### IN THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT

No. 15

- 10533

KELLY HALL; JOHN CROWDER, JR.,
Plaintiffs

- Appellants

v. PHENIX INVESTIGATIO NS, INCORPORATED; WOOD, THACKER ; WEATHERLY, P.C.; R. WILLIAM WOOD; C. JANE THACKER; SAMUEL B. BURKE,
Defendants

- Appellees

Appeal from the United States District Court for the Northern District of Texas USDC No. 3:14

- CV

- 665

Before STEWART , Chief Judge, and OWEN and C OSTA , Circuit Judges

. PER CURIAM: * Ke lly Ha ll and John Crowder, Jr. sued Phenix Investigations, Inc. and the Law Firm Defendants 1 for violat ions of the Fair Credit Reporting Act (FCRA) and the Fair Debt Collection Practices Act (FDCPA)

. The complaint

* Pursuant to 5 TH C IR . R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5 TH C IR . R. 47.5.4.

1 The Law Firm Defendants are Wood, Thacker & Weatherly, P.C., and Samuel B. Burke, R . William Wood, C. Jane Thacker , who are all attorneys at the firm. United States Court of Appeals Fifth Circuit 

### FILED March 29, 2016 Lyle W. Cayce Clerk Case: 15-10533 Document: 00513443431 Page: 1 Date Filed: 03/29/2016No. 15

- 10533

2 alleges that the Law Firm Defendants hired P henix to gather information about the Plaintiffs’ financial assets. As part of that process, Phen i x allegedly contacted two banks and impersonated Plaintiffs in order to obtain information about their accounts. The district court dismissed the lawsuit at the pleading stage , finding that Plaintiffs had not sufficiently alleged that Phenix’s reports

were consumer reports under the FCRA and that the FDCPA did not apply because any debt the Defendan ts were trying to collect was commercial rather than consumer in nature. For the reasons that follow, we AFFIRM. I. This federal suit was a response to two state lawsuits. In the first, Carroll Family Investments, Ltd, o btained a state court judgment against Texas Wing 2 corporate entities for $869,950 . That case involved a commercial lease dispute that arose from the asset sale of multiple Hooter’s restaurant s
. While the first lawsuit was making its way through the app ellate process (it is now final), Carroll filed a second lawsuit agains t Hall and Crowder, both of whom were Texas Wing investors. Carroll alleged that Hall and Crowder fraudulently transferred money from Texas Wing to their own personal accounts in order to avoid paying the judgment owe d from the prior suit. It was in connection with this second law suit that the Law Firm Defendants allegedly hired Phenix Investigations to obtain Hall and Crowder’s financial information . The Law Firm Defendants then use d this information to obtain a temporary restraining order and temporary injunction that prevented Hall and Crowder from disposing of any funds held at certain banks and also required them to each maintain a minimum balance in the ir accounts

. The

2 For simplicity, this Opinion uses Texas Wing to refer jointly to Texas Wing, Inc. and TWI XVIII, Inc., which are related corporate entities. The judgment was issued against both compan ies. Case: 15-10533 Document: 00513443431 Page: 2 Date Filed: 03/29/2016No. 15

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3 partie s ultimately settled th e transfer lawsuit

. That brings us to the lawsuit before this court that raises the FCRA and FDCPA claims

. The Law Firm Defendants and Phen i x each filed Rule 12(b)(6) motions to dismiss

. Before the district court ruled on the motio ns, the Plaintiffs repleaded on their own initiative. The Defendants again filed motions to dismiss. The district court dismissed the claims , but gran ted Plaintiffs leave to amend. A nother round of motions to dismiss followed Plaintiffs’ third complaint

. T h e district court found that the pleading defects had still not been cured and dismissed the case

. II. We review the Rule 12(b)(6) dismissal de novo , viewing well

- pleaded factual allegations as true and “ in t he light most favorable to the p laintiff [ s ] , ” making all reasonable inferences in th eir favor. R2 Invs

. LDC v. Phillips , 401 F.3d 638, 642 (5th Cir. 2005). But that standard does not allow a court to accept “conclusory allegations, unwarranted deductions, or legal conclusions.” Id. ; s ee also Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009). Among other elements required to state a n FCRA claim , Plaintiffs must allege that there was a “ consumer report. ” 15 U.S.C. § 1681 b

