Cousin v. Trans Union Corp

REVISED, APRIL 9, 2001
UNITED STATES COURT OF APPEALS
For the Fifth Circuit
No. 99-60429
TERRY COUSIN,
Plaintiff-Appellee,
VERSUS
TRANS UNION CORPORATION,
Defendant-Appellant.
Appeal from the United States District Court
For the Northern District of Mississippi
March 21, 2001
Before GARWOOD, DeMOSS, and PARKER, Circuit Judges.
DeMOSS, Circuit Judge:
Defendant-Appellant Trans Union Corporation (“Trans Union”)
appeals, after a jury trial, a final judgment awarding Plaintiff-
Appellee Terry Cousin (“Cousin”) $50,000 in compensatory damages
and $4,470,000 in punitive damages for violating the Fair Credit
Reporting Act (“FCRA”), 15 U.S.C. §§ 1681-1681u,1 and for defaming
Cousin with malice. Because no reasonable jury could have found
that Trans Union acted willfully or with malice and because there
was insufficient evidence of actual damages, we vacate the district
court’s judgment and render in favor of Trans Union.
I. BACKGROUND
Cousin lives in Clarksdale, Mississippi, with his wife and two
teenage daughters, and has worked at the Mississippi Department of
Health for 19 years. He has apparently maintained a flawless
credit history except for certain items resulting from the
fraudulent acts of others posing as Cousin.
In 1984, Cousin’s brother Richie misappropriated Cousin’s
personal identifying information, i.e., his name and social
security number, to obtain automobile loans from two different
lenders, NBC Bank of Mississippi (“NBC”) and City Finance of
Okolona (“City Finance”). When Richie failed to pay, the
delinquencies were negatively noted on Cousin’s file with Trans
Union, a consumer reporting agency as defined by the FCRA.
In 1993, Richie again pretended to be Cousin and applied for
credit to purchase an automobile in Aberdeen, Mississippi, a place
where Cousin has never lived. To purchase the automobile, Richie
gave a down payment check that later bounced. The dealer contacted
1
The FCRA is one of seven independent subchapters of the Consumer
Credit Protection Act, 15 U.S.C. §§ 1601-1693r.
2
Cousin, who explained that his brother was an impostor.
Nevertheless, General Motors Acceptance Corporation (“GMAC”), the
apparent lender on that automobile loan, forwarded negative
information about Cousin to Trans Union.
On December 6, 1993, Trans Union sent a consumer report to
Cousin containing the adverse information about the GMAC account or
tradeline. The consumer report also contained negative information
about the NBC account and another account with American General and
listed a fraudulent Aberdeen address. Cousin immediately informed
GMAC of the error, and on December 10, 1993, Cousin filled out
Trans Union’s Investigation Request Form (“IRF”) and requested
Trans Union to delete all the fraudulent information. On January
11, 1994, Trans Union responded by sending Cousin a partially
corrected consumer report. The GMAC account and the Aberdeen
address were deleted, but the consumer report still contained the
NBC and American General accounts. Attached to the consumer report
was a green postcard that said:
In response to your recent request, we have
reinvestigated disputed information contained on
your credit file. The enclosed file reflects the
results of our investigation. Some information
which was disputed may have been changed or deleted
due to the creditor’s failure to adequately respond
to our verification requests. If the creditor
satisfactorily verifies this information in the
future, it may be reinstated to the credit file.
In the event Trans Union reinstates information to
your report as a result of credit grantor
verification, you will be notified in writing and
you will receive an updated copy of your Trans
Union report reflecting the reinstatement.
3
In May 1994, however, Cousin sued Trans Union for its continued
reporting of the NBC and American General accounts.2 That lawsuit
was settled in January 1995, and Trans Union agreed to suppress all
the adverse information about NBC and American General.
To suppress the improperly adverse information, Trans Union
implemented a procedure called cloaking. Normally, when
information reported to Trans Union is found to be inaccurate after
reinvestigation pursuant to § 1681i, it is deleted. But unless the
credit grantor involved also deletes the information from its
monthly computer tape submission,3 the information will be re-
reported into the consumer’s Trans Union file. To avert such
errors, Trans Union designed a procedure called cloaking. The
cloak is a flag in Trans Union’s computer system associated with
the subject account. The cloaking flag prevents the deleted
information from reappearing in a consumer’s file even if the
credit grantor fails to remove the inaccurate information from its
magnetic tapes and resubmits the information. The cloaking flag
remains in effect until the credit grantor has deleted the
inaccurate information from its tape submissions for twelve
consecutive months. At that point, Trans Union believes that the
2
Cousin also sued Jerry Enis Motors and Equifax, Inc.
(“Equifax”), another major consumer reporting agency, for failing
to reinvestigate and delete information about the GMAC account.
3
Credit grantors regularly send to Trans Union magnetic tape data
that updates the credit history of their consumers. The update is
usually monthly.
4
credit grantor has deleted the information permanently, and the
cloaking flag expires automatically.
On February 6, 1995, three weeks after settling the first
lawsuit, Trans Union sent a consumer report to Cousin, which still
contained the fraudulent NBC and American General accounts and the
Aberdeen address. Furthermore, that consumer report for the first
time listed a fraudulent BellSouth Mobility (“BellSouth”) account.
Richie had apparently opened an account in Cousin’s name with
BellSouth for cellular phone service in mid-1994.
On February 17, 1995, Cousin completed another IRF, again
contesting the NBC and American General accounts and the Aberdeen
address. In addition, he challenged for the first time the
BellSouth account. On February 28, 1995, Trans Union forwarded
another consumer report to Cousin, but it still retained all of the
false information. After further communication between Cousin’s
lawyers and Trans Union, a clean consumer report was furnished to
Cousin on March 9, 1995. Moreover, the BellSouth account was
cloaked as of that date.4
On November 15, 1996, Cousin went to Heafner Motors
(“Heafner”) to buy a vehicle. After reaching agreement on price
and other details, Cousin sought credit to purchase the vehicle.
