Johnson v. MBNA, Xperian, E-fax, and TU

Official Site (for those of you with Lexis or Westlaw access): 357 F.3d 426 (4th Cir. 2004)
__________________________________________________ ______

PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
ü LINDA JOHNSON,
Plaintiff-Appellee,
v.
MBNA AMERICA BANK, NA,
Defendant-Appellant,
No. 03-1235 ý and
EXPERIAN INFORMATION SOLUTIONS,
INCORPORATED; EQUIFAX CREDIT
INFORMATION SERVICES,
INCORPORATED; TRANS UNION LLC,
Defendants. þ
Appeal from the United States District Court
for the Eastern District of Virginia, at Richmond.
Richard L. Williams, Senior District Judge.
(CA-02-523)
Argued: December 4, 2003
Decided: February 11, 2004


OPINION
WILKINS, Chief Judge:
MBNA America Bank, N.A. (MBNA) appeals a judgment entered
against it following a jury verdict in favor of Linda Johnson in her
action alleging that MBNA violated a provision of the Fair Credit
Reporting Act (FCRA), see 15 U.S.C.A. § 1681s-2(b)(1) (West 1998)
(amended Dec. 4, 2003), by failing to conduct a reasonable investigation
of Johnson’s dispute concerning an MBNA account appearing on
her credit report. Finding no reversible error, we affirm.
I.
The account at issue, an MBNA MasterCard account, was opened
in November 1987. The parties disagree regarding who applied for
this account and therefore who was legally obligated to pay amounts
owed on it. It is undisputed that one of the applicants was Edward N.
Slater, whom Johnson married in March 1991. MBNA contends that
Johnson was a co-applicant with Slater, and thus a co-obligor on the
account. Johnson claims, however, that she was merely an authorized
user and not a co-applicant.
In December 2000, Slater filed for bankruptcy, and MBNA
promptly removed his name from the account. That same month,
MBNA contacted Johnson and informed her that she was responsible
for the approximately $17,000 balance on the account. After obtaining
copies of her credit report from the three major credit reporting
agencies—Experian, Equifax, and Trans Union—Johnson disputed
2 JOHNSON v. MBNA AMERICA BANK
the MBNA account with each of the credit reporting agencies. In
response, each credit reporting agency sent to MBNA an automated
consumer dispute verification (ACDV). The ACDVs that Experian
and Trans Union sent to MBNA specifically indicated that Johnson
was disputing that she was a co-obligor on the account. See J.A. 278
(Experian) ("CONSUMER STATES BELONGS TO HUSBAND
ONLY"); id. at 283 (Trans Union) ("WAS NEVER A SIGNER ON
ACCOUNT. WAS AN AUTHORIZED USER"). The ACDV that
Equifax sent to MBNA stated that Johnson disputed the account balance.
In response to each of these ACDVs, MBNA agents reviewed the
account information contained in MBNA’s computerized Customer
Information System (CIS) and, based on the results of that review,
notified the credit reporting agencies that MBNA had verified that the
disputed information was correct. Based on MBNA’s responses to the
ACDVs, the credit reporting agencies continued reporting the MBNA
account on Johnson’s credit report.
Johnson subsequently sued MBNA, claiming, inter alia, that it had
violated the FCRA by failing to conduct a proper investigation of her
dispute. See 15 U.S.C.A. § 1681s-2(b)(1). A jury trial was held, and,
following the presentation of Johnson’s case, MBNA moved for judgment
as a matter of law. That motion was denied. After the close of
the evidence, the jury found that MBNA had negligently failed to
comply with the FCRA, and it awarded Johnson $90,300 in actual
damages. MBNA renewed its motion for judgment as a matter of law,
asserting that § 1681s-2(b)(1) only required MBNA to conduct a cursory
review of its records to verify the disputed information. Alternatively,
MBNA argued that even if it were required to conduct a
reasonable investigation of Johnson’s dispute, the evidence showed
that MBNA had met that obligation. The district court again denied
MBNA’s motion, concluding that § 1681s-2(b)(1) required MBNA to
conduct a reasonable investigation and that there was sufficient evidence
from which the jury could conclude that MBNA had failed to
do so.
II.
MBNA first maintains that the district court erred in ruling that
§ 1681s-2(b)(1) requires furnishers of credit information to conduct a
3 JOHNSON v. MBNA AMERICA BANK
reasonable investigation of consumer disputes. Section 1681s-2(b)(1)
imposes certain duties on a creditor who has been notified by a credit
reporting agency that a consumer has disputed information furnished
