Henson v. CSC Credit Services, 93-3441

Citation29 F.3d 280
Decision Date11 July 1994
Docket NumberNo. 93-3441,93-3441
PartiesGreg and Mary HENSON, Plaintiffs-Appellants, v. CSC CREDIT SERVICES, Trans Union Corporation, and Cosco Federal Credit Union, Defendants-Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)

Peter C. King, J. Kevin King (argued), Cline, King & King, Columbus, IN, for plaintiffs-appellants.

Philip A. Whistler, Curtis W. McCauley (argued), Ice, Miller, Donadio & Ryan, Indianapolis, IN, for CSC Credit Services, Inc.

Robert J. Schuckit (argued), Martha M.K. Baird, Dann, Pecar, Newman, Talesnick & Kleiman, Indianapolis, IN, for Trans Union Corp.

Jeffrey C. McDermott (argued), M. Kent Newton, James William Stevenot, Krieg, Devault, Alexander & Capehart, Indianapolis, IN, for Cosco Federal Credit Union.

Before PELL, MANION and KANNE, Circuit Judges.

KANNE, Circuit Judge.

This case has its origin in an earlier suit filed in an Indiana state court by the Cosco Federal Credit Union against one of the plaintiffs, Greg Henson, and his brother Jeff. In that action, the state court clerk erroneously noted in the Judgment Docket that a money judgment had been entered against Greg. Two credit reporting agencies, CSC Credit Services and Trans Union Corporation, relied on the state court Judgment Docket and indicated in Greg's credit report that he owed the money judgment. Greg and Mary Henson subsequently brought this suit against Cosco, CSC, and Trans Union. They sought recovery against CSC and Trans Union for violating various provisions of the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. Sec. 1681 through 1681t, and alleged several state law claims against Cosco. The district court dismissed the Hensons' second amended complaint for failure to state a claim for which relief can be granted. We affirm in part and reverse in part.

Background

In June of 1986, Greg Henson purchased a 1980 Chevrolet Camaro Z-28 from an unknown party. He financed the purchase by executing a note with Irwin Union Bank of Columbus, Indiana. In March of 1990, Greg's brother, Jeff, filed a loan application with Cosco so that he could purchase the Camaro from Greg. Cosco loaned Jeff enough money to purchase the car and paid off Greg's note with Irwin. Soon thereafter, the Camaro was stolen and Jeff stopped making payments to Cosco.

On February 7, 1990, Cosco filed suit against Jeff and Greg in the Bartholomew Circuit Court in Columbus, Indiana. Cosco alleged in its complaint that Jeff had defaulted on his loan obligation. Cosco sought possession of the Camaro and a 1978 Ford Mustang, so that they could be sold and the proceeds applied to Jeff's outstanding loan balance. Cosco stated in the complaint that "Greg Henson, may claim some interest in the 1980 Chevy Camaro Z-28 ... and he is made a party to this litigation to answer as to any ownership interest in or other claim that he may have to said automobile, if any."

On April 17, 1990, Cosco filed a Motion for Default Judgment and Judgment of Foreclosure against Jeff and Greg. The motion was prepared by Cosco's attorney, James K. Voelz, and contained proposed findings of fact and law. Cosco proposed the following finding, which the state court adopted: "the Court further finds that the Defendant, Greg Henson, has no ownership of or interest in the 1980 Chevy Camaro Z-28 ... and the Plaintiff may sell said automobile free and clear of any claim or right of Greg Henson." After Cosco took possession of the Camaro and sold it for $850, it asked the court to render a deficiency judgment against Jeff. The court rendered this judgment against Jeff on July 18, 1990. Shortly thereafter, the Clerk of the Bartholomew Circuit Court incorrectly noted the judgment in the Judgment Docket. The Judgment Docket listed Jeff and Greg together and erroneously indicated that a money judgment was entered against both of them in the amount of $4,075.54.

Greg and his wife, Mary, initially filed this suit in the Bartholomew Circuit Court against CSC, Trans Union and Cosco. Trans Union timely removed the case to federal court. As the result of several pre-trial motions, Greg and Mary found it necessary to amend their complaint twice. It is their second amended complaint that is the subject of this appeal.

In that complaint, Greg and Mary allege that CSC and Trans Union violated the FCRA by "erroneously report[ing] in its credit reports that Greg owed a money/civil judgment in the amount of $4,076." According to the Henson's complaint, the erroneously reported money/civil judgment arose out of the earlier Indiana state court action. The Hensons also allege that they "contacted Trans twice, in writing, to correct the horrible injustice. However, nobody at Trans would correct the injustice." The Hensons' complaint does not allege that they ever contacted CSC concerning the alleged error in Greg's credit report.