4
BellSouth also notified Trans Union via a Universal Data Form
(“UDF”) on December 15, 1995, that the BellSouth account was
subscription fraud.
5
The salesman filled out the paperwork and submitted it to the
credit manager Bill Harmon.
At trial, Harmon testified that Heafner does not lend any
credit.5 Instead, he stated that Heafner obtains consumer reports
on customers to select the best financing match among a group of
lenders. Heafner obtained a consumer report on Cousin from Trans
Union, which again included the old BellSouth account. The
consumer report listed the account as a “P and L write off” and
showed it to have a “N09" rating, the worst rating a consumer can
receive and which means “bad debt” or “charged off account.”
Heafner selected GMAC to provide financing for Cousin’s purchase
and sent his application, but not Trans Union’s consumer report, to
it.
Like Heafner, GMAC sought a consumer report and obtained one
from Equifax. The Equifax report also contained the BellSouth
account. GMAC denied in writing Cousin’s application for credit to
purchase the car from Heafner. GMAC based its denial on two items:
1) the Equifax report containing the BellSouth account and 2)
GMAC’s own internal record of the loss on the prior GMAC account,
which neither the Equifax or Trans Union reports listed.
Cousin called Heafner later in the afternoon of November 15,
1996, and was told that his application had not been approved. On
December 11, 1996, Cousin requested disclosure of his file from
5
The retail installment contract, however, would have listed
Heafner as the seller/creditor.
6
Equifax. Before releasing the file to Cousin, Equifax deleted the
BellSouth account from the file, thus making Cousin unaware of the
BellSouth problem.
On January 13, 1997, Cousin requested a consumer report from
Trans Union. Upon receipt, he noticed that the report included the
false Aberdeen address and the BellSouth account.6 As a result,
Cousin sent to Trans Union another IRF on January 24, 1997,
notifying it that the entries were false.
In response to Cousin’s notice, Trans Union sent to Cousin
another consumer report, dated February 27, 1997. That report
deleted any reference to the BellSouth account, but it restated the
GMAC account that had previously been deleted in January 1994.
Apparently, GMAC had decided to re-report the old GMAC account
after it noted that the Equifax report did not list the GMAC
account. Moreover, GMAC had re-reported the old GMAC account,
using a different prefix number to designate the account. On March
4, 1997, Cousin notified Trans Union about the GMAC account.7
On March 28, 1997, Cousin sued Trans Union, alleging various
claims, including 1) negligent violation of the FCRA, 2) willful
violation of the FCRA, 3) defamation with malice, and 4) breach of
6
This was the first time that Cousin realized that the BellSouth
account had been reinserted. Trans Union did not notify him before
the information was reinserted.
7
As with the BellSouth account, Trans Union did not notify Cousin
before reinsertion of the GMAC account.
7
contract.8 Notwithstanding this lawsuit challenging its handling
of the GMAC account, Trans Union sent to BellSouth a consumer
report displaying the GMAC account on April 9, 1997. Thereafter,
Trans Union attempted to recloak the GMAC account on April 21,
1997. It proved to be short-lived. The following day, Trans Union
pulled Cousin’s file off the automated system and manually examined
the file, penning certain comments on the file. Moreover, it
uncloaked the file. Later on May 12, 1997, Trans Union sent a
consumer report to GMAC with the GMAC tradeline still on the
report.
The jury trial commenced on May 11, 1998. Before submitting
the case to the jury, Trans Union moved for judgment as a matter of
law under Federal Rule of Civil Procedure 50. The district court
granted the motion with respect to the breach of contract claim,
but denied the rest of the motion. The jury returned a verdict of
$50,000 in compensatory damages and $4,470,0009 in punitive
damages.
On June 4, 1998, Trans Union again moved for judgment as a
8
Cousin also filed suits against several other defendants. On
March 20, 1997, Cousin sued BellSouth, alleging that it “willfully
and maliciously and in a secretive manner not reasonably
discoverable by plaintiff published the false and libelous
Bellsouth tradeline to Trans Union.” Furthermore, on April 7,
1997, Cousin commenced an action against GMAC for re-reporting the
GMAC account. In addition, he filed suits against Equifax and
Memphis Consumer Credit, an Equifax affiliate, for negligently
reporting the inaccurate BellSouth account to GMAC on November 15,
1996.
9
This represented one percent of Trans Union’s net worth.
8
matter of law under Rule 50 and moved for a new trial under Rule
59. In the alternative, Trans Union also moved for a remittitur of
the compensatory and punitive damages awards or for a new trial
based upon the admission of irrelevant and prejudicial evidence and
argument regarding the Heafner automobile transaction. The
district court denied the motions and entered judgment. This
appeal ensued.
II. DISCUSSION
On appeal, Trans Union contends that it was entitled to
judgment as a matter of law with respect to Cousin’s claims for
negligent violation of the FCRA, willful violation of the FCRA, and
defamation with malice. In the alternative, Trans Union maintains
that it merits a remittitur of the compensatory and punitive
damages awards or a new trial. We review those issues in turn.
A. Standard of Review
“Judgment as a matter of law is proper on an issue if ‘there
is no legally sufficient evidentiary basis for a reasonable jury to
find for that party on that issue.’” Satcher v. Honda Motor Co.,
52 F.3d 1311, 1316 (5th Cir. 1995) (quoting Fed. R. Civ. P. 50(a)).
When reviewing the denial of a motion for judgment as a matter of
law, we will uphold a jury verdict unless the facts and inferences
point so strongly and so overwhelmingly in favor of one party that
reasonable men could not arrive at any verdict to the contrary.
9
See id. Furthermore, we are bound to view the evidence and all
reasonable inferences in the light most favorable to the jury's
determination. See Denton v. Morgan, 136 F.3d 1038, 1044 (quoting
Rideau v. Parkem Indus. Servs., 917 F.2d 892, 897 (5th Cir. 1990)).
