Smith v. Sears, Roebuck and Co.

• Decision Date: 30 May 2003
• Docket Number: No. CIV. 3:01-CV-675LN.,CIV. 3:01-CV-675LN.
• Citation: 276 F.Supp.2d 603
• Parties: Rodney R. SMITH, Plaintiff, v. SEARS, ROEBUCK AND CO., Defendant.
• Court: U.S. District Court — Southern District of Mississippi

276 F.Supp.2d 603

Rodney R. SMITH, Plaintiff, v. SEARS, ROEBUCK AND CO., Defendant.

No. CIV. 3:01-CV-675LN.

United States District Court, S.D. Mississippi, Jackson Division.

May 30, 2003.

Joseph Patrick Frascogna, Frascogna Courtney, PLLC, Jackson, MS, David A. Szwak, Bodenheimer, Jones, Szwak & Winchell, LLP, Shreveport, LA, for Plaintiff.

Lester F. Smith, Smith & Mcarty, Jackson, MS, for Defendant.

MEMORANDUM OPINION AND ORDER

TOM S. LEE, Chief Judge.

This cause is before the court on the motion of defendant Sears, Roebuck and Company (Sears) to dismiss or, in the alternative, for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. Plaintiff Rodney R. Smith has responded in opposition to the motion, and the court, having considered the memoranda of authorities, together with attachments, submitted by the parties, along with additional pertinent authorities, concludes that defendant's motion for summary judgment should be granted.

Rodney Smith brought this action against Sears in September 2001 seeking to recover damages for alleged violation of the Fair Credit Reporting Act, 15 U.S.C. §§ 1681-1681u (FCRA), based on the appearance on his consumer credit report of a number of inquiries by Sears into his credit report, all of which were made by Smith's ex-wife, a Sears employee, and all of which were impermissible inquiries under the FCRA. In addition to his claims under the FCRA, Smith has also asserted various state law claims, including for invasion of privacy and defamation. The facts giving rise to plaintiffs' claims are largely undisputed.

Rodney Smith married Ydona Smith in 1996. The couple had one child during their marriage and were divorced in 1998. Thereafter, in 1999, Ydona Smith went to work for Sears in its retail-debt collections department where her job entailed efforts to collect debts from existing Sears account-holders who were behind on their payments. In that capacity, and for that purpose, Ydona had access to a computer terminal and password that allowed her to use a Sears informational system that linked with a company known as First Pursuit, from which she could obtain certain information on customers from their credit reports.¹ In November 2000, Ydona was transferred to a position in which she worked with Sears' commercial-business customers, evidently performing a similar function.

During her tenure at Sears, Ydona was engaged in an effort to secure child support payments from her ex-husband, but both she and the State of Mississippi Department of Human Services were having difficulty locating Mr. Smith in order that he could be served with process. Mr. Smith, it seems, was an on-the-road truck driver who could never be found at the residence he claimed. Accordingly, in an attempt to find a current address on her former husband, Ydona, following her transfer in November 2000, used Sears' credit information system fourteen times over the span of approximately three months to access Mr. Smith's credit report. Although Ydona has testified that she was under the impression she was inquiring only into Smith's present address and employment and not as to his credit information, and has further stated that she never intended that the inquiries would appear on his credit report, the First Pursuit program inexplicably placed all fourteen inquiries on Smith's consumer credit report. Upon discovering these inquiries, Smith contacted Sears to complain and, on October 18, 2001, based on her having violated Sears' policy in accessing Mr. Smith's credit report, Ydona was fired.

Sears maintains that it is entitled to dismissal and/or summary judgment on all of plaintiff's claims, and has advanced a number of arguments in support of its position as to each of the various claims. With reference, first, to his claims under the FCRA, Sears submits that although Ydona may have violated the terms of the Act, Sears has not violated the Act itself, and cannot be held vicariously liable for Ydona's violations. For the reasons that follow, the court agrees.

The Fair Credit Reporting Act, as amended in 1996, forbids any person from using or obtaining a consumer report for anything other than a permissible purpose, 15 U.S.C. § 1681b(f),² and specifically prohibits obtaining a consumer report under false pretenses or knowingly without a permissible purpose. Under the terms of the Act, any person³ who negligently or willfully fails to comply with any requirement of the Act with respect to any consumer is liable to that consumer for actual damages, together with attorney's fees and costs, 15 U.S.C. § 1681n,⁴ § 1681o⁵; and the violation is willful, punitive damages may also be imposed, 15 U.S.C. § 1681n.

