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BERMAN v. PARCO

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK


November 19, 1997

STEPHEN BERMAN, LUCILLE TURECKI, STEVE MILLER, INC., Plaintiffs,
v.
VINCENT PARCO, EDWARD GREENBERG, INTERCONTINENTAL INVESTIGATIONS, INC., Defendants.

The opinion of the court was delivered by: WOOD

OPINION & ORDER

 WOOD, U.S.D.J.

 In a Report and Recommendation dated February 6, 1997 (the "Report"), Magistrate Judge Andrew J. Peck recommended that I: grant defendant Edward Greenberg ("Greenberg")'s motion for summary judgment pursuant to Fed. R. Civ. P. 56 on the Fair Credit Reporting Act claim; deny plaintiffs's motion to file a second amended complaint to assert a negligence claim against defendant Greenberg; dismiss plaintiffs' pendent state law invasion of privacy claim against defendant Greenberg without prejudice; *fn1" and deny defendant Vincent Parco ("Parco")'s motion for summary judgment. *fn2"

 Plaintiff Lucille Turecki ("Turecki") filed objections to the Report on February 19, 1997. *fn3" Accordingly, I review the sections of the Report to which plaintiff Turecki objects de novo pursuant to 28 U.S.C. § 636(b).

 Defendant Parco never objected to the Report. In conformity with Small v. Secretary of Health and Human Services, 892 F.2d 15, 16 (2d Cir. 1989), the Magistrate Judge's Report explicitly cautioned that failure to file timely objections could constitute a waiver of those objections. I therefore accept and adopt the Magistrate Judge's recommendation with respect to Parco's motion for summary judgment. See Thomas v. Arn, 474 U.S. 140, 88 L. Ed. 2d 435, 106 S. Ct. 466 (1985) (failure to file timely objections constitutes waiver of objections, and district court review not required).

 I. Discussion

 Familiarity with the facts of this case, which are clearly laid out in both the Report and in an earlier opinion, Berman v. Parco, 1996 U.S. Dist. LEXIS 11921, 96 Civ. 0375, 1996 WL 46579 (S.D.N.Y. Aug. 15, 1996), is assumed. In brief, this case arose in the aftermath of Turecki's contentious divorce from her ex-husband, Stanley Turecki. Turecki and Berman, Turecki's current husband, have sued Turecki's ex-husband's private investigator, Parco; Parco's company, International Investigations, Inc.; and Turecki's ex-husband's divorce attorney, Greenberg, for alleged violations the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq. ("FCRA"). The basis of the complaint comes from a report written by Parco and dated June 15, 1995 (the "June 15 Report"), that contained credit profiles of Turecki and Berman. This report was faxed to defendant Greenberg after a conversation between Parco and Greenberg, and was intended for use in the arbitration proceedings between Turecki and her ex-husband surrounding their divorce.

 In the sections of the Report to which plaintiff Turecki objects, Magistrate Judge Peck recommended that I find that although there were material facts at issue regarding whether a settlement agreement released defendants from these claims and whether defendant Parco willfully violated the FCRA, because there was no evidence that defendant Greenberg acted willfully, I should grant Greenberg's motion for summary judgment on the FCRA claim. Additionally, Magistrate Judge Peck recommended that I deny plaintiffs' "eleventh hour" attempt to amend the complaint to assert a negligence claim against Greenberg.

 Turecki has two main objections to Magistrate Judge Peck's Report. First, Turecki argues that Magistrate Judge Peck exceeded his authority in finding that Greenberg did not act willfully and recommending that I grant Greenberg's summary judgment motion. Second, she argues that it would be an abuse of this Court's discretion to deny her leave to amend her complaint to state a claim for negligent violation of the FCRA. I will discuss these objections in turn.

 A. Summary Judgment on Greenberg's Alleged Violation of FCRA §§ 1681n and 1681q

 The relevant sections of the FCRA *fn4" at issue in this case, prohibit the willful use of credit reports for improper purposes. *fn5" Specifically, Section 1681n provides that:

 

Any consumer reporting agency or user of information which willfully fails to comply with any requirement imposed under this subchapter with respect to any consumer is liable to that consumer in an amount equal to the sum of

 

(1) any actual damages sustained by the consumer as a result of the failure;

 

(2) such amount of punitive damages as the court may allow; and

 

(3) in the case of any successful action to enforce any liability under this section, the costs of the action together with reasonable attorney's fees as determined by the court.