Although we might have reached a different conclusion if we had
been the trier of fact, we are not free to reweigh the evidence or
to reevaluate the credibility of witnesses. See id. “We must not
substitute for the jury's reasonable factual inferences other
inferences that we may regard as more reasonable.” Id.
B. Negligent Noncompliance with the FCRA
Section 1681o10 provides statutory authority for civil
liability for negligent noncompliance with the FCRA. Any person
who is negligent in failing to comply with a requirement of the
FCRA is liable for any actual damages sustained by the consumer.
15 U.S.C. § 1681o(a). Here, Cousin charged that Trans Union failed
to meet the requirements of § 1681e(b).11 Under that section,
10
That section provides in pertinent part:
Any person who is negligent in failing to comply with any
requirement imposed under this subchapter with respect to any
consumer is liable to that consumer in an amount equal to the
sum of–
(1) any actual damages sustained by the consumer as a
result of the failure;
(2) in the case of any successful action to enforce any
liability under this section, the costs of the action
together with reasonable attorney’s fees as determined by
the court.
15 U.S.C. § 1681o(a).
11
In his response brief, Cousin mentions a § 1681i claim. Under
that section, a consumer reporting agency after reinvestigation
10
“[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).
In the present case, Trans Union concedes the inaccuracy of
its disclosures but maintains that some of those disclosures were
not consumer reports and, therefore, could not have formed the
basis of a § 1681e(b) claim. Moreover, it asserts that it followed
reasonable procedures as a matter of law. Finally, Trans Union
argues that the inaccurate information must have been published to
a third party and that Cousin must have suffered a credit denial to
establish a § 1681e(b) claim.12 We review each argument in turn.
First, Trans Union maintains that there was only one consumer
report in evidence, the November 15, 1996 report to Heafner. With
respect to the other disclosures of January and February 1997 to
Cousin himself, Trans Union submits that they were not consumer
must promptly delete from a consumer’s file inaccurate, incomplete,
or unverifiable information that a consumer disputes. 15 U.S.C.
§ 1681i(a)(5)(A). Although Cousin’s complaint and the pre-trial
order averred general claims of negligent and willful violations of
the FCRA, neither specifically stated § 1681i nor did the jury
instructions present a claim for violating § 1681i. Because the
record does not establish that a § 1681i claim was ever presented
to the jury, we focus solely on the claims seeking redress for
noncompliance with § 1681e(b).
12
Trans Union seems to vacillate as to whether a credit denial is
necessary for a § 1681e(b) claim. At the district court, Trans
Union stated on one occasion that a credit denial may not be a
prerequisite. But it then argued that without a denial, Cousin
could not establish any causation between Trans Union’s alleged
failure to comply with § 1681e(b) and Cousin’s supposed damages.
11
reports and, hence, could not have formed the basis for a claim
under § 1681e(b), which concerns the preparation of consumer
reports.13 Trans Union contends that, by definition, a consumer
report is a communication of information to a third party bearing
on a consumer’s eligibility for credit. Because the January and
February 1997 disclosures were only to Cousin, Trans Union asserts
that they cannot be consumer reports.
Trans Union further argues that the qualified immunity
afforded § 1681g disclosures to consumers pursuant to § 1681h(e)
necessarily distinguishes the January and February 1997 disclosures
from consumer reports like the one sent to Heafner. Section 1681g
pertains to the disclosure of information in a consumer’s file to
consumers who make a request to a consumer reporting agency. Under
§ 1681h(e), disclosures made pursuant to § 1681g may not be the
predicate for a consumer’s common law claims of defamation or
negligence against a consumer reporting agency unless the
disclosures contained information furnished with malice or willful
13
In its initial brief, Trans Union argues that the report sent
to Heafner and the two disclosures in January and February were the
only possible “consumer reports.” Interestingly, it speaks very
little of its disclosures of Cousin’s file to BellSouth and to GMAC
on April 9 and May 12, 1997, respectively. Only in the reply to
Cousin’s brief, which clearly raises those two disclosures, does
Trans Union address them. Although those two disclosures were
transmitted after the filing of Cousin’s complaint, the pretrial
order clearly included those publications, and Cousin presented
evidence about them at trial. Consequently, those disclosures were
a part of the trial record. See Fed. R. Civ. P. 16(e) (“[Pretrial]
order shall control the subsequent course of the action unless
modified by a subsequent order.”).
12
intent to injure the consumer. Moreover, § 1681h(e) excludes from
qualified immunity those actions commenced under §§ 1681n and
1681o. Trans Union suggests that the January and February 1997
disclosures to Cousin were not consumer reports because it is
illogical to make disclosures to consumers qualifiedly immune from
common law torts such as negligence but still allow them to be
characterized as consumer reports and, consequently, vulnerable to
attack under § 1681o as the purported by-product of negligent
noncompliance with § 1681e(b).
Although Trans Union’s argument that the January and February
disclosures were not consumer reports may be valid, especially in
light of § 1681h(e), we generally do not consider on appeal matters
not presented to the trial court. Webb v. Investacorp Inc., 89
F.3d 252, 257 n.2 (5th Cir. 1996). Other than, 1) a general
statement by Trans Union in its answer denying Cousin’s
characterization of his communications with Trans Union and the
nature of those documents, and 2) an attempt to include a jury
instruction that no credit reports were disseminated in the instant
case and that all the reports admitted in evidence were file
disclosures, which attempt failed and which Trans Union did not
object to, Trans Union did not present any argument remotely
suggesting that the January and February 1997 disclosures, or any
other disclosures, were not consumer reports for purposes of a
§ 1681e(b) claim. Hence, we decline to address Trans Union’s
13
position that the January and February 1997 disclosures were not
consumer reports.
