Morris v. Equifax Information Services, LLC , 457 F.3d 460 ( 2006 )

United States Court of Appeals
Fifth Circuit
F I L E D
REVISED AUGUST 11, 2006
July 24, 2006
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT Charles R. Fulbruge III
Clerk
No. 05-20578
KENNETH M. MORRIS,
Plaintiff-Appellant,
versus
EQUIFAX INFORMATION SERVICES, LLC,
Defendant-Appellee.
Appeal from the United States District Court
for the Southern District of Texas
Before GARWOOD, HIGGINBOTHAM, and CLEMENT, Circuit Judges.
GARWOOD, Circuit Judge:
Plaintiff-appellant Kenneth M. Morris (Morris) appeals the
district court’s summary judgment in favor of defendant-appellee
Equifax Information Services, LLC (Equifax). On Morris’s claim
under the Fair Credit Reporting Act (FCRA), we reverse and remand.
On Morris’s state law claim for libel, we affirm.
Facts and Proceedings Below
On July 3, 2003, Morris obtained a “3-in-1 Credit Report”
through TrueCredit’s internet website.1 The 3-in-1 report
purported to show Morris’s account history information as provided
by the three major credit reporting bureaus: Experian, TransUnion,
and Equifax.2 The 3-in-1 report from July 3 contained several
pieces of information about Morris that he wanted either changed or
deleted. Morris wrote a letter to Equifax3 on July 16, 2003,
identifying these items and stating, “False information in the
credit report that you disseminate about me is causing me harm.”
One of the items identified by Morris for correction was a charge
account with RNB-Target (Target). The 3-in-1 report showed that
Experian, TransUnion, and Equifax all reported that Morris had
joint responsibility for this account, that the account’s condition
was “Derogatory” and its pay status was “Collection/Chargeoff” of
the past due amount of $253. In his letter to Equifax, Morris
1
The TrueCredit website states that TrueCredit is
“[m]ajority owned by TransUnion.” See
http://www.truecreditcorporate.com/about.html (last visited June
26, 2006). In addition, the printout of Morris’s TrueCredit “3-
in-1 Credit Report” includes the following statement: “Brought to
you by TransUnion.”
2
The 3-in-1 report also showed a list of the companies that
had recently requested Morris’s credit report and the date of
each request. For each entry on this list, a credit bureau was
also listed; presumably, the bureau listed was the one that
provided to TrueCredit the data on that entry on the list. The
only three credit bureaus identified in this list were Experian,
TransUnion, and Equifax.
3
Morris also wrote letters to TransUnion and Experian, but
only the letter to Equifax is involved in this case.
2
stated, “I owe Target nothing,” and explained that the account in
question had been opened by Rebecca Morris while she was married to
Morris, that the account was never a joint account, that Morris
divorced Rebecca in April 2001, and that the charge in question had
been effected by Rebecca in late 2001 after the divorce. In the
letter to Equifax, Morris stated that he had informed Target of his
position on this account, and he also stated that “Target’s
bureaucratic bungling is solely responsible for this false
information that Target has furnished to you.” Morris demanded
that Equifax correct the information about the Target account and
also that Equifax show the information as “disputed” in the
meantime. Morris’s letter also requested that Equifax give its
immediate attention to the disputed items and stated that Morris
was in the process of refinancing his home mortgage and that he
would hold Equifax responsible for substantial damages in the event
he could not obtain the lowest interest rate available because of
an incorrect credit report.
Equifax received Morris’s letter on July 19, 2003. Equifax
took none of the action demanded by Morris, but instead responded
by sending Morris a letter dated July 24, 2003, stating that
“Equifax does not maintain or service the information contained in
your credit file.” Equifax’s letter also informed Morris that his
letter of July 16 had been forwarded to CSC Credit Services (CSC),
which, according to Equifax, is “the credit reporting agency which
3
researches the credit file concerns of consumers living in
[Morris’s] area.” The July 24 letter from Equifax also provided
Morris with contact information for CSC and directed Morris to
contact CSC if he had any further concerns or needed additional
help.
It is not clear from the record when Equifax actually mailed
Morris’s July 16, 2003 letter to CSC, but it is clear that CSC
received the forwarded letter on July 29, 2003. In response to
Morris’s letter, CSC sent an Automated Consumer Dispute
Verification (ACDV) to Target on August 1, 2003. In its August 13,
2003 response to CSC, Target did not tell CSC to stop reporting the
account in question as a joint account with Morris. Equifax
admittedly, and CSC allegedly, did not report the results of this
reinvestigation to Morris in August 2003. In September 2003, CSC
sent another ACDV to Target. In its September 19, 2003 response to
CSC, Target again did not tell CSC to stop reporting the account as
a joint account. While Equifax again did not report the results of
this reinvestigation to Morris, CSC did report the results to
Morris by letter dated October 3, 2003, seventy-six days after
Equifax received Morris’s dispute letter (and sixty-six days after
CSC received Morris’s letter forwarded from Equifax).
