A District Court judge in New Jersey has denied a defendant’s appeal of a Magistrate Judge’s order lifting a stay on class discovery in a Fair Credit Reporting Act case, ruling that what consumers nationwide complained about may help answer whether the defendant should have known the plaintiff never applied for a loan in the first place.
The background: The plaintiff was a patient of a healthcare provider offering cosmetic services, and patients who wished to finance their treatment could apply for a loan through the defendant.
- The plaintiff alleged the defendant pulled her credit report to evaluate whether she qualified for a medical loan she never applied for, and that it pulled the credit reports of other patients based on unauthorized loan applications, in violation of the FCRA. She filed a class action back in 2021.
- In late 2024, a Magistrate Judge determined that discovery on the plaintiff’s individual claim appeared complete, granted the defendant leave to file a motion for summary judgment, and stayed class discovery. The plaintiff appealed.
- Last June, the District Court judge directed the parties to meet and confer about any outstanding discovery on the individual claim and administratively terminated both the appeal and the summary judgment motion.
- The parties met and conferred but could not resolve their disputes.
- In November, after reviewing their joint dispute letter and what he called “incessant disputes,” the Magistrate Judge lifted the class discovery stay on his own, finding that class discovery was intertwined with the plaintiff’s individual claim.
- The defendant appealed that order.
The ruling: Judge Claire C. Cecchi of the District Court for the District of New Jersey denied the defendant’s appeal.
- Because discovery disputes fall within a Magistrate Judge’s exclusive authority, Judge Cecchi reviewed the order under a highly deferential standard, asking only whether the Magistrate Judge abused his discretion.
- The defendant argued the Magistrate Judge acted outside his authority by addressing class discovery when the parties had been directed to confer about individual discovery. Judge Cecchi disagreed, pointing to the Magistrate Judge’s observation that “the distinction between merits and class discovery in this case is much more difficult to ascertain than originally expected.”
- To prevail on her FCRA claim, the plaintiff must show the defendant obtained her credit report for an impermissible purpose and did so willfully or negligently. The key question is whether the defendant knew or should have known that she did not want to apply for financing.
- The class discovery at issue, which includes consumer complaints about unauthorized applications, the defendant’s investigations finding merchants at fault, merchant training materials, and the defendant’s knowledge of systemic problems, may bear directly on that question. If the defendant knew consumers were complaining about merchants processing unauthorized applications, that could inform the reasonableness of its reliance on the merchant-submitted application in the plaintiff’s case.
- The defendant warned that reviewing millions of files “would take years to complete, working twenty-four hours a day, seven days a week.” Judge Cecchi was sympathetic but noted the Magistrate Judge made clear his order “shall not be taken as an allowance for boundless class discovery,” directing the parties to meet and confer to keep it from becoming overly burdensome.
- Judge Cecchi also declined to issue her own stay or keep discovery bifurcated, finding that doing so would prejudice the plaintiff.
