Court: District Court, E.D. Virginia; July 31, 2018; Federal District Court
Robert E. Payne, Senior United States District Judge, addressed Defendant Dish Network, L.L.C.'s motion to dismiss in the context of a lawsuit brought by Plaintiff Ross A. Miller under the Fair Credit Reporting Act (FCRA). Miller, representing himself, alleges that Dish Network improperly acquired his credit report. The case originated in the General District Court of Richmond, Virginia, on March 13, 2017, and was removed to the federal court on June 9, 2017. Following removal, Dish Network filed a motion to dismiss Miller's initial claims, which led to the Court ordering Miller to replead. He subsequently filed his First Amended Complaint.
Miller’s allegations outline that on April 4, 2015, he discovered a credit inquiry by Dish Network on his Equifax report, which prompted him to request its removal. Although Dish Network claimed to have forwarded a removal request to Equifax, the inquiry remained on Miller's report as of January 10, 2017. Despite further requests for investigation and removal, both Dish Network and Equifax provided unsatisfactory responses. Miller asserts that Dish Network lacked a permissible purpose for accessing his credit report, as he only sought information regarding services and explicitly denied permission for any credit checks. He states that he did not engage in any transactions with Dish Network, nor did he apply for any services that would necessitate a credit report inquiry. Miller emphasizes that no evidence supports Dish Network’s claim of having a legitimate reason to obtain his credit information, particularly since he had clearly refused consent.
The Court's ruling on the dismissal motion will partially favor one party while denying the other, though specific details of the ruling are not provided in the excerpt.
Miller alleges that Dish Network routinely obtains credit reports from individuals who inquire about its services, falsely representing to credit reporting agencies that it is doing so for legitimate business transactions. He asserts that he did not request Dish Network's services, resulting in a negative impact on his credit score, misrepresentation of his credit history, and ongoing harm due to the inquiry remaining on his report for nearly a year. Miller claims that he has incurred expenses related to efforts to rectify the situation, including costs for communication, court fees, and travel. Additionally, he reports suffering from aggravated medical conditions, including increased blood pressure and a diabetic flare-up, as well as significant emotional distress, such as anxiety and frustration. He also contends that his privacy has been violated by Dish Network.
Dish Network has moved to dismiss Miller's First Amended Complaint under Federal Rules of Civil Procedure 12(b)(1) for lack of standing and 12(b)(6) for failure to state a claim. The standards for evaluating these motions include the recognition that a defendant can challenge subject matter jurisdiction either by arguing that the complaint lacks sufficient factual allegations or by disputing the truth of those allegations. In the case of a standing challenge, general factual claims of injury may be sufficient at the pleading stage, with the presumption that such allegations encompass necessary specifics to support the claim.
Federal Rule of Civil Procedure 12(b)(6) outlines standards for evaluating motions to dismiss, requiring only a short and plain statement of the claim that demonstrates entitlement to relief. Courts must accept all factual allegations in the complaint as true and draw reasonable inferences in favor of the plaintiff. To survive dismissal, allegations must present a plausible claim for relief, which demands more than mere possibility but does not require a high probability of unlawful conduct. The complaint must provide the defendant fair notice of the claims and their basis, and should be construed liberally to achieve substantial justice. Pro se complaints receive similar liberal construction, held to less stringent standards than those drafted by attorneys.
Dish Network challenges the First Amended Complaint, claiming Miller lacks constitutional standing. However, Miller is found to have standing except regarding the claim under the Electronic Funds Transfer Act (EFTA). Article III standing requires plaintiffs to demonstrate three essential criteria: (1) an injury-in-fact, which must be concrete and particularized; (2) a causal connection between the injury and the defendant’s conduct; and (3) redressability, indicating that the injury is likely to be remedied by the requested relief. Injury-in-fact must be actual or imminent, and while it must be particularized, it also needs to be concrete, meaning it must exist in reality, not just as an abstract concept. Concrete injuries can include intangible harms, as long as they are real and not hypothetical.
