Yang v. Government Employees Ins. Co.

• Decision Date: 22 July 1998
• Docket Number: No. 97-8432,97-8432
• Citation: 146 F.3d 1320
• Parties: 23 Fla. L. Weekly Fed. C 1616 James S. YANG and Claire G. Yang, Plaintiffs-Appellants, v. GOVERNMENT EMPLOYEES INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1320

146 F.3d 1320

23 Fla. L. Weekly Fed. C 1616

James S. YANG and Claire G. Yang, Plaintiffs-Appellants, v. GOVERNMENT EMPLOYEES INSURANCE COMPANY, Defendant-Appellee.

No. 97-8432.

United States Court of Appeals Eleventh Circuit.

July 22, 1998.

A. Thomas Stubbs, Decatur, GA, for Plaintiffs-Appellants.

William P. Claxton, James Bradley McClung, Tracy M. Culver, Goodman, McGuffey, Aust & Lindsey, Atlanta, GA, James W. Hawkins, Christopher Paul Galanek, Carrie A. Hanlon, Powell, Goldstein, Frazer & Murphy, Atlanta, GA, for Defendant-Appellee.

Timothy W. Hewett, Decatur, GA, for Amicus Curiae Nat'l Ass'n of Consumer Advocates, et al.

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

Before HATCHETT, Chief Judge, and RONEY and CLARK, Senior Circuit Judges.

HATCHETT, Chief Judge:

While investigating an insurance claim, the appellee, Government Employees Insurance Company (GEICO), obtained information from a credit reporting agency regarding the appellants, James and Claire Yang. The Yangs commenced the present lawsuit alleging that GEICO violated the Fair Credit Reporting Act (FCRA), 15 U.S.C.A. §§ 1681-1681u (West 1997 & Supp.1998). The district court granted summary judgment in favor of GEICO, holding that GEICO's conduct was not subject to FCRA restrictions because the document GEICO obtained regarding the Yangs was not a "consumer report." We reverse.

I. BACKGROUND

In November 1993, James Yang (Yang) was involved in a car accident with a woman insured under a GEICO insurance policy. The Yangs submitted a bodily injury and property damage claim to GEICO. Kathleen Smith, a claims adjuster, referred the Yangs' claim to GEICO's Special Investigations Unit (SIU). The SIU examines claims where insurance fraud is suspected, and other claims that require more detailed investigations into claimants' backgrounds.

Smith completed an SIU referral form on the Yangs' claim. This form included a section marked "REASON FOR REFERRAL," wherein Smith made the following comments regarding the need for SIU involvement: (1) Yang owned his own company and worked out of his home; (2) the Yangs had not been cooperative in settling the property damage claims; (3) Yang was unemployed, had no health insurance and claimed that he could not afford his medical expenses; (4) Yang was in the process of buying his own company; and (5) GEICO representatives had not been able to speak directly with Yang because Claire Yang had intercepted all of his telephone calls. These circumstances caused Smith to suspect that the Yangs' insurance claim may be fraudulent.

Based on Smith's observations, SIU Manager Jed George sought to verify Yang's address, employment and social security number. To this end, George obtained an "Inquiry Activity Report" (IAR) on Yang through a local affiliate of Equifax Credit Information Services, Inc. (Equifax). ¹ To access Yang's IAR, an SIU clerk entered Yang's full name, current address and social security number into an SIU computer terminal that was linked to the local Equifax affiliate. An Equifax computer received this request directly. Then, without human intervention, the Equifax computer generated Yang's IAR and transmitted it back to GEICO. This system is called "ACRO," which stands for Automated Credit Reporting On-line. Subscribers receive the IARs directly from Equifax's data banks. Equifax's local affiliates act as intermediaries, handling the billing procedures and answering service-related questions from subscribers.

IARs are preexisting, non-customized documents containing the subject's name, recent addresses, social security number, date of birth and recent employers. IARs also contain a partially-encoded list of all the entities that have inquired about the subject's credit history for the previous two years, such as lending institutions and collection agencies. For instance, any entity requesting either an IAR or a full credit report would appear on the inquiry activity list. The purpose of each inquiry, however, cannot be discerned from the IAR on its face. This information may only be obtained directly from the individual inquirers. The Yangs offered evidence to suggest that substantial inquiry activity on an individual's report is a negative factor in evaluating the individual's credit risk, especially when the inquiring entities are collection agencies.

