IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT
No. 99-51018
Summary Calendar
LEA SECHLER; DAVID MURCHISON,
Plaintiffs – Counter Defendants – Appellants,
v.
RENT ROLL, INC.; ET AL.,
Defendants,
REALPAGE, INC., doing business as Rent Roll, Inc.,
Defendant – Appellee,
WALDEN RESIDENTIAL PROPERTIES, doing business as
Oak Ridge Apartments,
Defendant – Counter Plaintiff – Appellee.
Case No. 99-51187
LEA SECHLER; DAVID MURCHISON,
Plaintiffs – Counter Defendants – Appellants,
and
TIM MAHONEY,
Appellant,
v.
RENT ROLL, INC.; ET AL.,
Defendants,
REALPAGE, INC., doing business as Rent Roll, Inc.,
Defendant – Appellee,
WALDEN RESIDENTIAL PROPERTIES, doing business as
Oak Ridge Apartments,
Defendant – Counter Plaintiff – Appellee.
Appeals from the United States District Court
For the Western District of Texas
(A-98-CV-790-JN)
May 22, 2000
Before HIGGINBOTHAM, DeMOSS, and STEWART, Circuit Judges.
PER CURIAM:*
Plaintiffs sued defendants for violations of the Federal Fair
Credit Reporting Act and the Texas Deceptive Trade Practices Act.
The district court granted summary judgment to the defendants on
all claims and awarded attorney fees to the defendants for the DTPA
claims. We AFFIRM the summary judgments but REVERSE the attorney
fee awards.
I
In 1997, the plaintiffs applied to rent an apartment from
Walden Residential Properties d.b.a. Oak Ridge Apartments. In
processing the application, Oak Ridge obtained a credit report from
Realpage, Inc., d.b.a. Rent Roll, Inc. The credit report
contained, among other things, information regarding three credit
accounts belonging to the plaintiffs, either jointly or
individually. One of these accounts had been more than 60 days
late in the past. As a result of this, Oak Ridge denied the
plaintiffs’ rental application.
The plaintiffs protested to both Oak Ridge and Rent Roll that
the credit history relied upon was inaccurate because it only
included three credit accounts, whereas the plaintiffs’ complete
credit history included more than twenty credit accounts. In
response, Rent Roll did not update its credit report and Oak Ridge
did not change its decision to deny the plaintiffs’ application.
*
Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion
should not be published and is not precedent except under the limited
circumstances set forth in 5TH CIR. R. 47.5.4.
2
The plaintiffs sued Oak Ridge and Rent Roll in state court,
alleging violations of the Federal Fair Credit Reporting Act1 and
the Texas Deceptive Trade Practices Act.2 With regard to the FCRA,
the plaintiffs alleged that Rent Roll’s credit report was
inaccurate and that Oak Ridge failed to provide the plaintiffs with
the address of Rent Roll. With regard to the DTPA, the plaintiffs
claimed that Rent Roll’s practices were misleading and that Oak
Ridge refused the plaintiffs’ application in violation of its own
stated criteria.
The defendants removed to federal court. The district court
granted summary judgment on all claims in favor of the defendants
and awarded attorney fees to the defendants for the DTPA claims,
holding that the plaintiffs’ claims were groundless.
II
The district court correctly held that the plaintiffs’ FCRA
claims had no legal basis. Under the FCRA, credit reporting
agencies must follow “reasonable procedures to assure maximum
possible accuracy of the information” contained in credit reports.3
According to the FTC, this duty extends only to the accuracy of
information surrounding individual credit accounts on file with the
credit reporting agency. The agency has no duty to seek out
accounts whose information is only on file with other credit
1
15 U.S.C. § 1681 et seq.
2
Texas Bus. & Com. Code § 17.41 et seq.
3
15 U.S.C. § 1681e(b).
3
reporting agencies.4 While the plaintiffs cite authority for the
proposition that liability attaches for technically accurate but
misleading information,5 they have provided no authority or
persuasive reasoning for the proposition that such a duty extends
beyond the information currently within the files of a credit
reporting agency.
It should be noted that Rent Roll is not a typical credit
reporting agency, since it apparently does not maintain credit
histories on individuals, but instead simply resells such credit
histories that are obtainable from other credit reporting agencies
that do maintain files on individuals. Of course, by reselling the
information, Rent Roll becomes a credit reporting agency and must
comply with the associated duties. We find no reason, however, to
impose a greater duty on Rent Roll than that of the credit agencies
whose data Rent Roll resells.
Thus, we find no reason to require Rent Roll to report every
credit account in an individual’s credit history, even if Rent Roll
is responsible for the accuracy of the information on file with the
credit reporting agencies whose data Rent Roll resells and reports.
Of course, if Rent Roll chooses to only resell data from credit
reporting agencies that are meager sources of information, then
4
See 6 FTC Consumer Credit Guide 63,162, at ¶ 25,250 (1994 & Supp.).
