Smith v. Bob Smith Chevrolet, Inc.Smith v. Bob Smith Chevrolet, Inc.
MEMORANDUM OPINION
Christоpher Smith (“Plaintiff’) alleges that Defendant Bob Smith Chevrolet, Inc. (“Smith Chevrolet”) violated the Fair Credit Reporting Act,
I.
The underlying facts concern the disputed sale of a 2001 GMC Suburban [“Suburban”]. Having decided that he wanted to purchase a car, on December 13, 2000, Plaintiff completed a GMAC credit application to determine his eligibility for financing. On December 23, 2000, Plaintiff went to Smith Chevrolet with the intention of purchasing the Suburban to use on a family Christmas vacation.
After arriving at the dealership, Plaintiff met with a company employee to discuss the terms of the sale. Two factors complicated the sale. First, Plaintiff wanted to trade in his 1997 Mercury Villager. Second, as an employee of General Electric — a General Motors (“GM”) supplier — he was entitled to a standard discount uрon proof of employment. Although Plaintiff, did' have the 1997 Mercury Villager to trade-in on December 23, 2000, he did not have the proper documentation needed to secure the discount. Notwithstanding this fact, a Smith Chevrolet representative agreed to sell Plaintiff the Suburban at the GM discounted price provided he proved his entitlement to the full discount at a later date. After calculating the Villager’s trade-in value and the GM discount, the two sides agreed on a price and set forth the terms of the sale in a handwritten purchase order.
As part of this agreement, Smith Chevrolet requested that Plaintiff leave a check to cover the amount of his discount, which was $5,226.80, until Plaintiff provided the requisite documentation. After some hesitation and consideration, Plaintiff instead offered to leave a $500.00 check. A Smith Chevrolet representative agreed to accept this lesser amount and then prepared the typewritten purchase order. Thus, after signing the typewritten purchase order and handing over the Villager and his $500.00 check, Plaintiff left the lot with the Suburban. On January 10, 2001, Plaintiff faxed and mailed proof of his eligibility for the GM discount. Shortly thereafter, Plaintiffs bank issued Smith Chevrolet a check in the amount of the balance due.
About a week or ten days later, another dispute arose which gives rise to the current litigation. At that point Smith Chevrolet claims it realized the employee who generated the typewritten Purchase Agreement inadvertently doubled the amount of Plaintiffs discount. Smith Chevrolet contacted Plaintiff, explained the calculation error and told Plaintiff that he owed the dealership more money. Furthermore, Smith Chevrolet told Plaintiff that, until he paid the difference, it refused to transfer the Suburban’s title and pay off the outstanding loan attached on the Villager trade-in. These were both actions Smith Chevrolet had promised Plaintiff it would take when Plaintiff left the lot on December 23, 2000.
Following from this dispute, on February 21, 2000, Smith Chevrolet accessed Plaintiffs consumer report. The decision to access Plaintiffs report was made by Drew Smith, Smith Chevrolet’s chief executive officer and part-owner. Smith Chevrolet says it accessеd Plaintiffs report to determine whether Plaintiff was (1) continuing to make payments on the Villager’s loan and (2) maintaining insurance on the
When the parties could not agree on the amount due, Plaintiff sued Smith Chevrolet in Jefferson Circuit Court for breach of the sale contract. He demanded specific performance so that he could receive the Suburban’s title and transfer the Villager loan obligations to Smith Chevrolet. About a year later, a state court jury found in Plaintiffs favor. One day earlier, on May 13, 2002, Plaintiff filed this suit in federal court.
II.
Before considering the merits of Plaintiffs Fair Credit Reporting Act claim, the Court must first resоlve the important question of whether Kentucky’s claim preclusion rule bars his FCRA and invasion of privacy claims. Smith Chevrolet, arguing that it does, moved for summary judgment on this issue. 1
The doctrine of
res judicata,
or claim preclusion, provides that a final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in a prior action.
