Summary:
Nina Owens purchased an automobile from Dixie Motors in 2007, providing information including her home address, date of birth, social security number, phone number, insurance agent, insurance company, employment information, monthly mortgage payment. Ashley Owens, the daughter of Nina Owens, considered purchasing a vehicle from Dixie Motors in 2011, supplying similar credit information and personal identifiers. The credit application by Ashley Owens was declined, but at the same time Janet Pierce, the finance manager for Dixie Motors, completed an credit application in the name of Nina Owens. (It was disputed whether Nina Owens was aware and approved of the credit application or not.) Pierce subsequently inadvertently sent sensitive credit information and personal identifiers for both Nina and Ashley Owens when she included credit applications in a letter to Antwand Cherry, a.k.a. Mickey Mouse, who was incarcerated in North Carolina for opium trafficking and a Facebook friend of Janet Pierce.
Nina Owens and Ashley Owens, who are mother and daughter, brought claims based on an inadvertant mailing by Pierce, the finance manager for Dixie Motors, of their sensitive credit information and personal identifiers, obtained through an financing application made by Ashley Owens with Dixie Motors, to Antwand Cherry, who was incarcerated in North Carolina for opium trafficking and a Facebook friend of Janet Pierce. After Cherry contacted Ashley Owens by telephone from prison, reciting her personal information which he claimed to have received from Pierce, the Owenses brought claims against Dixie Motors, Pierce and Western Surety including for alleged violations of the Fair Credit Reporting Act ("FCRA"), the North Carolina Identity Theft Protection Act (“ITPA”), the Unfair and Deceptive Trade Practices Act ("UDTPA"), negligence per se for failure to comply with the Gramm-Leach-Bliley Act (“GLBA”), and breach of express and implied contractual duties, intentional infliction of emotional distress and sought to assert liability of surety against Western, as it provided Dixie Motor with a motor vehicle surety bond.
Western sought to dismiss the claim against it liability of surety, asserting that Nina Owens was not a purchaser as required for recovery under N.C.G.S. § 20-288(e). Pierce and Dixie Motors sought to dismiss the claims for punitive damages under the various state law claims.
The FCRA claims that Pierce and Dixie Motors had wrongfully procured the credit report of Nina Owens, requires that Pierce improperly obtained the credit report either willfully or negligently. see 15 U.S.C. § 1681n and § 1681o. The factual dispute whether Pierce had even spoken with Nina Owens, was sufficient to demonstrate the “ the existence of a genuine issue of material fact” and overcome a Motion to Dismiss. While wary that claims for emotional distress are “easily susceptible to fictitious and trivial claims.” Price v. City of Charlotte, N.C., 93 F.3d 1241, 1250 (4th Cir. 1996), the court found sufficient evidence in the affidavits of Nina Owens, Ashley Owens and others for damages for emotional distress. To support punitive damages under FCRA, willful acts need not be knowing, but include those acts taken in “reckless disregard of statutory duty.” Sapphic Ins. Co. of Am. v. Burr, 551 U.S. 47, 57-58 (2007). In obtaining Nina Owens’ credit report without permission, such conduct would be intentional and, accordingly, willful. The inclusion of the credit report in the letter to Cherry, however, was careless, but not reckless which requires a showing “an unjustifiably high risk of harm that is either known or so obvious that it should be known.” Id. at 68 (quotations omitted).
Dixie Motors could not, however, be held directly liable for Pierce improperly obtaining Nina Owen’s credit report. Following Ausherman v. Bank of America Corp., 352 F.3d 896 (2003), requirement that a user of credit reports have in place procedures to prevent violations of the FCRA, instead direct action by Dixie Motors in obtaining the credit report improperly was required. Yohay v. City of Alexandria Employees Credit Union, Inc., 827 F.2d 967 (4th Cir. 1987). Dixie Motors, could, however, be vicariously liable for the actions of pierce under several situations:
(1) Actual Authority: An employer may be held liable for its employee’s acts if the employer authorized such conduct, either expressly or implicitly (“actual authority”).
(2) Respondeat Superior: An employer may also be liable for its employee’s acts if the employee acts:
(A) in furtherance of his or her employer’s business, and
(B) within the scope of his or her employment.
(3) Apparent Authority: An employer is liable for its employee’s acts if the employee exercises a power he or she did not have, but the affected third party could reasonably interpret acts or omissions of the employer as indicating that the employee had authority to act on behalf of the employer.
(4) Aided in the Agency Relation: An employer may be held liable for the torts of its employee if the employee was aided in accomplishing the tort by the existence of the agency relation.
Here, Dixie Motors failed to show any genuine issue of material fact that Pierce was acting in furtherance of Dixie Motor’s business and within her employment parameters as its finance manager, subjecting it to liability under respondeat superior. Alternatively, as it was through her position as finance manager that Pierce was able to improperly obtain and/or misused the credit reports, the aided in agency relation doctrine applied. See Jones v. Federated Financial Reserve Corp., 144 F.3d 961 (6th Cir. 1998).