According to the FTC, the FCRA
does not require a consumer reporting agency to add new items of
information to its file[,] . . . nor is it required to add new lines
of information about new accounts not reflected in an existing file,
because the [FCRA] permits the consumer to dispute only the
completeness or accuracy of particular items of information in the
file.
Id. (emphasis added). The FTC has the primary responsibility for administering,
enforcing, and interpreting the FCRA. See 15 U.S.C. § 1681s(a)(1); 6 FTC
Consumer Credit Guide 63,231, at ¶ 25,400 (1994).
5
See, e.g., Pinner v. Schmidt, 805 F.2d 1258, 1262-63 (5th Cir. 1986).
4
Rent Roll’s report may lack value to its customers. Nevertheless,
we do not find that the FCRA requires any credit reporting agency
to provide complete credit histories. Because there has been no
allegation that Rent Roll’s report was inaccurate with respect to
the reported information, the plaintiffs’ FCRA claim against Rent
Roll fails.
The plaintiffs also allege on appeal that Oak Ridge violated
the FCRA by failing to provide the plaintiffs with Rent Roll’s
address after denying the plaintiffs’ application. Oak Ridge
argues that Rent Roll failed to plead this claim. Regardless, the
claim is without merit, since Oak Ridge provided the plaintiffs
with Rent Roll’s name and phone number, and the plaintiffs
successfully contacted Rent Roll within 24 hours of obtaining such
information. Such substantial compliance has been deemed
sufficient under the FCRA.6 For these reasons we AFFIRM summary
judgment in favor of the defendants with regard to the FCRA claims.
With respect to the plaintiffs’ DTPA claim against Rent Roll,
the plaintiffs first must have been consumers with respect to Oak
Ridge’s purchase of Rent Roll’s credit report. The DTPA defines
consumer as one “who seeks or acquires by purchase or lease, any
goods or services.”7 Second, the complaint must arise from the
goods or services sought or acquired.8 Importantly, however, the
consumer need not have been a party to the transaction at issue,9
6
See Kiblen v. Pickle, 653 P.2d 1338, 1343 (Wash. App. 1982).
7
Tex. Bus. & Com. Code Ann. § 17.45(4) (Vernon Supp. 2000).
8
See Clardy Mfg. Co. v. Marine Midland Bus. Loans, 88 F.3d 347, 356 (5th
Cir. 1996).
9
See Kennedy v. Sale, 689 S.W.2d 890, 893 (Tex. 1985).
5
so long as the transaction was not incidental to the goods or
services which the consumer sought or acquired.10
The plaintiffs concede that they were seeking only to acquire
an apartment lease and not a rental application or credit report.
Thus, the question is whether the plaintiffs’ DTPA claim against
Rent Roll arises from a transaction that is only incidental to the
leases which Oak Ridge provides and which the plaintiffs sought.
In their attempt to obtain a lease, the plaintiffs paid $30 to
Oak Ridge to have their application processed. Oak Ridge used this
money to purchase Rent Roll’s credit report, which was for Oak
Ridge’s benefit insofar as it enabled them to assess the risk of
renting to the plaintiffs. Moreover, the credit check fee was
clearly only a small percentage of the total rent due on a year-
long lease. In some cases, consumer status has been denied with
respect to a transaction when that transaction was not for the
benefit of the consumer and the costs associated with it are but a
small percentage of the transaction in which consumer was directly
involved.11 These cases may be distinguishable from the current
case because the plaintiffs in this case were required to pay for
their own credit check, even if it was primarily for Oak Ridge’s
benefit, and the credit check was an actual hurdle to obtaining the
lease and for that reason does not seem incidental to the
10
See Henry v. Cullum Cos., 891 S.W.2d 789, 795 (Tex. App. – Amarillo 1997,
writ denied).
11
See, e.g., Insurance Co. of N. Am. v. Morris, 981 S.W.2d 667, 676 (Tex.
1998); Clardy, 88 F.3d at 356.
6
plaintiffs’ attempt to acquire a lease even if the application fee
was minimal.12
Nevertheless, we express some doubt that Texas courts would
consider the plaintiffs to be consumers of Rent Roll’s credit
check. We refrain from resolving the issue, however, because we
instead find that even if the plaintiffs were consumers under the
DTPA with respect to Oak Ridge’s purchase of Rent Roll’s report,
there would be no DTPA violation.
While Texas might impose a greater duty on Rent Roll than that
imposed under the FCRA, the plaintiffs have not provided any
authority or cogent reasoning for such an extension. Moreover,
requiring every credit reporting agency to report all information
that is only available through the purchase of credit reports from
other credit reporting agencies is too onerous a burden to impose
casually. The market may shun agencies whose reports are
incomplete in this regard, but we find no basis to label the credit
reporting industry’s current practice of reporting only what is
internally available as deceptive or misleading under Texas law.13
12
In Morris, the consumers did not directly provide the funding for the
“pre-screening” services at issue, nor were those services any kind of hurdle to
obtaining the services which the consumers directly sought. See 981 S.W.2d at
676.