Kane v. Magna Mixer
Co.,
First, there must be identity of the parties. Second, there must be identity of the two causes of action. Third, the action must be decided on its merits. In short, the rule of res judicata does not act as a bar if there are different issues or the questions of law presented are different.
City of Louisville v. Louisville Prof'l Firefighters Ass’n,
As a starting point, Kentucky courts follow the Restatement’s transactional approach to analyze the identity of causes of action.
Harris v. Ashley,
More recently, however, the Kentucky Supreme Court has clarified that the rule “is not so broad as to foreclose all possible or potential claims against any known potential defendant not brought within the first litigation.”
Watts v. K, S & H,
The facts in
Watts
and
Hays
are helpful to understanding the application of this rule. In
Watts,
the Kentucky Supreme Court reversed a decision by the Kentucky Court of Appeals applying
res judicata
to bar a dram shop action where the plaintiff had previously brought a negligence suit against the drunk driver to whom the dram shop defendant had sold liquor.
Similarly,
Hays,
which the Wait’s Court substantially relied upon in reaching its conclusion, also involved successive suits between the same parties concerning facts arising from the same transaction. Like this case, the first suit involved the construction of an instrument; specifically, was a particular document a deed or a will? In the second suit, the issue was not how to interpret the written document, but turned on whether the grantor was of sound mind and whether certain payments were required under the terms of the deed.
Only the construction of the writing was involved in the first case ... A decree of construction of a deed or will does not more than tо ascertain and determine the intent of the grantor ... It does not change the status nor augment or diminish its binding force ... A suit seeking to have it adjudged void because of incapacity is an entirely different matter.
Id. at 649-51.
Thus, in both Watts and Hays, Kentucky’s highest court concluded that, though the plaintiff could have filed both claims in the original suit, the law did not require doing so where the facts and legal claims were distinct.
Applying Kentucky law here, the suit to enforce an agreement does not seem to preclude the second suit, premised on alleged violations of the Fair Credit Reporting Act. Though both lawsuits arise out of an automobile sale, the similarities end there. The breach of contract action stemmed from the sale agreement between Plaintiff and Smith Chevrolet and Smith Chevrolet’s subsequent realization that Plaintiff paid less than anticipated. To resolve the contract claim requires a trier of fact to ascertain what the agreed upon purchase price was. The second case stems from Smith Chevrolet’s decision to access Plaintiffs credit report on February 21, 2001. To resolve that claim requires
III.
The Court now turns to the merits of Plaintiffs claim. The heart of his case is the contention that Smith Chevrolet violated the FCRA when it accessed Plaintiffs credit report on February 21, 2001.
2
Specifically, Plaintiff contends Smith Chevrolet is liable for negligently and willfully violating the responsibilities imposed by the FCRA.
See
The FCRA identifies a limited set of “permissible purposes” for obtaining and using a consumer report.
See
(A) intends to use the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to, or review or collection of an account of, the consumer; or
(B) intends to use the information for employment purposes; or
(C) intends to use the information in connection with the underwriting of insurance involving the consumer; or
(D) intends to use the information in connection with a determination of the consumer’s eligibility for a license or other benefit granted by a governmental instrumentality required by law to consider an applicant’s financial responsibility or status; or
(E) intends to use the information, as a potential investor or servicer, or current insurer, in connection with a valuation of, or an assessment of the credit orprepayment risks associated with, an existing credit obligation; or
(F) otherwise has a legitimate business need for the information—
(I) in connection with a business transaction that is initiated by the consumer; or
(ii) to review an account to determine whether the consumer continues to meet the terms of the account.
In its summary judgment motion, Smith Chevrolet contends it had three bases for accessing Plaintiffs credit report. The Court now addresses each of these arguments.
A.