. The statute defines “consumer report” in a way you might expect ; it includes information by a consumer reporting agency bearing on a consumer’s credit worthiness, credit sta nding, and so forth , for the purpose of determining the consumer’s eligibility for credit or insurance

. But consumer reports may serve additional
purp oses under the Act, including the purpose Plaintiffs invoke: “collection of
an account of [] the consumer .” See 15 U.S.C. § § 1681a , 1681b. T he live pleading alleges that Phe nix’s reports qualify as consumer reports because they are related to debt collec tion

. In support, Plaintiffs point to Phenix’s websit e, which states that it provides “ litigation support ” services, including “ debt collection. ” Their theory is that because Phenix prepared a Case: 15-10533 Document: 00513443431 Page: 3 Date Filed: 03/29/2016No. 15

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4 report for litigat ion support , which according to its own advertising might include deb t collection activities, the report qualifies as a consumer report

. 3 The problem with this argument is that it assumes that because Phenix’ s litigation support activities sometimes include potentially qualifying purposes under the A ct, that it therefore included a qualifying purpose in Plaintiffs’ case. Without any factual connection to collection of a consumer account in their actual case, the Plaintiffs have only made a conclusory allegation

. A s the district court explained , it is not reasonable to infer that the report was made for such a purpose because the Plaintiffs conceded in their complaint that the report was commissioned for use in ongoing commercial litigation, which is not a qualifying purpose

. See Ippolito v. WNS , Inc. , 864 F.2d 440 445, 450

– 54 (7th Cir. 1988) , abrogated on other grounds by Safeco Ins. Co. of Amer

. v. Burr , 551 U.S. 47 (2007) ( recognizing that use of report s in trademark litigation is a commercial purpose and therefore cannot constitute “consum er reports” under the Act ) ; see also Cavaliere v. Burke , 50 F.3d 1033 , at * 3

– 4 (5th Cir. 1995) (per curiam) ( citing Ippolito favorably and noting that “not every credit report is a

c onsumer report” under the FCRA)

. Ippolito held that reports containing an individual’s credit information
were not consumer report s when used in a trademark litigation dispute, even though the preparer thought the report s would be used to evaluate prospective franchisees, because both such uses involved commercial, rather than
consumer purpose s
. 864 F.2d at 4 44

– 45, 4 5 1

– 54

. Although the underlying lawsuit did not involve a debt, the court’s reasoning focused on the commercial
purpose of the lawsuit in which the reports were used

. Id. at 45 3

– 5 4. A s in Ippolito , the purpose of the lawsuit here is commercial in nature because it

3 The second amended complaint concedes that other activities listed under litigation support are not qualifying purposes under the A ct. Case: 15-10533 Document: 00513443431 Page: 4 Date Filed: 03/29/2016No. 15

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5 arose out of a commercial lease dispute. See id. at 452 (stating that “reports collected for business, commercial, and professional purposes do not fall under the FCR A” (internal quotations and citations omitted ) ); see also Bacharach v. Suntrust Mortg

. , Inc. , 2015 WL 6442493, at *3

– 4 (E.D. La. Oct. 23, 2015) (“ [T]he FCRA does not apply where a consumer report is used for business purposes .”) (citing cases)

. E ven assuming that filing a lawsuit to collect on a judgment could constitute the collection of a consumer account within the meaning of the FCRA , there is no collection of a consumer account here because the judgment arose from a commercial transaction

. Numerous courts have concluded that the FCRA does not cover reports used or expected to be used only in connection with commercial business transactions. Bacharach , 2015 WL 6442493, at *3

– 4 ( surveying cases and concluding that the FCRA does not cover repo rts created for “business purposes” ); Grigoryan v. Experian Info. Sols., Inc. , 84 F. Supp. 3d 1044, 1081

– 82 (C.D. Cal. 2014) (the same) ; see also Ippolito , 864 F.2d at 452 (holding that reports used or expected to be used for commercial purposes do not qualify under the FCRA); Matthews v. Worthen Bank & Trust Co. , 741 F.2d 217, 219 (8th Cir. 1984) (holding that report’s “use[] solely for a commercial transaction” was not a q ualifying purpose); Johnson v. Wells Fargo Home Mortg