Trans Union’s second argument for reversing the district
court’s denial of its motion for judgment as a matter of law
concerns the reasonableness of its cloaking procedure. The
adequacy of the consumer reporting agency’s procedures is judged
according to what a reasonably prudent person would do under the
circumstances. Thompson v. San Antonio Retail Merchants Ass’n, 682
F.2d 509, 513 (5th Cir. 1982). In the majority of cases,
reasonableness is a question for the jury. Cahlin v. General
Motors Acceptance Corp., 936 F.2d 1151, 1156 (11th Cir. 1991).
Trans Union, however, maintains that its procedure should be deemed
to be reasonable as a matter of law because, unlike other reported
cases that concerned a consumer reporting agency’s inadequate
response to a known problem, it had no way to know that its
cloaking system would fail. It argues that BellSouth and GMAC
should have notified it before re-reporting their erroneous
information about Cousin, and thus, it should not have been
penalized for something others failed to do.
We disagree. “Allowing inaccurate information back onto a
credit report after deleting it because it is inaccurate is
negligent.” Stevenson v. TRW Inc., 987 F.2d 288, 293 (5th Cir.
1993). Creditors report all magnetic tape data without notice of
any kind. They do not highlight any particular data in their
14
magnetic tape submissions. Instead, it is incumbent on the
consumer reporting agency to permanently delete and cloak the
erroneous information. Trans Union knew about problems with re-
reporting as Trans Union’s own cloaking manual indicated that a
process had to be developed to ensure that inaccurate information
that was deleted did not keep reappearing. Trans Union offers no
reason why, as a matter of law, cloaking for only twelve months is
a reasonable procedure, especially when it could have easily
cloaked any adverse information permanently and when its own
witness conceded that in retrospect the twelve month cloaking
procedure may have been unreasonable.14 The fact that Experian,
another of Trans Union’s consumer reporting agency competitors, did
not have a problem with ensuring the non-reappearance of, at least,
the BellSouth account suggests the unreasonableness of Trans
Union’s procedure. Accordingly, Trans Union’s cloaking procedure
was not reasonable as a matter of law, and the issue of
reasonableness was properly before the jury to consider.
Trans Union’s final argument concerns whether the inaccurate
information must have been published to a third party and that
Cousin must have suffered a credit denial to establish a § 1681e(b)
claim. In essence, that argument involves two interrelated legal
elements--causation and injury--and charges that no injury flowed
from the disclosures of the inaccurate information because they
14
She partially retracted the statement later in the same
deposition testimony that was admitted into the trial record.
15
were not publicized to a third party and that Cousin suffered no
injury because there was no credit denial. Referring to various
cases from this and other circuits, Trans Union insists that
publication and denial of credit are prerequisites to a § 1681e(b)
claim. See, e.g., Pinner v. Schmidt, 805 F.2d 1258, 1262 (5th Cir.
1986); Philbin v. Trans Union Corp., 101 F.3d 957 (3d Cir. 1996);
Casella v. Equifax Credit Info. Servs., 56 F.3d 469 (2d Cir. 1995);
Cahlin, 936 F.2d 1151; Hauser v. Equifax, Inc., 602 F.2d 811 (8th
Cir. 1979). But see Guimond v. Trans Union Credit Info. Co., 45
F.3d 1329, 1333 (9th Cir. 1995) (concluding that district court
erred in predicating liability under § 1681e(b) on the occurrence
of a credit denial or the transmission of a report to a third
party). Because the January and February 1997 disclosures were
sent to Cousin, rather than a third party, and because they did not
contribute to a credit denial, Trans Union contends that those
disclosures cannot support Cousin’s claim for negligent
noncompliance with § 1681e(b). As for the consumer report sent to
Heafner in November 1996, Trans Union maintains that there was no
evidence indicating that Heafner utilized the report to deny credit
to Cousin.
We need not address Trans Union’s specific arguments as to
whether publication and denial of credit are necessary to assert a
§ 1681e(b) claim because even assuming arguendo that denial of
credit and publication are not prerequisites for a § 1681e(b)
16
claim, we see insufficient evidence of actual damages to warrant
the jury’s award. As previously noted, § 1681o provides for actual
damages when there has been negligent noncompliance with the FCRA.
Here, the jury awarded $50,000 in compensatory damages and
$4,470,000 in punitive damages. Those compensatory damages
constituted the actual damages award and were apparently for
Cousin’s purported denial of credit by Heafner and for his
emotional distress.15 Trans Union contends that no compensatory
damages should have been awarded for Cousin’s failure to receive
credit for the purchase of a vehicle because the credit grantor did
not utilize a Trans Union credit report. It asserts that GMAC, not
Heafner, denied Cousin credit and that GMAC used a report from
Equifax and its own internal files. Additionally, Trans Union
argues that the evidence did not support an award for Cousin’s
emotional distress.
Having reviewed the record, we agree. There was no legally
sufficient evidence for a reasonable jury to find that a Trans
Union credit report was utilized to deny Cousin credit. Three
items purportedly supported the belief that Heafner denied Cousin
15
Actual damages may include damages for humiliation or mental
distress even if the consumer has suffered no out-of-pocket losses,
as well as damages for injury to reputation and creditworthiness.
Fischl v. General Motors Acceptance Corp., 708 F.2d 143, 151 (5th
Cir. 1983). No evidence about other actual damages was in the
record. Cousin’s attorneys did seek attorney’s fees and costs, but
those related to the filing of the instant action and were sought
post-verdict pursuant to the attorney’s fees provisions of the FCRA
and the common law.
17
credit based on a Trans Union credit report. One, a letter from
GMAC read:
“We were recently informed by HEAFNER MOTORS, INC.
that it was considering the credit sale or lease of
an automobile or other product to you and asked
whether we would be prepared to accept your
obligation if the transaction was completed. We
must regretfully inform you that we were not
agreeable to handling the proposed transaction.”
Two, some testimony revealed that Heafner would have been noted as
the seller/creditor on the vehicle’s installment sales contract.