Determining if an intangible harm qualifies as an injury in fact involves historical context and Congressional judgment. The standing doctrine, rooted in the case-or-controversy requirement, necessitates an examination of whether the intangible harm closely aligns with traditionally recognized harms in courts. Congress can classify certain intangible harms as legally cognizable injuries, as established in Lujan, where it was noted that Congress can elevate previously inadequate injuries. However, simply having a statutory right does not ensure satisfaction of the injury-in-fact requirement; a concrete injury is still necessary, as indicated in Spokeo, Inc. v. Robbins. The causation standard requires a direct link between the injury and the alleged conduct, unaffected by external parties not involved in the case. Redressability is established if it is likely that a favorable decision will address the injury, as stated in Doe v. Va. Dep't of State Police. Furthermore, the Supreme Court emphasized that lack of a valid cause of action does not affect court jurisdiction, underscoring the distinction between standing and merits inquiries. Dish Network's arguments against standing center on two points: 1) that most damages claimed by Miller are not recoverable under the FCRA, and 2) that there is no causal connection between the damages and the alleged violation. However, the first argument is flawed because the absence of a valid cause of action does not undermine the court's jurisdiction to hear the case. Dish Network misinterprets the distinction between the merits of Miller's claim and the court's jurisdictional authority.
Miller's allegations regarding damages related to Dish Network's violation of the Fair Credit Reporting Act (FCRA) are deemed sufficient to establish Article III standing. Specifically, Miller claims that Dish Network accessed his credit report improperly, resulting in a decreased credit score, and necessitating time and expenses to address the issue with credit reporting agencies. Numerous courts have recognized a reduction in credit score as a valid injury in fact, reinforcing Miller's standing. Additionally, the Fourth Circuit has suggested that such a reduction, along with out-of-pocket costs to rectify the situation, constitutes an injury in fact. This perspective was affirmed in a case where identity theft led to unauthorized credit card applications that adversely affected the plaintiffs' credit scores, demonstrating that standing is not limited to those experiencing direct economic harm. The Fourth Circuit's stance indicates that a diminished credit score alone, even without subsequent denial of credit or increased interest rates, can establish injury in fact under the FCRA.
The Court of Appeals in Hutton did not differentiate among the various causes of action in its standing analysis. Dish Network’s argument was rejected because Miller claimed that their actions caused emotional distress, which has been recognized as an injury in fact under the Fair Credit Reporting Act (FCRA) and Fair Debt Collection Practices Act (FDCPA). Several cases support this view, illustrating that emotional damages can fulfill the injury requirement for standing. Miller’s allegations of emotional distress, loss of happiness, and other harms were sufficiently concrete to satisfy Article III requirements.
Moreover, Miller asserted that Dish Network's credit inquiry negatively impacted his credit score and claimed his emotional harms resulted from the company's actions, establishing a traceable connection between his injuries and Dish Network's conduct. Therefore, the Court denied Dish Network's motion to dismiss Miller's FCRA claims on standing grounds. However, Miller lacks standing to seek relief for violations of the Electronic Funds Transfer Act (EFTA) since any favorable decree would require speculative third-party intervention to address his injuries.
Subject-matter jurisdiction issues must be considered by courts even if they are not raised by the parties. Consequently, Dish Network's motion to dismiss Miller's claims for violations of the Electronic Fund Transfer Act (EFTA) is granted. Regarding Dish Network's motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the court disagrees with Dish Network's arguments concerning 15 U.S.C. § 1681b(f) but will dismiss claims under 15 U.S.C. § 1681n(b).
For claims under 15 U.S.C. § 1681b(f), a consumer report can only be obtained for permissible purposes as defined in 15 U.S.C. § 1681b(a). Key elements of a claim under this provision include: 1) a consumer report existed, 2) it was obtained or used by the defendant, 3) it was obtained without a permissible purpose, and 4) the defendant's mental state was as specified. The court must evaluate whether Miller sufficiently alleged that Dish Network lacked a permissible purpose for obtaining his credit report.