In the case at bar, Sears does not deny that Ydona Smith's inquiries of her exhusband's credit report were not for any of the purposes deemed permissible by the FCRA and that therefore, Ydona violated the Act. It submits, however, that it cannot be held vicariously liable for Ydona's violation of the Act.⁶ It further contends that while an employer's negligence in allowing a violation to occur may perhaps warrant the imposition of liability against such employer, there is no evidence in the case at bar from which it might be concluded that Sears was negligent. Sears insists, therefore, that it is entitled to dismissal, or alternatively, summary judgment as to plaintiff's FCRA claims.

The FCRA does not directly address the issue of vicarious liability, and the question whether and/or under what circumstances an employer may be held vicariously liable for its employees' violations of the FCRA has not been previously addressed by this court or by the Fifth Circuit. Only a few courts, in fact, appear to have considered the issue. Of those, most have concluded that employers are vicariously liable for their employees' violations of the FCRA based on one or another common law agency principles, including the theory of "apparent authority," or something akin thereto. See Jones v. Federated Financial Reserve Corp., 144 F.3d 961, 964 (6th Cir.1998); Yohay v. City of Alexandria Employees Credit Union, Inc., 827 F.2d 967, 972 (4th Cir.1987); Myers v. Bennett Law Offices, 238 F.Supp.2d 1196, 1201-02 (D.Nev.2002); Del Amora v. Metro Ford Sales and Service, Inc., 206 F.Supp.2d 947, 952 (N.D.Ill.2002). That conclusion, however, has not been unanimous. See Kodrick v. Ferguson, 54 F.Supp.2d 788 (N.D.Ill.1999).

In the earliest of these cases, Yohay v. City of Alexandria Employees Credit Union, Inc., Ryan, an attorney on retainer with the City of Alexandria Credit Union in connection with the collection of delinquent accounts, caused to be used the Credit Union's computer for her own personal purposes to obtain a consumer credit report on her ex-husband, Yohay, with whom she was engaged in a child custody battle. When he became aware that the Credit Union had obtained his credit report, Yohay made inquiry and learned that the report had been obtained at his exwife's request. Yohay sued the Credit Union alleging a willful violation of the FCRA and demanding an award of punitive damages; the Credit Union, in turn, sued Ryan for indemnification.

The court in Yohay determined, apparently on a variety of bases, that the Credit Union was liable for willfully violating the FCRA. The court first determined that both Ryan and the Credit Union were "users" of credit information under the FCRA, and held that "each of the two users ... is subject to civil liability under section 1681n if each user's individual noncompliance with section 1681b was willful." 827 F.2d at 972. The court then determined that there was "more than sufficient evidence" to support a finding that the Credit Union bad itself acted willfully. It noted, in particular, evidence that the manager of the Credit Union was friends with Ryan and her second husband, and that the manager had both known of Ryan's improper purpose in seeking her ex-husband's credit report and had directed an employee of the Credit Union to obtain the report for Ryan.

The court further held that Ryan was the Credit Union's agent and had apparent authority, even if not actual authority, to obtain Yohay's credit report, and concluded that the Credit Union was therefore liable for Ryan's wrongful actions as its agent pursuant to the doctrine of respondeat superior. Respecting this issue, the court initially observed that "the Credit Union had posted no rules or guidelines concerning the running of credit checks and that seemingly anyone, who could obtain physical access to the computer on the Credit Union's premises, could access [the credit bureau's] files for any reason." Id. at 969.

Seemingly, anyone who used the Credit Union's computer to access CBI's files appeared — from CBI's perspective — to have authority to gain such access. In that regard it is to be noted that the Credit Union had not posted any guidelines to users of the computer informing them of the circumstances under which such credit information could be obtained. Indeed, the Credit Union had posted the code which provided access to the computer system, enabling anyone with the physical opportunity to use the system to access CBI's files. The record also indicates that the credit check was run by Donna Hatton, an employee of the Credit Union, at the direction of George Filopovich, the manager of the Credit Union. There is little or no question about the apparent, if not the actual, authority of Filopovich to have ordered a credit check from CBI. Accordingly, the Credit Union would be liable to Yohay for Ryan's actions, regardless of whether Ryan had actual or apparent authority to obtain the information about Yohay from CBI.

Id. at 973.

In Jones v. Federated Financial Reserve Corporation, Jones' ex-husband, Lind, had a friend, Caylor, who worked as a debt collector for Federated, which had access to credit reporting agencies. Lind talked Caylor into getting Jones' credit report, which she...