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    FCRA Case3

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    er29r2017 YANG v. GOVERNMENT EMPLOYE PEIRCE Ne Cee ere eC co INSURANCE COMPANY | FindLaw fe YANG v. GOVERNMENT EMPLOYEES INSURANCE COMPANY United States Court of Appeals,Eleventh Cireutt James §. YANG and Claire G. Yang, Plaintiffe-A EMPLOYEES INSURANCE COMPANY, Defendant-Appelice. sllants, v. GOVERNMENT No. 978432. Decide: July 22,1998 Before HATCHET, Chef Judge, and RONEY and CLARK, ‘Stubbs, Decatur, GA, for Paintiffi- Appellants, William P. Claxton, James Bradley MeChing, Tracy M, Culver, Goodman, MeGutfey, Avs & Lindsey, Atlanta, GA James W, Hawkins, christopher Paul Galanek, Catie A. aalon, Powell, Goldstein, Frazee & Murphy, Maat, Ga, for Defendant-Appelle. Timothy W. Hewet, Decatur, GA, for Amicus Curiae Nat Assn of Consumer Advocates tal ‘While investiga surance clam, 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 th (GEICO violated the Fair Credit Reporting Act (FCRA), 15 USCA. §§ 1681-16810 (West 1997 & Supp.1998). The district eourt granted summary judgment in favor of GEICO, Dhoding that GEICO's conduct was not subject to FCRA restrictions because the document GEICO obtained regarding the Yangs was nota “consumer report.” Wi enior Ciruit Judges.A. Thomas 1. BACKGROUND ‘In November 1993, James Yang (Yang) was involved in aca acident with a woman insured ‘under GEICO insurance policy. ‘The Yangs submitted a bodily injury and property damage claim to GEICO, Katbloen Smith, a claims adjuster referred the Yangs' claim to (GEICO's Special Investigations Unit (SIU, Sau is suspected, and other claims that require more detailed investigations int claimants backgrounds, ‘The SIU examines claims where insurance ‘Smith completed an SIU refereal form on the Yang claim. This form included a setion ‘marked “REASON FOR REFERRAL,” wherein Smith made the fllawing comments regarding the need fr SIU involvement: (3) Yang owned his own company and worked out ‘of is home; (2 the Yangs had not been cooperative in setling the property damage claims; () 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 dretly with Yang because Claire Yang had intercepted all ofhis telephone ells. These circumstances caused Smith to suspect thatthe ‘Yangs insurance claim maybe fraudulent. Based on Smith's observations, SIU Manager Jed George sought to verify Yang's addres, ‘employment and social security sumber. To this end, George obtained an “Inquiry Activity Report” (LAR) on Yang through local affiliate of Equifax Credit information Services, Ins (auifax).. To ocess Yang's IAR, an SIU clerk entered Yang's fll me, current address and socal security number into an SIU computer terminal that was linked tothe local Equifax affiate. An Equifax computer received this request rely. ‘Then, without hpscaselaw findlaw.com/us-t1th-creu 1152557 hil ‘YOU COULD SAVE $620 FindLaw Career Center {ree $5 gift card when you buy 3.select Johnson's baby items me Fn ope ups 6 er29/2017 YANG v. GOVERNMENT EMPLOYEES INSURANCE COMPANY | FindLaw ‘human intervention, the Equifax computer generated Yang's IAR and transmitted itback to GEICO. This sytem is called “ACRO," which stands fr Automated Credit Reporting O- rs receive the TARs dreetiy from Equifax's databanks. Equa’ local afiliates act as intermediaries, handling the bling procedures and answering service related questions ftom subscribers. line, Subs ARS are preexisting, non-eustomized documents containing the subjets name, recent addresses, social security number, date ofbirth and recent employers. IARS als contain a partally-encoded Ts ofall the emits that have inquired about the subject's ered history for the previous two years, such as lending institutions and election agencies. For Instance, any entity requesting either an TAR ora full eredit report would appear on the inquiry aetivity ist. ‘The purpose ofeach inquiry however, cannot be discerned from the JAR on its face. “This information may only be obtained diretly from the individval inguirers. The Yangs offered evidence to suggest that substantial inquiry activity on an individuals report is a negative factor in evaluating the individual's credit