Hovater v. Equifax, Inc.

• Decision Date: 30 July 1987
• Docket Number: No. 86-7419,86-7419
• Citation: 823 F.2d 413
• Parties: Roger D. HOVATER, Plaintiff-Appellee, Cross-Appellant, v. EQUIFAX, INC., Equifax Services, Inc., and Equifax Services, Ltd., Defendants- Appellants, Cross-Appellees.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 413

823 F.2d 413

56 USLW 2085

Roger D. HOVATER, Plaintiff-Appellee, Cross-Appellant, v. EQUIFAX, INC., Equifax Services, Inc., and Equifax Services, Ltd., Defendants- Appellants, Cross-Appellees.

No. 86-7419.

United States Court of Appeals, Eleventh Circuit.

July 30, 1987.

James C. Barton, Johnston, Barton, Proctor, Swedlaw & Naff, J. William Rose, Jr., Birmingham, Ala., W. Rhett Tanner, Hansell & Post, David J. Bailey, Atlanta, Ga., for defendants-appellants, cross-appellees.

Ralph M. Young, Gonce, Young, Howard & Westbrook, Mary Anne Westbrook, Florence, Ala., for plaintiff-appellee, cross-appellant.

Appeals from the United States District Court for the Northern District of Alabama.

Before HATCHETT and ANDERSON, Circuit Judges, and TUTTLE, Senior Circuit Judge.

TUTTLE, Senior Circuit Judge:

I.

This case comes before the Court on cross appeals. Equifax Services, Inc. (Equifax) appeals from a jury verdict and awards of compensatory and punitive damages for defamation and for violations of the Fair Credit Reporting Act, (FCRA), 15 U.S.C. Sec. 1681 et seq. Concurrently, Roger Hovater (Hovater) appeals from the district court's grant of summary judgment for Equifax on his civil RICO claims. 18 U.S.C. Secs. 1961-68. As we find that Hovater's state law claims for libel and slander were time barred and that the FCRA does not apply in this case, we reverse the decision of the district court and remand this case for entry of a judgment for Equifax. The district court's summary judgment order on the RICO claims is affirmed.

II. FACTS

At the center of this controversy is a report on an investigation about Hovater that Equifax prepared and provided to Pennsylvania National Mutual Casualty Insurance Co. (Penn National), a non-party, and certain others. The circumstances surrounding the preparation and dissemination of this report are as follows.

On September 1, 1982, the old Hovater homeplace, located in Colbert County, Alabama, was destroyed by fire. At the time, the Hovater family resided elsewhere. It is undisputed that arson caused the blaze. After the fire, Hovater filed a proof of loss with his insurer, Penn National. In light of the circumstances, Penn National's attorney, Braxton Ashe, sought to obtain background information about Hovater for use in evaluating the claim. Towards that end, Penn National hired Equifax.

Equifax assigned the task of investigating Hovater to Greg Rowe, a claims investigator in its Huntsville, Alabama, office. Mr. Rowe performed his investigation on November 15 and 16, 1982. Rowe conveyed the results of the investigation orally to Braxton Ashe, Penn National's attorney, and to the Colbert County Sheriff's Department. Rowe also summarized his results in writing in a report dated November 18, 1982 and sent copies to: 1) Braxton Ashe, Penn National's Attorney; 2) James Goad, Penn National's Claims Manager; 3) Richard Romard, Equifax's Fire Investigation Supervisor in Atlanta; and 4) the Colbert County Sheriff's Department. Rowe's report accused Hovater, inter alia, of associating with known arsonists and of having accumulated large gambling debts.

Upon reviewing the report on November 23, 1982, in Equifax's Atlanta office, supervisor Romard recognized that the report was extremely shoddy and that its dissemination to the authorities violated company policy. Romard concluded that the copies of the report should be retrieved and destroyed and that a revised report should be provided only to Penn National. The report was retrieved and revised and the new report was sent to Penn National.

On December 22, 1982, Penn National contested Hovater's fire insurance claim by filing suit for declaratory relief to determine its liability under the policy. Penn National alleged arson and misrepresentation in terms of the contents of the house, its lien holders, and its occupancy, as grounds for not paying Hovater on the policy. While Penn National initiated the suit, it was less than cooperative in complying with Hovater's requests for discovery or with the court's orders compelling the production of evidence. Ultimately, on January 18, 1985, Penn National did produce a number of documents including a copy of Equifax's initial 1982 report. It seems that while Penn National had returned the original report to Equifax as requested, it had retained a copy in its files. On February 4, 1985, Penn National settled its dispute with Hovater for $129,000.