On October 31, 2003, Morris obtained a “3 Bureau Online Credit
4
Report” from consumerinfo.com.4 This 3 Bureau report, like the 3-
in-1 report from July 3, 2003, purported to show Morris’s account
history information as provided by the three major credit reporting
bureaus: Experian, TransUnion, and Equifax. On the 3 Bureau report
from October 31, 2003, the past due amount of $253 from the
disputed Target account was still displayed under all three of the
major bureaus, although Equifax no longer reported it as a “RNB-
Target” account as did Experian and TransUnion, but instead
reported it under the account heading of “Retailers National B.”
The remarks in the Equifax column for “Retailers National B”
stated, “Consumer says acct. is responsibility of separated or
divorced spouse.” In addition, the payment status for this account
was shown in the Equifax column as “Bad debt & placed for
collection & skip.” On January 8, 2004, Morris filed suit in
Texas state court against both Equifax and CSC asserting claims for
violations of the reinvestigation requirements of the Fair Credit
Reporting Act, 15 U.S.C. §1681i, and also a state law libel claim.
In this original petition, Morris alleged damages from receiving
higher insurance quotes and from being unable to refinance his
mortgage at a more favorable rate. Equifax, with CSC’s consent,
timely removed the case to the United States District Court for the
Southern District of Texas.
4
On its website, ConsumerInfo.com identifies itself as “An
Experian company.” See http://www.consumerinfo.com (last visited
July 5, 2006).
5
In mid-January 2004, Morris received a letter from Capital One
disapproving Morris’s request for a Capital One credit card. In
its letter, known as an “adverse action” letter from the
requirements of 15 U.S.C. § 1681m, Capital One provided the
following reasons, inter alia, for not approving Morris’s request:
the “presence of a collection record” and “too many 30-day
delinquencies on Installment Trades.” The Capital One letter also
stated that its decision “was based in whole or in part on
information contained in consumer credit report [sic] obtained from
the credit bureau(s) listed below.” The letter then listed
Equifax, Experian, and TransUnion. About the same time, Morris
received a letter from Citibank disapproving Morris’s application
for a Citi Platinum Select MasterCard account. Citibank identified
the following reason for its disapproval: “A delinquent credit
obligation(s), either paid or unpaid, was recorded in your credit
bureau report.” Much like the Capital One letter, the Citibank
letter stated that the “decision was based in whole or in part on
information obtained in a report from the consumer reporting agency
listed below.” Unlike Capital One, however, the Citibank letter
listed only one consumer reporting agency — Equifax. Neither the
Capital One letter nor the Citibank letter made any mention of
CSC.5
5
According to the FTC, the consumer report user’s adverse-
action letter “should provide the name and address of the
consumer reporting agency from which it obtained the consumer
report, even if that agency obtained all or part of the report
6
On January 24, 2005, Morris filed his first amended complaint,
which incorporated the January 2004 denials of credit by Capital
One and Citibank. At some point Morris sued Target in a separate
action and following that suit Target sent (to precisely whom is
unclear) a universal automated data form resulting in the
challenged information being removed from consumer credit reports
on file respecting Morris. Morris and CSC settled and on March 4,
2005, Morris filed an unopposed motion to dismiss without prejudice
his claims against CSC, which was granted on March 8, 2005,
dismissing CSC from the present case.
On March 22, 2005, Morris filed a motion for partial summary
judgment based on Equifax’s admission that it did not comply with
the FCRA’s reinvestigation provisions, 15 U.S.C. § 1681i. Also on
March 22, Equifax filed a motion for summary judgment on both of
Morris’s claims, arguing that its receipt of Morris’s dispute
letter did not trigger any obligation on its part to comply with
section 1681i, and on the ground that Morris’s libel claim was
barred under section 1681h(e)6 and conditional privilege under
from another agency.” FTC Commentary on the Fair Credit
Reporting Act, 16 C.F.R. pt. 600, App. § 615 ¶ 13 (emphasis
added).
