Summary
finding that American Express extended credit to individual personally by virtue of individual's use of corporate credit card
Summary of this case from In re James C. FairfieldOpinion
CIVIL ACTION NO. 02-26-JBC
May 28, 2002
MEMORANDUM OPINION ORDER
This matter is before the court upon the defendants' motion to dismiss (No. 5) and the plaintiff's motion for leave to file a supplemental memorandum (No. 14). The court, having reviewed the record and being otherwise sufficiently advised, will grant the defendants' motion and deny the plaintiff's motion.
The parties agree that, because the court has considered matters outside of the pleadings in ruling on the defendant's motion, the defendant's motion must be treated as one seeking summary judgment. See Fed.R.Civ. p. 12(b).
Factual Background
In late 1995 or early 1996, the plaintiff's former employer, United Parcel Service (UPS), provided him with an American Express corporate credit card. UPS told him, or at least gave him the impression, that he would not be personally liable for repayment of any charges placed on the card so long as the charges were incurred for business purposes only.
The plaintiff does not recall whether he received a copy of the American Express card member agreement during the time he worked for UPS. It is undisputed, however, that the reverse side of his card read, "Use of the Corporate Card constitutes acceptance of the terms and conditions of the Card Member Agreement accompanying this Card when issued . . . ." The reverse side of his card also directed him to a toll-free telephone number which he could contact if he had any questions regarding use of the card or if he wanted to obtain a copy of the card member agreement. The card member agreement provided as follows:
You agree to use the Corporate Card for business purposes in accordance with Company policy. All business charges are to be reported to Company for expense report processing in accordance with Company policy. All business charges billed to the Corporate Card will be reimbursable by the Company or paid directly by Company under the Company's expense procedures applicable to you. You as the Corporate Cardmember are accountable for any reimbursements and agree to remit such funds to us promptly. This Agreement has no effect on such procedures or your right to reimbursement or payment by the Company. You are not permitted to use the Corporate Card to incur charges for other purposes (including personal purposes). To the extent that you, as the Corporate Cardmember, fail to honor any of the obligations under this Agreement, we reserve the right to collect the amount of such charges directly from you.
The card member agreement also included a provision that read:
You, as the Corporate Cardmember, agree to be bound individually by all of the terms of this Agreement and to use the Corporate Card only for business purposes and submit the charges for reimbursement or payment in accordance with Company policy.
Another part of the agreement entitled "Payment" generally indicated that the cardmember was responsible for making payments for charges placed on the defendant's card.
The Cardmember Agreement explains that the terms "you," "your," or "Corporate Card member," refer to the person named on the Corporate Card. It is undisputed that the card issued to the plaintiff listed his name on the card.
The plaintiff used the card to pay his business travel expenses for several years without incident. He had no direct contact with American Express during this period, however. Instead, UPS paid the plaintiff's charges by remitting monthly payments directly to American Express.
In March 2000, American Express obtained the plaintiff's consumer credit report from Trans Union, L.L.C., a credit reporting agency. In August 2000, the plaintiff stopped working for UPS and returned his corporate card to UPS.
On January 15, 2002, the plaintiff filed this action, alleging that the defendants violated federal and state law by obtaining a copy of his credit report. The crux of his complaint is his claim that the defendants violated the Fair Credit Reporting Act and invaded his privacy rights by obtaining a copy of his r::credit report without his consent and in the absence of a statutorily defined permissible purpose. He also alleges that the defendants gained access to the plaintiff's credit report under false pretenses in violation 15 U.S.C. § 1681 (n).
Analysis
The Fair Credit Reporting Act ("FCRA"), 15 U.S.C. § 1681 et seq., prohibits disclosure of an individual's credit report except under certain, enumerated "permissible" circumstances. See 15 U.S.C. § 1681 (b). American Express maintains that it permissibly obtained a copy of the plaintiff's credit report because it extended credit to him by virtue of his use of the corporate credit card. American Express is correct.