First and most persuasively, Smith Chevrolet contends its actions cоmplied with
As a starting point, the Court begins with the FCRA’s text. The applicability of this permissible purpose boils down to whether Smith Chevrolet’s use of the credit report was “in connection with a transaction initiated by the consumеr,” as the statute uses those terms. That restriction to the actual statutory usage is important here because, in the abstract, it is true Smith Chevrolet accessed Plaintiffs credit report in connection with a transaction Plaintiff at one point initiated. The Court concludes, however, that the statute uses the terms “in connection with a transaction initiated by the consumer” more restrictively.
Turning to the text at issue, when Congress defined the term “consumer report,” it stated:
The term “consumer report” means any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer’s eligibility for—
(A) credit or insurance to be used primarily for personal, family, or household purposes;
(B) employment purposes; or
(C) any other purpose authorized under section 604 [15 USCS § 1681b ].
This definition suggests that Congress primarily envisioned consumer reports being disseminated for the purposes of assessing “eligibility.” Then, in
Tellingly, the two permissible purposes stated in
To be precise, Smith Chevrolet’s stated reason for accessing the credit report was not in connection with a standard business transaction that Plaintiff initiated. Instead, and quite significantly in this Court’s view, Smith Chevrolet accessed the credit report to determine how much additional money it could collect, apart from what the two parties agreed upon in a standard business transaction. Almost certainly, it did not access Plaintiffs credit report for a reason beneficial to the consumer. Nor did it access the credit report to collect on a pre-existing debt. Rather, it accessed the report for its own business purposes and as part of a new event: the recovery of the duplicative discount. Although this is a fine distinction, it may be an important one. Smith Chevrolet’s interpretation of the phrase “in connection with” is limitless. Under its reading, so long as any company had a reason to question any part of a transaction, it could access a consumer’s credit report “in connection with a business transaction” that at some point was “initiated by the consumer.” That is, five weeks, five months, or five years down the line, Smith Chevrolet could access Plaintiffs credit report if some dispute ever arose about the contracted price. In the Court’s view, such an interpretation would give commercial entities an unlimited blank check to access and reaccess a consumer credit report long after the typical issues of eligibility, price, and financing were determined. Neither the specific language nor the overall scope of the FCRA can be said to support such an interpretation.
The Federal Trade Commission’s own interpretation of the FCRA appears to confirm the Court’s view. Under the FCRA, the FTC is the agency empowered to enforce the Act.
Under this subsection, a party has a permissiblе purpose to obtain a consumer report on a consumer for use in connection with some action the consumer takes from which he or she might expectto receive a benefit that is not more specifically covered by subsections (A), (B), or (C). For example, a consumer report may be obtained on a consumer who applies to rent an apartment, offers to pay for goods with a check, applies for a checking account or similar service, seeks to be included in a computer dating service, or who has sought and received overpayments of government benefits that he has refused to return.
16 CFR Ch. 1, Pt. 600 App.
Similarly, in a series of Informal Staff Opinion Letters, the FTC has echoed this commentary. In one instance when asked to describe the outer bounds of the “legitimate business need” permissible purpose, the FTC wrote that:
[T]he only permissible purpose for which a credit report may be obtained in connection with a new business transaction is to determine the consumer’s “eligibility” — i.e., whether the business wishes to undertake a transaction with he consumer. In this regard, we note that the legislative history indicates that Congress intended the “permissible purposes” provisions of the FCRA to cover primarily “eligibility issues” (see, e.g., 116 Cong. Rec. 36,572 (statement of Rep. Sullivan)).
FTC Informal Staff Opinion Letter, William Haynes (Mar. 2, 1998); see also FTC Informal Staff Opinion Letter, David Med-ine (Feb. 11,1998).
In another case, the FTC considered an argument somewhat analogous to this one, where a landlord sought to obtain a credit report in connection with a tenant’s disputed debt. The FTC responded that § 604(a)(3)(F)(i) would certainly permit a landlord to procure a consumer report to evaluate a consumer’s rental application (that is, when the lease “transaction ... is initiated by the consumer.”) FTC Informal Staff opinion Letter, Clarke Brincker-hoff (July 7, 2000). However, the FTC noted, § 604(a)(3)(F)® “does not give any business the right to obtain a report on a customer long after the transaction commenced.”