Under the ITPA claims, Dixie Motors was entitled to dismissal regarding its failure to notify the Owens of the breach of security, as there was no showing of damages from such lack of notice. Similarly, the claims for failing to dispose of credit applications failed, as there was no evidence that Dixie Motors had not taken reasonable measures to protect against unauthorized access to or use of the information in connection with or after its disposal. While the Owens presented evidence that Dixie Motors failed to safeguard information, such failure was not related to the disposal of information, but the retention.
Emotional distress damages were not appropriate for the breach of contract claims, as pecuniary interests are the dominant motivating factor behind contracts, unless the matters of the contract directly to the dignity, mental concern or solicitude, or the sensibilities of the party to whom the duty is owed and which directly involves interests and emotions recognized by all as involving great probability of resulting mental anguish if not respected. See Stanback v. Stanback, 297 N.C. 181, 192, (1979) disapproved of on other grounds by Dickens v. Puryear, 302 N.C. 437 (1981). The court held that retention and security of financial information primarily pecuniary as it “is concerned with trade and commerce where it relates primarily to the arranging of financing....” The Owenses could recover nominal damages for showing a breach, See Robbins v. C. W. Myers Trading Post, Inc., 251 N.C. 663, 666 (1960), with the provision of financial information by the Owenses serving as valuable consideration “sufficient to support a contract regarding the safeguarding of plaintiffs’ information.”
The UDTPA does not require a showing of severe emotional distress, only that Dixie Motors was the proximate cause of the Owenses’ injuries. See Williams v. HomEq Servicing Corp., 184 N.C. App. 413. Similarly, the claim for negligence per se under the GLBA only requires the showing of an actual damage, which includes mental pain, suffering, inconvenience and loss of enjoyment. Iadanza v. Harper, 169 N.C. App. 776, 779 (2005).
The other North Carolina state claims require a showing of severe emotional distress, which “means any emotional or mental disorder, such as, for example, neurosis, psychosis, chronic depression, phobia, or any other type of severe and disabling emotional or mental condition which may be generally recognized and diagnosed by professionals trained to do so.” Waddle v. Sparks, 331 N.C. 73, 83 (1992). While this does not, however, require medical evidence or testimony. Kimes v. Lab. Corp. of Am., Inc., 313 F. Supp. 2d 555, 568 (M.D.N.C. 2004) (citing Coffman v. Roberson, 153 N.C. App. 618, 627-28 (2002)), the Owenses’ affidavits failed to “meet the high bar required to show severe emotional distress.”
Punitive damages for the state law claims “may be awarded only if the claimant proves that the defendant is liable for compensatory damages and that one of the following aggravating factors was present and was related to the injury for which compensatory damages were awarded: (1) Fraud. (2) Malice. (3) Willful or wanton conduct.” N.C.G.S. § 1D-15(a). Pursuant to N.C.G.S. § 1D-15(c), direct action, and not vicarious liability, is also required. Punitive damages are not allowed for breach of contract, N.C.G.S. § 1D-15(d), or under the UDTPA, See Holloway v. Wachovia Bank & Trust Co., N.A., 339 N.C. 338, 348 (1994) (citing Pinehurst, Inc. v. O’Leary Brothers Realty, Inc., 79 N.C. App. 51, 63 (1986) for the proposition that punitive damages are not recoverable under Chapter 75).
Dixie Motors then contended that the FCRA pre-empted the ITPA, as 15 U.S.C.§ 1681h(e) bars a consumer from bringing suit “with respect to the reporting of information against any consumer reporting agency, any user of information, or any person that furnishes information to a consumer reporting agency....” This pre-emption, however, only applies to improper reporting of consumer information, not improperly obtaining or disclosing credit reports. Further, 15 U.S.C. § 1681t also pre-empts state laws, but only regarding the requirements and standards for disposal of consumer information. There is further no “field pre-emption” by either FCRA or the GLBA. See Davenport v. Farmers Ins. Grp., 378 F.3d 839, 842 (8th Cir. 2004) and Wyeth v. Levine, 555 U.S. 555, 565 (2009).
Western Surety sought dismissal of the claims under N.C.G.S. § § 20-288(e), which requires motor vehicle dealers to furnish surety bonds in order to cover certain losses or damages for purchasers of motor vehicles, arguing that Nina Owens was not a “purchaser of a motor vehicle.” As there were genuine issues of material fact questioning whether information from Nina Owens’ original purchase of a vehicle for herself in 2007 was improperly used in 2011 or whether all information used in 2011 had been obtained separately, dismissal was not justified.
Commentary:
Antwand Cherry may face suit from the Holy Rodent Empire for using a street name that infringes on its copyright.
For a copy of the opinion, please see:
Owens v. Dixie Motors- FCRA, Improperly Obtaining Credit Report; Emotional Distress; Direct and Vicarious Liability; Pre-emption
Category
Blog comments