Smith v. Bob Smith Chevrolet, Inc., Civil Action No. 3:02-CV-258-H.

CourtUnited States District Courts. 6th Circuit. United States District Court of Western District of Kentucky
Writing for the CourtHeyburn
Citation275 F.Supp.2d 808
PartiesChristopher Neil SMITH, Plaintiff, v. BOB SMITH CHEVROLET, INC., Defendant.
Docket NumberCivil Action No. 3:02-CV-258-H.
Decision Date01 August 2003
275 F.Supp.2d 808
Christopher Neil SMITH, Plaintiff,
Civil Action No. 3:02-CV-258-H.
United States District Court, W.D. Kentucky, At Louisville.
August 1, 2003.

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Jeffrey A. Cross, David B. Mour, Borowitz & Goldsmith, Louisville, KY, for Plaintiff.

Mark S. Fenzel, Jason P.K. Underwood, Middleton & Reutlinger, David William Hemminger, Edward H. Stopher, Boehl, Stopher & Graves, Louisville, KY, for Defendant.


HEYBURN, Chief Judge.

Christopher Smith ("Plaintiff") alleges that Defendant Bob Smith Chevrolet, Inc. ("Smith Chevrolet") violated the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq., and invaded his privacy in violation of Kentucky common law. Smith Chevrolet has now moved for summary judgment on the grounds that Plaintiff's claims are barred by Kentucky's claim preclusion rule; both parties have moved for summary

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judgment on the issue of whether Smith Chevrolet lacked a permissible purpose when it accessed Plaintiff's credit report; Smith Chevrolet moved to dismiss the Kentucky invasion of privacy claim. After thoroughly considering the parties well-written motions and memoranda, the Court is able to resolve all of these issues and denies Smith Chevrolet's motions for summary judgment and finds that Smith Chevrolet did not have a permissible purpose to access Plaintiff's credit report.


The underlying facts concern the disputed sale of a 2001 GMC Suburban ["Suburban"]. Having decided that he wanted to purchase a car, on December 13, 2000, Plaintiff completed a GMAC credit application to determine his eligibility for financing. On December 23, 2000, Plaintiff went to Smith Chevrolet with the intention of purchasing the Suburban to use on a family Christmas vacation.

After arriving at the dealership, Plaintiff met with a company employee to discuss the terms of the sale. Two factors complicated the sale. First, Plaintiff wanted to trade in his 1997 Mercury Villager. Second, as an employee of General Electric — a General Motors ("GM") supplier — he was entitled to a standard discount upon proof of employment. Although Plaintiff did have the 1997 Mercury Villager to trade-in on December 23, 2000, he did not have the proper documentation needed to secure the discount. Notwithstanding this fact, a Smith Chevrolet representative agreed to sell Plaintiff the Suburban at the GM discounted price provided he proved his entitlement to the full discount at a later date. After calculating the Villager's trade-in value and the GM discount, the two sides agreed on a price and set forth the terms of the sale in a handwritten purchase order.

As part of this agreement, Smith Chevrolet requested that Plaintiff leave a check to cover the amount of his discount, which was $5,226.80, until Plaintiff provided the requisite documentation. After some hesitation and consideration, Plaintiff instead offered to leave a $500.00 check. A Smith Chevrolet representative agreed to accept this lesser amount and then prepared the typewritten purchase order. Thus, after signing the typewritten purchase order and handing over the Villager and his $500.00 check, Plaintiff left the lot with the Suburban. On January 10, 2001, Plaintiff faxed and mailed proof of his eligibility for the GM discount. Shortly thereafter, Plaintiff's bank issued Smith Chevrolet a check in the amount of the balance due.

About a week or ten days later, another dispute arose which gives rise to the current litigation. At that point Smith Chevrolet claims it realized the employee who generated the typewritten Purchase Agreement inadvertently doubled the amount of Plaintiff's discount. Smith Chevrolet contacted Plaintiff, explained the calculation error and told Plaintiff that he owed the dealership more money. Furthermore, Smith Chevrolet told Plaintiff that, until he paid the difference, it refused to transfer the Suburban's title and pay off the outstanding loan attached on the Villager trade-in. These were both actions Smith Chevrolet had promised Plaintiff it would take when Plaintiff left the lot on December 23, 2000.

Following from this dispute, on February 21, 2000, Smith Chevrolet accessed Plaintiff's consumer report. The decision to access Plaintiff's report was made by Drew Smith, Smith Chevrolet's chief executive officer and part-owner. Smith Chevrolet says it accessed Plaintiff's report to determine whether Plaintiff was (1) continuing to make payments on the Villager's loan and (2) maintaining insurance on the

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Villager. Plaintiff disputes Smith Chevrolet's motivations in this regard and claims that it simply wanted to invade Plaintiff's privacy.