6
Section 1681h(e) provides:
“(e) Limitation of liability
Except as provided in sections 1681n and 1681o of
this title, no consumer may bring any action or
proceeding in the nature of defamation, invasion of
privacy, or negligence with respect to the reporting of
information against any consumer reporting agency, any
7
Texas state law. The case was referred to a magistrate judge
who, on June 10, 2005, recommended that the district court deny
Morris’s motion for partial summary judgment and grant Equifax’s
motion for summary judgment. The magistrate judge recommended
summary judgment for Equifax on Morris’s FCRA claim because CSC,
not Equifax, owned Morris’s file and only CSC had the authority to
modify the information in Morris’s file. The magistrate judge also
recommended summary judgment for Equifax on the libel claim because
“the court finds that Plaintiff failed to raise a fact issue on
malice or willful intent.” In addition, the magistrate judge noted
that, although “[t]he record demonstrates that Equifax published
Plaintiff’s credit information[,] [n]othing in the record suggests
that Equifax knew or should have known at that time that the
information was false.”
Morris filed objections to the magistrate judge’s memorandum
and recommendation, arguing that the language of the FCRA does not
allow a consumer reporting agency to avoid the reinvestigation
obligations of 15 U.S.C. § 1681i simply because it does not “own”
user of information, or any person who furnishes
information to a consumer reporting agency, based on
information disclosed pursuant to section 1681g, 1681h,
or 1681m of this title, or based on information
disclosed by a user of a consumer report to or for a
consumer against whom the user has taken adverse
action, based in whole or in part on the report except
as to false information furnished with malice or
willful intent to injure such consumer.”
15 U.S.C. § 1681h (1998).
8
the file. In his objections, Morris also argued that he had raised
a fact issue concerning Equifax’s “malice” in that his evidence
shows “Equifax knew of the falsity because Morris told them of the
falsity, and Equifax did nothing but continue to publish the same
false information without any effort to ascertain the truth.”
After reviewing Morris’s objections, the district court, on June
28, 2005, adopted the magistrate judge’s memorandum and
recommendation and entered a final judgment that Morris take
nothing against Equifax. Morris timely appealed.
Jurisdiction and Standard of Review
The district court had jurisdiction under 28 U.S.C. § 1331 and
15 U.S.C. § 1681p, and we have jurisdiction under 28 U.S.C. § 1291.
We review a district court’s grant of summary judgment de novo.
Summary judgment is proper if, after adequate opportunity for
discovery, the pleadings, depositions, answers to interrogatories,
and admissions on file, together with any affidavits filed in
support of the motion, show that there is no genuine issue as to
any material fact and that the moving party is entitled to judgment
as a matter of law. Young v. Equifax Credit Information Services,
Inc., 294 F.3d 631, 635 (5th Cir. 2002).
Discussion
1. The Fair Credit Reporting Act Claim
A. Background
The purpose of the Fair Credit Reporting Act (FCRA) is “to
9
require that consumer reporting agencies adopt reasonable
procedures for meeting the needs of commerce for consumer credit.
. . in a manner which is fair and equitable to the consumer . . .
in accordance with the requirements of this subchapter.” 15 U.S.C.
§ 1681(b) (1998) (emphasis added). In July 2003, when Morris sent
his dispute letter to Equifax, the FCRA provided the following
general requirements for reinvestigations by a consumer reporting
agency:
“If the completeness or accuracy of any item of
information contained in a consumer’s file at a consumer
reporting agency is disputed by the consumer and the
consumer notifies the agency directly of such dispute,
the agency shall reinvestigate free of charge and record
the current status of the disputed information, or delete
the item from the file in accordance with paragraph (5),
before the end of the 30-day period beginning on the date
on which the agency receives the notice of the dispute
from the consumer.” 15 U.S.C. § 1681i(a)(1)(A) (1998)
amended by Fair and Accurate Credit Transactions (FACT)
Act of 2003, § 316, Pub. L. 108-159, 117 Stat. 1952,
1996.7
7
Section 1681a provides: “(g) The term ‘file’, when used in
connection with information on any consumer, means all of the
information on that consumer recorded and retained by a consumer
reporting agency regardless of how the information is stored.”
In December 2003, the general requirements of §
1681i(a)(1)(A) were amended to accommodate new, less stringent
requirements for consumer reporting agencies known as
“resellers.” The amendments were part of the Fair and Accurate
Transactions (FACT) Act of 2003, which tasked the Federal Trade
Commission and the Board of Governors of the Federal Reserve
System to jointly establish the effective dates for the various
provisions of the FACT Act. The relevant changes to § 1681i were
made effective December 31, 2004. 16 C.F.R. § 602.1(c)(3)(xvi-
xvii). Thus, it is the pre-FACT Act version of the FCRA that
governs this case. Nonetheless, the general requirements for
reinvestigation now provide:
10
“Subject to subsection (f) of this section, if the
completeness or accuracy of any item of information
contained in a consumer's file at a consumer reporting
agency is disputed by the consumer and the consumer
notifies the agency directly, or indirectly through a
reseller, of such dispute, the agency shall, free of
charge, conduct a reasonable reinvestigation to
determine whether the disputed information is
inaccurate and record the current status of the
disputed information, or delete the item from the file
in accordance with paragraph (5), before the end of the
30-day period beginning on the date on which the agency
receives the notice of the dispute from the consumer or
reseller.” 15 U.S.C. § 1681i(a)(1)(A) (Supp. 2006)
(emphasis added).