 15 U.S.C. § 1681n. Section 1681q provides for criminal penalties:

 

any person who knowingly and willfully obtains information on a consumer from a consumer reporting agency under false pretenses shall be fined not more than $ 5,000 or imprisoned not more than one year, or both.

 15 U.S.C. § 1681q. Additionally, courts have found that a violation of Section 1681q can result in civil liability under Section 1681n. Comeaux v. Brown & Williamson Tobacco Co., 915 F.2d 1264, 1273 (9th Cir. 1990); Letscher v. Swiss Bank Corp., 1997 U.S. Dist. LEXIS 7909, 94 Civ. 8277 (LBS), 1997 WL 304895 at *3 (S.D.N.Y. June 5, 1997). *fn6"

 In Section III of his report, after a thorough review of the caselaw, Magistrate Judge Peck recommended that I find that defendants Greenberg and Parco constitute "user[s] of information" within the meaning of the Section 1681n of the FCRA. I adopt this recommendation, which was not challenged by either Greenberg or Parco. *fn7"

  However, Magistrate Judge Peck recommended that I grant defendant Greenberg summary judgment on the claim that he failed to comply with the requirements of the FCRA, because there was no evidence in the record that Greenberg acted willfully. Citing Letscher v. Swiss Bank Corp., 1996 U.S. Dist. LEXIS 4908, 94 Civ. 8277, 1996 WL 183019 at *7 (S.D.N.Y. April 16, 1996), Magistrate Judge Peck suggested that there was insufficient evidence presented that Greenberg had "knowingly and intentionally committed an act in conscious disregard for the rights of others." Magistrate Judge Peck pointed out that the only evidence in the record pertaining to Greenberg and the June 15 Report was that: (1) Greenberg did not hire Parco; (2) Greenberg had no knowledge of how Parco obtained the information in the June 15 Report; (3) Greenberg did not directly or indirectly direct Parco's work on the June 15 Report; and (4) Greenberg had no substantive discussions with Parco.

 Plaintiff argues that because Magistrate Judge Peck found that there was an issue of material fact as to whether Parco had willfully violated the FCRA, there must be an issue of material fact as to Greenberg as well, because he acted "in concert" with Parco. Additionally, plaintiff argues that because willfulness goes to the question of Greenberg's state of mind, it is not a proper issue to be decided on summary judgment. Finally, plaintiff argues that there was evidence to indicate that Greenberg acted willfully. I find these arguments to be without merit.

 The willfulness requirement of Section 1681n is synonymous with the requirement of intent in criminal statutes. See Pinner v. Schmidt, 805 F.2d 1258, 1263 (5th Cir. 1986) ("there is no evidence that [the defendants] knowingly and intentionally committed an act in conscious disregard for the rights of others."). Furthermore, because willful conduct allows successful plaintiffs to collect punitive damages, this requirement has been strictly applied in FCRA cases. See, e.g., Cushman v. Trans Union Corp., 115 F.3d 220, 226-27 (3rd Cir. 1997) (reviewing willfulness requirement of Section 1681n and holding that "to justify an award of punitive damages, a defendant's actions must be on the same order as willful concealments or misrepresentations").