by that creditor:
After receiving notice pursuant to section 1681i(a)(2) of
this title of a dispute with regard to the completeness or
accuracy of any information provided by a person to a consumer
reporting agency, the person shall—
(A) conduct an investigation with respect to
the disputed information;
(B) review all relevant information provided
by the consumer reporting agency . . . ;
(C) report the results of the investigation to
the consumer reporting agency; and
(D) if the investigation finds that the information
is incomplete or inaccurate, report those
results to all other consumer reporting agencies to
which the person furnished the information and
that compile and maintain files on consumers on a
nationwide basis.1
1While this appeal was pending, § 1681s-2(b)(1) was amended to add
a new provision imposing certain additional duties on creditors in connection
with investigations of consumer disputes. See Fair and Accurate
Credit Transactions Act of 2003, Pub. L. No. 108-159, sec. 314(b),
§ 623(b)(1)(E), 117 Stat. 1952, 1995-96. That provision is not relevant
to our resolution of this appeal.
We recognize that the FCRA applies not only to those that furnish and
report consumer credit information but also to those that furnish and
report certain other types of information regarding consumers. See 15
U.S.C.A. § 1681a(d)(1) (West 1998 & Supp. 2003). Thus, consistent
with other provisions of the FCRA, § 1681s-2(b) uses the general terms
"furnisher[ ] of information" and "consumer reporting agency." However,
because of the specific nature of this case, and for ease of reference, in
this opinion we use the terms "creditor" and "credit reporting agency."
Nonetheless, our discussion of § 1681s-2(b)(1) and other FCRA provisions
applies equally to those who furnish other types of consumer information.
4 JOHNSON v. MBNA AMERICA BANK
MBNA argues that the language of § 1681s-2(b)(1)(A), requiring
furnishers of credit information to "conduct an investigation" regarding
disputed information, imposes only a minimal duty on creditors
to briefly review their records to determine whether the disputed
information is correct. Stated differently, MBNA contends that this
provision does not contain any qualitative component that would
allow courts or juries to assess whether the creditor’s investigation
was reasonable. By contrast, Johnson asserts that § 1681s-2(b)(1)(A)
requires creditors to conduct a reasonable investigation.2 We review
this question of statutory interpretation de novo. See Holland v.
Pardee Coal Co., 269 F.3d 424, 430 (4th Cir. 2001).
In interpreting a statute, we must first "determine whether the language
at issue has a plain and unambiguous meaning with regard to
the particular dispute in the case." Robinson v. Shell Oil Co., 519 U.S.
337, 340 (1997). "Our inquiry must cease if the statutory language is
unambiguous and the statutory scheme is coherent and consistent." Id.
(internal quotation marks omitted). "The plainness or ambiguity of
statutory language is determined by reference to the language itself,
the specific context in which that language is used, and the broader
context of the statute as a whole." Id. at 341.
The key term at issue here, "investigation," is defined as "[a]
detailed inquiry or systematic examination." Am. Heritage Dictionary
920 (4th ed. 2000); see Webster’s Third New Int’l Dictionary 1189
(1981) (defining "investigation" as "a searching inquiry"). Thus, the
plain meaning of "investigation" clearly requires some degree of care-
2Neither this court nor any other circuit has addressed the extent to
which a creditor must investigate a consumer dispute in order to avoid
liability under § 1681s-2(b)(1). However, district courts that have considered
the issue have consistently recognized that the creditor’s investigation
must be a reasonable one. See Agosta v. Inovision, Inc., 2003 WL
22999213, at *5 (E.D. Pa. Dec. 16, 2003); Buxton v. Equifax Credit Info.
Servs., Inc., 2003 WL 22844245, at *2 (N.D. Ill. Dec. 1, 2003); Wade v.
Equifax, 2003 WL 22089694, at *2-*3 (N.D. Ill. Sept. 8, 2003); Betts v.
Equifax Credit Info. Servs., Inc., 245 F. Supp. 2d 1130, 1135 (W.D.
Wash. 2003); Olwell v. Med. Info. Bureau, 2003 WL 79035, at *5 (D.
Minn. Jan. 7, 2003); Kronstedt v. Equifax, 2001 WL 34124783, at *16
(W.D. Wis. Jan. 25, 2001); Bruce v. First U.S.A. Bank, 103 F. Supp. 2d
1135, 1143 (E.D. Mo. 2000).
5 JOHNSON v. MBNA AMERICA BANK
ful inquiry by creditors.

