Horan v. Experian, et al.

Opinion

Horan v. Experian, et al. CV-97-536-M 06/19/98 UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

Constance C. Horan, Plaintiff

v. Civil No. 97-536-M

Experian f/k/a TRW Consumer Credit Services, Inc. and Tandy Corporation, Inc. d/b/a Radio Shack, Defendants

O R D E R

Defendant Experian moves to dismiss Constance Horan's suit

alleging violations of the Fair Credit Reporting Act (15 U.S.C.A.

§ 1681) on grounds that her claims are untimely and that her

defamation claim is preempted by FCRA. Horan agrees that claims

for FCRA-prohibited activities that occurred outside of the

limitations period are time barred, but contends that prohibited

acts occurred within the limitation period and are actionable.

Horan also argues that her defamation claims are actionable. For

the reasons that follow, Experian's motion to dismiss is granted

in part and denied in part.

Standard of Review

A motion to dismiss under Federal Rule of Civil Procedure

12(b)(6) is one of limited inguiry, focusing not on "whether a

plaintiff will ultimately prevail but whether the claimant is

entitled to offer evidence to support the claims." Scheuer v.

Rhodes, 416 U.S. 232, 236 (1974). In considering a motion to dismiss, the court accepts all well-pleaded facts as true and

resolves all reasonable inferences in favor of the nonmoving

party. Washington Legal Found, v. Massachusetts Bar Found. , 993

F.2d 962, 971 (1st Cir. 1993). Well-pleaded facts do not include

bald factual assertions or legal conclusions. Shaw v. Digital

Eguipment Corp., 82 F.3d 1194 1216 (1st Cir. 1996). Dismissal is

appropriate only if the facts, appropriately alleged in the

complaint, taken as true, and in the proper light, cannot support

an actionable claim. Doyle v. Hasbro, Inc., 103 F.3d 186, 190

(1st Cir. 1996) .

Background

Horan alleges that in October 1991, she bought an answering

machine at a Radio Shack store in Concord, New Hampshire, for

$99.95, charging it on her Radio Shack credit card. When the

answering machine did not operate properly, Horan returned it to

the store. The store accepted the machine and told plaintiff

that she would receive full credit on her account.

Sometime later, Horan learned that Radio Shack had not

credited her account as promised and that Radio Shack reported to

credit agencies including Experian that her account was

delinguent. In 1992, Horan sent a consumer statement to Experian

disputing the accuracy of her Radio Shack account and intending

her statement to be included in her credit file. Horan alleges

that "for reasons unknown, the Defendant Experian has failed,

refused, or otherwise neglected to place said consumer statement

2 into Plaintiff's consumer credit file." Horan believes that

Radio Shack notified Experian in 1994 that it had "charged-off"

her account as uncollectible.

Since then, Horan alleges, she has repeatedly applied for

credit and been refused. In October 1996, she applied for an

American Express Optima card and was denied based solely on the

information supplied by Experian. She says that she and her

authorized agents, including her lawyers, have repeatedly

notified Radio Shack and Experian that "their files contained

inaccurate and erroneous credit information" about her. She

further says that both defendants refused or neglected to remove

the inaccurate information from her file.

After Horan's application for credit was again denied in

November 1996, her agents contacted Experian to reguest that it

reinvestigate that part of her credit report pertaining to Radio

Shack. Experian notified Horan in January 1997 that "said Radio

Shack account belonged to [her]." Despite her efforts, the

adverse credit report continued in her credit file.

Horan brought suit on October 23, 1997. Her present claims

charge Experian with violations of the FCRA by failing to use

reasonable procedures "to assure maximum possible accuracy of the

information concerning the individual about whom the report

relates," § 1681e(b); by failing to reinvestigate the disputed

credit report from Radio Shack, § 16811(a); and by failing to

include in her credit file her consumer statement about her Radio

Shack account, § 16811(c). In count two, Horan alleges that

3 Experian knowingly, intentionally, and with malice provided her

credit report containing inaccurate information about her Radio

Shack account to merchants and retailers and that Experian knew

when it made the reports that the credit information was false,

which damaged her credit rating. Count three is a similar

defamation claim brought against Tandy Corporation.