“While these administrative interpretations are not products of formal rulemak-ing, they nevertheless warrant respect in closing the door on any suggestion that the usual rules of statutory construction should get short shrift for the sake of reading [‘legitimate business need’] in abstract breadth.”
Washington State Department of Social & Health Service, v. Keffeler,
Moreover, nearly every federal court addressing this issue has similarly held that the “legitimate business need” permissible purpose should be narrowly construed in the context of the other five enumerated purposes.
See, e.g., Williams v. AT & T
The Court concludes, therefore, that when Smith Chevrolet accessed Plaintiffs credit report it was not, as a practical matter, part of the transaction which Plaintiff initiated. That transaction, in so far as Plaintiffs eligibility and debt was concerned, ended when the parties created a contract for the car’s price and Plaintiff paid that price in full. Under any conceivable interpretation of the facts in this case, Smith Chevrolet cannot be said to have a “legitimate business need” for Plaintiffs credit report “in connection with a transaction initiated by the consumer.” § 604(a)(3)(F)(i).
B.
Smith Chevrolet also argues that its actions were protected both by
Any consumer reporting agency may furnish a consumer report under the following circumstances and no other:
(A) to a person which it has reason to believe intends to use the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to, or review or collection of an account of the consumer; or ...
(F) otherwise has a legitimate business neеd for the information ... (ii) to review an account to determine whether the consumer continues to meet the terms of the account.
Smith Chevrolet claims that it had a permissible purpose under both of these provisions because, due to its own error, Plaintiff received twice the discount he was entitled to and so a debt remained. Therefore, Smith Chevrolet says that it was reviewing whether Plaintiff owed any additional debt. And, because reviewing the size of the debt Plaintiff owed is synonymous with “collection of an account” and with determining “whether [Chris Smith] continue[d] to meet the terms of the account,” Smith Chevrolet contends it therefore clearly had a permissible purpose.
The problem with this argument is that there wаs no outstanding debt and, consequently, there was no “account” to collect on. To be sure, Smith Chevrolet thought there
should be
an outstanding debt. Thinking there
should be
a debt, Smith Chevrolet contacted Plaintiff and ordered him to pay. At that point, Plaintiff re
Whether a debt or existing account exists simply cannot be a function of whether Smith Chevrolet alleges the existence of a debt.
3
To do so would allow Smith Chevrolet infinite opportunities to access Plaintiffs credit report, so long as he could come up with a reason for thinking the account should continue in existence. As this Court has explained elsewhere,
Scharpf v. AIG Mktg.,
IV.
Both sides have also moved for summary judgment on Plaintiffs claim of willful non-compliance.
Questions involving a party’s state of mind are generally appropriately resolved by a jury rather than on summary judgment.
See Thibodeaux v. Rupers,
Based on these disputed facts, the Court cannot enter summary judgment on the issue of Smith Chevrolet’s state of mind and will thеrefore deny the parties cross motions for summary judgment as they pertain to
V.
Last, Smith Chevrolet has moved for summary judgment on Plaintiffs invasion of privacy claim. The Supreme Court of Kentucky adopted the principles for invasion of privacy as enunciated in the Restatement (Second) of Torts (1976) in
McCall v. Courier-Journal and Louisville Times Co.,
1. One who invades the right of privacy of another is subject to liability for the resulting harm to the interests of the other.
2. The right to privacy is invaded by
(a) unreasonable intrusion upon the seclusion of another ...; or
(b) appropriation of the other’s name or likeness ...; or
(c) unreasonable publicity given to the other’s private life ..., or
(d) publicity that unreasonably places the other in a false light before the public.... ’
Id.
Of these possibilities, Plaintiff premises his claim on the tort of “unreasonable intrusion upon the seclusion of another.”
