The Honorable Pasco M. Bowman succeeded the Honorable Richard S. 1

Arnold as Chief Judge of the United States Court of Appeals for the

Eighth Circuit at the close of business on April 17, 1998.

United States Court of Appeals

FOR THE EIGHTH CIRCUIT

___________

No. 97-3267

___________

Johnny L. Bakker, Teresa Bakker, *

Carrie Ann Bakker, *

*

Appellees, *

* Appeal from the United States

v. * District Court for the 

* Western District of Arkansas

Laura J. McKinnon, *

*

Appellant. *

___________

 Submitted: March 11, 1998

 Filed: August 21, 1998

___________

Before McMILLIAN, FAGG and BOWMAN, Circuit Judges. 1

___________

McMILLIAN, Circuit Judge.
The Honorable H. Franklin Waters, United States District Judge for the Western 2

District of Arkansas.

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Laura J. McKinnon, an attorney, appeals from a final judgment entered in the

United States District Court for the Western District of Arkansas, following a bench 2

trial, finding that she had intentionally and willfully violated the Fair Credit Reporting

Act (FCRA or the Act), 15 U.S.C. § 1681 et seq. Bakker v. McKinnon, Civil

No. 96-5112 (W.D. Ark. July 21, 1997) (mem. op.). The district court awarded to each

appellee, Dr. Johnny L. Bakker and his two daughters, Teresa Bakker and Carrie Ann

Bakker, $500 in compensatory damages and $5,000 in punitive damages. For reversal,

appellant contends that the district court erred in finding that she violated the FCRA

and in awarding an unreasonable amount for punitive damages. 

The district court has subject matter jurisdiction pursuant to 28 U.S.C. § 1331

(federal question). This court has jurisdiction pursuant to 28 U.S.C. § 1291. The

notice of appeal was timely filed pursuant to Fed. R. App. P. 4(a). For the reasons

given herein, we affirm the judgment of the district court.

I

In September 1996 appellees Dr. Johnny L. Bakker, who is a dentist, and his

adult daughters, Teresa Bakker and Carrie Ann Bakker, filed this lawsuit alleging that

appellant had requested several consumer credit reports about them from a local credit

bureau in violation of the FCRA. Appellant represents several women patients of Dr.

Bakker who claimed that Dr. Bakker had committed dental malpractice by improperly

touching them during the course of dental treatments. Appellant filed lawsuits in state

court on behalf of these women against Dr. Bakker. 

The district court found that appellant and her associates had engaged in

numerous acts which, in the district court’s view, “grossly crossed the line in respect
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to what is proper in conducting litigation.” Mem. op. at 2 (footnote omitted).

Basically, the district court concluded that appellant and her associates had requested

the credit reports as part of the litigation process to force a settlement. Id. at 3-9. The

district court noted that a speaker at a meeting of the Arkansas Trial Lawyer’s

Association (of which appellant was a member of the board of governors and a former

president) had recommended that consumer credit reports be routinely obtained against

defendants or prospective defendants. Id. at 7.

Appellant admitted that she (or, more precisely, someone in her office) obtained

the credit reports, but she argued that (1) she obtained them for a commercial or a

professional purpose and, thus, the credit reports were not consumer credit reports

within the meaning of the FCRA, 15 U.S.C. §§ 1681a(d), 1681b, or (2) in the

alternative, assuming the credit reports were consumer reports within the meaning of

the FCRA, she had a legitimate business need for requesting them, id. § 1681b(3)(E).

Dr. Bakker’s attorney had informed appellant that CNA Insurance Co. was defending

Dr. Bakker under reservation of rights letters. Appellant testified that she obtained the

credit reports about Dr. Bakker and his daughters in order to determine whether he was

judgment proof and whether he was transferring his assets to his daughters. Appellant

filed a motion for summary judgment, alleging that the credit reports were not consumer

reports or, in the alternative, they were obtained for a legitimate business need. The

district court denied the motion for summary judgment, holding that the credit reports

were consumer reports within the meaning of the FCRA. Order at 5-7 (Apr. 25, 1997)

(order denying defendant's motion for summary judgment). The district court decided

that the key is the purpose for which the information was collected, not the use to

which the information contained therein is put. Id. at 6, citing St. Paul Guardian Ins.