isk, especially ‘when the inquiring entities are collection agencies ‘naddition to his name, social security number and date of birth, Yang's TAR indiested (1) ‘the year that his socal security number was issued; (a) the state that issued his social security number, (3) his thee most recent addresses; () his nickname; (s) the names of his three most recent employers, including hsb tes fortwo ofthe thee; and (6) Claire ‘Yang's fll name and two most recent employers, in addition to her most recent job itl ‘Yang's IAR als indicated tha five entities had inquired about his credit history within the ‘wo years prior tothe date GEICO requested the IAR. From the industry codes asigned to ‘each inquirer, GEICO could discera that four ofthe ive inquirers were collection agencies. ‘Inne ofits internal reference guides, Equifax desribes ARS as “repot[s] that contain] ‘the consumer's identiiation information and listing of ered inquires on ther ile.” According to the guide, the pattern of activity ona subject's file can “help determine risk)” The guide also lists “collection agencies, personal finance companies, [and] financial {ntitutions" as “potential prospects” for obtaining IARs. Finally, the guide cautions against {improper ute of ARs since, in Equifax’s view, they eontain information “placing [ther] under the guidelines ofthe FCRA.” An Equifax representative testified that the company ‘would not knowingly allow asubseriber, such as GEICO, to obtain LARS to evaluate {ngurance claims because that is not one of the permissible uses of “consumer reports" vunder the PCRA. In November 1995, the Yangs fled tis lawsuit against Equifax, Ine, and GEICO inthe ‘Superior Court of Fulton County, Georgi, contending that GEICO's use of Vangs AR Violated the FCRA. Equifax, Inc. removed th cae tothe United States Distriet Court forthe Northern District of Georgia.» In May 1996, GEICO filed a motion for summary judgment. Relying upon this cours dession in Hovater¥. Equifax, Ine, the dstriet court granted the ‘motion, holding that Yang's TAR was nota “consumer report” subject to FCRA restrictions. Hoovaterv. Equifay, Ine. 829 F.2d 4x3 (ith Cir), cet. denied, 484 U.S. 977,108 S.C. 490, 98 L-Bd.24 488 (1987). This appeal followed. 1 ISSUE, ‘The question presented inthis appeal is whether the district court propery concluded that ‘Yang's IAR, which GEICO used forthe sole purpose of evaluating his insurance claim, was ‘ot "consumer report” within the meaning ofthe FCRA.: ML, STANDARD OF REVIEW ‘This court reviews the district court's grant of summary judgment de novo, applying the same logal standard thatthe district court employed inthe irs instance. Hairston. Gainesville Sun Publishing Co.,9 F.3d 913, 91839 (sth Cir.999) WW. DIscussION ‘Whes Congress enacted the FCRA in 1970, it recognized the “vital oe" that ered reporting agencies assume in our economic system, 15US.CA.§ 1683(a)9) (West 1997) ‘The FCRA reflets Congres's concern with the “need to insure that consumer reporting agencies exercise their grave responsiblities with faimess, impartiality, and a respect forthe consumer's right to privacy” 25 US.CA.§ 2681(a)6). The FCRA seoks to promote the hpscaselaw findlaw.com/us-t1th-creu1152557 hil er29/2017 YANG v. GOVERNMENT EMPLOYEES INSURANCE COMPANY | FindLaw credit reporting industry's responsible dissemination of accurate and relevant information Sce15USCA.§ 168:(6). The FCRA also sims to maintain confidentiality of information ‘that qualifies as “consumer report.” Accordingly, access to consumer reports is imited to parties having a legitimate interest in obtaining the information. See ig US.CA.