Three, additional testimony indicated that Heafner assigns loans to
other entities after the sale of a car. Although we are bound to
view the evidence and all reasonable inferences in the light most
favorable to the jury’s determination, we cannot find that a
reasonable jury would have inferred from the foregoing evidence
that Heafner denied Cousin credit based on a Trans Union credit
report, particularly when the unequivocal testimony from Heafner
was that it does not grant credit to customers.16 The thrust of the
16
The three items correspond to concerns with the Truth in
Lending Act (“TILA”), 15 U.S.C. §§ 1601-1667f. That statute
attempts to achieve the “informed use of credit results from an
awareness of the cost thereof” by consumers by “mandating a
meaningful disclosure of credit terms.” 15 U.S.C. § 1601(a). And
it distinguishes between the responsibilities of creditors and
assignees. See generally Riviere v. Banner Chevrolet, Inc., 184
F.3d 457, 460-61 (5th Cir. 1999). Under the TILA, “[i]f an
obligation is initially payable to one person, that person is the
creditor even if the obligation by its terms is simultaneously
assigned to another person.” Id. (quoting the staff interpretation
to Regulation Z, 12 C.F.R. § 226). The TILA recognizes that an
automobile dealer and a bank may create an arrangement whereby the
credit sale contracts are initially payable to the dealer but are
immediately assignable to the bank. Id. In such cases, the dealer
18
evidence indicated that GMAC was the credit grantor and that it
denied Cousin’s application based on an internal credit report and
a report from Equifax, not Trans Union. As the denial of credit
was due to something other than Trans Union’s consumer report on
Cousin, we cannot justify the $50,000 compensatory damages award to
include damages arising from that credit denial.
Accordingly, the only possible actual damages related to
Cousin’s emotional distress. The evidence of that distress,
however, was very limited and legally insufficient. Cousin
testified that as a result of the November 15, 1996 credit denial,
he felt real frustrated and irritated because the BellSouth
information was being re-reported.17 At the time he felt emotional
distress, he did not know whether a Trans Union report had been
utilized by any of the parties. In light of the fact that the
credit denial occurred due to an Equifax report, Cousin’s emotional
distress from the denial of credit cannot be attributed to Trans
Union, and he cannot recover actual damages for that distress.
The only other testimony about emotional distress concerned
and purchaser execute the contract only after the bank approves the
creditworthiness of the purchaser; yet, the dealer is deemed to be
the only creditor in the transaction. Id. Heafner’s arrangement
with GMAC correlates to the TILA model.
17
Cousin testified:
A: On that day I felt real frustrated, real irritated to
know that this information was continuing to be reported
over and over again. I already told them that it was not
me. I wanted to say that it was a feeling of like being
in jail knowing that I – I mean, I didn’t do this. I’m
not guilty, but I was continuing to be punished for it.
19
Cousin’s reaction to seeing his inaccurate Trans Union credit
reports of November 15, 1996, and January 17, 1997.18 Upon being
questioned about how he felt when he saw the November 15, 1996
credit report, Cousin testified:
A: Very upset, angry. And it just was that, you know,
all things I had done, the company to not – they
didn’t hear me. I had told them over and over
again but they didn’t listen to me, you know. So
that’s how I felt.
Q: You felt like nobody was listening?
A: Felt like nobody was listening.
As for the January 17, 1997 disclosure, Cousin stated:
A: I felt like, if you [k]now anything about a maze,
it’s like being trapped inside of something that
you can’t get out of.
In Carey v. Piphus, 98 S. Ct. 1042, 1052 (1978), the Supreme
Court required proof of actual injury for compensatory damages to
be awarded for mental or emotional distress in an action brought
under 42 U.S.C. § 1983. It concluded that a jury’s award for
emotional distress must be supported by evidence of genuine injury,
such as the evidence of the injured party’s conduct and the
observations of others. Id. at n.20. We extended Carey’s holding
and reasoning to other cases involving federal claims for emotional
harm in Patterson v. P.H.P. Healthcare Corp., 90 F.3d 927, 938 (5th
18
No testimony related to the February 1997 disclosure to Cousin,
the April 9, 1997 disclosure to BellSouth, or the May 12, 1997
disclosure to GMAC. Accordingly, no damages award may stand based
on those arguably negligent acts.
20
Cir. 1996), a case concerning claims for racial discrimination and
retaliatory discharge. There, we recognized that to establish
intangible loss, Carey requires “a degree of specificity which may
include corroborating testimony or medical or psychological
evidence in support of the damage award. Id. at 940. In
Patterson, we were confronted with the following evidence of
emotional distress by one of the plaintiffs.
[He] testified that he felt “frustrated” and “real
bad” for being judged by the color of his skin.
[He] explained that the work environment was
“unbearable” and was “tearing [his] self-esteem
down.” [He] also stated that it “hurt” and made
him “angry” and “paranoid” to know that his
supervisor referred to [him] as a “porch monkey” or
a “nigger” and generally though that he was
inferior to white employees.
Id. at 939. That plaintiff’s testimony was much more concrete than
Cousin’s; yet, we vacated the district court’s $40,000 emotional
distress award, finding that his testimony of mental distress was
insufficient. Id. Because Cousin presented no more than what was
offered in Patterson, we likewise vacate the award for emotional
distress in the present case for insufficient evidence of actual
damages.19
19
Although in vacating the emotional distress award in Patterson
we remanded the case to the district court with instructions for
the district court to award nominal damages, “[n]ominal damages to
vindicate a technical right cannot be recovered unless actual loss
has occurred.” Hyde v. Hibernia Nat’l Bank, 861 F.2d 446, 448 (5th
Cir. 1988) (mentioning general rule about nominal damages in
context of FCRA); Restatement (Second) of Torts § 907 cmt. a (1979)
(“If actual damage is necessary to the cause of action, as in
negligence, nominal damages are not awarded.”); W. Page Keeton et
21
C. Willful Noncompliance with the FCRA
Section 1681n20 provides the statutory authority for civil
liability for willful noncompliance with the FCRA. As with his
negligent noncompliance claim, Cousin’s willful noncompliance claim
pertains to Trans Union’s failure to meet the requirements of
§ 1681e(b). Under the willful noncompliance statute, a consumer
may obtain punitive damages. See 15 U.S.C. § 1681n(a)(2). Here,
the jury awarded $4,470,000 in punitive damages.
al., Prosser and Keeton on Torts § 30, at 165 (5th ed. 1984).