On February 19, 1985, Hovater requested Equifax's Florence, Alabama, office to disclose to him any information it had about him. Hovater was referred to the Birmingham office where upon initial investigation his file was not located. It appears that his file had been transferred to Atlanta when the 1982 report was revised and reissued. Equifax informed Hovater that it would be back in touch with him but before it did so Hovater filed suit. This Hovater did on March 1, 1985, less than two weeks after he first contacted the agency. Pursuant to discovery, by mid-April of 1985, Equifax provided Hovater with a copy of the initial 1982 report. Equifax had also retained a copy of the report which it placed in investigator Rowe's personnel file.

Hovater sued Equifax for its preparation and dissemination of the 1982 report under various legal theories. The portions of Hovater's complaint which are pertinent to this appeal include his claims for libel and slander under Alabama law, violations of the Fair Credit Reporting Act, and civil RICO. The trial judge let the claims for defamation and violation of the FCRA go to the jury, which found for Hovater, but granted summary judgment for Equifax on the claims for civil RICO. Both parties have appealed.

III. DEFAMATION

Equifax argues that Hovater's claims for libel and slander were barred by the applicable statute of limitations. It is uncontested that the applicable limitation period was one year. Ala.Code Sec. 6-2-39(a)(4) (1975); see, e.g., Holdbrooks v. Central Bank of Alabama, N.A., 435 So.2d 1250, 1251 (1983). Further, it is uncontested that Hovater did not file suit until more than two years from the date of publication of the alleged defamation, the event giving rise to a cause of action under Alabama law and causing the statute to commence running. The district court held that the limitations period had tolled until Hovater discovered the existence of his cause of action. Accordingly, the court held that Hovater's action was not time barred.

The basis for the district court's decision that the limitations period had tolled is Ala.Code Sec. 6-2-3 (1975). On its face, this statute provides for the tolling of the limitations period in actions involving fraud until such time as the aggrieved party discovers or should have discovered the cause of action. Significantly, the Alabama courts have construed the tolling provision of Sec. 6-2-3 to apply not only to causes of action for fraud but also to the concealment of the existence of other types of causes of action where a party has a duty to disclose the information upon which the cause of action is based because of the existence of a confidential relationship between the parties or due to the presence of some special circumstance. Holdbrooks, 435 So.2d at 1251; Tonsmeire v. Tonsmeire, 285 Ala. 454, 233 So.2d 465, 468 (1970); Ala.Code Sec. 6-5-102 (1975). The district court found that the statute had tolled in this case. On the basis of Alabama law, however, we must disagree. Under the applicable precedents no confidential relationship or special circumstances existed which required Equifax or Penn National to divulge the existence of a potential cause of action for defamation to Hovater. As there was no requirement of disclosure, no grounds for tolling the statute was present.

The Alabama Supreme Court's decision in Tonsmeire, 233 So.2d 465 (1970), is illustrative. A wife sued her estranged husband for libel. The suit was dismissed because she filed it more than a year after the date the alleged libel was published. She appealed on the ground that the limitation period was tolled due to the parties' confidential relationship as husband and wife. The Alabama Supreme Court held that while the parties were still legally married at the time of the publication of the alleged libel, the deterioration of their marriage and its impending dissolution ended its status as a confidential relationship. Id. at 467. The court then stated that:

In the absence of a confidential relationship, we know of no duty imposed by law obligating an alleged tort feasor to make known to one possibly injured by his acts the existence of a possible cause of action. Nor was there any duty on the part of those to whom the libel was published to inform the plaintiff of the alleged libel.

Since no duty to inform the plaintiff was cast either upon the defendant or those to whom he allegedly published the libel, plaintiff's reason for delay in filing her suit in reality resulted from ignorance of her alleged cause of action.

Id. at 468. The court noted that ignorance of a cause of action does not typically toll the limitations period for to do so would be to undermine the valuable policy consideration behind such statutes.

Tonsmeire is frequently cited for the proposition that absent a confidential relationship no duty to disclose a potential cause of action for defamation arises. Cases decided on the basis of Tonsmeire elaborate this concept as well as provide illustrations as to what are confidential relationships under Alabama law. Holdbrooks v. Central Bank of Alabama, N.A., supra, is such a case.

In Holdbrooks, the Alabama Supreme Court held that a bank did not have a duty to inform a guarantor of an allegedly libelous statement it made about the guarantor in a report to a credit agency. The court held that the parties did not occupy the type of confidential relationship requiring disclosure, especially in light of the bank's expressed intent to foreclose on the loan....