Stevenson v. TRW Inc.

• Decision Date: 01 April 1993
• Docket Number: No. 91-7142,91-7142
• Parties: 27 UCC Rep.Serv.2d 37 John STEVENSON, Plaintiff-Appellee, v. TRW INC., Defendant-Appellant.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 288

987 F.2d 288

27 UCC Rep.Serv.2d 37

John STEVENSON, Plaintiff-Appellee, v. TRW INC., Defendant-Appellant.

No. 91-7142.

United States Court of Appeals Fifth Circuit.

April 1, 1993.

Barbara McDowell, Jones, Day, Reavis & Pogue, Washington, DC, for defendant-appellant.

O. Glenn Weaver, Irving, TX, Charles W. McGarry, Dallas, TX, for plaintiff-appellee.

Appeal from the United States District Court for the Northern District of Texas.

Before WILLIAMS, HIGGINBOTHAM, and BARKSDALE, Circuit Judges.

JERRE S. WILLIAMS, Circuit Judge:

TRW Inc. is a credit-reporting firm that appeals a judgment against it for violations of the Fair Credit Reporting Act (15 U.S.C. §§ 1681-1681t). Following a bench trial, the district court awarded John M. Stevenson actual damages of $30,000 for mental anguish, punitive damages of $100,000, and attorney's fees of $20,700 for TRW Inc.'s negligent and willful violations of the Act. After carefully reviewing the record, we affirm the district court's findings of negligence and the award of actual damages and attorney's fees, but we reverse the finding of willfulness and vacate the award of punitive damages.

I. FACTS AND PRIOR PROCEEDINGS

TRW Inc. is one of the nation's largest credit reporting agencies. Subscribing companies report to TRW both the credit information they obtain when they grant credit to a consumer and the payment history of the consumer. TRW then compiles a credit report on the consumer to distribute to other subscribers from whom the consumer has requested credit.

John M. Stevenson is a 78-year-old real estate and securities investor. In late 1988 or early 1989, Stevenson began receiving numerous phone calls from bill collectors regarding arrearages in accounts which were not his. Stevenson first spoke with TRW's predecessor, Chilton's, to try to correct the problem. When TRW purchased Chilton's, Stevenson began calling TRW's office in Irving, Texas. In August 1989, Stevenson wrote TRW and obtained a copy of his credit report dated September 6, 1989. He discovered many errors in the report. Some accounts belonged to another John Stevenson living in Arlington, Texas, and some appeared to belong to his estranged son, John Stevenson, Jr. In all, Stevenson disputed approximately sixteen accounts, seven inquiries, and much of the identifying information.

The reverse side of the credit report contained a printed notice describing how consumers could send a written dispute of the accuracy of their credit reports to the local TRW office. Stevenson, however, called TRW to register his complaint and then wrote TRW's president and CEO on October 6, 1989, requesting that his credit report be corrected. Stevenson's letter worked its way to TRW's consumer relations department by October 20, 1989, and on November 1, 1989, that office began its reinvestigation by sending Consumer Dispute Verification forms (CDVs) to the subscribers that had reported the disputed accounts. The CDVs ask subscribers to check whether the information they have about a consumer matches the information in TRW's credit report. Subscribers who receive CDVs typically have twenty to twenty-five working days to respond. If a subscriber fails to respond or indicates that TRW's account information is incorrect, TRW deletes the disputed information. Stevenson understood from TRW that the entire process should take from three to six weeks.

As a result of its initial investigation, TRW removed several of the disputed accounts from the report by November 30, 1989. TRW retained one of the remaining accounts on the report because the subscriber insisted that the account was Stevenson's. The others were still either pending or contained what TRW called "positive information." It also began to appear that Stevenson's estranged son had fraudulently obtained some of the disputed accounts by using Stevenson's social security number. This information led TRW to add a warning statement in December 1989, advising subscribers that Stevenson's identifying information had been used without his consent to obtain credit. Meanwhile, Stevenson paid TRW a fee and joined its Credentials Service, which allowed him to monitor his credit report as each entry was made. TRW finally completed its investigation on February 9, 1990. By then, TRW claimed that all disputed accounts containing "negative" credit information had been removed. Inaccurate information, however, either continued to appear on Stevenson's reports or was re-entered after TRW had deleted it.

