Fuges v. Sw. Fin. Servs., Ltd.

• Decision Date: 06 December 2012
• Docket Number: No. 11–4504.,11–4504.
• Parties: Marie Ann FUGES, on behalf of herself and all others similarly situated v. SOUTHWEST FINANCIAL SERVICES, LTD. Marie Ann Fuges, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

707 F.3d 241

Marie Ann FUGES, on behalf of herself and all others similarly situated

v. SOUTHWEST FINANCIAL SERVICES, LTD.Marie Ann Fuges, Appellant.

No. 11–4504.

United States Court of Appeals, Third Circuit.

Argued Sept. 25, 2012.

Filed: Dec. 6, 2012.

James A. Francis [Argued], Erin A. Novak, John Soumilas, Francis & Mailman, Philadelphia, PA, for Appellant.

Darryl J. May [Argued], Mark J. Furletti, Ballard Spahr, Philadelphia, PA, for Appellee.

Thomas M. Hanson, Dykema Gossett PLLC, Dallas, TX, for Not Party Amicus Consumer Data Industry Association.

Before: McKEE, Chief Judge, JORDAN, and VANASKIE, Circuit Judges.

OPINION OF THE COURT

JORDAN, Circuit Judge.

Marie Ann Fuges appeals from an order of the United States District Court for the Eastern District of Pennsylvania entering summary judgment in favor of Southwest Financial Services, Ltd. (“Southwest”) with respect to Fuges's claim that Southwest willfully violated the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. §§ 1681–1681x. Fuges claims that Southwest willfully violated FCRA when it included inaccurate information in a report to Fuges's lender concerning potential encumbrances on her home. Southwest argues in response that it is not a “consumer reporting agency” (“CRA”) governed by FCRA, and that the statute does not apply to the report that it provided to Fuges's lender. The District Court held that no reasonable jury could find that Southwest had willfully violated FCRA, because Southwest reasonably interpreted the statute as inapplicable to its activities and so, under the standard set forth in Safeco Insurance Co. of America v. Burr, 551 U.S. 47, 127 S.Ct. 2201, 167 L.Ed.2d 1045 (2007), Southwest could not be liable as claimed. For the following reasons, we will affirm.

I. BackgroundA. Facts

Southwest sells current owner title reports, otherwise known as property search or limited property reports (“property reports” or “reports”) to consumer lenders. The purpose of those reports is to confirm the identity of the current holder of title to the property and to determine whether the property is encumbered. All of the information that Southwest collects is available in public records.

Southwest's reports include the name and address of the property owner, the marital status of the property owner (if it appears on the deed), the amounts of any outstanding mortgages, and the amounts of any outstanding liens or judgments against the property.¹ The property reports do not include the owner's social security number, payment history, previous addresses, employment information, date of birth, or outstanding account balances all of which would typically be included in a consumer credit report prepared by one of the “Big Three” credit reporting agencies (Equifax, Experian, and Trans Union). Another point of distinction is that Southwest endeavors to include in its property reports only those judgment liens that remain unsatisfied at the time of the report, because only those liens encumber the property. A typical credit report, by contrast, shows judgment liens that have been satisfied, because they are part of a consumer's payment history.

Marie Ann Fuges had a $35,000 line of credit from PNC Bank (“PNC”), which she secured with the home she owned in Philadelphia. In 2008, she applied to PNC for payment protection insurance that would repay her line of credit in the event that she died or became disabled. PNC told Fuges that, in order to obtain the insurance, she needed to reapply for her line of credit.² She did so, and, after she submitted her loan application, PNC ordered a credit report generated by a credit reporting agency, as well as a property report on the home that she owned. Southwest prepared the latter and provided information concerning the ownership of the home that Fuges put up as collateral, as well as information on whether the property was subject to mortgages, judgment liens, unpaid taxes, or other encumbrances.

More specifically, that property report contained the following information: (1) Fuges's name and address; (2) a note concerning her marital status; (3) the amount of her mortgage ($35,000.00); (4) a reference to a $111.11 property tax delinquency; and (5) a reference to a $2,923.63 judgment lien filed by a merchant for a delinquency on the part of her son, Robert W. Fuges. The report was inaccurate in two respects. First, Fuges's property tax payments were arguably not delinquent because she had an agreement with the City of Philadelphia to pay her taxes in monthly installments. Second, the property report should not have reflected the judgment lien because inclusion of the lien wrongly assumed that the debt was owed by Fuges's deceased husband, Robert E. Fuges, who had been an owner of the property at one time.

