5th Cir. Says FCRA Does Not Cover Commercial Losses; Requires Something More to Prove Non-Economic Losses

In Bacharach v. Suntrust Mortgage, Incorporated, 2016 WL 3568059, at *1-2 (C.A.5 (La.), 2016), the Court of Appeals for the Fifth Circuit held that the FCRA does not provide protection against commercial losses.

Bacharach argues that due to SunTrust’s alleged FCRA violations that resulted in the reporting of misinformation to various credit agencies, she was unable to purchase property at 2841 Magazine Street that abuts her personal residence. The FCRA was implemented “to protect an individual from inaccurate or arbitrary information about himself in a consumer report.” Pinner v. Schmidt, 805 F.2d 1258, 1261 (5th Cir. 1986). “Numerous courts have concluded that the FCRA does not cover reports used or expected to be used only in connection with commercial business transactions.” Hall v. Phenix Investigations, Inc., No. 15–10533, ––– F.3d ––––, ––––, 2016 WL 1238602, at *3 (5th Cir. Mar. 29, 2016) (unpublished) (collecting cases); see also Ippolito v. WNS, Inc., 864 F.2d 440, 452 (7th Cir. 1988) (“In enacting the FCRA, Congress sought to regulate the dissemination of information used for consumer purposes, not business purposes.”); Matthews v. Worthen Bank & Tr. Co., 741 F.2d 217, 219 (8th Cir. 1984) (noting that the “[FCRA] was intended to apply only to reports which relate to the consumer’s eligibility for personal credit or other commercial benefits as a consumer, and not to the consumer’s business transactions” (citation omitted)). Moreover, courts have specifically held that real estate investment losses due to allegedly inaccurate credit information are not within the scope of the FCRA. See Podell v. Citicorp Diners Club, Inc., 914 F.Supp. 1025, 1036 (S.D.N.Y. 1996), aff’d, 112 F.3d 98 (2d Cir. 1997).  Bacharach’s failed purchase of property at 2841 Magazine Street was an attempted commercial transaction and is therefore not within the scope of the FCRA. Bacharach, who testified that she was a real estate investor in the business of “buying and flipping or buying and fixing up real estate,” also stated that she intended to purchase the property to “rent it out and get the rental income.” Indeed, Bacharach seeks as damages the lost rental income she could have earned had she successfully purchased the property. The district court did not err in categorizing these real estate investment losses as a related to a failed “commercial business transaction[ ]” that falls outside the scope of the FCRA. See Hall, ––– F.3d at ––––, 2016 WL 1238602 at *3.

The Court of Appeals also found that the Plaintiff failed to demonstrate enough to recover non-economic loss.

Bacharach also contends that she is entitled to emotional distress damages resulting from the stress and anxiety of “fighting SunTrust.” Even if we were to assume arguendo that Bacharach has pleaded sufficient facts to support liability under the FCRA as a predicate to emotional distress damages, she fails to create a material fact issue with respect to the existence of such damages. The FCRA permits “recovery for humiliation and mental distress and for injury to one’s reputation and creditworthiness.” Sapia v. Regency Motors of Metairie, Inc., 276 F.3d 747, 753 (5th Cir. 2002). However, a claim related to emotional distress requires a “degree of specificity” and “must be supported by evidence of genuine injury,” such as “the observations of others,” “corroborating testimony,” or “medical or psychological evidence.” Cousin v. Trans Union Corp., 246 F.3d 359, 371 (5th Cir. 2001); see also Vadie v. Miss. State Univ., 218 F.3d 365, 376 (5th Cir. 2000) (noting that to prove emotional distress, a plaintiff must show a “specific discernable injury to the [plaintiff’s] emotional state, proven with evidence regarding the nature and extent of the harm” (citation omitted)).  We have previously held that a plaintiff’s testimony that he or she was “upset,” “hurt,” “angry,” “paranoid,” or “frustrated” was insufficient to support an award of actual damages for emotional distress. Cousin, 246 F.3d at 371. Here, the only evidence of emotional distress that Bacharach points to is her own vague and conclusory deposition testimony, where she stated that she was a “complete wreck,” and that, while unable to “recall exactly,” she had seen a number of medical professionals due to her “anxiety and stress.” This uncorroborated testimony lacks specificity and fails to show the nature and extent of the actual emotional harm; it does not satisfy the standards set in our precedents. As such, this testimony does not raise a material fact issue sufficient to overcome summary judgment as to the claim of emotional distress. Id. (vacating jury award for emotional distress in a FCRA case).