McCalmont et al v. Federal National Mortgage Association et al

Filing 173

ORDER granting Plaintiffs' Rule 54(d)(1) Motion to Vacate Costs Taxed 168 and vacating the Clerk's taxation judgment 166 . Signed by Judge John J Tuchi on 8/14/2019. (REK)

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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James McCalmont, et al.,
Plaintiffs,

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ORDER

v.

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No. CV-13-02107-PHX-JJT

Federal National Mortgage Association, et
al.,

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Defendants.

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At issue is Plaintiffs’ Motion to Vacate Costs Taxed (Doc. 168, Mot.), to which

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Defendant filed a Response (Doc. 170, Resp.) and Plaintiff filed a Reply (Doc. 171, Reply).

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I.

BACKGROUND

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Plaintiffs filed a Complaint (Doc. 1) in October 2013 alleging that a prior short sale

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of their home was later reported as a foreclosure in Defendant’s automated Desktop

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Underwriter system (“DU”), resulting in the denial of Plaintiffs’ later applications for home

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mortgage loans. After years of litigation in this and related matters, the Ninth Circuit held

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in a separate case that Defendant is not a Consumer Reporting Agency (“CRA”) and thus

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is not subject to the relevant provision of the Fair Credit Reporting Act (“FCRA”). See

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Zabriskie v. Fed. Nat’l Mortgage Ass’n, 912 F.3d 1192 (9th Cir. 2019). Based on the Ninth

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Circuit’s ruling in Zabriskie, the Court granted Defendant’s Motion for Summary

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Judgment in this case. (Doc. 153.)

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On March 15, 2019, after considering Plaintiffs’ objections, the Clerk entered

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judgment on taxable costs against Plaintiffs in the amount of $4,898.90—about $2,000 less

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than Defendant originally requested. (Doc. 166). Plaintiffs now move to vacate the taxable

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costs in their entirety.

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II.

LEGAL STANDARD

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Federal Rule of Civil Procedure 54(d)(1) provides that “[u]nless a federal statute,

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these rules, or a court order provides otherwise, costs—other than attorney’s fees—should

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be allowed to the prevailing party.” The Rule “creates a presumption in favor of awarding

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costs to a prevailing party, but vests in the district court discretion to refuse to award costs.”

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Ass’n of Mexican-American Educ. v. California, 231 F.3d 572, 591 (9th Cir. 2000). The

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Court’s discretion “is not without limits.” Id. Rather, the Court “must specify reasons for

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its refusal to award costs.” Id. (internal citation omitted).

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Appropriate reasons for the Court to deny costs include: “(1) the substantial public

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importance of the case, (2) the closeness and difficulty of the issues in the case, (3) the

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chilling effect on future similar actions, (4) the plaintiff’s limited financial resources, and

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(5) the economic disparity between the parties.” Escriba v. Foster Poultry Farms, Inc., 743

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F.3d 1236, 1247–48 (9th Cir. 2014). These five indicators are not “‘an exhaustive list of

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good reasons for declining to award costs,’ but rather a starting point for analysis.” Id.

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(quoting Ass’n of Mexican-American Educ., 231 F.3d at 591).

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III.

ANALYSIS

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While the Court’s review is not necessarily limited to the five considerations in

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Escriba, both parties seem to agree that those are dispositive in this matter, and indeed the

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Court reaches its conclusion based on those indicators alone.

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1.

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The Court finds that the first factor—the public importance of the case—weighs in

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Plaintiffs’ favor. While Defendant argues that the case does not reflect an issue of public

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importance, in part because “Plaintiffs’ constitutional or civil rights were [not] at issue,”

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that is not a requirement for substantial public importance. (Resp. at 2.) Cases do not have

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to pertain to constitutional or civil rights in order to be a matter of public importance. See

Substantial Public Importance

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Ass’n of Mexican-American Educ., 231 F.3d at 593 (“Nor are we attempting to create an

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exhaustive list of ‘good reasons’ for declining to award costs.”).

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Defendant also argues that the issue is not of public importance because “DU was

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adjusted in 2013 (before Plaintiffs’ lawsuit was filed) to enable lenders to instruct DU to

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disregard foreclosure information after validating the applicant had only a short sale.”

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(Resp. at 3.) But while Defendant’s decision to change its DU policy is important in

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evaluating the third indicator—the potential chilling effect on future actions—it is not

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relevant to the Court’s analysis of what constitutes an issue of substantial public

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importance. Plaintiffs should not be prejudiced because a policy that allegedly caused them

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harm has since been remedied, at least in part. At the time of his suit, the DU policy had

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been a matter of public importance because it affected other people seeking home financing

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in the same way it affected Plaintiffs. While the Court is not persuaded by Plaintiffs’

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argument that the sheer volume of amicus briefs in the pending Ninth Circuit en banc

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review renders this matter important, it is persuaded by the fact that this issue affected

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many consumers and, by implication, the nationwide housing market. Thus, the first

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indicator weighs in Plaintiffs’ favor.

