Wednesday, November 1, 2006
Justices Hold ‘Security Freeze’ Law Unconstitutional as Applied to Public Records, Reverse Injunction
By KENNETH OFGANG, Staff Writer
A state law that allows consumers to bar the dissemination of their credit reports, designed to deter identity theft, violates the First Amendment because it precludes the reporting of information containing in public records, the Court of Appeal for this district has ruled.
Div. Five ruled Monday that U.D. Registry, Inc., which maintains information on tens of millions of people in California and elsewhere and provides landlords and property managers with reports about prospective tenants, had established that Civil Code Sec. 1785.11.2, the “security freeze” law, is unconstitutional as applied to those reports.
The court, however, reversed an injunction that completely barred the state from enforcing the law, and directed that a new injunction be issued barring enforcement against U.D. Registry only.
The law, which took effect Jan. 1, 2003, provides that a consumer may place a notice on his or her credit report, that generally prohibits reporting agencies from releasing credit information without a specific authorization from the consumer.
U.D. Registry contended that the law deprives it of free speech rights by allowing the consumer to suppress information that the company would otherwise disseminate from public records, including information about evictions, foreclosures, and bankruptcies.
Los Angeles Superior Court Judge Andria K. Richey found that the law was unconstitutional on its face to the extent that it barred dissemination of information based on public records, but was otherwise constitutional, and granted an injunction allowing the state to enforce the law, against U.D. Registry and others, only with respect to information not obtained from public records.
But Presiding Justice Paul A. Turner, writing for a divided panel, said the trial judge should have rejected the facial challenge, held the law unconstitutional only as applied, and enjoined enforcement of the law, in its entirety, against the plaintiff.
The security freeze law, Turner said, serves important public interests which, in some cases, will take precedence over a reporting agency’s right to distribute information. But in the case of an agency like U.D. Registry, whose reports are “drawn in material part from public records including court documents,” the law “sweeps more broadly than is necessary to serve the government interest in protecting consumers from identity theft,” the presiding justice wrote.
“[P]reventing plaintiff from disseminating all of the public record information does not serve the asserted state interest. The knowledge that an individual has been the subject of an unlawful detainer action by a lessor, a tax lien imposed by the government, or a foreclosure action by a lender does not facilitate identity theft. Even if that information could be of some use to a potential identity thief, it would be available without resort to plaintiff’s credit reports. Nor is it likely the absence of such records, without more, would result in an extension of consumer credit to a would-be thief.”
Nor, he went on to say, can the statute be reformed by a court, as the trial judge attempted to do.
“The trial court’s construction that prevents a consumer from freezing information ‘contained in and/or obtained from public records’ permits the disclosure to plaintiff’s customers of the very information the Legislature sought to keep confidential—names, social security numbers, addresses, tax information, rental records, and judgments,” Turner wrote. “The Legislature intended to allow consumers to prevent disclosure of any information in a credit reporting agency report; not merely that ‘contained in and/or obtained from public records’ as the trial court’s reformation order permits....The Legislature never intended, much less even contemplated, that once the consumer’s written notice was received, the credit reporting agency would have to peer over the information to ascertain whether there is data which is not ‘contained in and/or obtained from public records, as the trial court’s order in effect requires.”
Justice Sandy Kriegler concurred in the opinion, while Justice Orville Armstrong, dissenting in part, argued that the judgment should be affirmed in its entirety.
The case is U.D. Registry, Inc. v. State of California, 06 S.O.S. 5768.
Copyright 2006, Metropolitan News Company