Discussion

Experian contends that Horan's FCRA claims are barred as

untimely under the applicable two-year limitations period, §

1681p. Experian also argues that Horan's defamation claim is

preempted by FCRA, and, alternatively, that the claim is untimely

under New Hampshire's applicable limitation period. Horan does

not contest the application of the limitations periods, but

relies on Experian's actions within the time allowed as grounds

for her claims, and argues that her defamation claim falls within

the claims not preempted by FCRA.

A. Timeliness of the FCRA Claims

The FCRA has a two-year limitation period providing, except

under circumstances not applicable here, "[a]n action to enforce

any liability created under this subchapter may be brought . . .

within two years from the date on which the liability arises."

15 U.S.C.A. § 1681p. Since Horan filed her complaint on October

23, 1997, to be timely, her claims must allege liability that

arose after October 23, 1995. Experian contends that because

4 Horan was aware in 1992 that her credit report contained

allegedly false information about her Radio Shack account, she is

time barred from bringing suit based on any of its allegedly

FCRA-prohibited actions, even if they occurred within two years

of the date she filed her complaint. Experian interprets the

FCRA's limitations period to begin when a consumer knows that a

false credit report exists rather than when "liability arises"

under the FCRA. Experian's interpretation would allow credit

agencies to violate the FCRA with impunity two years after a

consumer first becomes aware of disputed or false information in

her credit file. Conversely, Experian's interpretation would

also seem to incorporate at least an initial eguitable discovery

rule into the FCRA's statutory limitation period, a theory which

has been rejected by most courts that have considered the issue.

See, e.g., Wilson v. Porter, Wright, Morris & Arthur, 921 F.

Supp. 758, 760-61 (S.D.Fla. 1996); Edgar v. Reich, 881 F. Supp.

83, 86-7 (D. Mass. 1995).

Section 1681p allows two years to enforce FCRA liability -

two years "from the date on which liability arises." Liability

arises when an entity violates a provision of the FCRA, and

presumably liability arises with each separate violation of the

FCRA. See, e.g., Philbin v. Trans Union Corp., 101 F.3d 957, 968

n.7 (3d Cir. 1996); Hyde v. Hibernia Nat'l Bank, 861 F.2d 446,

449-450 (5th Cir. 1988); Andrews v. Trans Union Corp., No. 96-

7369 LGB VAPX, 1998 SL 278740 *8 (C.D. Cal. May 27, 1998);

Williams v. Colonial Bank, 826 F. Supp. 415, 418-19 (M.D. Ala.

5 1993); but see Lawhorn v. Trans Union Credit Info. Corp., 515 F.

Supp. 19, 20 (E.D. Mo. 1981). Thus, the date when Horan first

knew that Experian allegedly included false credit information in

her credit report is irrelevant to the limitations analysis under

FCRA.

Horan alleges that some of Experian's FCRA violations

occurred after October of 1995, within two years of filing her

complaint. Accordingly, her complaint is timely only as to those

claims for which Experian's alleged liability arose after October

23, 1995.

B. Defamation

_____ 1. FCRA preemption of defamation claim.

Section 1681e(h) of the FCRA limits common law actions for

defamation against a credit reporting agency to claims arising

from "false information furnished with malice or willful intent

to injure such consumer." Experian moves to dismiss Horan's

defamation claim on grounds that she has not pled any basis for

malice or willful intent.

Courts have interpreted "willful" for section 1681e(h)

purposes to mean "knowingly and intentionally committed an act in

conscious disregard for the rights of others," and have taken the

meaning of "malice" from New York Times v. Sullivan, 376 U.S.

254, 279-80 (1964), that is, "speaker knew it was false or acted

with reckless disregard of its truth or falsity." Whelan v.

Trans Union Credit Reporting Agency, 862 F. Supp. 824, 833

6 (E.D.N.Y. 1994) (internal quotations omitted); accord Yeager v.

TRW Inc., 984 F. Supp. 517, 523 (E.D. Texas 1997) . Malice or

willful intent to injure need not be based upon "smoking gun"

evidence, but instead may be inferred from the circumstances

surrounding the provision of an allegedly false consumer credit

report. Mirocha v. TRW Inc., 805 F. Supp. 663, 674-75 (S.D. Ind.

1992) . When a credit reporting agency is reliably informed or

otherwise knows that its credit report contains false or

inaccurate information but nevertheless disseminates the report

without correction or giving any indication that particular

information is disputed, malice, at least, may be inferred from

its actions. See, e.g., Yeager, 984 F. Supp at 523; Wiggins v.