. , Inc. , 558 F. Supp. 2d 1114, 112 1

– 2 7 (D. Nev. 2008) (explaining that information in report collected solely for commercial purposes in connection with plaintiff’s business did not qualify as a consumer report); Lucchesi v. Experian Info. Sols., Inc. , 226 F.R.D. 172, 17 3

– 7 4 (S.D.N.Y. 2005) (holding that FCRA does not apply to report, even one containing consumer information, where the report was created for use in connection with the plaintiff’s business transaction). Aside from its commercial nature, there is an additional reason why the debt arising out of the first lawsuit was not “an account of[] the consum er ,” 15 Case: 15-10533 Document: 00513443431 Page: 5 Date Filed: 03/29/2016No. 15

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6 U.S.C. § 1681b (emphasis added): it was im posed against corporate entities

. As the nature of the state court litigation rejects any conclusory allegation that Phenix was creating a “credit report” for the purpose of collecting on a
consumer account , the FCRA claim fails. The commercial nature of the underlying dispute also dooms Plaintiffs’ FDCPA claims even though the two federal statutes have different frameworks and terms. To state a n FDCPA claim , Plaintiffs must first allege that they have been the object of collectio n activity arising from “debt.” See, e.g. , Douglas v. Select Portfolio Servicing, Inc. , 2015 WL 1064623, at *4 (S.D. Tex. Mar. 11, 2015) (setting forth the elements of a FDCPA claim); Sibley v. Firstcollect, Inc. , 913 F. Supp. 469, 471 (M.D. La. 1995) (the same)

. The FDCPA defines “debt”

as :

“ [A] ny obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for pers onal, family, or household purposes , whether or not such obligation has been r educed to judgment.” 15 U.S.C. § 1692a(5) (emphasis added)

. Plaintiffs argue that the judgment debt arose from “personal investments made for personal purposes” in Texas Wing , so it qualifies as a “debt” under the A ct

. Yet any disputed debt that the second state lawsuit sought to collect arose out of the first suit involving the Hooter’s lease, which Plaintiffs rightly admit was “commercial in nature.” See First Gibraltar Bank , FSB v. Smith , 62 F.3d 133, 13 4

– 36 (5th Cir. 1995) (collection efforts related to personal guaranty of business debt are not “debts” within the meaning of the FDCPA because they are not for personal purposes) ; Scarola Malone & Zubatov LLP v. McCarthy, Burgess & Wolff , 2016 WL 536864, at *1

– 2 (2d Cir. Feb. 11, 2016) (holding that debt, even if not actually owed, “stem[ming] from telecommunication services provided by Verizon to [law firm] . . . ar[ose] out of Case: 15-10533 Document: 00513443431 Page: 6 Date Filed: 03/29/2016No. 15

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7 a commercial transaction and [was] not cover ed by the FDCPA ”); Goldman v. Cohen , 445 F.3d 152, 154 n.1 (2d Cir. 2006) ( “ [A] ctions arising out of commercial debts are not covered by the pro tective provisions of the FDCPA .” ) ; Garza v. Bancorp Grp., Inc. , 955 F. Supp. 68, 7 1

– 7 2 (S.D. Tex. 1996) ( holding that debt from equipment installed at two commercial establishments, even though used to provide security to family members working at the stores, “d[id] not transform the p urpose into a noncommercial one” and was therefore not qualifying “debt” un der the FDCPA)

. Once again the commercial nature of the debt rebut s any conclusory allegation that there was a consumer debt subject to the FDCPA. And additional support for this conclusion is again found in the fact that the judgment in the first lawsui t was entered agains t Texas Wing corporate entities. That means there was no “ obligation of a consumer ” (15 U.S.C. § 1692a (5)) being collected in the second lawsuit. The second lawsuit essentially sought to hold the individuals liabl e for that corporate obligation; it was not seeking to collect a preexisting personal debt. AFFIRMED. Case: 15-10533 Document: 00513443431 Page: 7 Date Filed: 03/29/2016