Houston v. TRW Information Services, Inc., 88 Civ. 0186(MEL).

• Decision Date: 22 February 1989
• Docket Number: No. 88 Civ. 0186(MEL).,88 Civ. 0186(MEL).
• Citation: 707 F. Supp. 689
• Parties: Leonard W. HOUSTON, Sr., Plaintiff, v. TRW INFORMATION SERVICES, INC., Defendant.
• Court: U.S. District Court — Southern District of New York

707 F. Supp. 689

Leonard W. HOUSTON, Sr., Plaintiff, v. TRW INFORMATION SERVICES, INC., Defendant.

No. 88 Civ. 0186(MEL).

United States District Court, S.D. New York.

February 22, 1989.

Leonard W. Houston, Sr., New York City, pro se.

Townley & Updike, New York City, for defendant; Jerome P. Coleman, Andrew D. Goldsmith, of counsel.

LASKER, District Judge.

These cross-motions for summary judgment arise in an action by Leonard W. Houston, Sr. alleging that defendant Information Services Division of TRW Inc. ("TRW")¹ violated the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. §§ 1681a-1681t, by negligently and willfully failing to follow reasonable procedures to assure the accuracy of consumer credit reports that it issued on Houston. At issue is the legal consequence of TRW's admitted failure to omit from credit reports the listing of a judgment against Houston that had been vacated nearly two years prior to the issuance of the credit reports. Houston asserts first, in counts I and III of the amended complaint that TRW included "erroneous and defamatory information of libelous matter" in its credit reports on him, and that it failed to maintain strict and reasonable procedures to assure the accuracy of its reports in violation of 15 U.S.C. § 1681e(b); second, in count II, that TRW subsequently failed to reinvestigate the accuracy of disputed information in violation of 15 U.S.C. § 1681i; and third, in count IV, that TRW defamed him by reporting the 1983 judgment.

TRW responds first, that it recorded the information regarding the judgment against Houston accurately in its files prior to vacatur, that it was not required to update this information and that in any event TRW's verification procedures were reasonable; second, it promptly reinvestigated the matter and corrected its credit report after plaintiff disputed its accuracy; and finally, Houston cannot maintain a defamation claim because he lacks evidence of malice necessary to overcome TRW's qualified common-interest privilege. For the reasons discussed below, TRW's motion for summary judgment is granted with respect to count IV, the defamation claim, but denied with regard to counts I-III, the § 1681i and § 1681e(b) claims; Houston's cross-motion for summary judgment is denied.

I. Background

On September 25, 1987 Houston applied to Dick Gidron Cadillac, Inc. ("Gidron") for the credit sale of an automobile. On the same day, Gidron obtained a consumer credit report on Houston from TRW which contained, among other items, notice of an outstanding default judgment of more than $25,200 that had been filed on July 13, 1983 in New York Supreme Court. The report failed to mention that the judgment was vacated on October 24, 1985. Gidron denied Houston's application for a credit sale but referred it to another credit grantor, General Motors Acceptance Corp ("GMAC"). GMAC also denied the application.

Houston attributes both denials to the erroneous inclusion of the 1983 judgment in the report. Houston asserts that on September 2, 1987, prior to making his auto credit applications, he sent TRW a credit profile dispute form which contested several of the credit entries in TRW's file on him, including the 1983 judgment. TRW claims that it never received the page of Houston's dispute form containing his objection to inclusion of the 1983 judgment. Houston contends that he wrote follow-up letters to TRW after he received no reply to his initial letter.

TRW states that it first received notice of Houston's challenge to the accuracy of the listing of the 1983 judgment on November 6, 1987, at which time it wrote to Houston requesting additional information necessary to check the judgment, which it received on December 14. Although TRW began reinvestigating the accuracy of other disputed items in Houston's file on November 23, 1987, it only began reinvestigation of the 1983 judgment on January 4, 1988, when it sent a Consumer Dispute Verification Form to American Clerical Service Inc., a recognized investigative company. As a result of American Clerical's investigation, TRW contends that both the New York County Clerk's Docket of Individual Judgment Debtors, the public record TRW contends is generally accepted as most authoritative as to the validity of a civil money judgment, and the New York County Clerk's Minute Book entries contained no record of the 1985 vacatur judgment. However, Houston maintains that reasonable efforts would have revealed the existence of the 1985 vacatur because notice of the decision was published in the New York Law Journal and that the County Clerk's Minute Book contained entries which should have led TRW to discover the existence of the judgment.²

On January 27, 1988, shortly after Houston filed his complaint in this action, TRW's attorneys obtained a copy of the 1985 judgment, which had been placed in the court file. Two days later TRW deleted the 1983 judgment from its files. On March 29, TRW advised Houston of the deletion and offered to send updated credit reports to Gidron and GMAC. TRW asserts that as late as May, 1988, the Minute Book and the Docket of Judgment Debtors continued to omit any record of the 1985 judgment.