The italicized portions above represent the additions made to
this subsection by the FACT Act. The FACT Act also defined
“reseller” for the first time:
“The term ‘reseller’ means a consumer reporting agency
that--
(1) assembles and merges information contained in the
database of another consumer reporting agency or
multiple consumer reporting agencies concerning any
consumer for purposes of furnishing such information to
any third party, to the extent of such activities; and
(2) does not maintain a database of the assembled or
merged information from which new consumer reports are
produced.” 15 U.S.C. § 1681a(u) (Supp. 2006).
The FACT Act also added new subsection 1681i(f), which provides
less stringent reinvestigation requirements for resellers. Under
§ 1681(f) resellers are made exempt from the reinvestigation
requirements of § 1681 except that resellers who receive notice
of a dispute from a consumer must, within five business days of
receiving the notice determine whether the reseller’s act or
omission resulted in the disputed information being inaccurate or
incomplete and, if not, the reseller, within the same five
business days, must convey the notice of the dispute, along with
all relevant information provided by the consumer, to the
consumer reporting agency from which the reseller obtained the
disputed information. 15 U.S.C. § 1681i(f)(Supp. 2006). That
consumer reporting agency must then conduct its reinvestigation
per § 1681i and provide the results of the reinvestigation to the
reseller which must immediately convey those results to the
consumer. Id.
11
Morris alleges that Equifax failed to meet the requirements of
section 1681i after Morris notified Equifax directly of his dispute
with the credit information that Equifax had reported to TrueCredit
and that Morris had seen on the 3-in-1 Credit Report.8 In its
motion for summary judgment, Equifax does not argue that it met the
section 1681i requirements, but instead argues that “Equifax does
not have a duty to reinvestigate consumer disputes on credit files
owned by affiliates.” To understand this argument, one needs first
to understand the relationship between Equifax and CSC. Although
Equifax is a nationwide consumer reporting agency, it does not
“own” credit files on consumers living in certain geographic areas.
In these certain areas, Equifax contracts with a wholly separate
entity – referred to (perhaps misleadingly) as an affiliate – which
does own a credit file on the consumers in that area. One such is
former defendant CSC, whose territory encompasses all or parts of
eight states, including the area of Texas in which Morris lives,
and whose consumer files number in the tens of millions. Like
Equifax, CSC is generally a consumer reporting agency. Equifax and
CSC have entered into a contract under which CSC stores its credit
8
“A consumer reporting agency’s obligation to reinvestigate
disputed items is not contingent upon the consumer’s having been
denied a benefit or having asserted any rights under the FCRA
other than disputing items of information.” FTC Commentary on
the Fair Credit Reporting Act, 16 C.F.R. pt. 600, App. § 611 ¶ 9.
12
files in an Equifax-owned computer system known as ACROPAC.9 When
a CSC-owned file such as Morris’s is stored in ACROPAC, apparently
any customer of either Equifax or of any of Equifax’s “affiliates”
(including CSC) can obtain the information contained in the CSC
file. It likewise appears that: CSC pays Equifax a fee for each
billable inquiry that is made into the ACROPAC system as to any
CSC-owned file; in addition, the revenue associated with each
billable inquiry is shared between the file’s “owner” (in this
case, CSC) and the company (either Equifax or one of the
affiliates) whose customer makes the billable inquiry. Thus, as we
generally understand it: when a CSC customer requests Morris’s
credit report, all of the revenue from that billable inquiry would
go to CSC, and CSC would then pay Equifax the billable inquiry fee;
on the other hand, when an Equifax customer requests Morris’s
credit report, CSC and Equifax divide the revenue and CSC then pays
Equifax the same billable inquiry fee.
B. File ownership
9
Under this contract, the ownership of the credit file is
based on the residence of the consumer. If Morris were to move
out of a CSC area and into an area where Equifax owned the credit
files, his credit file in the Equifax system would then
apparently be owned by Equifax rather than CSC. Conversely, when
a consumer moves from an Equifax area into a CSC area, the credit
file previously owned by Equifax would apparently then be owned
by CSC. The ACROPAC system is generally described in our
unpublished opinion, CSC Credit Services, Inc. v. Equifax Inc.,
119 Fed. Appx. 610, 611-12 (5th Cir. Dec. 27, 2004). Equifax
states that approximately 20% of the credit files in ACROPAC are
owned by Equifax’s affiliates, and that CSC is by far the largest
affiliate.
