Thompson v. San Antonio Retail Merchants Ass'n

• Decision Date: 13 August 1982
• Docket Number: No. 81-1506,81-1506
• Citation: 682 F.2d 509
• Parties: William Douglas THOMPSON, III, Plaintiff-Appellee, v. SAN ANTONIO RETAIL MERCHANTS ASSOCIATION, Defendant-Appellant. Summary Calendar.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 509

682 F.2d 509

William Douglas THOMPSON, III, Plaintiff-Appellee, v. SAN ANTONIO RETAIL MERCHANTS ASSOCIATION, Defendant-Appellant.

No. 81-1506

Summary Calendar.

United States Court of Appeals Fifth Circuit.

Aug. 13, 1982.

LeLaurin, Adams, Eichelbaum & Sanders, Louis LeLaurin, III, San Antonio, Tex., for defendant-appellant.

John W. Benbow, San Antonio, Tex., for plaintiff-appellee.

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

Before RUBIN, JOHNSON and GARWOOD, Circuit Judges.

PER CURIAM:

This case involves the liability of the San Antonio Retail Merchants Association (SARMA) for an inaccurate credit report. Gulf Oil Corporation (Gulf) and Montgomery Ward (Ward's) denied credit to William Douglas Thompson, III, on the basis of erroneous credit information furnished by SARMA. The district court, after a nonjury trial, entered judgment for Thompson in the sum of $10,000 actual damages and $4,485 attorneys' fees. SARMA appeals.

I. Background

SARMA provides a computerized credit reporting service to local business subscribers. This service depends heavily upon credit history information fed into SARMA's files by subscribers. A key mechanism used by SARMA to update its files is a computerized "automatic capturing" feature. A subscriber must feed certain identifying information from its own computer terminal into SARMA's central computer in order to gain access to the credit history of a particular consumer. When presented with this identifying information, SARMA's computer searches its records and displays on the subscriber's terminal the credit history file that most nearly matches the consumer. The decision whether to accept a given file as being that of a particular consumer is left completely to the terminal operator. ¹ When a subscriber does accept a given file as pertaining to a particular consumer, however, the computer automatically captures into the file any information input from the subscriber's terminal that the central file did not already have.

The disadvantage of an automatic capturing feature is that it may accept erroneous information fed in by subscribers, unless special auditing procedures are built into the system. In the instant case, SARMA failed to check the accuracy of a social security number obtained by its automatic capturing feature. The social security number is the single most important identifying factor for credit-reference purposes. As a result, the computer erroneously began to report the bad credit history of "William Daniel Thompson, Jr.," to subscribers inquiring about "William Douglas Thompson, III."

In November 1974, William Daniel Thompson, Jr., opened a credit account with Gordon's Jewelers (Gordon's) in San Antonio, listing his social security number as 457-68-5778, his address as 132 Baxter, his occupation as truck loader, and his marital status as single. He subsequently ran up a delinquent account of $77.25 at Gordon's that was ultimately charged off as a bad debt. When Gordon's voluntarily reported the bad debt, SARMA placed the information and a derogatory credit rating into file number 5867114, without any identifying social security number.

In early 1978, the plaintiff, William Douglas Thompson, III, applied for credit with Gulf and with Ward's in San Antonio. He listed his social security as 407-86-4065, his address as 6929 Timbercreek, his occupation as grounds keeper, and his wife as Deborah C. On February 9, 1978, Gulf's terminal operator mistakenly accepted file number 5867114 as that of the plaintiff. SARMA's computer thereupon automatically captured various information about William Douglas Thompson, III, including his social security number, into file number 5867114. At that point, the original file, which was on William Daniel Thompson, Jr., became a potpourri of information on both the plaintiff and the original William Daniel Thompson, Jr. The name on the file remained that of William Daniel Thompson, Jr. The social security number became that of the plaintiff, the current address and employer became that of the plaintiff, a former address and employer became that of William Daniel Thompson, Jr., and the wife's name became that of the plaintiff's wife.

Shortly thereafter, Ward's terminal operator ran a credit check on the plaintiff, was given the garbled data, and accepted file number 5867114 as that of the plaintiff. As a result of the adverse information regarding the Gordon's account, Ward's denied the plaintiff credit. The plaintiff applied for credit at Ward's in May 1979 and was again rejected.