Co. v. Johnson, 884 F.2d 881, 883 (5th Cir. 1989) (St. Paul Guardian). Here, the credit

reports apparently consisted primarily of a listing of outstanding credit card and similar

debts. Mem. op. at 9. The district court also rejected appellant’s legitimate business

need argument because she and appellees were not involved in a business transaction

within the meaning of the FCRA. Order at 7. The district court rejected the “broad”
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interpretation of “business transaction” and instead limited “business transaction” to

consumer credit, insurance or employment transactions. Id.; see Ippolito v. WNS, Inc.,

864 F.2d 440, 451 (7th Cir. 1988), cert. dismissed, 490 U.S. 1061 (1989). The district

court also noted that appellant's reason for obtaining the credit reports was not a

“business need” within the meaning of the FCRA because “[d]etermining whether an

adverse party in litigation will be able to satisfy a judgment is plainly a purpose

unrelated to ‘an individual’s eligibility for credit, insurance or employment.’” Order at

8, citing Mone v. Dranow, 945 F.2d 306, 308 (9th Cir. 1991) (per curiam) (citing

cases).

Before trial, the district court had advised the attorneys that, in light of its

previous rulings, the only issue left for trial was damages. Mem. op. at 12. Appellees

testified about how appellant's wrongful requests for their credit reports had violated

their privacy. The district court found that appellant and her associates had willfully

violated the FCRA, 15 U.S.C. § 1681q, by requesting consumer reports on appellees

in “a blatant attempt to extract a settlement from the insurance carrier for Dr. Bakker

by whatever means were at hand.” Id. at 14. The district court characterized the

multiple requests for credit reports as part of a “vendetta” pursued by appellant and her

associates against Dr. Bakker and his family to harass and coerce them into settling the

litigation. The district court awarded each appellee actual damages in the amount of

$500 and punitive damages in the amount of $5,000. Id. at 16-17. Subsequently, the

district court awarded appellees attorney’s fees and costs. Order at 1-2 (Aug. 12,

1997) (order granting plaintiffs' motion for attorney's fees and costs). This appeal

followed. 

II

Appellant first argues that the district court erred in denying her motion for

summary judgment because she did not violate the FCRA as a matter of law. Although

we do not believe appellant properly preserved this issue for appellate review, we need
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not decide that issue because the denial of summary judgment is interlocutory in nature

and not appealable after a full trial on the merits; judgment after a full trial on the merits

supersedes earlier summary judgment proceedings. Metropolitan Life Ins. Co. v.

Golden Triangle, 121 F.3d 351, 354 (8th Cir. 1997), citing Johnson Int’l Co. v. Jackson

Nat’l Life Ins. Co., 19 F.3d 431, 434 (8th Cir. 1994).

III.

Appellant argues the district court erred in finding that she violated the FCRA.

Appellant argues she requested the credit reports in the course of a commercial or

professional transaction, that is, in her capacity as an attorney representing clients in

litigation, and not in connection with any type of consumer transaction involving

appellees’ credit, insurance or employment. Appellant argues that credit reports

obtained in connection with commercial or professional transactions are not covered

by the FCRA. Appellant also argues that there was no evidence that she obtained the

credit reports under false pretenses. In the alternative, appellant argues that, assuming

for purposes of analysis that the credit reports are consumer reports within the meaning

of the FCRA, she did not violate the FCRA because she had a legitimate “business

need” for obtaining them within the meaning of 15 U.S.C. § 1681b(3)(E). We do not

agree.

The underlying facts are not substantially disputed. Whether the credit reports

were consumer reports and, if so, whether the business need exception applies are

questions of statutory interpretation of the FCRA. The district court found that

appellant had engaged in numerous acts, which in its view, grossly crossed the line in

respect to what is proper in conducting litigation; during the litigation against Dr.

Bakker, appellant had attempted to “dig up as much dirt” as possible about appellees

without regard to its relevance; appellant had threatened to destroy and ruin Dr.

Bakker’s dental practice through litigation and publicity; and appellant had improperly

accused Dr. Bakker of being a child molester. Mem. op. at 2-8 (citing letters dated
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January 23, 1992, and February 14, 1992). The district court found that appellant’s

reason for obtaining the credit reports was a blatant attempt to coerce a settlement from

Dr. Bakker's insurance carrier.

When appellant obtained the credit reports in September 1995 and April 1996,

15 U.S.C. § 1681b(3) provided in part that 

any consumer reporting agency may furnish a consumer report under

the following circumstances and no other:

. . . .

(3) To a person which it has reason to believe--

(A) intends to use the information in connection with a credit

transaction involving the consumer on whom the information is to be

furnished and involving the extension of credit to, or review or

collection of an account of, the consumer; or 

(B) intends to use the information for employment purposes; or

(C) intends to use the information in connection with the

underwriting of insurance involving the consumer; or

(D) intends to use the information in connection with a

determination of the consumer’s eligibility for a license or other benefit

granted by a governmental instrumentality required by law to consider

an applicant’s financial responsibility or status; or 

(E) otherwise has a legitimate business need for the information

in connection with a business transaction involving the consumer. 