Dish Network argues that a user only needs a reasonable belief of having a permissible purpose, which the court agrees with in relation to § 1681b(a)(3). However, while Miller asserts that the reasonable belief standard pertains to credit reporting agencies, courts in the Fourth Circuit have applied this standard to users of credit reports as well.
In Frazier v. RJM Acquisitions LLC and other cited cases, the courts addressed the permissible purposes under Title 15, U.S.C. § 1681b for a consumer reporting agency to furnish consumer reports without the consumer's authorization. The statute allows reports to be provided to parties who have a legitimate business need or intend to use the information for a credit transaction involving the consumer. The Fourth Circuit's unpublished opinions suggest alignment with this prevailing view, implying that a user can have a permissible purpose if they reasonably believe they do, even in situations where the law is ambiguous regarding what constitutes a credit or business transaction.
The court highlighted that the "reason to believe" standard does not absolve defendants from legal ambiguities but provides a defense if the facts lead them to reasonably believe they have a permissible purpose. For instance, courts have ruled that creditors may obtain credit reports even in cases of identity theft, as long as there is a belief that they are collecting on a legitimate account. In this case, the plaintiff did not present sufficient facts to challenge the defendant's belief that they were collecting on a delinquent account for American Express.
The email and declaration indicate that the Defendant had reasonable grounds to believe a debt existed, even if the Plaintiff asserts it did not. Under Section 1681b, Fannie Mae only needed to have a permissible purpose to access Bracken's credit report, regardless of account ownership. CCS presented evidence supporting a permissible purpose for accessing the Plaintiff's credit report to collect a debt believed to be owed to RBS. The Court recognized that the parties' agreement, which the Plaintiff acknowledged, provided Angelozzi with grounds to believe that Korotki and/or APK Development owed him a debt, thus establishing a business relationship.
Regarding Dish Network, the company contended that Miller failed to allege a lack of a permissible purpose for accessing his credit report, arguing that Miller’s own statements indicated reasonable belief for such access. However, Miller's allegations, when construed liberally, suggest that Dish Network cannot claim several permissible purposes under 15 U.S.C. 1681b(a). Specifically, Miller stated that he did not authorize the credit report request, did not apply for credit or services, and merely inquired about prices and plans. These assertions invalidate all permissible purposes except for credit transactions and business transactions initiated by the consumer. Consequently, the Court will examine whether Miller adequately alleged a lack of permissible purpose under the relevant provisions.
Miller asserts that his only engagement with Dish Network involved basic inquiries related to service, during which Dish Network accessed his credit report as part of its standard procedure. The critical legal question is whether these interactions fall under the permissible purposes outlined in 15 U.S.C. 1681b(a)(3)(A), which allows for credit report access when there is a belief that the information will be used in connection with a credit transaction involving the consumer. Since Miller claims there was no account between him and Dish Network, the company could not have reasonably believed it would use the credit report for account review or collection purposes.
The remaining issue is whether there was a legitimate reason for Dish Network to believe it would use the credit information for a credit transaction or extension of credit. Legal precedents indicate that simply obtaining a credit report based on comparison shopping does not satisfy the legal standard for permissible purpose. Multiple cases illustrate this point, including Boone, where a consumer explicitly stated he did not want his credit accessed during inquiries about plans, yet a hard inquiry was made. Similarly, in Qureshi, the plaintiffs had authorized access to their credit report only after engaging in substantial negotiations for a vehicle purchase. In Heaton, consumers proceeded through an online loan process before a hard inquiry was performed. Lastly, in Traveler, a consumer received a pre-approved loan offer but left without making a purchase, yet there was an intention to discuss credit during the interaction. These cases collectively demonstrate that engagement levels and explicit consent are pivotal in determining the legitimacy of credit report access.
