United States Court of Appeals, Second Circuit.: No. 460, Docket 97-7257
United States Court of Appeals, Second Circuit.: No. 460, Docket 97-7257
3d 41
39 Fed.R.Serv.3d 492
W. Philip Jones, Jones & Wanchak, L.L.C., Avon, CT, for PlaintiffAppellant.
Herbert Watstein, Watstein & Watstein, Bristol, CT (Mona E. Herman,
Simsbury, CT, of counsel), for Defendants-Appellees Hoffman of
Simsbury, Inc., d/b/a/ Hoffman Honda of Avon; Jeffrey S. Hoffman, as
President of Hoffman of Simsbury, Inc.; John Doe # 1, an unknown
employee of Hoffman of Simsbury, Inc.; and John Doe # 2, an unknown
employee of Hoffman of Simsbury, Inc.
James V. Somers, Halloran & Sage, Hartford, CT (John B. Farley,
Halloran & Sage, of counsel), for Defendant-Appellee Larry F. Katzke, an
employee of XYZ Corporation.
I.
2
Plaintiff claims that these actions interfered with her efforts to obtain a
mortgage and inflicted emotional distress. She brings this action based on
alleged violations of the FCRA and the Connecticut Unfair Trade Practices Act,
We review de novo the grant of a motion to dismiss under Rule 12(b)(6) for
failure to state a claim upon which relief can be granted. See Allen v.
WestPoint-Pepperell, Inc., 945 F.2d 40, 44 (2d Cir.1991). The complaint may
be dismissed only where " 'it appears beyond doubt that the plaintiff can prove
no set of facts in support of his claim which would entitle him to relief.' " Id.
(quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 101-02, 2 L.Ed.2d
80 (1957)).
On appeal, appellant does not contest the conclusion that defendants are not
"consumer reporting agencies," nor does she contest the fact that defendants did
not deny her credit or increase the charge for credit. Rather, she argues that
defendants can be held liable under 1681n because they willfully violated the
"requirement" imposed by 1681q, a criminal provision of the FCRA that
imposes penalties upon "[a]ny person who knowingly and willfully obtains
information on a consumer from a consumer reporting agency under false
pretenses." (emphasis supplied). While the district court indicated that users of
information can be held liable under 1681n solely for violating the disclosure
obligations of 1681m, which apply only when "credit ... is denied or the
charge for such credit ... is increased," appellant argues that users of
information may also be held civilly liable under 1681n for violating
1681q, which is incorporated into 1681n. That is, appellant argues that
1681q, prohibiting "any person" from procuring credit information under false
pretenses, is among the FCRA "requirements" whose willful violation by users
of information supports civil liability under 1681n.5 We agree.
III.
10
11
Northrop's Second Amended Complaint did allege that defendants received her
consumer credit report from a credit reporting agency while they were
conducting no business with her of any kind, the natural implication of which is
that they did so "under false pretenses."6 Indeed, the memorandum of law
offered in support of one of the defendants' motions to dismiss evidences clear
awareness of the substance of plaintiff's claim--even if the statutory basis of her
complaint remained opaque--stating that "[t]he essence of Plaintiff's Second
Defendants rely on DiGianni v. Stern's, 26 F.3d 346, 348 (2d Cir.1994) (per
curiam), to argue that users of information may not be held liable merely for
procuring credit reports under false pretenses, claiming that DiGianni prevents
liability from being imposed upon users of information under 1681n in
situations other than where "credit ... is denied or the charge for such credit ...
is increased," 15 U.S.C. 1681m. We disagree with this reading of DiGianni, a
case that did not address, and does not foreclose, the imposition of liability
upon users of information under 1681n based on violations of 1681q.
13
In DiGianni, we held that the defendants in that case (department stores that
had provided information to consumer reporting agencies regarding accounts
that had been opened under plaintiff's social security number) were not
"consumer reporting agencies," and therefore could not, under the particular
circumstances of that case, be held liable under the FCRA. 26 F.3d at 348-49.
We noted in passing, however, that the FCRA
While [plaintiff] suggests on appeal that [defendants] are liable under the
FCRA as users, she does not allege that either of them denied credit or
increased the charge for credit to her on the basis of information supplied by
reporting agencies. Accordingly, the only remaining issue is whether the
appellees can be held liable under the provisions of the FCRA governing
consumer reporting agencies.
16
Id. at 348.
17
In stating that the defendants in that case could not be held liable as "users"
because they had not denied credit to plaintiff or increased the charge for credit,
DiGianni cited 1681m and clearly considered only that section. This is
understandable, inasmuch as this is the only provision of the FCRA that
explicitly imposes specific obligations upon "users." However, neither 1681m
nor DiGianni (nor any other section of the FCRA, for that matter), define the
term "user of information" under the Act. DiGianni did not restrict the
definition of the term "user" to those situations governed by 1681m--and
therefore did not delimit the imposition of liability against "users" under
1681n--but merely concluded that the defendants in that case did not fall within
1681m. Not at issue in DiGianni, however, was 1681q, a provision that
imposes criminal liability upon "any person" who willfully obtains credit
information under false pretenses. Inasmuch as there was no issue of any party
procuring credit information under false pretenses in DiGianni, we had no
reason to consider whether a "user of information" who violates 1681q might
be held liable under 1681n. If in fact the "requirements" of the FCRA, the
willful violation of which supports civil liability under 1681n, include the
requirement under 1681q not to obtain credit information using false
pretenses, then willful violation of this requirement also provides a basis for
liability against "users of information."