Here, in this negligent noncompliance action, there was
insufficient evidence of actual loss. Therefore, we need not award
any nominal damages, and we make no determination as to whether
Cousin has satisfied all the purported elements of a negligent
noncompliance with § 1681e(b) claim to warrant nominal damages.
It is true that Cousin maintained a willful noncompliance claim
and a claim for defamation with malice for which nominal damages
could possibly be awarded, but both fail for other reasons. See
infra Parts C & D.
20
That section provides in pertinent part:
Any person who willfully fails to comply with any requirement
imposed under this subchapter with respect to any consumer is
liable to that consumer in an amount equal to the sum of–
(1)(A) any actual damages sustained by the consumer as a
result of the failure or damages of not less than $100
and not more than $1,000; or
(B) . . .
(2) such amount of punitive damages as the court may
allow; and
(3) in the case of any successful action to enforce any
liability under this section, the costs of the action
together with reasonable attorney’s fees as determined by
the court.
15 U.S.C. § 1681n(a).
22
“Malice or evil motive need not be established for a punitive
damages award, but the violation must have been willful.” Fischl
v. General Motors Acceptance Corp., 708 F.2d 143, 151 (5th Cir.
1983). In Pinner, we noted that “willful” is a word of many
meanings and that its construction is often influenced by its
context. See Pinner, 805 F.2d at 1263. In concluding that the
consumer reporting agency in that case did not commit a willful
violation, we remarked that there was no evidence suggesting that
the agency “knowingly and intentionally committed an act in
conscious disregard for the rights of others.” Id.; see also
Philbin, 101 F.3d at 970; Stevenson, 987 F.2d at 293. Generally,
courts have allowed a willful noncompliance claim to proceed where
a defendant’s conduct involves willful misrepresentations or
concealments. See Pinner, 805 F.2d at 1263. In those cases, a
consumer reporting agency has typically misrepresented or concealed
some or all of a credit report from a consumer. See id.
(discussing Millstone v. O’Hanlon Reports, Inc., 528 F.2d 829 (8th
Cir. 1976)); see also Stevenson, 987 F.2d at 294.
In its initial brief, Trans Union asserts two bases for
rejecting Cousin’s § 1681n claim. First, it argues that Cousin’s
§ 1681n claim depended heavily on allegations that Trans Union
willfully reinserted the GMAC tradeline into Cousin’s consumer
report in early 1997 and that judicial estoppel should have barred
that claim from being asserted. Second, Trans Union maintains that
23
Cousin failed to present sufficient evidence of willfulness,
comparing the instant situation to various other decisions
involving far more egregious facts that were held insufficient to
state a claim under § 1681n.
We need not address the first of Trans Union’s arguments as
Cousin essentially concedes in his response brief that Trans Union
did not willfully dredge up the GMAC tradeline and reinsert it into
Cousin’s consumer report. Notwithstanding this apparent
concession, Cousin challenges Trans Union’s second argument that he
failed to present sufficient evidence of willfulness. Cousin
points to several facts, which apparently were brought forth at
trial, to establish that Trans Union’s actions constituted willful
noncompliance. First, Cousin refers to the re-reporting of the
BellSouth account in the November 15, 1996 report to Heafner
despite the prior cloaking and the December 1995 notice from
BellSouth to Trans Union confirming that the BellSouth information
was subscription fraud. Second, Cousin argues that Trans Union
knew about the problems of re-reporting but failed to do anything
about it. He maintains that the company failed to adequately
assess whether a twelve-month cloaking system would work. Third,
Cousin complains of Trans Union’s transmittal to BellSouth on April
9, 1997, a report including the fraudulent GMAC tradeline.
Finally, Cousin raises the uncloaking of his consumer report on
April 22, 1997, after the report had been cloaked on April 21, and
24
its transmission to GMAC.21 In its reply to Cousin’s brief, Trans
Union attempts to address Cousin’s counter-arguments.22
At trial, Cousin introduced evidence that the BellSouth
tradeline was fraudulent and that Trans Union had cloaked the
account in March 1995. Additional evidence indicated that in
December 1995, BellSouth had submitted to Trans Union a UDF stating
that the BellSouth account was probably subscription fraud. Eleven
21
Cousin also avers that Trans Union made misrepresentations to
him when it sent a green postcard during the first Trans Union
lawsuit in 1995, telling him that if the inaccurate information was
ever reinstated after reverification, Trans Union would notify him.
That allegation does not raise a § 1681n claim for violating
§ 1681e(b). As noted in Pinner, the misrepresentations that might
give rise to a willfulness claim normally concern
misrepresentations of the consumer’s own report and concealment of
that report from the consumer. See Pinner, 805 F.2d at 1263.