Further, § 1681s-2(b)(1)(A) uses the term
"investigation" in the context of articulating a creditor’s duties in the
consumer dispute process outlined by the FCRA. It would make little
sense to conclude that, in creating a system intended to give consumers
a means to dispute—and, ultimately, correct—inaccurate information
on their credit reports, Congress used the term "investigation" to
include superficial, unreasonable inquiries by creditors. Cf. Cahlin v.
Gen. Motors Acceptance Corp., 936 F.2d 1151, 1160 (11th Cir. 1991)
(interpreting analogous statute governing reinvestigations of consumer
disputes by credit reporting agencies to require reasonable
investigations); Pinner v. Schmidt, 805 F.2d 1258, 1262 (5th Cir.
1986) (same). We therefore hold that § 1681s-2(b)(1) requires creditors,
after receiving notice of a consumer dispute from a credit reporting
agency, to conduct a reasonable investigation of their records to
determine whether the disputed information can be verified.
III.
MBNA next contends that even if § 1681s-2(b)(1) requires creditors
to conduct reasonable investigations of consumer disputes, no
evidence here supports a determination by the jury that MBNA’s
investigation of Johnson’s dispute was unreasonable. We review the
denial of MBNA’s motion for judgment as a matter of law de novo.
See Baynard v. Malone, 268 F.3d 228, 234 (4th Cir. 2001). We must
view the evidence in the light most favorable to Johnson, the nonmovant,
and draw all reasonable inferences in her favor without weighing
the evidence or assessing the witnesses’ credibility. See id. at 234-
35. "The question is whether a jury, viewing the evidence in the light
most favorable to [Johnson], could have properly reached the conclusion
reached by this jury." Id. at 235 (internal quotation marks omitted).
We must reverse if a reasonable jury could only rule in favor of
MBNA; if reasonable minds could differ, we must affirm. See id.
As explained above, MBNA was notified of the specific nature of
Johnson’s dispute—namely, her assertion that she was not a coobligor
on the account. Yet MBNA’s agents testified that their investigation
was primarily limited to (1) confirming that the name and
address listed on the ACDVs were the same as the name and address
contained in the CIS,3 and (2) noting that the CIS contained a code
3Under MBNA’s procedures, agents are only required to confirm two
out of four pieces of information contained in the CIS—name, address,
6 JOHNSON v. MBNA AMERICA BANK
indicating that Johnson was the sole responsible party on the account.

The MBNA agents also testified that, in investigating consumer disputes
generally, they do not look beyond the information contained
in the CIS and never consult underlying documents such as account
applications. Based on this evidence, a jury could reasonably conclude
that MBNA acted unreasonably in failing to verify the accuracy
of the information contained in the CIS.
MBNA argues that other information contained in the CIS compels
the conclusion that its investigation was reasonable. For example, in
support of its alleged belief that Johnson was a co-applicant, MBNA
presented evidence that Johnson’s last name had been changed on the
account following her marriage to Slater and that Johnson’s name was
listed on the billing statements. But this evidence is equally consistent
with Johnson’s contention that she was only an authorized user on
Slater’s account and that, to the extent MBNA’s records listed her as
a co-obligor, those records were incorrect. MBNA also points to evidence
indicating that, during her conversations with MBNA following
Slater’s bankruptcy filing, Johnson attempted to set up a reduced payment
plan and changed the address on the account to her business
address. However, a jury could reasonably conclude that this evidence
showed only that Johnson had tried to make payment arrangements
even though she had no legal obligation to do so. Indeed, Johnson testified
that, during her conversations with MBNA, she had consistently
maintained that she was not responsible for paying the account.
Additionally, MBNA argues that Johnson failed to establish that
MBNA’s allegedly inadequate investigation was the proximate cause
of her damages because there were no other records MBNA could
have examined that would have changed the results of its investigation.
In particular, MBNA relies on testimony that, pursuant to its
five-year document retention policy, the original account application
was no longer in MBNA’s possession. Even accepting this testimony,
however, a jury could reasonably conclude that if the MBNA agents
had investigated the matter further and determined that MBNA no
social security number, and date of birth—in order to verify an account
holder’s identity. Johnson’s social security number and date of birth were
not listed on the CIS summary screen.
7 JOHNSON v. MBNA AMERICA BANK
longer had the application, they could have at least informed the
credit reporting agencies that MBNA could not conclusively verify
that Johnson was a co-obligor.4 See 15 U.S.C.A. § 1681i(a)(5)(A)
(West 1998) (providing that if disputed information "cannot be verified,
the consumer reporting agency shall promptly delete that item
of information from the consumer’s file or modify that item of information,
as appropriate, based on the results of the reinvestigation")
(amended Dec. 4, 2003).
IV.
MBNA next asserts that the district court improperly instructed the
jury regarding the standards for determining liability. We review challenges
to jury instructions for abuse of discretion. See S. Atl. Ltd.
P’ship of Tenn. v. Riese, 284 F.3d 518, 530 (4th Cir. 2002). "Instructions
are adequate if construed as a whole, and in light of the whole
record, they adequately inform the jury of the controlling legal principles
without misleading or confusing the jury to the prejudice of the
objecting party." Id. (internal quotation marks & alterations omitted).
Even if we conclude that the challenged instructions are erroneous,
we will not reverse "unless the error seriously prejudiced the challenging
party’s case." Id.