The Hensons also allege that Cosco negligently failed to release Greg from the default judgment. The complaint further alleges that Cosco violated Ind.Code Ann. Sec. 32-8-1-1 (West 1993), 1 by not releasing Greg from the judgment. Finally, the complaint alleges that Cosco invaded the privacy of Greg and Mary by casting a false light upon them through its refusal to release Greg from the judgment. As the result of the defendants' conduct, the complaint states that Greg and Mary suffered "denial of credit, high interest loans, public ridicule and humiliation, and embarrassment."

After the Hensons filed their second amended complaint, all the defendants reasserted previously filed motions to dismiss. The district court granted the defendants' motions and dismissed the Hensons' complaint for failure to state a claim upon which relief can be granted pursuant to Federal Rule of Civil Procedure 12(b)(6). In reaching its decision, the district court noted that a consumer must allege that a credit reporting agency prepared a credit report containing inaccurate information to state a claim under the FCRA. Henson v. CSC Credit Servs., 830 F.Supp. 1204, 1207 (S.D.Ind.1993). The court further found that "technically accurate" information may still be considered inaccurate under the FCRA if the information could be interpreted as being misleading or incomplete. Id. The district court noted that the D.C. Circuit in Koropoulos v. Credit Bureau, Inc., 734 F.2d 37 (D.C.Cir.1984), adopted a "balancing test" in cases where information is "technically accurate" but misleading. Id. Under that test, the court is required to "weigh the potential that the information will create a misleading impression against the availability of more accurate information ... and the burden of providing that information." Koropoulos, 734 F.2d at 42.

Applying this test, 2 the district court found that "requiring Trans Union and CSC to have discovered the clerk's erroneous entry of judgment against Greg is overly burdensome under the balancing test." Henson, 830 F.Supp. at 1207. Thus, the court held that "Trans Union's and CSC's reporting of the recorded default judgment was not 'inaccurate' under FCRA" and granted their motions to dismiss. Id. The court also granted Cosco's motion to dismiss, finding that Cosco had no duty to correct the erroneously recorded default judgment and no duty to release Greg from the judgment.

The Hensons now appeal and we review dismissal of their complaint under Fed.R.Civ.P. 12(b)(6) de novo. We accept all factual allegations in the complaint as true, drawing all reasonable inferences in favor of the plaintiff. Northwest Tissue Ctr. v. Shalala, 1 F.3d 522 (7th Cir.1993) (citing Mosley v. Klincar, 947 F.2d 1338, 1339 (7th Cir.1991)). Dismissal under Fed.R.Civ.P. 12(b)(6) is appropriate only if the plaintiff can establish no set of facts upon which relief can be granted. Id.

Analysis

Judicial Notice of Public Records Under 12(b)(6)

As a preliminary matter, the parties dispute whether the district court was permitted to consider the public court documents filed in the earlier Indiana state court case in deciding the defendants' motions to dismiss. Fed.R.Civ.P. 12(b) provides:

If, on a motion asserting the defense numbered (6) to dismiss for failure of the pleading to state a claim upon which relief can be granted, matters outside the pleading are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56, and all parties shall be given reasonable opportunity to present all material made pertinent to such a motion by Rule 56.

Despite the express language of Fed.R.Civ.P. 12(b), we recently held that "[t]he district court may also take judicial notice of matters of public record" without converting a 12(b)(6) motion into a motion for summary judgment. United States v. Wood, 925 F.2d 1580, 1582 (7th Cir.1991). We are not alone. See MGIC Indem. Corp. v. Weisman, 803 F.2d 500, 504 (9th Cir.1986) ("On a motion to dismiss, we may take judicial notice of matters of public record outside the pleadings.") (citations omitted); Pension Benefit Guar. Corp. v. White Consolidated Indus., 998 F.2d 1192, 1196-1197 (3rd Cir.1993), cert. denied, --- U.S. ----, 114 S.Ct. 687, 126 L.Ed.2d 655 (1994); Allen v. Westpoint-Pepperell, Inc., 945 F.2d 40, 44 (2d Cir.1991) ("In determining the adequacy of a claim under Rule 12(b)(6), consideration is limited to the facts stated on the face of the complaint ... and to matters of which judicial notice may be taken.") (citation omitted); 5A Wright & Miller, Federal Practice and Procedure Sec. 1357, at 299 (2d ed. 1990) ("In determining whether to grant a Rule 12(b)(6) motion, the court primarily considers the allegations in the complaint, although matters of public record ... also may be taken into account."). The district court properly considered the public court documents in deciding the defendants' motions to dismiss, thus we proceed to merits of the Hensons' claims.

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