22
Normally, “[a]n appellant abandons all issues not raised and
argued in its initial brief on appeal.” Cinel v. Connick, 15 F.3d
1338, 1345 (5th Cir. 1994). But see Piney Woods Country Life
School v. Shell Oil Co., 905 F.2d 840, 854 (5th Cir. 1990)
(recognizing procedural bar about raising issues in initial brief,
but still addressing as an exercise of discretion some issues newly
raised in reply brief). Although Trans Union’s initial brief did
not directly address some of the specific acts that may have formed
the basis of the jury’s § 1681n verdict and that Cousin discusses
in his response brief, we believe that Trans Union’s appeal
questioning the evidentiary sufficiency of the willfulness claim
sufficiently raised the issue of Trans Unions’ willful conduct for
us to consider all the arguments. Indeed, Cousin’s brief raising
all the purported willful acts is a tacit acknowledgment that the
general issue of willful conduct was presented in Trans Union’s
brief. Furthermore, unlike the more contemptible situation where
an appellant raises a completely new issue in its reply brief,
disadvantaging the appellee, and for which the procedural bar
concerning initial briefs was properly developed and utilized, we
see no real new issue in the reply brief, but rather responsive
arguments to the appellee’s own contentions, and, therefore, little
or no prejudice. With that in mind, we review the sufficiency of
the willfulness claim.
25
months later, the BellSouth tradeline reappeared in Cousin’s file.
Testimony indicated that BellSouth may have re-reported the adverse
tradeline information to Trans Union between April 1996 and August
1996. The prior lawsuit, the cloaking of the BellSouth account,
and BellSouth’s own UDF transmittal may have put Trans Union on
notice about the falsity of the BellSouth account with respect to
Cousin; nevertheless, we cannot conclude that such evidence is
legally sufficient to establish that Trans Union willfully violated
§ 1681e(b). In Philbin, the Third Circuit found no willful
violation despite the reappearance of inaccurate information that
had previously been deleted and which the consumer had again
notified the consumer reporting agency about when that information
reappeared. See id.; see also Casella, 56 F.3d at 476 (failing to
delete inaccurate information notwithstanding notification to
consumer reporting agency did not rise to the level of conscious
disregard or deliberate and purposeful action necessary to make out
a willful noncompliance claim). The present situation is no more
egregious than in Philbin or Casella. The fact that Trans Union
may have had experience with Cousin’s BellSouth tradeline and that
BellSouth had submitted a UDF to Trans Union about subscription
fraud does not necessarily translate into knowingly and
intentionally committing an act in conscious disregard of Cousin’s
rights. BellSouth itself appears to have reinserted the
information, and several months had elapsed from the time of the
26
UDF and/or the initial cloaking to the reinsertion of the BellSouth
tradeline into Cousin’s file. Finally, Trans Union did not conceal
Cousin’s consumer reports or misrepresent them. That in and of
itself suggests that Trans Union did not commit a willful violation
of § 1681e(b). Stevenson, 987 F.2d at 294 (“Only defendants who
engaged in ‘willful misrepresentations or concealments’ have
committed a willful violation and are subject to punitive damages
under § 1681n.”).
Similarly, we find Cousin’s argument with respect to Trans
Union’s failure to implement a better cloaking system unavailing.
The system was not perfect, but it was effective for a few months,
and Trans Union never attempted to mislead Cousin with respect to
his consumer report or his rights. We may fault the failure to
implement a full-proof cloaking procedure as unreasonable, but we
cannot say that it was willful.
As for Trans Union’s disclosure of Cousin’s consumer reports
to BellSouth in April 1997 and to GMAC in May 1997, we first note
the evidence at trial and the parties’ admissions. When on January
17, 1997, after having been denied credit to purchase a car from
Heafner, Cousin received a Trans Union report, the report included
the false Aberdeen address and the BellSouth tradeline. Cousin
immediately notified Trans Union that those entries were false, and
Trans Union deleted them. At that time, however, GMAC submitted to
Trans Union, as much of the evidence indicates and as Cousin now
27
apparently concedes, the old GMAC tradeline that had previously
been deleted from Cousin’s report. But GMAC utilized a different
prefix code to identify the tradeline rather than the old one.
Cousin notified Trans Union about the fraudulent nature of the GMAC
tradeline on March 4, 1997. That tradeline was later released in
a consumer report to BellSouth on April 9, 1997. On April 21,
1997, the record reveals that Cousin’s file was cloaked. That
cloak was short-lived as it was uncloaked the next day.
Thereafter, on May 12, 1997, Cousin’s consumer report with the
fraudulent GMAC tradeline was transmitted to GMAC.
Although the consumer reports to BellSouth and to GMAC
contained inaccurate information about the GMAC tradeline, we do
not believe that those or any other acts amount to legally
sufficient evidence for a reasonable jury to find for Cousin on his
§ 1681n claim for violation of § 1681e(b). The GMAC tradeline had
a new prefix code and, in essence, was not the same as before. We
cannot deem as a willful violation Trans Union’s inability to
distinguish two tradelines that on their face were different.
Thus, Trans Union’s failure to quickly delete the GMAC tradeline
and its decision to release a consumer report with that information
while it reinvestigated the tradeline cannot be deemed a willful
violation of § 1681e(b). See 15 U.S.C. § 1681i (providing
reinvestigation procedure in case of disputed accuracy).
Cousin makes much of the fact that Trans Union cloaked his
28
file on April 21 with notations stating “ID FRAUD” and “derogs” and
then uncloaked the file the next day. He argues that the
uncloaking demonstrates willfulness because the evidence showed
that only a Trans Union supervisor could have manually uncloaked
his file. Thus, Cousin believes that Trans Union must have
intended for the GMAC tradeline to be in his file. Even if a Trans
Union supervisor had uncloaked Cousin’s file, we conclude that such
an act did not constitute a willful violation of § 1681e(b). As
the testimony indicated, cloaking is a process whereby Trans Union
precludes future submissions of inaccurate tradeline information
from being entered into a consumer’s file. Cloaking does not
concern the actual deletion of any inaccurate information. Hence,
when Trans Union determined to uncloak Cousin’s file, it did not
actually do anything substantively to his file. Rather, Trans
Union allowed the status quo to stand while it reinvestigated the
fraudulent nature of the GMAC tradeline. Consequently, we see no
willful violation of § 1681e(b) under the evidence presented to the
jury.23
D. Defamation With Malice
Cousin’s last claim is a common law action for defamation with
malice. Under § 1681h(e), consumer reporting agencies are
generally qualifiedly immune from state law claims for defamation
23
In making this ruling, we again make no determination as to
whether publication and denial of credit are prerequisites for a
claim predicated on § 1681e(b).