13
Equifax’s summary-judgment argument relied on its contractual
relationship with CSC. At the district court, Equifax did not
dispute that it is in general a consumer reporting agency; instead,
Equifax simply argued that it was CSC’s responsibility — not
Equifax’s — to reinvestigate Morris’s dispute. According to
Equifax, because CSC “owns” Morris’s file and only CSC can lawfully
make any deletions, additions or alterations to it, only CSC is
subject to the requirements of section 1681i respecting that file.
The district court, by adopting the magistrate judge’s
memorandum, noted that, although “[t]he parties agree that Equifax
and CSC are consumer reporting agencies[,] . . . [t]he question is
whether Equifax is the consumer reporting agency on which the
statute places the burden of investigation for Plaintiff’s credit
file.” The district court accepted Equifax’s argument, holding
that “[t]he better interpretation [of section 1681i] is that the
consumer reporting agency that owns the consumer’s file and has the
authority to modify the information therein is the only agency
obligated by section 1681i to reinvestigate the challenged credit
report.”
While no federal court of appeals has addressed this question,
Equifax has successfully made this argument in at least two other
federal district courts. See Zotta v. NationsCredit Financial
Services Corp., 297 F. Supp. 2d 1196, 1206 (E.D. Mo. 2003)(“In
light of plaintiffs’ concession that Equifax does not own and
14
maintain plaintiffs’ credit files . . . , the court concludes
Equifax is entitled to summary judgment.”); Slice v. ChoiceDATA
Consumer Services, Inc., No. 3:04-CV-428, 2006 WL 686886, *6
(E.D.Tenn. March 16, 2006) (“[B]ecause Equifax does not own
plaintiff’s credit file, it cannot be liable for conducting a
reinvestigation of that file.”) (citing the lower court’s opinion
in the present case). Cf. Gohman v. Equifax Information Services,
L.L.C., 395 F. Supp. 2d 822, 826 n.3 (D. Minn. 2005) (“[T]he court
. . . declines to hold that Equifax is not subject to section 1681e
merely because it does not own or maintain plaintiff’s file.
Section 1681e(b) is not limited to [consumer reporting agencies]
who own and maintain credit files.”).10
The district court in this case did not mention Gohman, but it
did cite Zotta. The court acknowledged that the Zotta case is
wanting in legal analysis, but held that Zotta “seems to reach the
10
Section 1681e(b) provides that “[w]henever a consumer
reporting agency prepares a consumer report it shall follow
reasonable procedures to assure maximum possible accuracy of the
information concerning the individual about whom the report
relates.” 15 U.S.C. § 1681e(b) (1998).
However, in Gohman the evidence showed “that Equifax
prepared her [plaintiff’s] consumer reports, including the
report” allegedly causing the claimed damage. 395 F. Supp. 2d at
826 n.3. Here the district court did not determine (and the
evidence does not show) that Equifax “prepared” the consumer
report in question on Morris. Slice distinguishes Gohman on the
basis that, unlike the situation in Gohman, “Equifax did not
prepare any of the consumer reports at issue in this case.”
Slice, 2006 S.W. 686886, at *6.
15
correct conclusion.”11 We disagree.
The version of section 1681i that governs this case does not
distinguish between the consumer reporting agency (CRA) that “owns”
the consumer’s credit file and the CRA that sells, or, to use
Equifax’s term, “distributes” the consumer’s credit file. The more
recent version of section 1681i, however, as amended by the FACT
Act, does distinguish between a CRA and a CRA that operates as a
“reseller.” See supra note 7. It is possibly helpful to
understand why Congress added the reseller provisions to section
1681i. Under the pre-FACT Act version of section 1681i, the
11
In this case, the magistrate judge’s memorandum to the
district court also cited the following language from Bruce v.
First U.S.A. Bank, Nat’l Ass’n, 103 F. Supp. 2d 1135, 1140 (E.D.
Mo. 2000): “When a consumer in Missouri disputes an item on an
Equifax or CSC credit report, CSC is responsible for performing
the necessary investigations, updates or revisions.” The quoted
language from Bruce is not particularly helpful, however, because
both Equifax and CSC had already settled out of that case and the
quoted language comes from Bruce’s “Factual Background” section
and plays no part in the decision. See id. at 1139–40.
