Nayab v. Capital One Bank (USA), N.A.

• Citation: 942 F.3d 480
• Decision Date: 31 October 2019
• Docket Number: No. 17-55944,17-55944
• Parties: Freshta Y. NAYAB, individually and on behalf of others similarly situated, Plaintiff-Appellant, v. CAPITAL ONE BANK (USA), N.A., Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (9th Circuit)

942 F.3d 480

Freshta Y. NAYAB, individually and on behalf of others similarly situated, Plaintiff-Appellant,

v.CAPITAL ONE BANK (USA), N.A., Defendant-Appellee.

No. 17-55944

United States Court of Appeals, Ninth Circuit.

Argued and Submitted December 6, 2018 Pasadena, California

Filed October 31, 2019

RICE, Chief District Judge:

Freshta Nayab appeals the district court’s order which dismissed her Fair Credit Reporting Act ("FCRA") claim with prejudice and without leave to amend for lack of standing and for failure to state a claim. We have jurisdiction pursuant to 28 U.S.C. § 1291. "We accept as true all factual allegations in the operative complaint, and we construe them in the light most favorable to Plaintiff as the non-moving party." Eichenberger v. ESPN, Inc. , 876 F.3d 979, 981 (9th Cir. 2017). "We review de novo the district court’s decision to grant a motion to dismiss a claim under Rule 12(b)(6)." Id. at 982. "To survive a motion to dismiss, the claim must be plausible on its face." Id. "We must uphold a district court’s decision to dismiss either if a cognizable legal theory is absent or if the facts alleged fail to suffice under a cognizable claim." Id. (emphasis in original).

This case presents two issues of first impression for this Circuit: (1) whether a consumer suffers a concrete Article III injury in fact when a third-party obtains her credit report for a purpose not authorized by the FCRA and (2) whether the consumer-plaintiff must plead the third-party’s actual unauthorized purpose in obtaining the report to survive a motion to dismiss. We hold that a consumer suffers a concrete injury in fact when a third-party obtains her credit report for a purpose not authorized by the FCRA. We also hold that a consumer-plaintiff need allege only that her credit report was obtained for a purpose not authorized by the statute to survive a motion to dismiss; the defendant has the burden of pleading it obtained the report for an authorized purpose.

THE FAIR CREDIT REPORTING ACT

"Congress enacted the FCRA in 1970 in response to concerns about corporations’ increasingly sophisticated use of consumers’ personal information in making credit and other decisions." Syed v. M-I, LLC , 853 F.3d 492, 496 (9th Cir.), cert. denied , ––– U.S. ––––, 138 S. Ct. 447, 199 L.Ed.2d 340 (2017) (citation omitted); see Spokeo, Inc. v. Robins (Spokeo II) , ––– U.S. ––––, 136 S. Ct. 1540, 1550, 194 L.Ed.2d 635 (2016). "Specifically, Congress recognized the need to ‘ensure fair and accurate credit reporting, promote efficiency in the banking system, and protect consumer privacy.’ " Syed , 853 F.3d at 496 (quoting Safeco Ins. Co. v. Burr , 551 U.S. 47, 52, 127 S.Ct. 2201, 167 L.Ed.2d 1045 (2007) ). In the context of the protections afforded under the FCRA, we recently observed that "[t]he modern information age has shined a spotlight on information privacy, and on the widespread use of consumer credit reports to collect information in violation of consumers’ privacy rights." Id. at 495.

The FCRA defines a credit report as any written, oral, or other communication of information "bearing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living ...." 15 U.S.C. § 1681a(d)(1). The FCRA provides:

A person shall not use or obtain a consumer report for any purpose unless—

(1) the consumer report is obtained for a purpose for which the consumer report is authorized to be furnished under this section; and

(2) the purpose is certified in accordance with section 1681e of this title by a prospective user of the report through a general or specific certification.

15 U.S.C. § 1681b(f). Section 1681b(a) provides the authorized purposes for which a consumer report may be furnished:

Subject to subsection (c), any consumer reporting agency may furnish a consumer report under the following circumstances and no other:

(1) In response to the order of a court ... or a subpoena issued in connection with proceedings before a Federal grand jury.

(2) In accordance with the written instructions of the consumer ....

(3) To a person which it has reason to believe–

(A) intends to use the information in connection with a credit transaction involving the consumer ... and involving the extension of credit to, or review or collection of an account of, the consumer; or

(B) intends to use the information for employment purposes; or

(C) intends to use the information in connection with the underwriting of insurance involving the consumer; or

(D) intends to use the information in connection with ... a license or other benefit granted by a governmental instrumentality ... ; or

(E) intends to use the information, as a potential investor or servicer, or current insurer, in connection with a valuation of, or an assessment of the credit or prepayment risks associated with, an existing credit obligation; or

(F) otherwise has a legitimate business need for the information–

(i) in connection with a business transaction that is initiated by the consumer; or

(ii) to review an account to determine whether the consumer continues to meet the terms of the account.