The plaintiff allowed a salesman to continue searching for a suitable car, and the dealership accessed the plaintiff's credit report. The court determined that summary judgment for the defendant was inappropriate, as further factual development was necessary regarding the permissible purpose of the credit report access under 15 U.S.C. § 1681b(a)(3)(A). Legal precedents indicate that mere comparison shopping does not qualify as a permissible purpose under this statute. The Seventh Circuit has established that only consumers who initiate a transaction can justify a request for credit reports, asserting that requests cannot be made without a direct link to the consumer's search for credit. This interpretation has been widely adopted by various courts, including the Third and Ninth Circuits. The Ninth Circuit emphasized that a consumer's mere actions leading to a creditor's report request do not suffice to establish that a transaction was initiated. The court found the reasoning in Heaton and Boone particularly relevant, noting that actions on a website could be classified as comparison shopping rather than a credit transaction. A Federal Trade Commission staff opinion letter clarified that a transaction is considered initiated only when the consumer clearly understands they are initiating a purchase, reinforcing the distinction between comparison shopping and legitimate credit transactions.
FTC Staff Opinion Letters are recognized as informative for interpreting the Fair Credit Reporting Act (FCRA) but do not receive the same deference as formal Commission Opinions. The Heaton court's interpretation aligns with principles from Stergiopoulos and is supported by previous cases like Qureshi and Traveler, which utilized a 1998 FTC Letter to determine permissible purposes under 15 U.S.C. § 1681b(a)(3)(A). The FTC clarified that no credit transaction occurs merely when a consumer inquires about products and prices. Therefore, comparison shopping does not establish a permissible purpose under the FCRA.
Furthermore, the Boone case emphasized that § 1681b(a)(3)(A) necessitates a consumer's active participation in a credit transaction for an entity to access credit reports. A third party cannot request reports without a direct link to the consumer's credit search. T-Mobile's lack of a credit account with Boone and Boone's mere request for price quotes indicated he was not engaging in a credit transaction. The definition of "credit" under the FCRA, consistent with the Equal Credit Opportunity Act, underscores that it involves the right to defer payment or incur debt, which Boone did not pursue. Previous rulings, including Huertas v. Citigroup, reaffirm that permissible access to credit reports occurs only when a consumer applies for or has received credit. The Court finds Boone's reasoning persuasive and adopts it alongside Heaton's conclusions, along with the guidance from the 1998 FTC Letter on the application of § 1681b(a)(3)(A).
The Letter indicates that a car dealer can obtain a consumer's credit report to arrange financing or check creditworthiness if the consumer pays by personal check; however, this does not apply if the consumer intends to pay in cash. The court finds the FTC Staff Letters useful for interpreting 15 U.S.C. § 1681b(a)(3)(A) and states that Dish Network's actions lack a permissible purpose under this statute regarding Miller. Miller's interactions with Dish Network were akin to window shopping, as he did not initiate a transaction or seek to create debt. The First Amended Complaint does not suggest that Miller intended to pay for services with credit or a check, nor did he apply for services. Thus, Dish Network lacked a permissible purpose to access Miller's credit report under 15 U.S.C. § 1681b(a)(3)(A). Furthermore, the "reason to believe" exception is factual, and Miller's allegations do not show any ambiguity regarding his interactions with Dish Network. Miller claims Dish Network regularly obtains credit reports from consumers merely inquiring about prices, indicating no reasonable belief that his report was needed for a credit transaction. Consequently, Miller has adequately alleged that Dish Network cannot invoke 15 U.S.C. § 1681b(a)(3)(A) to dismiss his claim. The analysis regarding 15 U.S.C. § 1681b(a)(3)(F)(i) is similar, as Miller asserts his interactions were limited to comparison shopping, questioning whether this fits the legitimate business need criterion outlined in the statute.
Comparison shopping behavior does not establish a permissible purpose under either the "credit transaction" or "business transaction" provisions. Relevant case law, including Boone, Qureshi, and Traveler, illustrates that such conduct cannot prove a legitimate business need. The Fourth Circuit has clarified that the terms "legitimate business need" and "in connection with" pertain to the needs of the report recipient rather than the subject of the report. However, the question remains whether comparison shopping can demonstrate a legitimate business need in a consumer-initiated transaction.
