bank the credit report of a different corporation named County Van & Storage, Inc. ("CV&S"). (Id. ¶ 6.) This credit report contained negative credit information about CV&S, all of which predated CVL's 1996 incorporation date. This information included documentation of late bill payments, past-due payments, a written-off unpaid cellular phone/paging account and a tax lien. (Id. ¶¶ 6-7; Rabin Decl., Ex. 14; Broderick Decl., Ex. R.) Relying on this credit report, the bank denied plaintiffs request for a loan. (Rabin Decl., Ex. 13.) Thereafter, plaintiff commenced this action on June 18, 2001. (Notice of Removal ¶ 2.)

  Experian answered the Complaint by asserting, inter alia, that the credit report was true. (Ans., 2d Aff. Def.) Thereafter, plaintiff moved pursuant to FED R. Civ. P. 12(f) to strike that and other affirmative defenses. See County Vanlines, 205 F.R.D. at 149. We denied that motion with respect to the affirmative defense of truth because we concluded that there were issues of fact and law that required resolution, particularly whether plaintiff was the alter ego of CV&S. Id. at 154. In so holding, we took judicial notice of Judge Martin's opinion in NLRB v. County Van & Storage, Inc., No. 97 Civ. 2099, 1997 WL 282212, at *4 (S.D.N.Y. May 28, 1997), which denied CVL's cross motion for summary judgment on that issue because, although the NLRB had failed to establish "reasonable cause to believe" that CVL was the alter ego of CV&S, the factual record was nevertheless insufficient to prove that they were not the alter ego.*fn5 County Vanlines, 205 F.R.D. at 154. We held that because the NLRB action did not conclusively determine the alter ego status, there were "disputed issues of fact and law as to whether plaintiff was an alter ego of CV&S, and as a consequence, whether the disputed credit report was true" that precluded granting the motion to strike the affirmative defense. Id. We also denied plaintiff's motion to strike the affirmative defense of the qualified privilege afforded to credit reporting agencies under New York law, holding that "whether or not defendant acted with [the requisite] gross negligence turns in large part upon unsettled issues of fact." Id. at 157.

  Discovery having concluded, plaintiff now claims that the affirmative defense of truth fails as a matter of law because defendant has not offered any additional proof tending to show that CVL is the alter ego of CV&S. (PL Mem. Supp. Summ. J. at 6-7.) Defendant contends in response that the record demonstrates the existence of a genuine issue of material fact as to the alter ego/truth defense, and also cross moves for summary judgment on the ground that there is insufficient evidence of gross negligence or malice to overcome the qualified privilege afforded to credit reporting agencies. (Def. Mem. Supp. Cross Mot. Summ. J. at 6, 10.) The additional undisputed facts adduced during discovery control the disposition of both plaintiff's motion and defendant's cross motion. CV&S was a New York corporation in the business of moving and storage. (Lucchesi Dep. at 8-10.) One hundred percent of the stock of CV&S was owned by Frank Lucchesi, who was the only officer as well. (Id. at 9-10.) CV&S was a local agent for Atlas Van Lines, a national moving company. (Id. at 13-14.) In 1994, Lucchesi sold CV&S to Bruce Michaels, but Lucchesi remained employed by Michaels in the sales department. (Id. at 15, 17.) CV&S subsequently was reincorporated as a Delaware corporation that became known as County Van & Storage of Delaware. (Id. at 18.) It continued, however, to do business at the same address. (Id. at 18-19.)

  Thereafter, in 1996, Michaels failed to make payments on notes issued to Lucchesi. (Id. at 23.) Michaels then abandoned the business and Lucchesi foreclosed on the note, after which a corporation owned by Lucchesi known as F.L. Van Associates ("F.L.") took control of CV&S. (Id.) F.L. then became known as CVL, with Lucchesi as president. (Id. at 25-26.)

  Lucchesi testified at his deposition that CVL is located at the same address as CV&S and has the same telephone number used by CV&S. (Lucchesi Dep. at 18-19, 32-33; Def. Rule 56.1 Stmt. ¶¶ 5-6, Ex. L.) The two companies also share some of the same employees, vendors and customers. (Lucchesi Dep. at 26-28.) After his 1994 sale of CV&S to Michaels, Lucchesi retained no ownership interest in the company and it had no officers or directors in common with CVL. (Id. at 78-79.)