Stevenson filed suit in Texas state court alleging both common-law libel and violations of the Fair Credit Reporting Act (FCRA). TRW removed the case to federal court. On October 2, 1991, the case was tried before the court without a jury. The district court gave judgment for Stevenson on the libel and FCRA claims. It made the following findings:

1. The evidence did not show a failure by TRW to maintain "reasonable procedures to assure maximum possible accuracy" of Stevenson's credit report. See 15 U.S.C. § 1681e(b).

2. TRW had negligently and willfully violated 15 U.S.C. § 1681i(a) by not promptly deleting information found upon investigation to be inaccurate or unverifiable.

3. TRW had negligently and willfully violated 15 U.S.C. § 1681i(d) by failing to provide sufficiently conspicuous notice of Stevenson's right to have his corrected credit report sent to creditors who had made inquiries.

4. TRW had libeled Stevenson by publishing false reports "with reckless disregard of whether [they were] false or not after Mr. Stevenson made known to [TRW] that the reports had inaccuracies in them."

The district court awarded Stevenson $1 nominal damages on the libel claim. Although the court found that Stevenson had suffered no out-of-pocket monetary losses, it found that Stevenson had suffered mental anguish and was entitled to actual damages of $30,000 and attorney's fees in the amount of $20,700. Finally, the court awarded Stevenson $100,000 in punitive damages for TRW's willful violations of FCRA. TRW has timely appealed.

II. DISCUSSION

Congress enacted FCRA "to require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information...." 15 U.S.C. § 1681(b). To guard against the use of inaccurate or arbitrary information in evaluating an individual for credit, insurance, or employment, Congress further required that consumer reporting agencies "follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom" a credit report relates. 15 U.S.C. § 1681e(b); Act of Oct. 26, 1970, Pub.L. No. 91-508, § 601, 1970 U.S.C.C.A.N. (84 Stat. 1130) 4394, 4415 (legislative history). A consumer reporting agency that negligently fails to comply with FCRA's requirements is liable for actual damages, costs, and reasonable attorney's fees. 15 U.S.C. § 1681o. Willful noncompliance renders a consumer reporting agency additionally liable for punitive damages. 15 U.S.C. § 1681n.

Although the district court found that the evidence failed to show a violation of § 1681e(b) requiring reasonable procedures, it found that TRW violated other provisions of FCRA when it responded to Stevenson's complaints. On appeal TRW argues that the district court erred (1) in finding that TRW negligently and willfully violated FCRA by failing to delete promptly inaccurate or unverifiable entries on Stevenson's credit report, (2) in finding a negligent and willful violation of FCRA's requirement that TRW provide clear and conspicuous notice of Stevenson's rights, and (3) in awarding damages for mental anguish. TRW does not appeal the finding of libel.

Our standard of review is deferential to the district court. We uphold findings of fact unless we are left with the firm and definite conviction that they were "clearly erroneous," and we give due regard to the opportunity of the district court to judge the witnesses' credibility. FED.R.CIV.P. 52(a); see also Thompson v. San Antonio Retail Merchants Ass'n, 682 F.2d 509, 513 (5th Cir.1982).

A. Prompt Deletion under § 1681i(a)

Consumers have the right to see their credit information and to dispute the accuracy or completeness of their credit reports. 15 U.S.C. §§ 1681g and 1681h. When it receives a complaint, a consumer reporting agency must reinvestigate the disputed information "within a reasonable period of time" and "promptly delete" credit information that has been found to be inaccurate or unverifiable. 15 U.S.C. § 1681i(a). The parties here stipulated that TRW began its reinvestigation within a reasonable period of time after receiving Stevenson's written dispute. Nevertheless, the court found that TRW had negligently and willfully violated § 1681i(a) by not deleting inaccurate and unverifiable information promptly and by allowing deleted information to reappear.

1. Negligence

Section 1681i(a) provides TRW a reasonable time to investigate and delete inaccurate information, and "[a]lthough consumer reporting agencies are able to reinvestigate most disputes within 30 days, a 'reasonable time' for a particular reinvestigation may be shorter or longer depending on the circumstances of the dispute." FTC Commentary, 16 C.F.R. Pt. 600, App. at 367 (1992). TRW contends that ten weeks was a reasonable time to complete the reinvestigation of Stevenson's complicated dispute, especially because many of the inaccurate accounts had been obtained fraudulently.

The record, however, contains evidence from which the district court could find that TRW did not delete unverifiable or inaccurate information promptly. First, TRW did not complete its reinvestigation until February 9, 1990, although TRW's subscribers were supposed to return the CDVs by December 4, 1989. Se...