After PNC received the Fuges property report, it informed Fuges that it could not approve her loan application without proof that she had paid her property taxes. Later,however, PNC provided Fuges with the credit insurance, leaving her existing line of credit in place.³

B. Procedural History

On February 18, 2009, Fuges filed a putative class action against Southwest, alleging that Southwest failed to comply with FCRA in preparing the property report that it had provided to PNC in connection with her credit application. She initially claimed damages for both willful and negligent violations of the statute under 15 U.S.C. §§ 1681n and 1681 o, respectively.

On April 22, 2009, Southwest filed a motion to dismiss for failure to state a claim, arguing that Fuges had failed to take certain actions required under FCRA (such as contacting Southwest and asking for a copy of her property report) and also arguing that Fuges could not prove that the report caused PNC to deny her credit application. On July 15, 2009, the District Court dismissed most of Fuges's claims because she had failed to take actions required by FCRA, but the Court granted Fuges leave to amend her complaint. She then filed an amended complaint, and Southwest again filed a motion to dismiss, which the District Court denied.

On August 1, 2011, Southwest moved for summary judgment. It argued that its reports are not subject to FCRA, and that, even if they were, it was not liable because it did not willfully violate FCRA under the standard articulated in Safeco, 551 U.S. at 69–70, 127 S.Ct. 2201.⁴ Southwest also asserted that it could not be held liable for any negligent violation of FCRA because PNC ultimately gave Fuges the credit insurance for which she had applied, and she did not suffer any injury as a result of Southwest's conduct.⁵

On November 21, 2011, the District Court issued an opinion and order granting the motion for summary judgment. The Court did not address whether Southwest's conduct fell within the scope of FCRA, or whether there was evidence of FCRA violations. Rather, it determined that no reasonable jury could find that Southwest had acted willfully because Southwest's reading of FCRA as not being applicable to its business was not unreasonable. In particular, the Court said, “a reasonable jury could not conclude that Southwest willfully, i.e., knowingly or recklessly, violated ... FCRA, because Southwest reasonably interpreted its activities to fall outside the scope of the Act, in light of the less-than-clear statutory text and absence of meaningful judicial or FTC guidance.” ⁶ (App. at 13.) In reaching that conclusion, the District Court reasoned that Southwest's interpretation of FCRA was “objectively reasonable” because the Fuges property report contained four sections—deeds, mortgages, parcel number and taxes, and lien information—that “more closely relate to a particular parcel of property than to a particular consumer.” (App. at 10.) The Court also considered it significant that Southwest's report did not contain “Fuges'[s] social security number, payment history on various debts, or previous addresses, all of which one might expect to see on a typical credit report from a CRA.” ⁷ ( Id.) Thus, it determined that “Southwest's reading of FCRA's CRA definition, i.e., that Southwest's reports are ‘on properties' not ‘on consumers,’ and therefore Southwest is not a CRA, has a foundation in the statutory text, which suggests that Southwest acted reasonably, not recklessly, with respect to FCRA.” ( Id.)

Fuges filed a timely notice of appeal.

II. Discussion ⁸A. FCRA

FCRA “require[s] that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information ... with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information.” 15 U.S.C. § 1681(b).⁹ The statute imposes civil liability on “[a]ny person who ... fails to comply with any requirement imposed” by the statute. See id.§§ 1681n, 1681 o. A person who negligently fails to comply is liable to the affected consumer for actual damages. Id.§ 1681 o(a)(1). A person who willfully fails to comply is liable to the affected consumer for actual damages, or statutory damages ranging from $100 to $1,000, as well as punitive damages and attorney's fees. Id.§ 1681n(a).

The enactment of FCRA “was prompted by congressional concern over abuses in the credit reporting industry.” Philbin v. Trans Union Corp., 101 F.3d 957, 962 (3d Cir.1996) (internal quotation marks omitted). Congress wanted “to ensure fair and accurate credit reporting, promote efficiency in the banking system, and protect consumer privacy.” Safeco, 551 U.S. at 52, 127 S.Ct. 2201. In support of FCRA, Congress found that

[a]n elaborate mechanism [had] been developed for investigating and evaluating the credit worthiness, credit standing, credit capacity, character, and general reputation of consumers[;] [ ] [that] [c]onsumer reporting agencies [had] assumed a vital role in assembling and evaluating consumer credit and other information on consumers; [and that] [ ] [t]here [was] a need to insure that...