A.
MBNA first argues that the district court erred in instructing the
jury that, in determining whether MBNA’s investigation was reasonable,
it should consider "the cost of verifying the accuracy of the
information versus the possible harm of reporting inaccurate information."
J.A. 767-68. MBNA apparently contends that the balancing test
described in this instruction is inapplicable here because it is derived
from cases involving the reasonableness of a credit reporting agency’s
reinvestigation, see, e.g., Cushman v. Trans Union Corp., 115
4Because we conclude there is sufficient evidence to support a jury
finding that MBNA failed to conduct a reasonable investigation of Johnson’s
dispute, we do not consider Johnson’s argument that the judgment
should be affirmed on the alternative ground that MBNA failed to "report
the results of the investigation to the consumer reporting agenc[ies]," 15
U.S.C.A. § 1681s-2(b)(1)(C).
8 JOHNSON v. MBNA AMERICA BANK
F.3d 220, 225 (3d Cir. 1997); Henson v. CSC Credit Servs., 29 F.3d
280, 287 (7th Cir. 1994). We recognize that creditors and credit
reporting agencies have different roles and duties in investigating
consumer disputes under the FCRA. Nevertheless, we believe that the
general balancing test articulated by the district court—weighing the
cost of verifying disputed information against the possible harm to the
consumer—logically applies in determining whether the steps taken
(and not taken) by a creditor in investigating a dispute constitute a
reasonable investigation. The district court therefore did not abuse its
discretion in giving this instruction.
B.
MBNA also contends that, after instructing the jury that the FCRA
"does not require that credit card account records, including original
applications, be kept in any particular form," J.A. 770, the district
court erred in further instructing the jury that "the law does prohibit
MBNA from maintaining its record[s] in such manner as to consciously
avoid knowing that information it is reporting is
[in]accurate," id. MBNA claims that this instruction improperly permitted
the jury to assess the adequacy of MBNA’s record keeping
system. However, the other detailed instructions given by the district
court made clear that Johnson’s claim was based on MBNA’s failure
to conduct a reasonable investigation of its records, not on the inadequacy
of those records. And, it appears that the brief instruction challenged
by MBNA, which the district court gave near the end of its
jury instructions, was simply intended to clarify the legal effect of
MBNA not maintaining the original account application—not to
invite the jury to independently assess MBNA’s record keeping practices.
MBNA further claims that the challenged instruction improperly
incorporated a legal standard from another provision of § 1681s-2,
relating to the accuracy of information that creditors provide to credit
reporting agencies. See 15 U.S.C.A. § 1681s-2(a)(1)(A) (West 1998)
(prohibiting creditors from furnishing consumer information to a
credit reporting agency "if the [creditor] knows or consciously avoids
knowing that the information is inaccurate") (amended Dec. 4, 2003).
MBNA emphasizes that this provision is enforceable only by government
agencies and officials, not by consumers. See 15 U.S.C.A.
9 JOHNSON v. MBNA AMERICA BANK
§ 1681s-2(d) (West 1998) (amended Dec. 4, 2003).

Again, however,
the extensive instructions by the district court made clear that Johnson’s
claim was based on MBNA’s duty to investigate consumer disputes,
not its duty to provide accurate information. Indeed, the district
court instructed the jury that the damages recoverable by Johnson
"may not include any damages that were caused by the inaccuracy of
the information itself." J.A. 768. We therefore conclude that the
instruction given by the district court did not mislead the jury or otherwise
prejudice MBNA.
V.
For the reasons set forth above, we affirm the judgment of the district
court.
AFFIRMED
10 JOHNSON v. MBNA AMERICA BANK

[Jerseee]

Thanks Cute Chick!

I think the holdings of this case should appear in all letters addressed to the CCCs and CRAs.