When the parties could not agree on the amount due, Plaintiff sued Smith Chevrolet in Jefferson Circuit Court for breach of the sale contract. He demanded specific performance so that he could receive the Suburban's title and transfer the Villager loan obligations to Smith Chevrolet. About a year later, a state court jury found in Plaintiff's favor. One day earlier, on May 13, 2002, Plaintiff filed this suit in federal court.


Before considering the merits of Plaintiff's Fair Credit Reporting Act claim, the Court must first resolve the important question of whether Kentucky's claim preclusion rule bars his FCRA and invasion of privacy claims. Smith Chevrolet, arguing that it does, moved for summary judgment on this issue.1

The doctrine of res judicata, or claim preclusion, provides that a final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in a prior action. Kane v. Magna Mixer Co., 71 F.3d 555, 560 (6th Cir.1995) (quoting Federated Dep't Stores, Inc. v. Moitie, 452 U.S. 394, 398, 101 S.Ct. 2424, 69 L.Ed.2d 103 (1981)). Under Kentucky law, there are three requirements for the application of res judicata:

First, there must be identity of the parties. Second, there must be identity of the two causes of action. Third, the action must be decided on its merits. In short, the rule of res judicata does not act as a bar if there are different issues or the questions of law presented are different.

City of Louisville v. Louisville Prof'l Fire-fighters Ass'n, 813 S.W.2d 804, 806 (Ky. 1991) (quoting Newman v. Newman, 451 S.W.2d 417, 419 (Ky.1970)). Two of the requirements are not in dispute: the same parties are involved in both suits and the state court decided its case on the merits. Thus, the only remaining question is whether there is a sufficient identity of the breach of contract and FCRA claims to support a finding of claim preclusion.

As a starting point, Kentucky courts follow the Restatement's transactional approach to analyze the identity of causes of action. Harris v. Ashley, 165 F.3d 27, 1998 WL 681219 (6th Cir.1998). This approach "looks beyond the legal theories asserted to see if the two claims stem from the same underlying factual circumstances." Id. Thus, in Dennis v. Fiscal Court of Bullitt County, 784 S.W.2d 608, 610 (Ky.Ct.App.1990), the Kentucky Court of Appeals held that analyzing the identity of claims requires the Court to look at a "claim" in "factual terms and to make it coterminous with the transaction regardless of the number of substantive theories or variant forms of relief flowing from these theories, that may be available to the plaintiff . . ."

More recently, however, the Kentucky Supreme Court has clarified that the rule "is not so broad as to foreclose all possible or potential claims against any known potential defendant not brought within the first litigation." Watts v. K, S & H, 957 S.W.2d 233, 236 (Ky. 1997). In Watts, the Kentucky Supreme Court clarified the two limitations Kentucky courts recognize to the rule against

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claim splitting. First, the Court held that a prior claim will not preclude a subsequent claim if the subsequent claim had not yet ripened when the prior claim was brought. Id. at 237. Second, and particularly relevant in this instance, the Court stated that a prior claim will not preclude a subsequent claim if the prior claim was based on matters which are "not germane to, implied in, or essentially connected with the actual issues in the [second] case although they may affect the ultimate rights of the parties and might have been presented in the former action." Id. (citing Hays v. Sturgill, 302 Ky. 31, 193 S.W.2d 648 (1946)).

The facts in Watts and Hays are helpful to understanding the application of this rule. In Watts, the Kentucky Supreme Court reversed a decision by the Kentucky Court of Appeals applying res judicata to bar a dram shop action where the plaintiff had previously brought a negligence suit against the drunk driver to whom the dram shop defendant had sold liquor. 957 S.W.2d at 236. The Watts Court explained that there was no identity between the two causes of action because the first action involved the drunk driver's negligence in operating the vehicle that collided with plaintiff, whereas the second action involved the liquor store's negligence in selling alcohol to the minor who later became drunk and collided with plaintiff. Id. To put it in transactional terms, the two cases did not arise from the same set of facts: the negligence action focused on the accident and the dram shop claim focused on the purchase of the alcohol. Thus, the court held, "to utilize the defense that the plaintiff has improperly split the cause of action, the actions must involve relitigation of the same facts and issues." Id. at 237.

Similarly, Hays, which the Watt's Court substantially relied upon in reaching its conclusion, also involved successive suits between the same parties concerning facts arising from the same transaction. Like this case, the first suit involved the construction of an instrument; specifically, was a particular document a deed or a will? In the second...

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