Other than summarily adopting intrusion upon seclusion as a cause of action, no Kentucky court in a published opinion has explained in any detail the elements required to meet this standard. This is therefore a question of first impres
As to these three elements, Smith Chevrolet does not appear to dispute the second element: Plaintiff had a right to keep his credit report private. The issue, then, is has Plaintiff has raised a question of fact as to whether Smith Chevrolet intentionally invaded Plaintiffs credit report аnd whether that invasion was highly offensive to a reasonable person? The Court finds the evidence as to whether Smith Chevrolet intentionally violated Plaintiffs privacy is shaky at best. Rather, it appears Smith Chevrolet’s actions were more likely negligent or careless. Plaintiff has, however, put forth evidence which, at trial, could show that Smith Chevrolet acted with such reckless disregard for Plaintiffs privacy as to amount to an intentional tort. In the alternative, it may turn out that Smith Chevrolet genuinely thought he was taking actions that were in accordance with the law and therefore the Plaintiffs effort to paint Smith Chevrolet as a reckless, malicious operation will fail. Finally, on these facts, the Court cannot rule as a matter of law that the Smith Chevrolet’s actions were not “highly offensive to a reasonable person.” The Court will therefore deny Smith Chevrolet’s motion for summary judgment as to the intrusion upon seclusion claim.
The Court will enter an order consistent with this Memorandum Opinion.
Notes
. The parties are in agreement that under the Full Faith and Credit Act,
. The Court notes that, although § 1681b(a)(3) regulates those who furnish consumer reports, none of the parties here dispute the fact — as numerous other courts have recognized — that users of consumer reports are also subject to the regulations set forth therein.
See, e.g., Hansen v. Morgan,
. The Court notes this is quite different from the case where a consumer pays for a debt with a bad check.
See, e.g., Wright v. Bogs Management, Inc.,
. As this Court noted in Scharpf,
In enacting the FCRA, Congress made four findings, three of which are particularly relevant to the question of law Plaintiff poses. Those pertinent findings stаte:
(2) An elaborate mechanism has been developed for investigating and evaluating the credit worthiness, credit standing, credit capacity, character, and general reputation of consumers.
(3) Consumer reporting agencies have assumed a vital role in assembling and evaluating consumer credit and other information on consumers.
(4) There is a 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) .
In effect, the FCRA created a fair mechanism through which creditors and insurers could obtain a consumer's report in order to make an offer and evaluate creditworthiness. Conversely, it also established procedures to ensure accuracy and to protect consumer privacy. The FCRA strikes a balance between these two competing ends.
Evidence of this give and take is prevalent throughout the FCRA. When preparing a report, a consumer reporting agency must follow "reasonable procedures to assure maximum possible accuracy.” 15 U.S.C. 1681e(c) (emphasis added). The stated aim is therefore perfection in protecting the consumer, but the burden on the credit reporting agency is only to act reasonably. Similarly, it is presumed that a consumer’s privacy will not be violated in the context of a firm offer for a permissible purpose, unless that consumer personally seeks to have her name removed from a consumer reporting agency's list.15 U.S.C. § 1681b(c) . Moreover, if a plaintiff seeks to bring a state law defamation, invasion of privacy, or negligence reporting claim against a consumer reporting agency, she can succeed only upon overcoming the highest standard of malice.15 U.S.C. § 1681h(e) . Last, only after a creditor or insurer takes action against a consumer’s interest, is that consumer informed of her right to see their credit report or know that it was used against her.15 U.S.C. § 1681a(k) .
242 F.Supp.2d at 462 .
. The parties dispute whether the fact that Defendant subjective believed it had a permissible purpose at the time it accessed a consumer reрort can insulate it from liability under § 1681n. The Court declines to address this argument at this time for two reasons. First, the Court does not think the issue is ripe for judgment because very little evidence has been offered. Second, to the extent this is a question of law, it may be more properly cast as defense which Smith Chevrolet should argue for in the jury instructions.
. For other courts applying these three elements,
see e.g., Plaxico v. Michael,