In 1996 § 1681b was amended and the “business need” exception was renumbered

as § 1681b(a)(3)(F). That subsection now provides that a party may obtain a report

if it “otherwise has a legitimate business need for the information–– (i) in connection

with a business transaction that is initiated by the consumer; or (ii) to review an

account to determine whether the consumer continues to meet the terms of the

account.” Consumer Credit Reform Act of 1996, Pub. L. No. 104-208, § 2403, 110

Stat. 3009, 3009-430 (1996). Because the 1996 amendment does not apply here (its

effective date was 365 days after September 30, 1996), our statutory analysis
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does not consider it. See Duncan v. Handmaker, No. 96-6523, 1998 WL 292256, at *2

n.3 (6th Cir. June 8, 1998) (noting 1996 amendment arguably restricts scope of

business need exception), citing Northrop v. Hoffman of Simsbury, Inc., 134 F.3d 41,

45 n.5 (2d Cir. 1997).

Appellant testified that she obtained the credit report on Dr. Bakker seeking

information concerning his ability to satisfy a judgment if the parties settled the

underlying litigation. She admitted that the first credit report did not contain any such

information. Yet, she subsequently obtained a second credit report on Dr. Bakker and

his two daughters. Her explanation for obtaining credit reports on Dr. Bakker’s

daughters was to see if Dr. Bakker was transferring assets to his daughters. Appellant

gave no explanation why she thought the later reports might provide helpful information

even though the earlier report had not done so. Mem. op. at 9-10. 

Appellant argues that, because she obtained the credit reports in connection with

the underlying litigation against Dr. Bakker, they were obtained for a commercial or

professional use and not in connection with a consumer transaction. Thus, she

contends that the credit reports are not consumer reports covered by the FCRA. The

district court rejected this argument, holding that appellant’s alleged purpose did not

alter the fact that the credit reports in question were consumer reports within the

meaning of the Act. Order at 5. The definition of “consumer reports” under the Act

is “limited to information that is ‘used or expected to be used or collected’ in

connection with a ‘business transaction’ involving one of the ‘consumer purposes’ set

out in the statute, that is, eligibility for personal credit or insurance, employment

purposes, and licensing.” Ippolito v. WNS, Inc., 864 F.3d at 451.

We hold that, regardless of appellant’s intended use of the credit reports, these

reports are consumer reports within the meaning of the FCRA because the information

contained therein was collected for a consumer purpose. Under the FCRA whether a

credit report is a consumer report does not depend solely upon the ultimate use to
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which the information contained therein is put, but instead, it is governed by the

purpose for which the information was originally collected in whole or in part by the

consumer reporting agency. St. Paul Guardian, 884 F.2d at 883-84. 

In other words, even if a report is used or expected to be used for a nonconsumer purpose, it may still fall within the definition of a consumer

report if it contains information that was originally collected by a

consumer reporting agency with the expectation that it would be used for

a consumer purpose. 

Ippolito v. WNS, Inc., 864 F.3d at 453. Furthermore, appellant’s contract with the

Credit Bureau of Fayetteville/Springdale indicated that the reports were subject to the

Act and that she agreed that she would only request the information when she intended

to use the information in relation to consumer purposes identical to those set out in the

Act, i.e., eligibility for personal credit or insurance, employment purposes and licensing

or a business transaction involving the consumer.

Next, appellant contends pursuant to § 1681b(3)(E) that she had a legitimate

business need for the credit reports. Appellees, of course, argue that appellant failed

to articulate a legitimate business need within the Act’s exception. We hold that

appellant cannot be said to have a legitimate business need within the meaning of the

Act unless and until she can prove or establish that she and appellees were involved in

a business transaction involving a consumer. In order to be entitled to the business

need exception found in § 1681b(3)(E), the business transaction must relate to “a

consumer relationship between the party requesting the report and the subject of the

report” regarding credit, insurance eligibility, employment, or licensing. Houghton v.

New Jersey Mfrs. Ins. Co, 795 F.2d 1144, 1149 (3d Cir. 1986). Appellant admits that

she and appellees were not involved in any consumer transaction involving the

extension of credit, insurance, employment, or licensing. Thus, no consumer

relationship existed between appellant, the party requesting the reports, and appellees,

the subjects of the reports, and the business need exception did not apply. We also
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reject appellant's argument that , as an attorney representing clients in litigation, she had

a business need to obtain credit reports on the opposing parties. See Duncan v.