  The credit report that gave rise to the present litigation was not the first time that defendant issued a credit report about CVL. In December 1998, plaintiff applied for a loan from Fleet Bank. (PL Rule 56.1 Stmt. ¶ 13.) Fleet subsequently requested from defendant credit reports on both CV&S and CVL. (Broderick Decl., Exs. O-P; Poteraj Aff. ¶ 28.) On December 22, 1998, defendant sent to Fleet Bank a report with credit information about both CV&S and CVL.*fn6 (PL Rule 56.1 Stmt. ¶ 13; Broderick Decl., Exs. O-P; Poteraj Aff. ¶ 28.) The CVL report did not contain negative credit information, but the CV&S report contained the same negative credit information that appeared in the April 2001 report at issue in the present case. (PL Rule 56.1 Stmt. ¶ 13; Broderick Decl., Exs. O, P, R.) Fleet denied plaintiff's loan application. (Pl. Rule 56.1 Stmt. ¶ 13.) Thereafter, plaintiff requested a reinvestigation and obtained from defendant a credit report on January 14, 1999 referring only to CVL.*fn7 (PL Rule 56.1 Stmt. ¶ 13; Broderick Decl., Ex. Q.) The record does not indicate whether plaintiff reapplied to Fleet for credit after receiving the reinvestigated report. Brian Poteraj, a technical manager employed in that capacity since 1990 by defendant and its predecessor TRW, Inc., described the process by which defendant's computer search system retrieves businesses' credit information. (Poteraj Aff. ¶ 1.) Defendant's computer system stores items of credit information from thousands of sources, who include "contributors" such as banks, retailers, finance companies and collection agencies, in addition to the public record. (Id. ¶ 3.) Defendant does not originate or create credit information; it only stores information supplied to it. (Id.) Defendant maintains credit information on approximately 20 million businesses, and processes over 40 million updates to that information per month. (Id. ¶ 4.)

  Defendant has developed a process of matching business information with its computer system that is intended to address matching problems caused by, inter alia, name changes, address changes, misspelling, misreading and inconsistent identification. (Id. ¶ 6.) When contributors provide credit information to defendant, they include certain identifying information. (Id. ¶ 7.) This information is collected primarily from lenders' accounts receivable files, and usually includes the "doing business as" name of a business as shown on, for example, signs and letterheads, and not necessarily its corporate legal name that is on file with the secretary of state. (Id. ¶ 8.) When a subscriber requests a credit report, that subscriber submits similar information about the subject of the requested report. (Id. ¶ 7.)

  Defendant does not store information as completed credit reports. (Id. ¶ 10.) Rather, when a subscriber requests a credit report, the computer system creates a report by comparing and matching the information provided by the subscriber with information contained in the system. (Id. ¶ 11.) The subscriber obtains the information that it provides to defendant by requesting it from the potential borrower. (Id. ¶ 13.) This information includes identifying information that may not be unique to a particular business, such as addresses and similar business names. (Id. ¶ 12.) Defendant has no control over the accuracy or completeness of the information provided to it by subscribers or contributors for the generation of reports, including whether the subscriber has correctly identified the potential borrower. (Id. ¶ 13.)

  The computer system does not require 100 percent matching between information provided and information in the database because that level of precision would eliminate a lot of accurate and relevant data by precluding consideration of identification material that varies even slightly. (Id. ¶¶ 17-18, 20.) To ensure accuracy in matching, the system's matching system ascribes different weights, obtained from extensive statistical analysis, to a variety of identifying factors. (Id. ¶ 19.) If the computer system identifies multiple candidates that match the information provided, defendant sends the match list to the subscriber. (Id. ¶ 14.) The subscriber may elect to receive up to five reports from that list, and will only be charged for one report. (Id.) Defendant does not keep copies of the reports that it ultimately sends to its subscribers. (Id.)

  In the present case, Lucchesi completed and signed the loan application with the Bank of New York. (Lucchesi Dep. at 53.) CVL was identified by name on the application form as "County Van Lines," rather than the more accurate "County Vanlines." (Broderick Decl., Ex. L.) Thereafter, when defendant created a credit report at the bank's request, Poteraj testified that the similarity in name between "County Van Lines" and the former "County Van & Storage," as well as the identical addresses and similar businesses, caused the computer system to provide information on both companies. (Poteraj Aff. ¶¶ 22, 24.) Indeed, some companies reporting information to defendant about plaintiff still use the business name "County Van & Storage." (Id. ¶ 23.) The bank then relied on the negative report dated April 4, 2001, in which the business was identified as "County Van & Storage, Inc.," and denied plaintiffs request for a loan on April 20, 2001. (Rabin Decl., Exs. 11-12.) Thereafter, plaintiff obtained from defendant a copy of this report on April 16, 2001, and a subsequent report in July 2001 identifying the company as "County Vanlines, Inc." that did not include the negative information. (Rabin Decl., Exs. 13-15.) Defendant subsequently separated the information linking the two companies, and has not thereafter published any further credit reports that link the two companies. (Poteraj Aff. ¶ 27.)

  ...


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