29
unless they involve malice or willful intent to injure. Both Trans
Union and Cousin agree that courts have determined that malice
under this statutory scheme is congruent with the common law
standard. See Thornton v. Equifax, 619 F.2d 700, 703 (8th Cir.
1980). Thus, to establish defamation with malice in the present
case, one must establish 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. See Gulf
Publishing Co. v. Lee, 434 So. 2d 687, 695 (Miss. 1983) (citing
Reaves v. Foster, 200 So. 2d 453, 458-59 (Miss. 1967)).
In the instant case, there were three disclosures to outside
parties: 1) the report to Heafner Motors with the BellSouth
tradeline and the fraudulent Aberdeen address on November 15, 1996;
2) the report to BellSouth with the GMAC tradeline on April 9,
1997; and 3) the report to GMAC with the GMAC tradeline on May 12,
1997. None of those disclosures amounted to defamation with
malice.
As previously indicated, after learning of the fraudulent
nature of the BellSouth tradeline, Trans Union had cloaked the
BellSouth tradeline in March 1995. Pursuant to that procedure,
that information was not reported in Cousin’s file for at least a
year and was not publicized to another party until November 1996.
Only after BellSouth had apparently begun re-reporting that
tradeline did it get back into Cousin’s file. The lack of
30
permanence with the cloaking procedure may evidence the weakness
and unreasonableness of the procedure, but no malice can be derived
from it.
Likewise, we see no legally sufficient evidentiary basis for
concluding that Trans Union defamed with malice when it transmitted
the GMAC tradeline to BellSouth and to GMAC itself. GMAC had re-
reported the tradeline, utilizing a different prefix code.
Although in March 1997 Cousin had notified Trans Union about the
fraudulent nature of that tradeline, we cannot say that Trans Union
knew that the tradeline was false when the evidence revealed that
the tradeline had been re-reported with a different prefix code and
that Trans Union was reinvestigating that tradeline. Trans Union’s
subsequent actions do not suggest a reckless disregard for the
truth. It promptly corrected any errors and fully disclosed its
reports to Cousin. Therefore, we find that there was legally
insufficient evidence to support Cousin’s defamation with malice
claim.24
24
We also note that in Thornton, the Eighth Circuit held that the
standard of proof required for a claim under the exception to the
qualified immunity provision of § 1681h(e) is greater than that for
a willful violation claim under § 1681n. Thornton, 619 F.2d at
705. Assuming that were the case, we would have to find against
the defamation with malice claim in light of our previous
determination that there was no legally sufficient evidence to
support a willfulness violation under § 1681n.
31
III. CONCLUSION
For the foregoing reasons, we vacate the district court’s
judgment and render that Cousin taken nothing with respect to his
claims.25 Each party is to bear their respective costs on appeal.
ENDRECORD
25
In light of our ruling, we do not address Trans Union’s
argument, in the alternative, regarding remittitur or a new trial.
32
ROBERT M. PARKER, Circuit Judge, dissenting:
Because the evidence, taken in the light most favorable to the
jury verdict, supports that verdict, I respectfully dissent. “Our
assigned role is neither to re-try the case de novo nor to supplant
the jury verdict so long as it is supported by substantial
evidence.” Pinner v. Schmidt, 805 F.2d 1258 (5th Cir. 1986).
I agree that with the majority that Trans Union’s cloaking
procedure cannot be held reasonable as a matter of law and that the
issue of reasonableness was properly submitted to the jury.
However, I would hold that the evidence of actual damages was
sufficient to warrant the jury’s award of $50,000. Actual damages
may include out-of-pocket losses, damages for injury to reputation
and creditworthiness and for humiliation or mental distress. See
Fischl v. General Motors Acceptance Corp., 708 F.2d 143, 151 (5th
Cir. 1983). Cousin and his attorney, over a four-and-one-half year
period, repeatedly advised Trans Union that specific derogatory
credit information in its files was inaccurate. Cousin commenced
two successive federal lawsuits in an effort to obtain Trans
Union’s compliance with the Fair Credit Reporting Act (“FCRA”), 15
U.S.C. §§ 1681-1681u. Moreover, Cousin testified concerning his
mental and emotional pain arising from the ongoing struggle. The
jury’s conclusion that Cousin suffered actual financial and
emotional damages was entirely reasonable in light of the evidence
33
presented at trial.
Further, I conclude that the evidence supports the jury’s
punitive damage award of one percent of Trans Union’s net worth.
Cousin presented evidence of Trans Union’s willful noncompliance
with 15 U.S.C. § 1681e(b)’s requirement that a credit reporting
agency shall follow reasonable procedures to assure maximum
possible accuracy of credit information. Again, the majority does
not find as a matter of law that Trans Union complied with the
reasonableness requirement of FCRA. Rather, it reverses the jury
verdict on the basis that the evidence was insufficient for the
jury to conclude that its noncompliance was willful. I disagree.
At the heart of our inquiry lies Trans Union’s policy of limiting
its cloaking of erroneous information to one year. The evidence
was more than sufficient for a jury to conclude that Trans Union
was aware that one-year cloaking limit was inadequate, and that it
could have addressed the problem by implementing permanent cloaking
procedures. Further, Trans Union knew, after years of repeated
complaints and a prior lawsuit, that Cousin’s file had been the
target of “ID FRAUD,” yet the majority holds that a reasonable
juror could not conclude that the decision to uncloak the file and
release a consumer report while it reinvestigated yet another
complaint was a willful violation of its duty to behave reasonably.
In short, both Trans Union’s general cloaking policy and its
specific handling of Cousin’s file support the jury’s finding of
willful noncompliance.
34
Based on the foregoing, I would affirm the verdict for Cousin
in toto.
35