The Bruce opinion, however, is interesting for another
reason related to the reinvestigation of consumer disputes. In
Bruce, as in this case, CSC “owned” the consumer’s [Bruce’s]
credit file. Id. at 1140. When Bruce first disputed account
information that was reported by Equifax, it was CSC that
reinvestigated by sending a consumer dispute verification (CDV)
to First U.S.A. Bank. Id. at 1140-41. However, when Bruce then
sent to Equifax another dispute letter, “[t]his time, Equifax
forwarded a CDV form to First U.S.A.” Id. at 1141. According to
the Bruce opinion, “First U.S.A. returned the form to CSC.” Id.
This appears to possibly be an example of Equifax conducting a
reinvestigation for a file that is not owned by Equifax, but by
CSC. Although Equifax has never stated in this case that it
could not have conducted a reinvestigation of Morris’s file, it
implied as much. Equifax, however, has always expressly
maintained that it could make no change in a CSC file.
16
Federal Trade Commission (FTC) seems to have enforced the
requirements of section 1681i generally against CRAs involved in
reporting the consumer’s information — not against just the CRA
that owned the consumer’s credit file, but also against CRAs that
acted as resellers of that file. See In the Matter of First
American Real Estate Solutions, LLC, 127 F.T.C. 85 (1999). In
hearings on H.R. 2622, which became the FACT Act, the FTC
testified, “Persons who purchase consumer reports for resale (also
known as ‘resellers’) are covered by the FCRA as consumer reporting
agencies and have all the obligations of other CRAs, including the
duty to reinvestigate . . . .” H.R. 2622—Fair and Accurate Credit
Transactions Act of 2003: Hearing Before the H. Comm. on Financial
Services, 108th Cong. (July 9, 2003) (prepared statement of the
Federal Trade Comm’n). Although the FTC applied the requirements
of section 1681i to resellers, it recognized that these
requirements “do not work well when applied to resellers.” Id.12
12
The FTC recognized the following problems that a reseller
faces when attempting to comply with the reinvestigation
requirements of § 1681i:
“[T]he reseller may meet resistance in getting the
creditor who originally furnished the information to
investigate the dispute, because the creditor has no
relationship with the reseller. Yet, if the reseller
sends the dispute to the relevant repository [the CRA
that maintains the consumer’s file], that repository
currently has no legal obligation to reinvestigate,
because the dispute did not come directly from the
consumer.” H.R. 2622—Fair and Accurate Credit
Transactions Act of 2003: Hearing Before the H. Comm.
on Financial Services, 108th Cong., Serial No. 108-47,
17
Nonetheless, prior to the FACT Act’s amendments, the FTC seems to
have considered the requirements of section 1681i to be generally
applicable to CRAs that were notified of a dispute directly by the
consumer, whether they be the owner of the file or a reseller of
the file. While the FTC’s position on this question is only
advisory in nature, it may provide helpful guidance to the courts.
See Fischl v. General Motors Acceptance Corp., 708 F.2d 143, 149
n.4 (5th Cir. 1983). Because the governing version of section
1681i does not distinguish between a CRA that owns the consumer’s
credit file and a CRA that distributes the consumer’s credit file,
we hold that the mere fact that a CRA does not own a consumer’s
file does not of itself necessarily relieve that CRA of the
reinvestigation requirements of the FCRA, 15 U.S.C. § 1681i.13
Our opinion in this respect is bolstered by the precise
scenario presented in this case, in which CSC initially was not
at 216 (July 9, 2003) (prepared statement of the
Federal Trade Comm'n).
Based in part on these problems, the FTC supported the FACT Act’s
amendments to § 1681i in order “to better address reinvestigation
duties when a reseller is involved.” Id. The amended version of
§ 1681i addresses at least some of these problems. See supra
note 7.
13
Equifax has not argued that here it would be a “reseller”
as defined in the FACT Act amendments to the Fair Credit
Reporting Act (see note 7, supra). Rather, it stated at oral
argument “we don’t meet the technical terms of the reseller prong
. . . [because] we do not maintain a database . . . I do not
believe that the relationship here is addressed in the Fair
Credit Reporting Act.” See 15 U.S.C. § 1681a(u) (Supp. 2006) (“.
. . maintain[] a database . . . from which new consumer reports
are produced”).