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2.

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The second indicator also weighs in Plaintiffs’ favor. As Plaintiffs point out, the

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question in Zabriskie, which is largely identical to the question here, was difficult enough

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to merit Ninth Circuit en banc review. Further, in the Court’s own experience, the issues

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in this case were close and difficult to decide.

Closeness and Difficulty of the Issues

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Defendant urges that the difficulty of the issues cannot weigh in any party’s favor

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because “[w]hether [Defendant] was a [CRA] was not the only issue to be decided before

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Plaintiff[s] could prevail,” and “a jury would still have needed to find that the foreclosure

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notation in the DU findings was inaccurate and this inaccuracy caused the lenders to deny

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Plaintiffs’ financing.” (Resp. at 3.) While this is a correct assessment of the case’s posture,

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it does not render this case any less difficult to resolve. In fact, the baseline question of

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Defendant’s status as a CRA was difficult to resolve. Further, Defendant cannot show that,

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had the Court declared Defendant a CRA, the subsequent questions would have been any

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easier to resolve. In fact, the Court is sure that those questions would have proven equally

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difficult.

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3.

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Neither party presents the Court with sufficient argument on the question of whether

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awarding Defendant costs in this case would chill future similar actions. Plaintiffs generally

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declare that any award of costs would “have a chilling effect on consumers who would dare

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to ever seek to clear their name in the future when [Defendant] falsely informs any potential

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mortgage lenders about the contents of a consumer’s credit history.” (Mot. at 10.)

Chilling Effect on Future Similar Actions

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Defendant, on the other hand, argues that “with the law settled that [Defendant] is

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not a [CRA], and the adjustments made to DU in 2013 . . . along with further revisions to

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the software since that time, future lawsuits about the issues raised by Plaintiffs in this case

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are extremely unlikely.” (Resp. at 4.) But Defendant cites no authority to support its

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proposition that the only actions the Court should worry about chilling are identical actions

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against the same Defendant regarding the same issue. Indeed, the Court is concerned about

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chilling consumer protection actions against large financial clearinghouses similar to

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Defendant. Further, the Court notes that if costs, which “might be considered modest when

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compared to amounts sought in other, larger cases, even modest costs can discourage

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potential plaintiffs who . . . earn low wages.” Escriba, 743 F.3d at 1249. For these reasons,

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on balance, the third indicator weighs slightly in favor of Plaintiffs.

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4.

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While Defendant asserts that Plaintiffs are not of limited means, the Court cannot

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be sure because Plaintiffs failed to proffer any evidence of their financial resources.

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Characterizing Plaintiffs as “individual consumers with extraordinarily modest comparable

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income” is not sufficient to show the Court that the $4, 898.90 of costs would render them

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indigent. See id. at 1248 (“Costs are properly denied when a plaintiff ‘would be rendered

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indigent should she be forced to pay’ the amount assessed”) (quoting Stanley v. Univ. of S.

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Cal., 178 F.3d 1069, 1080 (9th Cir. 1999)). Due to Plaintiffs’ failure to provide any

Plaintiffs’ Limited Financial Resources

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evidence to the contrary, this factor weighs in favor of Defendant. See Greene v. Buckeye

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Valley Fire Dep’t., No. CV-11-02351-PHX-NVW, 2013 WL 12160997, at *1 (D. Ariz.

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July 16, 2013) (“[Plaintiff] is not obligated to provide any evidence of her financial

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situation, but . . . she has the burden to support her claim of an inability to pay Defendants’

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costs . . . [and] without any evidence beyond her declaration, [the Court] cannot find that

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[Plaintiff] carried her burden.”).

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5.

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While the Court cannot be sure of Plaintiffs’ exact financial position, it can be sure

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that there is great economic disparity between the parties. Plaintiffs assert that Defendant

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has “assets presently valued over [three] trillion dollars and net income of over $15 billion

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last year alone.” (Mot. at 9.) Defendant does not dispute this characterization. Instead,

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Defendant argues that “economic disparity alone is insufficient to deny costs, as economic

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disparity is commonplace in litigation.” (Resp. at 4 (citing Redwind v. W. Union, LLC, No.

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3:14-CV-01699-AC, 2017 WL 1025184, at *5 (D. Or. Mar. 16, 2017)).) The Court does

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not dispute this point but has already found that three other indicators weigh in favor of

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Plaintiffs. The vast economic disparity between the parties is not the sole consideration,

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but it does weigh in Plaintiffs’ favor.

Economic Disparity Between the Parties

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In sum, these factors weigh in favor of declining to award Defendant costs.

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IT IS THEREFORE ORDERED granting Plaintiffs’ Rule 54(d)(1) Motion to

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Vacate Costs Taxed (Doc. 168) and vacating the Clerk’s taxation judgment (Doc. 166).
Dated this 14th day of August, 2019.

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Honorable John J. Tuchi
United States District Judge

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