Eguifax Servs., Inc., 848 F. Supp. 213, 219 (D.D.C. 1993).

In this case, Horan alleges that Experian knew, beginning in

1992, that its credit file on her contained false and inaccurate

information about her Radio Shack account. Horan also alleges

that despite Experian's knowledge, it neither reinvestigated the

information nor included her consumer statement disputing the

allegedly false information nor otherwise indicated that the

Radio Shack account information was at least disputed. Based on

Horan's allegations of the circumstances surrounding Experian's

actions, a jury could find that Experian continued to provide an

allegedly inaccurate credit report in conscious disregard of

Horan's rights under the FCRA, or did so knowing the information

was false. Thus, Horan has made sufficient allegations of malice

7 or willful intent to injure to avoid preemption under section

168Ih (e) .

2. Timeliness of defamation claims.

Experian also challenges the timeliness of Horan's

defamation claims. While section 1681h(e) of the FCRA limits the

availability of a common law defamation claim, it does not create

a FCRA defamation cause of action. See Lema v. Citibank, 935 F.

Supp. 695, 698 (D. Md. 1996). Thus, the New Hampshire statute of

limitations applicable to defamation actions applies to Horan's

defamation claim.

New Hampshire's statute provides: "Personal actions for

slander or libel, unless otherwise provided by law, may be

brought only within 3 years of the time the cause of action

accrued." N.H. Rev. St. Ann. 508:4, II. New Hampshire's single

publication rule allows only one cause of action for multiple

publications of a defamatory statement, and a plaintiff's cause

of action accrues on the first date of publication. See Keeton

v. Hustler Magazine, 131 N.H. 6, 20 (1988). Thus, if Experian

published Horan's allegedly inaccurate credit report before

October 23, 1994 (three years before she filed her complaint in

this court), her defamation claim is not timely.

It is not clear from the allegations in Horan's complaint

when Experian first published the allegedly inaccurate credit

report after being informed of its inaccuracies in 1992.

Experian asserts in its motion that "Plaintiff admits in her Complaint that the alleged defamation first occurred in December

of 1992 when Plaintiff learned that Experian was reporting that

her account with Radio Shack was delinguent." Unfortunately,

Experian offers no cite to the complaint where such a statement

might be found, and the allegations in the complaint do not seem

to include a statement as to when Experian first published the

inaccurate credit report.

Horan alleges that she sent a consumer statement to Experian

in December 1992 disputing the accuracy of her Radio Shack

account. That statement seems to have been in response to her

discovering that Radio Shack was reporting to credit agencies

that she was delinguent in paying her account. Horan does not

explain how she happened to know that Experian maintained a

credit report on her that included her Radio Shack account.

Horan also alleges that from 1992 until the present she, her

attorneys, and other "authorized agents" repeatedly notified

Experian that her credit report was inaccurate. The only

specific example of credit denial based on Experian's credit

report allegedly occurred in 1996.

Thus, it cannot be determined from the allegations in the

complaint when Experian first published the disputed credit

report and, therefore, when Horan's defamation cause of action

accrued under New Hampshire's law. A defendant who raises an

affirmative defense based on a statute of limitations bears the

burden of proving that the statute of limitations applies to bar the plaintiff's claim. Glines v. Bruk, 140 N.H. 180, 181 (1995).

Experian has not yet carried that burden.

Horan's FCRA claims are substantially limited, but not

eliminated, by the application the FCRA limitations period. Her

defamation claims may be affected by the New Hampshire statute

applicable to defamation actions in combination with New

Hampshire's single publication rule, but that issue cannot be

resolved in the context of a motion to dismiss. A joined motion

for summary judgment challenging the claims' factual basis would

more appropriately address issues related to the defamation

claims.

Conclusion

For the foregoing reasons, defendant's motion to dismiss

(document no. 8) is granted with respect to plaintiff's FCRA

claims in count one based on actions before October 23, 1995, and

is otherwise denied.

SO ORDERED.

Steven J. McAuliffe United States District Judge

June 19, 1998

cc: Paul J. Haley, Esg. Brian T. Tucker, Esg. Kimberly C. Roosevelt, Esg. Bradley A. Stolzer, Esg.