18
notified directly by Morris of the dispute. Under the governing
version of section 1681i, CSC arguably did not have a statutory
obligation to conduct a reinvestigation when Equifax forwarded
Morris’s dispute letter to CSC because Morris did not notify CSC
directly of his dispute. See Whelan v. Trans Union Credit
Reporting Agency, 862 F. Supp. 824, 832–33 (E.D.N.Y. 1994) (granting
summary judgment for CRAs alleged to have violated § 1681i because
the consumer did not notify the CRAs directly of his dispute but
instead notified the creditor who had furnished the disparaging
information and that creditor then notified the CRAs); see also FTC
statement quoted supra note 12. If Equifax’s interpretation is
combined with such an application of the “notify directly”
requirement of section 1681i, neither Equifax nor CSC were
obligated under section 1681i to reinvestigate Morris’s dispute.14
While Equifax forwarded Morris’s letter to CSC, Equifax says it did
this due to its own internal policy, not due to any FCRA
requirements.15
14
Equifax states that CSC has admitted in this case to having
the responsibility to comply with the reinvestigation
requirements of § 1681i.
However, under Gohman, if Equifax “prepare[d]” a consumer
report on Morris it was required by § 1681e(b) to follow
reasonable procedures to achieve accuracy. See note 10 supra.
15
In its brief to this court, after Equifax stated that it is
“the policy and procedure of Equifax . . . to forward any such
mail to the correct Affiliate immediately upon receipt of such
mail by Equifax,” Equifax went on to state, “This is beyond what
the FCRA requires.”
19
The purpose of the FCRA is to require consumer reporting
agencies to “adopt reasonable procedures . . . in accordance with
the requirements” of the FCRA. 15 U.S.C. § 1681(b) (1998). Here,
Morris viewed adverse credit information apparently transmitted to
TrueCredit from the Equifax computer, and Morris then contacted
Equifax directly to dispute the accuracy of that information in
accordance with the FCRA. Section 1681i provides the “Procedure in
case of disputed accuracy” and includes specific time requirements
to ensure that consumer disputes are handled expeditiously. The
procedures adopted by Equifax, while arguably reasonable, are not
in accord with the requirements of section 1681i.
C. Other section 1681i liability issues
Equifax also argues that, “although Equifax is a consumer
reporting agency, it did not act as one here because it did not
‘assemble’ or ‘evaluate’ the consumer credit information contained
in Morris’ credit file. . . . Equifax’s role here was merely that
of distributor.” The FCRA defines a consumer reporting agency
(CRA) as follows:
“[A]ny person which, for monetary fees, dues, or on a
cooperative nonprofit basis, regularly engages in whole
or in part in the practice of assembling or evaluating
consumer credit information or other information on
consumers for the purpose of furnishing consumer reports
to third parties, and which uses any means or facility of
interstate commerce for the purpose of preparing or
furnishing consumer reports.” 15 U.S.C. § 1681a(f)
20
(1998).16
The district court did not address whether Equifax either
assembled or evaluated consumer credit information with
respect to Morris, or acted as a CRA respecting Morris, within
the meaning of section 1681a(f). Equifax did not expressly
make that argument in the district court and it is not clear
to us that the present record evidence adequately resolves
those questions (or whether Equifax “prepared” a consumer
credit respecting Morris).17 In these circumstances we
16
The FCRA does not define any version of “assemble” or
“evaluate.” Nor is there any such definition in any applicable
regulation. Moreover, 15 U.S.C. § 1681e(e)(2) identifies the
“Responsibilities of procurers for resale,” which indicates that,
at least for purposes of § 1681e, a “procurer[] for resale” is
distinct from a “consumer reporting agency.” On the other hand,
an FTC staff opinion letter has stated that “it is clear from a
review of the legislative history that Congress intended for the
FCRA to cover a very broad range of ‘assembling’ or ‘evaluating’
activities” and notes legislative history indicating that
resellers are considered consumer reporting agencies even though
a reseller “may do nothing more than transmit to their customers
a report obtained from another consumer reporting agency.” FTC
Staff Opinion Letter (June 9, 1998), available at 1998 WL
34323759.
15 U.S.C. § 1681s(a) (1998) gives the FTC administrative and
enforcement powers respecting the FCRA.
17
Other possibly relevant aspects of the relationship between
Equifax and CSC and their respective customers with regard to
individuals whose files are owned by CSC but are stored on the
Equifax ACROPAC computer system are unclear and largely
unexplained in the record as well as not being expressly
addressed by the district court. Nor does the record reflect the
precise content of the information transmitted out of the Equifax
ACROPAC computer system with respect, for example, to whether (or
how or in what circumstances) it identifies the file owner (e.g.,
CSC in Morris’s case) and/or the “evaluator” of the information
therein or the like. Nor does the record reflect whether any of
21
conclude that it is preferable that Equifax’s contentions in
this respect be addressed in the first instance by the
district court on remand.18
2. The Libel Claim
In his Texas law libel claim Morris alleges that Equifax
libeled him by continuing to publish the adverse credit information
regarding the Target account after Morris notified Equifax that the
information was false. In its motion for summary judgment, Equifax
argues that Morris’s state law libel claim is precluded under both
15 U.S.C. § 1681h(e) and Texas’s law of conditional privilage.
Section 1681h(e) bars a consumer from bringing any claim “in
the nature of defamation . . . with respect to the reporting of
information against any consumer reporting agency, any user of
information, or any person who furnishes information to a consumer
reporting agency . . . except as to false information furnished
with malice or willful intent to injure such consumer.” 15 U.S.C.