 Plaintiff's argument that because Greenberg worked in concert with Parco, the Court need not find that Greenberg's conduct was willful is contrary to caselaw. *fn8" I note that in cases in which two or more defendants have allegedly breached Section 1681n, courts have found that plaintiffs must present evidence that each of the defendants acted willfully in order to sustain a claim against each of them. See, e.g., Yohay v. City of Alexandria Employees Credit Union Inc., 827 F.2d 967, 972 (4th Cir. 1987) ("each of the two users -- the Credit Union and Ryan -- is subject to civil liability under section 1681n if each user's individual non-compliance with section 1681b was willful."); accord Boothe v. TRW Credit Data, 557 F. Supp. 66, 71 (S.D.N.Y. 1982). Even if plaintiff could prove that defendants were working in concert (and at this point she has failed to provide evidence of this allegation), plaintiff still must offer evidence that all defendants willfully violated the FCRA. Cf Daley v. Haddonfield Lumber Inc., 943 F. Supp. 464, 468 (D.N.J. 1996) ("defendants admit that [person who requested credit report who was a club member] in fact sought and obtained the report at the request and for the benefit of [his co-defendant club] and that that report was filed in the club's manager's office."). Furthermore, because no evidence has been offered that Parco was working for Greenberg, a willfulness finding could not be based on any agency principle. Auriemma v. City of Chicago, 1990 U.S. Dist. LEXIS 2335, 86 Civ. 9260, 1990 WL 36774 at *3 (N.D.Ill. March 2, 1990) (granting summary judgment to defendants where plaintiff had failed to prove that official with authority either personally obtained credit reports or authorized an agent to obtain credit reports in violation of FCRA); cf. Millstone v. O'Hanlon Reports, Inc., 383 F. Supp. 269 (E.D.Mo. 1974) (finding defendant liable where agent included false information in credit report). Finally, even if Greenberg had requested the credit report from Parco, the FCRA, "does not, by its plain terms, place any duty upon persons to refrain from requesting consumer reports from individuals for purposes not authorized by the FCRA." Ippolito v. WNS, Inc., 864 F.2d 440, 448 (7th Cir. 1988). Accordingly, plaintiff's argument that I need not find that Greenberg acted willfully because he was working in concert with Parco is without merit. *fn9"

 Plaintiff's second argument, that a finding of willfulness is inappropriate for a summary judgment motion, also lacks merit. Courts in this circuit and in other circuits have routinely granted summary judgment in FCRA cases against plaintiffs who have failed to offer any evidence of willful conduct. See, e.g., Casella v. Equifax Credit Info. Servs., 56 F.3d 469, 476 (2d Cir. 1995); Philbin v. Trans. Union Corp., 101 F.3d 957, 970 (3rd Cir. 1996); Bloom v. I.C. System, Inc., 972 F.2d 1067 (9th Cir. 1992); Letscher 1997 W.L. 304895 at *3-4.

 Finally, plaintiff's argument that there is enough evidence to find that Greenberg acted willfully is also without merit. All the evidence presented in support of and against this motion indicates that Greenberg had no part in acquiring the credit report and had no knowledge of how Parco obtained it. Simple hope that a jury will not believe the testimony of defendants that has been submitted in support of a summary judgment motion will not defeat the motion where there has been no affirmative evidence submitted to counter the defendants' evidence. See, e.g., Goldhirsh Group, Inc. v. Alpert, 107 F.3d 105, 109 (2d Cir. 1997) ("'if all of the witnesses deny that an event essential to the plaintiff's case occurred, the plaintiff cannot get to the jury simply because the jury might disbelieve these denials. There must be some affirmative evidence that the event occurred.'") (citations omitted).

 Accordingly, I adopt Magistrate Judge Peck's recommendation that I grant defendant Greenberg summary judgment on the FCRA claim because there has been no evidence presented that Greenberg willfully failed to comply with the FCRA.

 B. Plaintiffs' Motion to Amend the Complaint

 Plaintiffs attempted to amend their complaint in September 1996. Specifically, they wanted to add a claim against Greenberg for negligent noncompliance with the FCRA pursuant to Section 1681o in light of their probable difficulty of proving willful conduct. Section 1681o allows actual damages and reasonable attorney's fees for "any consumer reporting agency or user of information which is negligent in failing to comply with any requirement imposed under this subchapter with respect to any consumer." 15 U.S.C. § 1681o.