A 1998 FTC Letter provides guidance, indicating that consumer reporting agencies (CRAs) may supply reports to parties with a legitimate business need connected to a transaction initiated by the consumer. The FTC staff opined that a general inquiry about products, such as at an automobile dealership, does not constitute a business transaction initiated by the consumer. For a dealer to access a consumer report, it must be clear that the consumer is initiating a specific purchase or lease and that the dealer has a legitimate business need for the information. Merely asking about prices or financing does not indicate such intent, thus preventing the dealer from obtaining the report without consent. Only in cases where the consumer's intent to initiate a transaction is unequivocal can a dealer legitimately access consumer report information.
Obtaining information for negotiation purposes does not qualify as a "legitimate" business need under the Fair Credit Reporting Act (FCRA). A dealer must demonstrate a specific need for information directly linked to completing a transaction. For instance, a dealer may obtain a report to facilitate financing or assess creditworthiness when a consumer presents a personal check. Conversely, if a consumer intends to pay in cash, obtaining such information lacks a permissible purpose. The guidance from the Federal Trade Commission (FTC) emphasizes that comparison shopping does not justify a permissible purpose under 15 U.S.C. 1681b(a)(3)(F)(i), a principle affirmed in several cases, including Boone (2018) and Qureshi (2016). In Boone, the court concluded that a consumer’s general inquiry about services does not constitute the initiation of a business transaction, as the consumer did not engage in a specific purchase or lease and explicitly stated a desire to avoid a hard credit inquiry. This reasoning applies similarly to Miller’s situation with Dish Network, where no clear indication existed that Miller initiated a purchase or that Dish Network had a legitimate business need for his credit report. Consequently, Dish Network lacked a permissible purpose for accessing Miller's consumer report under the FCRA, as the allegations did not support any reasonable belief of a permissible purpose related to a business transaction.
Dish Network typically obtains credit reports for individuals in similar situations as Miller, indicating a lack of reasonable belief that the credit information would be used for a business transaction initiated by Miller. Consequently, Miller has adequately alleged that Dish Network lacked a permissible purpose under 15 U.S.C. § 1681b(a)(3)(F)(i). If Dish Network cannot refute these allegations, it could be legally determined that they had no permissible purpose under the statute. Dish Network did not contest that Miller met the other necessary elements of a claim under 15 U.S.C. § 1681b(f), so the court will not address those elements, resulting in the denial of Dish Network's motion to dismiss regarding this claim.
Regarding the claim under 15 U.S.C. § 1681n(b), Dish Network argued that Miller failed to state a claim, but Miller acknowledged he is not pursuing an individual claim under this provision. Therefore, the motion will be granted on this issue.
The court provided instructions for Miller to submit a Second Amended Complaint due to the unclear nature of his First Amended Complaint, which presented claims in a disorganized manner. Miller must clarify his claims into specified counts and avoid referencing unrelated facts or materials. Additionally, the court noted that incorporating previous complaints into new filings is procedurally improper and can create ambiguity. Miller is instructed to directly include any relevant content from prior complaints in future submissions. Consequently, Dish Network's motion to dismiss is granted in part and denied in part.
Relief will be granted for the Court to refer Dish Network to the appropriate authorities and for claims under 15 U.S.C. 1681n(b), but other aspects of the motion are denied. Miller alleges unauthorized deductions from his account by Dish Network, claiming this violates the Electronic Funds Transfer Act; however, such claims are time-barred. He requests the Court to refer the issue to relevant authorities. In his Opposition, Miller introduces new allegations not present in the First Amended Complaint; the Court clarifies that new facts cannot be raised in opposition to a motion to dismiss. Some of these new allegations imply that Miller's interactions with Dish Network went beyond mere "comparison shopping," a point that may be revisited during summary judgment. Dish Network is only challenging the claims on a facial basis, not an evidentiary one.