§ 1681h(e) (1998). In addition, the Supreme Court of Texas has
agreed, with certain limitations not applicable here, that “reports
of mercantile or other credit-reporting agencies, furnished in good
the material comprising Morris’s file in the Equifax ACROPAC
computer system was “recorded” by Equifax (see § 1681a(g), note 7
supra).
18
To the extent summary judgment is employed on remand, the
court will, of course, have to determine whether the material
facts are undisputed, and, to insure that the respective parties
have proper notice, further summary judgment motions and
responses would appear to be necessary.
22
faith to one having a legitimate interest in the information, are
privileged.” Dun & Bradstreet, Inc. v. O'Neil, 456 S.W.2d 896, 898
(Tex. 1970) (quotations omitted). As the Texas Supreme Court
explained, “Such privilege is termed conditional or qualified
because a person availing himself of it must use it in a lawful
manner and for a lawful purpose. The effect of the privilege is to
justify the communication when it is made without actual malice.”
Id. at 899 (emphasis added; quotations omitted). Morris does
not allege that Equifax willfully intended to injure him, but he
does allege “malice.” Although the FCRA does not define malice, we
have previously applied the common-law standard for malice when
both parties agreed to such application. See Cousin v. Trans Union
Corp., 246 F.3d 359, 375 (5th Cir. 2001) (requiring the plaintiff
to show that “the defendant when he published the words — (1)
either knew they were false, or (2) published them in reckless
disregard of whether they were true or not”). In this case, we
cannot say the parties agree to such application because Equifax
has not addressed the “malice” exception to preemption under
section 1681h(e). Morris has relied on Thornton v. Equifax, 619
F.2d 700 (8th Cir. 1980), an FCRA case in which the Eighth Circuit
“cite[d] the New York Times standard as an example of a type of
malice necessary to overcome a qualified privilege.” Id. at 705.
23
(citing New York Times v. Sullivan, 84 S. Ct. 710, 726 (1964)).19
We apply that standard in this case, and we agree with the district
court that Morris presented no evidence that Equifax published
false statements about Morris knowing the statements were false or
with a reckless disregard of whether they were false.
While Morris has presented evidence that Equifax knew that
Morris claimed that there were false statements in the information
that Equifax was publishing about Morris, this evidence does not
show that Equifax knew these statements were false. Morris also
argues that Equifax had a reckless disregard for whether the
statements were false because “Equifax continued to publish the
same false information about Morris without lifting a finger to
determine whether the information was false or not.” To show
“reckless disregard,” however, Morris must present “sufficient
evidence to permit the conclusion that the defendant in fact
entertained serious doubts as to the truth of his publication.”
St. Amant v. Thompson, 88 S. Ct. 1323, 1325 (1968) (emphasis
added).20 In this case, there is no such evidence. As there is no
19
Under the New York Times standard, a statement has been
made with “actual malice” if it was made “with knowledge that it
was false or with reckless disregard of whether it was false or
not.” New York Times Co. v. Sullivan, 84 S. Ct. 710, 726 (1964).
20
See also, e.g., Casso v. Brand, 776 S.W.2d 551, 558 (Tex.
1989) (quoting with approval the above passage from St. Amant);
Peter Scalamandre & Sons, Inc. v. Kaufman, 113 F.3d 556, 561 (5th
Cir. 1997) (same). The federal, rather than state, summary
judgment procedure and standard applies to the Texas law
24
evidence of malice, Morris’s libel claim fails under both section
1681h(e) and the conditional privilege under Texas law.21
Conclusion
For the foregoing reasons, we REVERSE the summary judgment on
the FCRA claim, AFFIRM the summary judgment on the libel claim, and
REMAND the case for further proceedings not inconsistent herewith
on the FCRA claim.
REVERSED in part, AFFIRMED in part, and REMANDED.
defamation claim. See Duffy v. Leading Edge Products, Inc., 44
F.3d 308, 312-15 (5th Cir. 1995).
21
If Equifax were to prevail on its argument that it is not a
consumer reporting agency, it would likely lose the protection of
§ 1681h(e). Nonetheless, Morris’s libel claim still fails in
this case because Equifax enjoys Texas’s conditional privilege.
25