  The Federal Rules of Civil Procedure provide that leave to amend "shall be freely given," Fed. R. Civ. P. 15(a), and, as the Supreme Court has held, "this mandate is to be heeded." Foman v. Davis, 371 U.S. 178, 182, 9 L. Ed. 2d 222, 83 S. Ct. 227 (1962). However, there are valid reasons for denying a plaintiff leave to amend; they include: undue delay, bad faith, or the futility of the amendment. Mackensworth v. S.S. American Merchant, 28 F.3d 246, 251 (2d Cir. 1994) (citing Foman, 371 U.S. at 182).

 Magistrate Judge Peck recommended that I deny plaintiffs leave to amend their complaint. He found that plaintiffs had delayed unduly, and that an amendment at this late date and at the close of discovery would prejudice defendant Greenberg, who had been conducting discovery based on a willfulness claim as opposed to a negligence claim. Additionally, he found that plaintiffs failed to offer an adequate explanation for why they had missed the deadline for amending pleadings by more than two months, especially when they should have known to bring a negligence claim as soon as defendant Greenberg answered the complaint and alleged that he never hired Parco.

 Plaintiffs argue that the reason they waited so long to request leave to amend their amended complaint was because defendant Greenberg was delinquent in responding to discovery requests. They point out that they requested leave to amend their complaint on the same day that they finished deposing Greenberg and learned additional facts about his relationship with Parco. Plaintiffs also point out that at a conference on September 13, 1996, when plaintiffs requested leave to move to amend their complaint to add the negligence claim, defendant failed to identify any way in which he would be prejudiced by the addition of this claim when questioned by Magistrate Judge Peck. (Tr. Conf. before Mag. J. Peck.)

 Although I am sympathetic to plaintiffs' complaints regarding defendant Greenberg's delinquence in responding to discovery requests, I concur with Magistrate Judge Peck's recommended findings that defendant Greenberg would be prejudiced by the addition of this claim, and that plaintiffs should have added this claim as soon as they received their answer, if not before. As Magistrate Judge Peck points out, it is common for plaintiffs to allege alternative intent requirement claims at the commencement of a case. See, e.g., Letscher, 1996 W.L. 183091 at *6-7 (pro se plaintiff alleged both willful and negligent violations of FCRA).

 Additionally, I am denying plaintiffs' motion to amend because it would be futile. Initially, I note that under Section 1681o, plaintiffs can recover actual damages and attorney's fees only. Plaintiffs have not indicated that they have suffered any actual damages from Greenberg's use of the credit report. More importantly, I find that Section 1681o, unlike Section 1681n, does not provide for civil liability under Section 1681q because Section 1681q requires willful conduct and Section 1681o requires negligent conduct only. See, Ippolito, 864 F.2d at 448 ("we have serious doubts as to whether merely negligently requesting a consumer report violates the FCRA. . . the statute does not . . . appear to impose any liability upon a person merely for "negligently causing" a consumer report to be prepared for an impermissible purpose"); Kennedy v. Border City Savings and Loan Ass'n, 747 F.2d 367, 368 (6th Cir. 1984) ("Since violation of Section 1681q occurs only when an individual acts knowingly and willfully, Section 1681n rather than 1681o is the proper vehicle for civil liability violations of 1681q"); Letscher, 1996 W.L. 183019 at *6 (finding it would be a "logical impossibility" for one to be able to "negligently violate a provision requiring willful conduct"). Accordingly, plaintiff would not be able to recover damages on the theory that Greenberg negligently used information which was obtained for an improper purpose, or that "Greenberg was negligent in failing to acquaint himself with Parco's activities and ensure that he acted within the law," which is plaintiffs' stated goal in serving a second amended complaint. (Kresky Decl. in support of Mot. to Amend Am. Compl. PP 16, 17.)

 Accordingly, I am denying plaintiffs leave to amend their amended complaint

  II. Conclusion

 For the reasons stated above, I hereby grant defendant Greenberg's motion for summary judgment, deny defendant Parco's motion for summary judgment, deny plaintiffs' motion for leave to amend their complaint, and dismiss the state law invasion of privacy claim against defendant Greenberg. The parties should submit a joint pre-trial order on December 1, 1997, and will be marked ready for trial December 2, 1997.

 SO ORDERED.

 DATED: New York, New York

 November 19, 1997

 Kimba M. Wood

 United States District Judge


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