In addition to his name, social security number and date of birth, Yang's IAR indicated (1) the year that his social security number was issued; (2) the state that issued his social security number; (3) his three most recent addresses; (4) his nickname; (5) the names of his three most recent employers including his job titles for two of the three; and (6) Claire Yang's full name and two most recent employers, in addition to her most recent job title. Yang's IAR also indicated that five entities had inquired about his credit history within the two years prior to the date GEICO requested the IAR. From the industry codes assigned to each inquirer, GEICO could discern that four of the five inquirers were collection agencies.

In one of its internal reference guides, Equifax describes IARs as "report[s] that contain[ ] ... the consumer's identification information and a listing of credit inquiries on their file...." According to the guide, the pattern of activity on a subject's file can "help determine risk[.]" The guide also lists "[c]ollection agencies, personal finance companies, [and] financial institutions" as "potential prospects" for obtaining IARs. Finally, the guide cautions against improper use of IARs since, in Equifax's view, they contain information "placing [them] under the guidelines of the FCRA." An Equifax representative testified that the company would not knowingly allow a subscriber, such as GEICO, to obtain IARs to evaluate insurance claims because that is not one of the permissible uses of "consumer reports" under the FCRA.

In November 1995, the Yangs filed this lawsuit against Equifax, Inc. and GEICO in the Superior Court of Fulton County, Georgia, contending that GEICO's use of Yang's IAR violated the FCRA. Equifax, Inc. removed the case to the United States District Court for the Northern District of Georgia. ² In May 1996, GEICO filed a motion for summary judgment. Relying upon this court's decision in Hovater v. Equifax, Inc., the district court granted the motion, holding that Yang's IAR was not a "consumer report" subject to FCRA restrictions. Hovater v. Equifax, Inc., 823 F.2d 413 (11th Cir.), cert. denied, 484 U.S. 977, 108 S.Ct. 490, 98 L.Ed.2d 488 (1987). This appeal followed.

II. ISSUE

The question presented in this appeal is whether the district court properly concluded that Yang's IAR, which GEICO used for the sole purpose of evaluating his insurance claim, was not a "consumer report" within the meaning of the FCRA. ³

III. STANDARD OF REVIEW

This court reviews the district court's grant of summary judgment de novo, applying the same legal standard that the district court employed in the first instance. Hairston v. Gainesville Sun Publishing Co., 9 F.3d 913, 918-19 (11th Cir.1993).

IV. DISCUSSION

When Congress enacted the FCRA in 1970, it recognized the "vital role" that credit reporting agencies assume in our economic system. 15 U.S.C.A. § 1681(a)(3) (West 1997). The FCRA reflects Congress's concern with the "need to insure that consumer reporting agencies exercise their grave responsibilities with fairness, impartiality, and a respect for the consumer's right to privacy." 15 U.S.C.A. § 1681(a)(4). The FCRA seeks to promote the credit reporting industry's responsible dissemination of accurate and relevant information. See 15 U.S.C.A. § 1681(b). The FCRA also aims to maintain confidentiality of information that qualifies as a "consumer report." Accordingly, access to consumer reports is limited to parties having a legitimate interest in obtaining the information. See 15 U.S.C.A. § 1681b. The willful or negligent failure to comply with any of the FCRA's requirements may give rise to civil liability. See 15 U.S.C.A. §§ 1681n-1681p.

The Yangs contend that IARs are consumer reports and emphasize that insurance claims evaluation is not among the permissible purposes for procuring a consumer report under section 1681b. The Yangs therefore assert that GEICO's conduct ran afoul of the FCRA. They seek compensatory and punitive damages against GEICO, as well as attorney's fees.

We begin our analysis with the statutory definition of a "consumer report" under the FCRA. Our starting point is section 1681a. In pertinent part, that section provides as follows:

The term "consumer report" means any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer's eligibility for--

(A) credit or insurance to be used primarily for personal, family, or household purposes;

(B) employment purposes; or

(C) any other purpose authorized under section 1681b of this title.

15 U.S.C.A. § 1681a(d)(1). The foregoing definition indicates that a consumer report is made up of three fundamental elements. First, a "consumer reporting agency" must "communicat[e] ... information[.]" Second, the "communication of information" must "bear[ ] on" any one of a list of factors. Third, the "communication of information" must be "used or expected to be used or collected in whole or in part" for any one of several purposes. For ease of reference, we will refer to the language of the third element as the "Purpose clause."

Equifax is certainly a "consumer reporting agency" as the FCRA defines that term, and Equifax's transmission of IARs to its subscribers satisfies the first element of ...