149 F.3d 424 (6th Cir. 1998), 96-6523, Duncan v. Handmaker

Docket Nº:96-6523.
Citation:149 F.3d 424
Party Name:James DUNCAN, Annette Duncan, Plaintiffs-Appellants, v. Kenneth S. HANDMAKER, Middleton & Reutlinger, P.S.C., Defendants-Appellees.
Case Date:June 08, 1998
Court:United States Courts of Appeals, Court of Appeals for the Sixth Circuit

Page 424

149 F.3d 424 (6th Cir. 1998)

James DUNCAN, Annette Duncan, Plaintiffs-Appellants,


Kenneth S. HANDMAKER, Middleton & Reutlinger, P.S.C.,


No. 96-6523.

United States Court of Appeals, Sixth Circuit

June 8, 1998

Argued Dec. 2, 1997.

Page 425

David B. Mour (argued and briefed), Borowitz & Goldsmith, Louisville, KY, for Plaintiffs-Appellants.

Jennifer L. Robinson (briefed), Douglass C. Farnsley (argued), Stites & Harbison, Louisville, KY, for Defendants-Appellees.

Before: NORRIS, SUHRHEINRICH, and CUDAHY, [*] Circuit Judges.


CUDAHY, Circuit Judge.

Information is power, as any good attorney knows. Those who hunger for information often need look no further than to a person's consumer report--which summarizes, among other things, credit history and credit worthiness. Given the value of this data, and the rise of the credit reporting industry, it is not surprising that Congress passed the Fair Credit Reporting Act (FCRA) to regulate consumer reporting agencies and the users of consumer reports. See generally Hovater v. Equifax, Inc., 823 F.2d 413, 416-17 (11th Cir.1987). Nor is it surprising that some individuals seek to capitalize on general language in the FCRA and thereby construe it as allowing them access to the data they desire. In this appeal, the information-seekers--an attorney and his law firm--argue that the FCRA permits them to obtain consumer reports in the course of defending their client against a lawsuit. We conclude, however, that the FCRA does not generally permit consumer reports to be procured for this purpose. We also find genuine issues of fact with respect to whether the attorney and his firm may be held civilly liable for violations of the FCRA.

  1. Background

    In 1992, James and Annette Duncan purchased residential property in Bullitt County, Kentucky. The Federal Housing Authority guaranteed the loan and Bankers Mortgage Corporation served as the private lender. Less than a year after the closing, the Duncans learned that their well was contaminated with fecal coliform. Eventually they filed suit against several parties involved in the purchase of the property, including Bankers Mortgage. The Duncans alleged that Bankers Mortgage was negligent because it failed to ensure that the water supply had been inspected prior to extending the loan and closing the transaction.

    Page 426

    Bankers Mortgage employed Kenneth Handmaker to defend against the Duncans' suit. Approximately a year and a half after the action commenced, Handmaker deposed Mrs. Duncan. His questions led the Duncans to suspect that Handmaker had reviewed their consumer reports in preparation for the deposition. Handmaker later affirmed that he had requested and received the Duncans' reports pursuant to a service agreement between his law firm, Middleton & Reutlinger, and Trans Union Corporation, a consumer reporting agency.

    The Duncans filed suit against Handmaker and Middleton & Reutlinger, alleging a violation of the FCRA, 15 U.S.C. § 1681 et seq. Pursuant to § 1681n, the complaint sought to hold the defendants civilly liable for procuring the Duncans' consumer reports under false pretenses. 1 See Compl. at pp 20-21. As a general rule, a person is proceeding under false pretenses when she (1) knowingly and willfully obtains a consumer report for a purpose that is not sanctioned by the FCRA and (2) fails to disclose her true motivation to the consumer reporting agency. 2 See Northrop v. Hoffman of Simsbury, Inc., 134 F.3d 41, 46 n. 6 (2d Cir.1997); Zamora v. Valley Fed. Sav. & Loan Ass'n, 811 F.2d 1368, 1370-71 (10th Cir.1987); cf. Kennedy, 747 F.2d at 370 (Wellford, J., concurring).

    The district judge granted Handmaker and Middleton & Reutlinger's motion for summary judgment on the ground that they had obtained the reports for a purpose that is permissible under the FCRA. Of course, summary judgment is proper only if there are no genuine issues of material fact and the moving party is entitled to judgment as a matter of law. See Tate v. Boeing Helicopters, 55 F.3d 1150, 1153 (6th Cir.1995). On appeal, we review the district court's grant of summary judgment de novo and consider "the evidence in the light most favorable to the nonmoving party." Id.

  2. Permissible Purposes Under the FCRA

    The defendants obtained the consumer reports to prepare for the Duncans' suit against their client, Bankers Mortgage. Appellees' Br. at 8. The Duncans' complaint alleged that their property was "virtually unmarketable and uninhabitable" because of the contaminated well. In answers to interrogatories, the Duncans further stated that the value of their property had "been reduced to zero." At Mrs. Duncan's deposition, armed at least in part with information from the consumer reports, Handmaker asked Mrs. Duncan whether...

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