Johnny L. Bakker, Teresa Bakker, Carrie Ann Bakker v. Laura J. McKinnon
1998 U.S. App. LEXIS 20505, 1998 WL 514652, 152 F.3d 1007 (1998)
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Rule of Law:
Obtaining a credit report on an opposing party in litigation to determine their ability to satisfy a potential judgment is not a permissible purpose under the Fair Credit Reporting Act (FCRA). The "legitimate business need" exception requires a consumer relationship between the requester and the subject of the report.
Facts:
- Laura J. McKinnon, an attorney, represented several women in dental malpractice lawsuits against Dr. Johnny L. Bakker.
- The lawsuits alleged that Dr. Bakker had improperly touched the women during dental treatments.
- During the litigation, McKinnon was informed that Dr. Bakker's insurance company was defending him under a reservation of rights, creating uncertainty about coverage.
- McKinnon, or someone in her law office, obtained a credit report on Dr. Bakker to determine if he was 'judgment proof,' meaning whether he had sufficient assets to pay a potential judgment.
- McKinnon later obtained a second credit report on Dr. Bakker and also obtained credit reports on his two adult daughters, Teresa and Carrie Ann Bakker.
- McKinnon claimed she obtained the daughters' reports to investigate whether Dr. Bakker was transferring assets to them.
- There was no consumer credit, insurance, employment, or other business relationship between McKinnon and the Bakkers.
Procedural Posture:
- Dr. Johnny L. Bakker and his two daughters (appellees) sued attorney Laura J. McKinnon (appellant) in the U.S. District Court for the Western District of Arkansas.
- The complaint alleged that McKinnon had violated the Fair Credit Reporting Act (FCRA) by requesting their consumer credit reports without a permissible purpose.
- McKinnon filed a motion for summary judgment, arguing her actions were permissible, which the district court denied.
- The case proceeded to a bench trial solely on the issue of damages.
- The trial court found that McKinnon had intentionally and willfully violated the FCRA.
- The district court awarded each of the three appellees $500 in actual damages and $5,000 in punitive damages, plus attorney's fees.
- McKinnon appealed the final judgment to the United States Court of Appeals for the Eighth Circuit.
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Issue:
Does an attorney have a permissible purpose under the Fair Credit Reporting Act (FCRA) to obtain the credit report of an opposing party and his family in a lawsuit to determine their ability to satisfy a potential judgment?
Opinions:
Majority - McMillian, J.
No. An attorney does not have a permissible purpose under the FCRA to obtain an opposing party's credit report solely to assess their ability to pay a potential judgment, as this does not constitute a 'legitimate business need' absent a consumer transaction between the parties. First, the court held that the reports were 'consumer reports' under the FCRA. This classification is governed by the purpose for which the information was originally collected by the credit reporting agency (i.e., for credit, insurance, or employment purposes), not by the user's intended purpose. Second, the court rejected McKinnon's argument that she had a 'legitimate business need' under 15 U.S.C. § 1681b(3)(E). The court adopted a narrow interpretation, holding that this exception requires a consumer relationship between the party requesting the report and the subject of the report. Because McKinnon and the Bakkers were only adversaries in litigation and had no such consumer relationship, the exception did not apply. The court found that using a credit report to evaluate an opponent's litigation assets is not a permissible purpose under the Act. The court also affirmed the award of punitive damages, finding that McKinnon's actions constituted a willful violation of the FCRA, which requires only a knowing and intentional act in conscious disregard for the rights of others, not malice or evil motive.
Analysis:
This decision significantly clarifies the scope of the pre-1996 'legitimate business need' exception under the FCRA, establishing that litigation is not a 'business transaction' that permits access to an opponent's credit history. The ruling serves as a strong deterrent to attorneys considering using credit reports as a litigation tactic to gain leverage or assess an adversary's financial standing. By focusing on the collector's purpose rather than the user's, the court reinforced the consumer-protection goals of the Act, preventing the statute's exceptions from being used as loopholes for purposes unrelated to consumer eligibility. This case sets a clear precedent that the FCRA's privacy protections extend to individuals involved in litigation, shielding their consumer credit information from their legal opponents.