§ 168ib. ‘The willl or negligent failure to comply with any of the FCRA' requirements may give rise to chil liabllty. Seex5 USCA $8 1683n-1681p. ‘The Yangs contend that JARS are consumer reports and emphasize that insurance claims ‘evaluation is not among the permissible purposes for procuring consumer report under section 1681b, "The Vangs therefore assert that GEICO's conduet ran afoul ofthe FCRA, ‘They seek compensatory and punitive damages against GEICO, as well as attorney's fees. ‘We bogin our analysis with the statutory definition ofa “consumer report” under the FCRA. (Our starting point is section 16812. In pertinent part, that section provides as follows: ‘Theterm “consumer report” means any written, orl or other communication of any Information by a consumer reporting agency bearing ona consumer's credit worthiness, ret standing, credit capacity, character, general reputation, personal characteristics, ‘mode of living whieh is used or expected to be used or eollected in whole or in part forthe purpose of servings factor in establishing the consumers eligi for- (4) eit or insurance tobe wsed primarily for personal, family, or household purposes; (8) employment purposes; or (©) any other purpose authorized under section 1681b of thistle 25USCA.§ 1681a(4)(). The foregoing definition indicates theta consumer reports made up of three fundamental elements. First, “consumer reporting agency” must communicate]. information(J". Second, the “communication of information” must “bear{ Jon" any one of alist of factors. Third, the “communication of information” must be “used or expected tobe used or collected in whole orn part” for any one of sever ‘purposes. For eas of reference, we wil refer to the language ofthe tind element asthe “Purpose cause,” [Equifax certainly a “consumer reporting agency” as the FCRA defines that term, and ‘Equi’ transmission of ARs to it subseribers satisfies the frst element of section 1681a(@)'s definition. We ind thatthe seond element is also met because the information contained in JARs “bears on” several ifmot all ofthe seven enumerated factors, such as an “personal characteristics” and "mode of living.” “We deem ‘the third element to be outeome-determinative in this case, Aevordingly, we devote the remainder ofthe following analyssto te issue of whether IARs meet the requirements of the Purpose clause, so as to qualify as consumer reports under the FCRA. Sndividuals “red stand ‘Under the Purpose cla report” unless itis “used or expected to be used or collected” either (1 to “serve as a factor {nestablishing the consumers eligibility” fr ered, insurance or employment; of (2) for “other purposels] authorized under section 68ib, "15US.CA.§ 1681a(8(1), To complete section 16810(4' definition of a consumer report, we must therefore refer to section 1681, entitled "Permissible purposes of consumer reports.” Section 1683b(8) provides that “any consumer reporting agency may furnish a consumer report under the following eixcumstaness and no other." the relevant “communication of informations nota “consumer (0 In response tthe order ofa court. (2) In accordance with the writen instructions of the consumer to whom it lates. (2) Toa person which ithas reason to believe. () intends to use the information in connection with a credit ransaction involving the ‘consumer on whom the information eto be furnished and involving the extension of redit 10, orreview or collection of an account of, the consumer; oF (B){ntends to use the information for employment purposes; oF hpscaselaw findlaw.com/us-t1th-creu 1152557 hil er29/2017 YANG v. GOVERNMENT EMPLOYEES INSURANCE COMPANY | FindLaw (©) intends to use the information in connection with the underwriting of insurance involving the consumer; oF (D) intend to use the information in conneston with a determination of the consumers lity fora ieense or other benefit granted by a governmental instramentalty required Dy law to consider an applicant’ financial responsibility or status; or (2) intends tous the information, as a potential investor or servicer, or current insurer, connection with a valuation of, or an assessment of the eredit or prepayment risks associated with, an existing eed obligation; or (otherwise has legitimate business need fr the information- (6) in connection with» business transection tht is initiated by the consumer; oF (Gi) to review an account zo determine whether the consumer continues to meet the terms of the account. (a) In response toa request by the head ofa State or local child support enforcement agency. (6) To an agency administering a State plan for use to sot an iniil or modified child support award, 1BUSCA.