In Clardy the incidental transaction admittedly was a hurdle to completing
the main transaction, since the main transaction was a loan and the incidental
transaction was the loan processing service. See 88 F.3d at 356. Consumer
status was denied, but that result is somewhat incomparable because as a matter
of law, loans (unlike leases) are not goods or services under the DTPA. For that
reason, the court held that loan processing services cannot be the basis for
consumer status when the loan was the consumer’s primary objective. See id.
Because of the unique status of loans under the DTPA, Clardy may provides less
guidance as to the circumstances in which leases or lease application processing
services support consumer status under the DTPA.
13
Cf. Robinson v. Preston Chrysler-Plymouth, Inc., 633 S.W.2d 500, 502 (Tex.
1982). In Robinson, the Texas Supreme Court held that a failure to disclose
claim under the DTPA could not be based on the failure to disclose facts that the
defendant himself did not know. Id. at 502. The court in Robinson specifically
limited its holding to failure to disclose claims, as opposed to claims based on
misrepresentation and other misleading or deceptive practices. See id. Thus,
7
For these reasons, we AFFIRM summary judgment in favor of Rent Roll
on the plaintiffs’ DTPA claim.
With regard to the plaintiffs’ DTPA claim against Oak Ridge,
it is clear that the plaintiffs were consumers with respect to an
Oak Ridge lease, since they sought to acquire a lease. The
plaintiffs allege that Oak Ridge denied their application in
violation of criteria stated on Oak Ridge’s lease application
addendum. While Oak Ridge’s purchase of a credit report from Rent
Roll may have been incidental to the plaintiffs’ attempt to obtain
a lease, Oak Ridge’s denial of the plaintiff’s application was not.
Oak Ridge’s rental criteria stated that “[t]he credit history
will be reviewed and no more than 25% of the total accounts
reported can be over 60 days past due, or charged to collection in
the past two (2) years.” (Emphasis in original.) The credit
history which Oak Ridge obtained included only three credit
accounts, one of which was over 60 days past due, although the
credit report does not say when that past due status existed.
Thus, more than 25% of the accounts had been 60 days past due at
some time.
The plaintiffs argue that Oak Ridge’s rental criteria only
allowed denials based on past due accounts when such status existed
in the past two years. Oak Ridge argues that the time limitation
only modifies the phrase “charged to collection,” thus allowing Oak
Ridge to base denials on past due accounts regardless of when the
the strict applicability of Robinson is debatable where, as here, Rent Roll has
undertaken the duty to provide credit histories and either has, or was given,
reason to know that the histories it provides are often incomplete. In such
circumstances, the plaintiffs’ claim that the practice is deceptive or misleading
has some basis, albeit not for a failure to disclose claim.
8
past due status existed. The plaintiffs counter that at best, the
language is ambiguous and should be construed against Oak Ridge,
the drafter.
Even if the criteria were ambiguous, we find that such an
ambiguity does not rise to the level of a misrepresentation that is
actionable under the DTPA.14 Furthermore, we do not find that Oak
Ridge’s use of Rent Roll’s credit report as a “credit history”
violates the DTPA because it was incomplete, since that would
impose a greater duty on consumers of credit reporting agencies
than on the agencies themselves. Thus, we AFFIRM summary judgment
in favor of Oak Ridge on the plaintiffs’ DTPA claims.
III
The district court awarded attorney fees to the defendants
based on a finding that the plaintiffs’ DTPA claims were
groundless.15 We find, however, that the plaintiffs presented
arguable DTPA claims against both defendants. With respect to Rent
Roll, the consumer status of the plaintiffs is at least a debatable
question even if the weight of authority is against such a finding,
and with respect to Oak Ridge, the application criteria were not
clearly defined. More importantly, with respect to both
defendants, the scope of a duty to provide or consider a complete
credit history under the DTPA was uncertain. Thus, the plaintiffs’
claims were not groundless even if weak and in the end failing.
14
Cf. Quitta v. Fossati, 808 S.W.2d 636, 644-45 (Tex.App. – Corpus Christi
1991, writ denied).
15
See Tex. Bus. & Com. Code Ann. § 17.50(c) (allowing attorney fees for
defendants for claims that are groundless, in bad faith, or brought for the
purposes of harassment).
9
We also find no evidence that these claims were brought in bad
faith or for the purposes of harassment. Indeed, it is clear why
these claims were brought: Oak Ridge relied on an incomplete credit
history in choosing to deny an apartment to the plaintiffs, and Oak
Ridge persisted in its denial despite being informed by the
plaintiff that the credit report was incomplete. Such business
practices may be arbitrary and are undeniably frustrating, even if
ultimately they create no liability under the DTPA. We therefore
hold that the attorney fee awards under the DTPA were an abuse of
discretion.
We therefore AFFIRM summary judgment on all claims for the
defendants and REVERSE the attorney fee awards. We also DENY Oak
Ridge’s request for attorney fees on appeal.
AFFIRMED in part, REVERSED in part, and fee request DENIED.
10