18
While we have not previously had occasion to rule on the question whether
1681q states a "requirement" under the FCRA supporting liability under
1681n, a number of other circuits have addressed the issue, and all have agreed
that a civil cause of action is available. See Yohay v. City of Alexandria
Employees Credit Union, Inc., 827 F.2d 967, 971-72 (4th Cir.1987); Zamora v.
Valley Fed. Sav. & Loan Ass'n, 811 F.2d 1368, 1370 (10th Cir.1987) (per
curiam); Kennedy v. Border City Sav. & Loan Ass'n, 747 F.2d 367, 369 (6th
Cir.1984); Hansen v. Morgan, 582 F.2d 1214, 1219 (9th Cir.1978); see also
Boothe v. TRW Credit Data, 557 F.Supp. 66, 71 (S.D.N.Y.1982); Rice v.
Montgomery Ward & Co., 450 F.Supp. 668, 671 (M.D.N.C.1978).7
19
We join the other Courts of Appeals that have ruled on the question in holding
that 1681n incorporates 1681q. The plain language of 1681n, imposing
liability upon "user[s] of information which willfully fail[ ] to comply with any
requirement imposed under [the FCRA]," appears on its face to encompass the
"requirement" imposed by 1681q not to obtain credit information under false
pretenses. "Phrasing the 'requirement' as a thing prohibited or required not to be
done rather than as an affirmative obligation does not deprive Section 1681q of
its status as a requirement. Nor does imposition of criminal penalties for
violation of Section 1681q rob it of its enforceability through Section 1681n."
Kennedy, 747 F.2d at 369.8
20
V.
21
Under the terms of 1681n, defendants may only be held liable if they are
"users of information,"9 a term that is not defined by the FCRA. Although, as
discussed above, DiGianni did not purport to limit this term to those who deny
credit or increase the charge for credit,10 Northrop must still be able to prove
that defendants are "users of information" under the Act in order to state a claim
for relief under 1681n.
22
23
24
25
26
With regard to defendants John Doe # 1 and John Doe # 2, we are aware that
they are alleged in plaintiff's Second Amended Complaint to have requested
plaintiff's credit report "in the performance of his or their duties as employees
of Hoffman"--a fact that, if proven, will shield these defendants from liability.
Nonetheless, the fact that a complaint alleges facts that constitute a defense to
plaintiff's claim does not in all cases require dismissal of the complaint. See 5
Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure 1226,
at 209-10 (1990) ("The court, in its discretion, may allow the pleader to amend
his complaint if it believes that the defense can be avoided.... Even if the
defense is absolute on the face of the complaint, the court may decide that a
motion for summary judgment, which provides an opportunity for an
investigation of the facts surrounding the bare allegations in the pleading, is
more appropriate and more productive in terms of reaching the merits than a
motion to dismiss under Rule 12(b)(6)."). Accordingly, we leave it to the
discretion of the district court on remand to determine what actions are
appropriate regarding the claims against defendants John Doe # 1 and # 2.
VI.
27
For the reasons stated above, we vacate the district court's dismissal of
Northrop's complaint, and remand the case to the district court for further
proceedings consistent with this opinion.
The other defendants in this case are implicated by the following facts, alleged
in plaintiff's complaint "on information and belief." Defendants John Doe # 1
and/or John Doe # 2, in the performance of his or their duties as Hoffman
employees, utilized Hoffman's facilities to obtain plaintiff's credit report.
Defendant XYZ Corporation and/or its employee, defendant-appellee Larry F.
Katzke, utilizing his position with XYZ Corporation, requested John Doe # 1
and/or John Doe # 2 to obtain the report. Defendant Richard Roe requested
XYZ Corporation and/or Katzke, and/or John Doe # 1 and/or John Doe # 2, to
utilize Hoffman's facilities to obtain the report
Northrop claims on appeal that "the Motion to Dismiss was granted despite
Defendant Katzke's acknowledgement that, as material outside the pleadings
was presented, the motion should have been treated as one for summary
judgment." It is true that "[i]n considering a motion to dismiss for failure to
state a claim under Fed.R.Civ.P. 12(b)(6), a district court must limit itself to
facts stated in the complaint or in documents attached to the complaint as
exhibits or incorporated in the complaint by reference," and that "[i]f a district
court wishes to consider additional material, Rule 12(b) requires it to treat the
motion as one for summary judgment under Rule 56." Kramer v. Time Warner
Inc., 937 F.2d 767, 773 (2d Cir.1991). However, nothing in the district court's
ruling suggests that it looked beyond the four corners of the complaint
Section 1681m was amended after the events giving rise to this case. The new
version of this provision imposes disclosure obligations when a party takes an
"adverse action" based on the receipt of credit information, rather than simply
when it denies credit or increases the charge for credit. See Consumer Credit
Reporting Reform Act of 1996, Pub.L. No. 104-208, Div. A, Title II, 2411,
110 Stat. 3009, *3009-443 to -446 (1996). This subsequent amendment (which
is effective 365 days after Sept. 30, 1996, unless any person or entity complies
with any provision before that date, see id. at 2420, 110 Stat. at * 3009-454)
does not apply to the instant case. In any event, as discussed below, we do not
believe that 1681m governs this dispute, and therefore need not speculate as
to what this amendment suggests regarding the original intent of 1681m.