On February 21, 1978, Gulf requested a "revision" of file number 5867114, a procedure which entails a rechecking of information in a file with respect to a particular creditor or creditors. Following its usual procedures, SARMA would call Gordon's to verify in detail the information in the file. Although this was probably done, whoever contacted Gordon's apparently failed to check the social security number of Gordon's delinquent customer and take corrective action when it was received. Instead, the adverse information remained in the file under the plaintiff's social security number after Gulf's revision request, and Gulf denied the plaintiff credit.

The adverse information remained in the plaintiff's file during 1978 and the first five and a half months of 1979. During all of this time the plaintiff thought he had been denied credit from Ward's and Gulf because of a 1976 Texas felony conviction for burglary. He had received a five-year probationary sentence, ² but subsequently gained fulltime employment and straightened out his life. In June of 1979, plaintiff's wife learned from her credit union in processing an application for a loan that her husband's adverse credit rating resulted from a bad debt at Gordon's. The plaintiff knew he had never had an account at Gordon's so he and his wife went directly to their place of business. After waiting some two hours he was informed that there had indeed been a mistake, their credit record was for William Daniel Thompson, Jr.

The plaintiff and his wife went to SARMA with this information in an attempt to purge the erroneous credit information. They spoke with an individual and showed birth registration and drivers license information revealing his name to be William Douglas Thompson III. The entire process required some three hours. Nevertheless SARMA thereafter mailed appellee a letter addressed to William Daniel Thompson III. Appellee's wife again returned to SARMA. Following this SARMA once again addressed appellee in another letter as William Daniel Thompson III. Appellee again returned to SARMA-yet again SARMA wrote still another letter with the same incorrect name. Further, though SARMA's policy was to send corrections made on a file to any subscribers who had made inquiry about it within the last six months, SARMA failed to notify Ward's of the corrections. The plaintiff filed an action in state court on October 4, 1979. It was not until October 16, 1979, that SARMA informed Ward's of the erroneous credit information. ³ On November 5, 1979, the action was removed to the federal district court. After a bench trial, the district court found that denials of credit to the appellee by Gulf and Ward's were caused by SARMA's failure to follow reasonable procedures to assure the maximum possible accuracy of its files. The district court awarded plaintiff actual damages in the sum of $10,000 plus attorneys' fees in the sum of $4485.

II. The Liability Issue

Under 15 U.S.C. § 1681o of the Fair Credit Reporting Act (Act), a "consumer reporting agency" is liable to "any consumer" for negligent failure to comply with "any requirement imposed" by the Act. ⁴ In the instant case, the district court determined that SARMA was liable under section 1681o for negligent failure to comply with section 1681e(b) of the Act, which provides:

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

15 U.S.C. § 1681e(b) (emphasis added).

Section 1681e(b) does not impose strict liability for any inaccurate credit report, but only a duty of reasonable care in preparation of the report. That duty extends to updating procedures, because "preparation" of a consumer report should be viewed as a continuing process and the obligation to insure accuracy arises with every addition of information. Lowry v. Credit Bureau, Inc. of Georgia, 444 F.Supp. 541, 544 (N.D.Ga.1978). The standard of conduct by which the trier of fact must judge the adequacy of agency procedures is what a reasonably prudent person would do under the circumstances. Bryant v. TRW, Inc., 487 F.Supp. 1234, 1242 (E.D.Mich.1980).

Applying the reasonable-person standard, the district court found two acts of negligence in SARMA's updating procedures. First, SARMA failed to exercise reasonable care in programming its computer to automatically capture information into a file without requiring any minimum number of "points of correspondence" between the consumer and the file or having an adequate auditing procedure to foster accuracy. Second, SARMA failed to employ reasonable procedures designed to learn the disparity in social security numbers for the two Thompsons when it revised file number 5867114 at Gulf's request. This Court can reverse the district court on these findings of fact only if there is a definite and firm conviction that the judgment of the district court is clearly erroneous. United States v. Gypsum Co., 333 U.S. 364, 394-395, 68 S.Ct. 525, 541-542, 92 L.Ed. 746 (1948); Ferrero v. United States, 603 F.2d 510, 512 (5th Cir. 1979).

With respect to the first act of negligence, George Zepeda, SARMA's manager, testified that SARMA's computer had no minimum number of points of correspondence to be satisfied before an inquiring subscriber could accept credit...