Benoit v. Transworld Systems, Inc.

Background

Robert Benoit sued Transworld Systems, Inc., and other defendants. He asserted a claim under the Fair Credit Reporting Act (FCRA), a federal law governing the use of consumer credit information, and a state-law claim for invasion of privacy based on intrusion upon seclusion.

Benoit alleged that the defendants obtained his credit report without a permissible purpose under the FCRA. He alleged that the defendants had no business or contractual relationship with him, were not involved in collecting a debt owed by him, were never retained by one of his creditors, and never contacted him to collect one of his debts. Benoit was unrepresented.

The defendants moved to dismiss both claims. They argued that debt collectors may access a credit report when deciding whether to collect a debt. They also argued that the privacy claim was preempted, meaning displaced or barred, by the FCRA.

FCRA Claim

The court applied the pleading standard described by the Ninth Circuit in Nayab v. Capital One Bank (USA), N.A. That decision treats the FCRA’s permissible purposes as affirmative defenses. In other words, the defendants bear the burden of showing that a permissible purpose existed; the plaintiff does not have to disprove every permissible purpose in the complaint.

The court found Benoit’s complaint similar to the complaint that survived dismissal in Nayab. Benoit alleged that the defendants obtained his credit report without a permissible purpose and alleged facts supporting his assertion that the defendants were not collecting a debt from him. The court said the defendants’ motion barely addressed Nayab and did not provide a sufficient basis for dismissal. The FCRA claim may proceed. The court noted that the defendants may attempt to prove later that they had a permissible purpose for accessing Benoit’s report.

Privacy Claim

The court said the invasion-of-privacy claim was very likely preempted by the FCRA, but it found that the defendants had not made a sufficient showing at the motion-to-dismiss stage. The cases cited by the defendants concerned FCRA preemption of state-law claims against the furnisher of a credit report, rather than against the requester or recipient of the report. The court therefore declined to dismiss the privacy claim on preemption grounds at that time, while allowing the defendants to raise the argument again at summary judgment.

The court also held that Benoit adequately stated an intrusion-upon-seclusion claim. At the pleading stage, the allegations were sufficient to show a reasonable expectation of privacy in the credit-report information and an intrusion that could be highly offensive. The court relied on the Ninth Circuit’s description of credit-report information as highly personal and on its statement that providing such information without permission can constitute a highly offensive harm.

Disposition

Judge Vince Chhabria denied the motion to dismiss with regard to both the FCRA claim and the invasion-of-privacy claim. Both claims may proceed.