Other amendments to 1681m, as well as to 1681n, are more directly relevant
to this case and are described infra notes 5 and 9, although they likewise do not
ultimately influence our analysis
As discussed supra, note 4, the FCRA was amended subsequent to the events in
this case, which amended version does not govern the present dispute. The
amended version of 15 U.S.C. 1681n expressly recognizes a civil cause of
action against a party for "obtaining a consumer report under false pretenses or
knowingly without a permissible purpose." Consumer Credit Reporting Reform
Act of 1996, Pub.L. No. 104-208, Div. A, Title II, 2412, 110 Stat. 3009, at *
3009-446. This amendment appears to codify the interpretation of the preamended statute adopted in the cases cited below that found a civil cause of
action to be available under 1681n based on the receipt of credit information
under false pretenses. Inasmuch as we cannot be certain whether this
amendment clarifies Congress's original intent, or simply reflects Congress's
belief that such a civil cause of action should be available (whatever the preamended version may have intended), we do not allow the amendment to affect
our interpretation of the pre-amendment statute
However mistaken the statutory basis (as opposed to the underlying claim) of
her complaint, appellant may have intended to support her "false pretenses"
argument by citing 1681b, which lists the exclusive circumstances under
which a consumer reporting agency may furnish a credit report. Other courts
have in fact read the "false pretenses" prohibition of 1681q in light of
1681b. See, e.g., Hansen v. Morgan, 582 F.2d 1214, 1219-20 (9th Cir.1978)
("The standard for determining when a consumer report has been obtained
under false pretenses will usually be defined in relation to the permissible
purposes of consumer reports which are enumerated in 15 U.S.C. 1681b....
[O]btaining a consumer report in violation of the terms of the statute without
disclosing the immpermissible [sic] purpose for which the report is desired can
constitute obtaining consumer information under false pretenses...."); accord
Yohay v. City of Alexandria Employees Credit Union, Inc., 827 F.2d 967, 971-
72 (4th Cir.1987). This makes it all the more clear that plaintiff's Second
Amended Complaint was sufficient to state a claim that defendants obtained her
credit report under false pretenses, in violation of 1681q
7
The amended version of 1681n, see supra note 5, replaced the reference to "
[a]ny consumer reporting agency or user of information" with "any person."
Consumer Credit Reporting Reform Act of 1996, Pub.L. No. 104-208, Div. A,
Title II, 2412, 110 Stat. 3009, at * 3009-446. Section 1681m was also
amended at the same time by replacing the word "user" with "any person" and
"a person," although "user" continues to appear in the heading and in new
subheadings. Id. at 2411, 110 Stat. at * 3009-443 to *3009-446 Cf. supra,
note 4 (describing other amendments to 1681m)
It is unclear what conclusions we can draw from these amendments with
respect to the meaning of "user" in the pre-amended version of the statute. On
the one hand, it might be argued that the amendments reflect Congress's intent
to expand the FCRA beyond its initial scope and to permit it to apply to
previously excluded defendants. (Of course, even if this were true it would not
mandate any particular conclusion regarding which defendants are and are not
"users" under the old statute.) It might just as easily be argued, however, that
these amendments were intended simply to clarify that Congress never
11
Apart from those cases, at least one court has apparently taken the express
position that a party who requests and obtains a credit report need not put it to
any particular "use" in order to qualify as a "user of information" under
1681n. See Zeller v. Samia, 758 F.Supp. 775, 779 n. 2 (D.Mass.1991) ("The
defendant ... argues that FCRA does not apply because he is not a 'user of
information.' ... This argument, however, is without merit. It is undisputed that
the defendant both requested and received the plaintiff's credit report.
Therefore, the defendant is a 'user of information' under the Act regardless
whether he actually ever used the information for any purpose other than to
'verify that a charge-off' had been received and recorded by the credit agency.")
12
Defendant XYZ Corporation may also fall into the latter category, inasmuch as
it is alleged "on information and belief" that this defendant "and/or its
employee, Defendant Larry F. Katzke," requested Hoffman employees to
obtain Northrop's credit report. We express no conclusions regarding any
liability that may be imposed upon any of the corporate or individual
defendants based not on their own status as "users of information" but on their
responsibility for any violations by other defendants