(G) executive departments and agencies in connection with the issuance of government-sponsored individually-billed travel charge cards.

(4) In response to a request by the head of a State or local child support enforcement agency ....

(5) To an agency ... for use to set an initial or modified child support award.

(6) To the Federal Deposit Insurance Corporation or the National Credit Union Administration ....

15 U.S.C. § 1681b(a).

Notably, § 1681b(a)(3)(A) allows a third-party to obtain a consumer’s credit report without having a previous relationship with the consumer and without the consumer initiating the transaction. See 15 U.S.C. § 1681b(c)(1) (a third-party may obtain a consumer’s credit report if "the transaction consists of a firm offer of credit or insurance[,]" even if the transaction "is not initiated by the consumer"); S. REP. 103-209, 4 (1993) ("the Committee bill explicitly permits consumer report information to be obtained in connection with two types of transactions that are not initiated by the consumer: direct marketing and prescreening."). In recognition "that some consumers may find that direct marketing and prescreening entail an undesirable invasion of their privacy[,]" S. REP. 104-185, 38 (1995), a "consumer may elect to have the consumer’s name and address excluded from any list provided by a consumer reporting agency under subsection (c)(1)(B) in connection with a credit or insurance transaction that is not initiated by the consumer[,]" 15 U.S.C. § 1681b(e)(1).

DISCUSSION

I. Standing

Does a consumer sustain a "concrete" injury when a third-party obtains her credit report for a purpose not authorized by the Fair Credit Reporting Act?

The judicial Power of the United States "extends only to ‘Cases’ and ‘Controversies[.]’ " Spokeo II , 136 S. Ct. at 1547 (United States Constitution, Art. III, § 2). "Standing to sue is a doctrine rooted in the traditional understanding of a case or controversy." Id . "[T]he ‘irreducible constitutional minimum’ of standing consists of three elements. The plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision." Id. (quoting Lujan v. Defs. of Wildlife , 504 U.S. 555, 560–61, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) ).

This case, like Spokeo II , "primarily concerns injury in fact, the ‘[f]irst and foremost’ of standing’s three elements." Id. (quoting Steel Co. v. Citizens for a Better Environment , 523 U.S. 83, 103, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998) ) (brackets in original). "To establish injury in fact, a plaintiff must show that he or she suffered ‘an invasion of a legally protected interest’ that is ‘concrete and particularized’ and ‘actual or imminent, not conjectural or hypothetical.’ " Id. at 1548 (quoting Lujan, 504 U.S. at 560, 112 S.Ct. 2130 ). "For an injury to be ‘particularized,’ it ‘must affect the plaintiff in a personal and individual way.’ " Id. (quoting Lujan , 504 U.S. at 560, n.1, 112 S.Ct. 2130 ). "A ‘concrete’ injury must be ‘de facto ’; that is, it must actually exist[,]" meaning—" ‘real,’ and not ‘abstract.’ " Id. (citations omitted). " ‘Concrete’ is not, however, necessarily synonymous with ‘tangible.’ Although tangible injuries are perhaps easier to recognize. ... intangible injuries can nevertheless be concrete." Id. at 1549.

"In determining whether an intangible harm constitutes injury in fact, both history and the judgment of Congress play important roles." Id . "Because the doctrine of standing derives from the case-or-controversy requirement, and because that requirement in turn is grounded in historical practice, it is instructive to consider whether an alleged intangible harm has a close relationship to a harm that has traditionally been regarded as providing a basis for a lawsuit in English or American courts." Id. (citing Vermont Agency of Natural Resources v. United States ex rel. Stevens, 529 U.S. 765, 775–777, 120 S.Ct. 1858, 146 L.Ed.2d 836 (2000) ). "In addition, because Congress is well positioned to identify intangible harms that meet minimum Article III requirements, its judgment is also instructive and important." Id. "The ... injury required by Art. III may exist solely by virtue of ‘statutes creating legal rights, the invasion of which creates standing.’ " Lujan , 504 U.S. at 578, 112 S.Ct. 2130 (quoting Warth v. Seldin , 422 U.S. 490, 500, 95 S.Ct. 2197, 45 L.Ed.2d 343 (1975) ).

The Supreme Court in Spokeo II —a case addressing standing in the FCRA context—cautioned that a bare procedural violation may not establish a concrete harm sufficient for Article III standing. 136 S. Ct. at 1550. On remand from the Supreme Court, however, we adopted the Second Circuit’s holding that "an alleged procedural violation [of a statute]...