The Western District of Texas recently considered an issue that’s led multiple circuits in different—and contradictory—directions: does the Fair Credit Reporting Act waive the United States’ sovereign immunity? The plaintiff in Thurston v. Equifax Info. Servs., 2020 U.S. Dist. LEXIS 203511, argued just that.
The plaintiff in this dispute held an account with the Army and Airforce Exchange Service, d/b/a Military Star (“AAFES”), which was among the named defendants. AAFES reported a late payment on the plaintiff’s account to various credit reporting agencies, which the plaintiff disputed. The plaintiff sued the credit reporting agencies and AAFES, alleging violation of the FCRA. AAFES, in turn, moved to dismiss the complaint on the grounds that it was an instrumentality of the federal government and enjoyed sovereign immunity from suit.
The core of the dispute is whether the FCRA’s definition of “person” constitutes a waiver of sovereign immunity. FCRA imposes civil liability on any “person” who willfully or negligently fails to comply with the Act’s requirements. “Person,” in turn, is defined as “any individual, partnership, corporation, trust, estate, cooperative, association, government or governmental subdivision or agency, or other entity.” 15 U.S.C. § 1681a(b).
The federal government and its instrumentalities, including AAFES, enjoy sovereign immunity from suit unless that immunity is unambiguously waived. The Fourth and Ninth Circuits have held that the FCRA does not contain such a waiver, while a Fifth Circuit case predating those decisions states that the Equal Credit Opportunity Act did contain a waiver through its inclusion identical language with regard to the government or a governmental subdivision or agency in its definition of “person.”
The Thurston court sided with the Fourth and Ninth Circuits, and determined that the FCRA doesn’t categorically waive sovereign immunity. First, the FCRA explicitly waives sovereign immunity in a different section of the statute related to the FBI obtaining information from consumer reporting agencies. Because that express waiver isn’t replicated elsewhere in the statute, it couldn’t be implied for the purposes of other FCRA claims. Second, a general waiver of immunity would lead to absurd results: the United States could be tried criminally and imprisoned, and state governments could initiate enforcement actions against the federal government, even seeking punitive damages.
This issue is far from settled among federal courts (and the Supreme Court recently avoided granting cert on this very issue). But this is another arrow in the quiver for federal governmental entities that want to avoid FCRA liability.