Handmaker, 1998 WL 292256, at *2-3; cf. Mone v. Dranow, 945 F.2d at 308

(employer's obtaining credit report for purpose of determining whether employee would

be able to satisfy judgment was not for lawful purpose).

Finally, we consider appellant’s argument that the punitive damages award was

unreasonable. Title 15 U.S.C. § 1681q provides criminal penalties for knowingly and

willfully obtaining a credit report under false pretenses. A violation of this criminal

statute is a violation of any requirement imposed under the subchapter within the

meaning of §§ 1681n and 1681o. Hansen v. Morgan, 582 F.2d 1214, 1218 (9th Cir.

1978) (violation of § 1681q forms a basis of civil liability under §§ 1681n and 1681o).

Therefore, obtaining a credit report under false pretenses creates civil liability under the

FCRA. Where civil liability exists because of a willful failure to comply with the

requirements of the Act, the consumer may recover (1) any actual damages sustained

by the consumer as a result of the failure; (2) such punitive damages as the court may

allow; and (3) in the case of any successful action to enforce 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(a).

Therefore, the question becomes whether the evidence showed that appellant’s

and her associates’ conduct in obtaining the reports was willfully done. “To show

willful noncompliance with the FCRA, [the plaintiff] must show that [the defendant]

‘knowingly and intentionally committed an act in conscious disregard for the rights of

others,’ but need not show ‘malice or evil motive.’” Cushman v. Trans Union Corp.,

115 F.3d 220, 226 (3d Cir. 1997), citing Philbin v. Trans Union Corp., 101 F.3d 957,

970 (3d Cir. 1996) (citing Pinner v. Schmidt, 805 F.2d 1258, 1263 (5th Cir. 1986), cert.

denied, 483 U.S. 1022 (1987)); accord Thornton v. Equifax, Inc., 619 F.2d 700, 705

(8th Cir.), cert. denied, 449 U.S. 835 (1980). In Millstone v. O’Hanlon Reports, Inc.,

528 F.2d 829 (8th Cir. 1976) (O'Hanlon), an opinion written by Associate Justice Tom
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C. Clark, sitting by designation, the credit reporting agency had produced a report on

the plaintiff which was filled with inaccuracies. There was evidence that the

defendant’s agent did a sloppy job because he had only devoted, at most, 30 minutes

to prepare the report. Justice Clark concluded that the defendant had willfully violated

both the spirit and the letter of the FCRA by “trampling recklessly” upon the plaintiff's

rights thereunder, upheld the recovery of damages for “mere mental pain and anxiety,”

and also held that the trial court was acting within its discretion when it awarded

punitive damages. Id. at 834-35. “Actual damages are not a statutory prerequisite to

an award of punitive damages under the [FCRA].” Yohay v. City of Alexandria

Employees Credit Union, Inc., 827 F.2d 967, 972 (4th Cir. 1987) (noting an award of

punitive damages in the absence of any actual damages, in an appropriate case,

comports with the underlying deterrent purpose of FCRA).

Here, the district court found that at the very early stages of the underlying

litigation, appellant and her associates set out upon a course of conduct, which in the

words of O’Hanlon, 528 F.2d at 835, “willfully violated both the spirit and the letter of

the Fair Credit Reporting Act . . . by trampling recklessly upon [appellees’] rights

thereunder.” That conduct was obviously a blatant attempt to extract a settlement from

Dr. Bakker’s insurance carrier, without regard to whether such conduct was fair or a

clear violation of Rule 4.4 of the Arkansas Rules of Professional Conduct.

The district court further found that appellant intentionally and egregiously

threatened Dr. Bakker with loss of his profession, both by the destruction of his name

and by forfeiture or suspension of his dental license. Appellant’s conduct included

allegations that Dr. Bakker and his wife had been involved in child molestation matters,

allegations that could have had a devastating effect upon their lives even if false.

Finally, the district court found that appellant’s multiple requests for credit reports on

Dr. Bakker and his daughters were designed and intended to carry on the “vendetta”

that appellant's law firm pursued against appellees.
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While it is true that appellees were not able to produce any actual out-of-pocket

expenses or costs incurred as a result of appellant's willful conduct, appellees testified

about how they felt when appellant obtained their credit reports and violated their

privacy, thereby causing them some emotional distress. We hold that the district court

did not abuse its discretion in awarding appellees actual and punitive damages.

Accordingly, the judgment of the district court is affirmed.

A true copy.

Attest:

 CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.