Even assuming that the plaintiff did not receive a copy of the card member agreement, he nevertheless had an opportunity to ascertain its terms by contacting the telephone number on the back of the card. The back of the card stated unambiguously that his use of the card constituted acceptance of the terms of the card member agreement. It also directed him to a telephone number which he could call to obtain a copy of that agreement. If he had called that number, he could have learned that the language of that agreement subjected him to personal liability for any charges placed on the card. He is charged with knowledge and acceptance of the terms that he could have read in the exercise of ordinary care, including whether he assumed personal liability for use of the card. See Cecil v. Cecil, 712 S.W.2d 353, 355 (Ky.App. 1986).
The fact that the plaintiff's liability to the defendant was perhaps only secondary or contingent is immaterial; the card member agreement shows that the defendant was nevertheless extending credit to the plaintiff.
Because American Express was thus extending credit to the plaintiff, it had a permissible purpose for obtaining his credit report. 15 U.S.C. § 1681b(a)(3)(A) ("A consumer reporting agency may furnish a consumer report . . . [t]o a person which it has reason to believe — (A) intends to use the information in connection with a credit transaction involving the consumer . . . and involving the extension of credit to, or review or collection of an account of, the consumer."). This interpretation is consistent with one of the Act's chief goals of limiting the disclosure of consumer reports to those with a legitimate need to know about a consumer's creditworthiness. See, e.g., Duncan v. Handmaker, 149 F.3d 424, 428 (6th Cir. 1998). It is beyond doubt that American Express's choice to extend business credit to the plaintiff gave it a legitimate need to know about his creditworthiness. See Estiverne v. Sak's Fifth Ave., 9 F.3d 1171, 1173 (5th Cir. 1993) ("one of the authorized purposes for disclosure of consumer information is `a legitimate business need for the information in connection with a business transaction involving the consumer.'").
Furthermore, this interpretation is consistent with the Federal Trade Commission's ("FTC's") interpretation of § 1681 b(a)(3)(A). As the agency empowered to administer and enforce the FCRA, 15 U.S.C. § 1681s(a)the FTC is accorded deference in interpreting the Act unless its interpretations conflict with statutory text or FCRA's legislative history. Chevron, U.S.A., Inc. v. Natural Resources Defense Council, 467 U.S. 837, 843 (1984). In a letter dated June 22, 2001, the FTC interpreted § 1681b(a)(3)(A) as allowing a lender, such as the defendant, to obtain a credit report on a consumer who has accepted personal liability on a business debt. FTC Informal Staff Opinion Letter, Joel Winston, June 22, 2001 ("Tatelbaum II"). Although this interpretation is not binding on the court, 16 C.F.R. § 600.2 (2002), it is persuasive, since it is consistent with one of the underlying purposes of the Act and the plain language of § 1681b(a)(3)(A) itself.
Additionally, since the defendant had a permissible purpose for obtaining the plaintiff's credit report, and the plaintiff has not come forward with significantly probative evidence that the defendant actually had an impermissible purpose — such as to market other financial products to him — which it did not disclose to Trans Union, L.L.C., the defendant also cannot be held liable under § 1681(n) for allegedly obtaining the plaintiff's report under false pretenses. Lusk v. TRW, Inc., 1999 U.S. App. LEXIS 1848, at * 4 (6th Cir. 1999) (unpublished); Duncan, 149 F.3d at 426, n. 2.
Accordingly,
IT IS ORDERED that the defendant's motion to dismiss (No. 5) is GRANTED.
IT IS FURTHER ORDERED that the plaintiff's FCRA claims are DISSMISSED WITH PREJUDICE and his state law privacy claims are DISMISSED WITHOUT PREJUDICE pursuant to 28 U.S.C. § 1367(c)(3).
IT IS FURTHER ORDERED that the pretrial conference scheduled on February 18, 2003 and the jury trial scheduled for March 17, 2003 are CANCELLED.