The Court references two cases regarding the impact of credit score reductions on standing. In *Del Llano v. Vivint Solar Inc.*, the court noted a lack of consensus on whether a drop in credit score satisfies the "injury in fact" requirement for standing, suggesting credit score reductions alone may not constitute concrete harm. Conversely, *Diedrich v. Ocwen Loan Servicing, LLC* indicates that allegations of concrete injuries related to credit damage could support standing. *Nayab v. Capital One Bank* found that mere speculation about future credit denials due to a lower score does not suffice for standing. The Court does not find the latter decisions convincing and highlights that Dish Network contests the compensability of out-of-pocket expenses incurred for reporting errors, asserting these do not qualify as actual damages under the Fair Credit Reporting Act (FCRA).
Out-of-pocket expenses can constitute sufficient injury for legal standing, particularly when there is a substantial risk of harm, as established in Hutton v. National Board of Medical Examiners. Dish Network contends that emotional distress damages under the Fair Credit Reporting Act (FCRA) are only permissible if the plaintiff demonstrates that their credit information was shared with a third party; however, Fourth Circuit case law, including Freedom Plus/Cross River and Burke v. Experian Info. Solutions, Inc., does not support this limitation. The longstanding interpretation of "actual damages" under the FCRA includes emotional harm, as affirmed in Sloane v. Equifax Info. Services, LLC, which references precedents dating back to 1974. The Fair and Accurate Credit Transactions Act of 2003 explicitly states that it does not alter any existing liabilities under specific sections of the FCRA. Congress’s position aligns with the prevailing interpretation of "actual damages." Miller claims his credit score was negatively affected and that he suffered emotional distress, which are particularized harms that could be remedied by damages, costs, and fees. Dish Network's reliance on Dilday v. Directv, LLC is misplaced, as that case involved a complaint lacking any harm claims, unlike Miller's situation. The excerpt also notes the circumstances under which consumer reporting agencies may furnish consumer reports, emphasizing the need for proper authorization or legitimate business purposes.
Permissible purposes for obtaining consumer reports include: (i) business transactions initiated by the consumer or (ii) account reviews to assess compliance with account terms. Specific instances cited involve requests from child support enforcement agencies for establishing or modifying child support obligations, provided certain conditions are met, including confidentiality and restricted use of the report. Additional permissible uses are outlined for agencies managing state plans for child support awards and for federal entities like the FDIC or NCUA in their regulatory roles.
The passage references legal precedent, specifically Cappetta v. GC Services Ltd., highlighting the Fourth Circuit's interpretation of the "reason to believe" standard regarding permissible purposes for obtaining consumer reports. Dish Network argues that users do not require direct permission or previous dealings to obtain consumer reports legally. The court's decision in Qureshi v. Penkhus Motor Co. emphasized that, although the facts allowed for permissible purpose under the Fair Credit Reporting Act, the case was complex and the interactions differed from those in the current matter. The 1998 FTC Letter is mentioned as relevant to the discussion of permissible purposes, although Dish Network contends that it is not legally binding.
The Court finds the guidance previously established persuasive and notes that Dish Network fails to cite any contrary controlling decisions in its arguments. Dish Network's assertions regarding Miller's inquiries about pricing do not support its position, and its certification to Equifax regarding a permissible purpose does not demonstrate a reasonable belief of such a purpose. Under the Fair Credit Reporting Act (FCRA), the Court is obligated to ascertain if a user had a legitimate purpose for obtaining a credit report, notwithstanding a user's certification. The Court rejects the notion that the FCRA assumes the infallibility of such certifications, as this would undermine the statute's requirements. Miller alleges that Dish Network falsely certified a permissible purpose despite lacking one, as his only interaction was for comparison shopping, which does not constitute a legitimate purpose. Dish Network's cited cases do not support its stance, as they involved more significant interactions than those present in this case. The Court acknowledges that a legitimate business need arises when assessing a consumer’s eligibility for services, but asserts that there must be an initiated business transaction, which is absent here. Regarding damages, Miller's claims of emotional distress are recognized as actual damages under the FCRA. Although Miller expresses a desire for the Court to report Dish Network for violations, he lacks standing for such relief. The Court does not evaluate whether Miller has stated claims under other theories but allows him to incorporate relevant evidentiary documents in the future.
