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McSherry v. Capital One-Class Action Defense Issues: No Right Of Indemnity Under FCRA (Fair Credit Reporting Act) Or TILA (Truth In Lending Act) Federal Court Holds

Federal District Court Grants Motion to Strike Third-Party Complaint for Indemnity/Contribution Against Parent

Plaintiffs Kristen and William McSherry Jr. (“William Jr.”) filed suit against Capital One FSB and others alleging violations of the federal Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA), and Truth in Lending Act (TILA), together with Washington state law claims for defamation and invasion of privacy. McSherry v. Capital One FSB, ___ F.R.D. ___, 2006 WL 1420839 (W.D. Wash. 2006). Capital One filed a third-party complaint against plaintiff’s father, William McSherry Sr., (“William Sr.”) for indemnity and contribution because “[a]ccording to several documents in the record, including Plaintiffs’ complaint, it appears that the debt allegedly incurred by [William Jr.], may have been incurred by [William Sr.].” Slip Opn., at 2. The district court granted plaintiffs’ motion to strike, finding that “[w]hile it does appear that Capital One’s allegedly tortuous actions or omissions would not have occurred but for [William Sr.’s] alleged actions, this is not enough.” Id., at 1 and 12.

The federal court began with a summary of federal law on impleader actions, noting that it must be based on “an assertion of the third-party defendant’s derivative liability to the third-party plaintiff” and that it “cannot be used to assert any . . . rights to recovery arising from the same transaction or occurrence as the underlying action.” Slip Opn., at 3-4 (citation omitted). Here, the plaintiffs’ complaint was carefully drafted to seek damages solely based on Capital One’s acts or omissions in response to communications from plaintiffs concerning the debt:

More particularly, Plaintiffs claim that they “repeatedly disputed information reported or furnished regarding their creditworthiness that associated Mr. McSherry’s creditworthiness with his father, to no avail” . . .; that “Capital One has a policy of refusing to properly investigate and/or take action with regard to the erroneous association of family members with their children” . . .; that despite Plaintiffs’ repeated attempts to correct the information, “Capital One continued to wrongfully report false information regarding his creditworthiness” . . .; and that “Capital One failed to conduct reasonable investigation(s) of plaintiff’s claims”.

Slip Opn., at 4. The district court ultimately concluded that William Sr.’s conduct was irrelevant and, paraphrasing another court opinion, held:

Even though Capital One may be “technically correct” about Mr. McSherry, Sr.’s alleged actions as but-for cause, “that is only because but for the … alleged acts, the possibility that [Capital One] would conduct inadequate investigations in response to disputed charges or impermissibly access plaintiff’s credit report would never have arisen.”

Slip Opn., at 13 (citation omitted, italics added).

The district court provided a thorough analysis of a defendant’s potential rights to seek indemnity or contribution under the FCRA, TILA and the Fair Credit Billing Act (which is part of TILA), and held that no such rights exist. The opinion is well worth reading.

Download PDF file of McSherry v. Capital One