§ 1681b(). Under the foregoing statutory scheme, section 168th has two functions: it adds to section 36812(@)s definition ofa consumer report, as well as delineates the permissible uses for ‘those “communications of information” already filing within the definition of “consumer report” ‘We now turn to our aplication ofthe Purpose clause to the fet ofthis ease and determine ‘whether TARS ae "used or expected tobe used or collected in whole ot in pat” for any ofthe purposes described in sections 1681a(@) or 168ib. We note tat ths elause incorporates thre dstnet concepts: ultimate use, expectation of use, and reason for eompilation.+ Accotingy in analyzing whether Yang's TAR qualifies asa consumer eeport unde the third clement of section 16818(@)'sdeiition, we consider (1) whether GBICO ultimately "used the TAR for one ofthe purposes listed; (2) whether Equifax “expected [IARs] toe used” for ‘one ofthe purposes listed; and (2) whether Equifax "eolected” the information contained in TAR for one ofthe purposes listed. ‘With respect tothe frst consideration, GEICO indisputably “used” Yang's IAR forthe sale purpose of evaluating the Yangs'insurance claim. Because this purpose is no listed in sections 168ia(@) or 168, Yang's TAR does not qualify asa consumer report when ceamining GEICO's ultimate se alone. Itmakes no diference whether GEICO was actully interested in examining the pattera of inguiny activity on Yang's report or whether ‘sought the repr: only to verify Yang's background information. ‘The Yangs ague that TARS are consumer reports, despite GEICO's ultimate use ofthe Information, based on the second and third eomponent of the Purpose dlause, The Yangs contend that Equifax “expected [TARS] tobe used” for many of the speifcally-enumerated purposes outlined in sections 1681a(@) and 1681b, especialy those purposes related to eredit eligibility determinations and the evaluation of individuals within the context of eredit- ‘elated transactions. The Yangs als contend tht Equifax colleted” the information ned in IARS forthe same spesifcally-enumerated reasons, To support these contentions, the Yangs point to Equifax'scharacterizations of JARS in ts internal reference materials, Emphasizing the Purpose clauses repetitive use ofthe disjunctive “r,"the YYangs contend that ARS are consumes reports ifsuch a finding i consistent with any one of the clauses components-ultimate use, expectation of use, oF reason for compilation, We agree. ‘The district court's reliance on ths circuit's desision in Hovaterv. Equi, Ine. was risplaced. Hovaterv. Equifax ine, 823 Fd 4u3 (ath Cir), cert. denied, 484 US. 977, 108 S.Ct. 490, 98 L#d.2d 488 (987). After an arsonist set fire destroying “the old Hovater homeplace," Roger Hovater filed a claim with his insurer, Pennsylvania National ‘Mutual Casualty Insurance Company (Penn National). 829 Fadat 414. Penn National hpscaselaw findlaw.com/us-t1th-creu 1152557 hil er29/2017 YANG v. GOVERNMENT EMPLOYEES INSURANCE COMPANY | FindLaw hired Equifax Services, In. (Equifax Services) to obtain background information about rovaterfor use in evaluating the claim. Greg Rowe, an Equifax Services claims Snvestigetor, prepared report revealing that Hovater was saddled with substantial gambling debts and that he associated with known arsonists, Hovater sued Equifox Services alleging that its preparation and dissemination ofthis report violated the FCRA. ‘The district court found that Rowe's report was a “consumer repor,” and the jury awarded ovater damages under 15 USC. § 16810 for Equifax Services’ negligent noncompliance With the FCRA. This court reversed and remanded fr entry of judgment in favor of Equifax Services finding thet the question of compliance was improperly before the jury because the report at ise was nota “consumer report” under the FCRA. 823 Fd at 46, {In Hovater, this court held that “a eport which an insurer procures from a credit reporting ageacy solely for use in evaluating an insureds claim for benefits under an existing policy is sot ‘consumer report’ subject tothe regulatory provision[s ofthe FCRA.” 82g F.2d at 427 Gives the typeof report at issue in Hovater, the cour’ decison was undoubledly corre, "The opinion exhaustively analyzed the FCRA's text and legislative history. Interms of

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