Houston alleges that TRW's failure to delete the 1983 judgment from its files after it was vacated and before release of the credit report to Gidron and GMAC was negligent and willful; that it failed to reinvestigate the 1983 judgment after he had disputed it, and that TRW supplied the inaccurate information with malice sufficient to prove defamation. Houston seeks actual and punitive damages for emotional distress and injury to his creditworthiness.

II. The § 1681e(b) Claims

Section 607 of the FCRA, 15 U.S.C. § 1681e(b), states:

Whenever a consumer reporting agency prepares a consumer report it shall follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates.

The threshold question in a § 1681e(b) action is whether the challenged credit information is inaccurate. If the information is accurate no further inquiry into the reasonableness of the consumer reporting agency's procedures is necessary. Todd v. Associated Credit Bureau, 451 F.Supp. 447, 449 (E.D.Pa.1977); Middlebrooks v. Retail Credit Co., 416 F.Supp. 1013, 1015 (N.D. Ga.1976).

Houston contends that TRW's report of the entry of the 1983 default judgment against him was inaccurate because the report failed to state that the judgment was later vacated. TRW answers that the information concerning the judgment against Houston was accurately recorded in its files prior to the date of the vacatur and that it was not legally inaccurate simply because that information had become stale by the time TRW issued Houston's credit reports in 1987.

Colletti v. Credit Bureau Services, Inc., 644 F.2d 1148 (5th Cir.1981) lends support to TRW's position. In Colletti plaintiff challenged the information provided by defendant Credit Bureau Services ("CBS") as inaccurate and incomplete. The court held that CBS's failure to check whether admittedly accurate information it had received seven months earlier that plaintiff was in arrears in his payments had become stale did not constitute a FCRA violation. Id. at 1151. Similarly, in McPhee v. Chilton, 468 F.Supp. 494, 497 (D.Conn.1978), the court held that a credit agency's failure to state in its credit report that plaintiff's petition for bankruptcy had subsequently been withdrawn did not render the report inaccurate. The court ruled that the FCRA does not require that information which is verified as accurate when received be updated. Id.

Unless the information was available at the time the agency first learned that a petition for bankruptcy had been filed, so that the agency could find information in the reasonable process of verifying adverse material as received, the agency could not be charged under the Credit Act with a violation of § 1681e for the omission of later developments.

Id. at 498.

The Chilton court rejected the argument that the defendant consumer reporting agency should be required under § 1681e(b) to continually update credit information. Id. at 498. The court found significant that, unlike other provisions in the FCRA, such as § 1681c which specifically prohibits reporting of obsolete information under certain circumstances,³ § 1681e(b) does not include additional updating provisions.

Some courts have criticized the narrow approach taken in Chilton and Colletti. In Koropoulos v. Credit Bureau, Inc., 734 F.2d 37, 40 (D.C.Cir.1984), the court contested the notion that section 1681e(b) violations occur only when a credit report contains information which is technically inaccurate. The court stated:

Congress did not limit the Act's mandate to reasonable procedures to assure only technical accuracy; to the contrary, the Act requires reasonable procedures to assure "maximum accuracy." ... Certainly reports containing factually correct information that nonetheless mislead their readers are neither maximally accurate nor fair to the consumer who is the subject of the reports.

Id. However, the Koropoulos court also recognized "that in some cases, the additional information necessary for clarification would have required the credit agencies to conduct further investigation, a burden that the courts may have considered unreasonable." Id. at 41. Koropoulos did not involve reinvestigation or updating of information, a potentially burdensome task, but rather a credit agency's failure to include in a report conflicting information it already had in its files.

In the instant case by contrast, Houston alleges that TRW was required to update and check its information prior to the issuance of its credit report. There is no allegation that TRW had information about the 1985 judgment in its files; instead, Houston only alleges that it should have discovered its existence through outside investigation. Therefore, the analysis in Chilton...