Melba Gauci v. Citi Mortgage et al

Filing 95

ORDER by Judge Otis D Wright, II: granting 67 defendants Experian Information Solutions, Inc.; Equifax Information Services, LLC; and Trans Union LLCs Motion for Summary Judgment. (lc) Modified on 4/30/2012 (lc).

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UNITED STATES DISTRICT COURT

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CENTRAL DISTRICT OF CALIFORNIA

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MELBA GAUCI
v.

Case No. 2:11-cv-01387-ODW(JEMx)
Plaintiff,

ORDER GRANTING
DEFENDANTS’ MOTION FOR
SUMMARY JUDGMENT [67]

CITI MORTGAGE, et al.,
Defendants.

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I.

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INTRODUCTION

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Before the Court is Defendant credit reporting agencies Experian Information

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Solutions, Inc.; Equifax Information Services, LLC; and Trans Union LLC’s

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(collectively “CRAs”) February 16, 2012 Motion for Summary Judgment. (ECF

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No. 67.) Plaintiff filed an Opposition on March 26, 2012, to which the CRAs filed the

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Reply on April 2, 2012. (ECF Nos. 87, 89.) The Court has carefully considered the

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parties’ briefs, the evidence submitted in support of and in opposition to those briefs,

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and the parties’ presentations made at oral argument on April 16, 2012, and April 30,

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2012. For the following reasons, the Court GRANTS the CRAs’ Motion.

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II.

FACTUAL BACKGROUND

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In 2008, Plaintiff Melba Gauci obtained a mortgage loan from Callisto Group,

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Inc. to finance the purchase of property located at 301 South Weymouth Avenue, Los

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Angeles, California 90732. (Def.’s Statement of Uncontroverted Facts (“UF”) 1.)

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Plaintiff is a real estate broker and purchased this property as an investment. (Gauci

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Depo. 14:2–22, 16:19–22, 26:10–14.) As part of the purchase, Plaintiff authorized

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Callisto to create an impound account, from which property taxes and property

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insurance would be paid. (UF 3.) Callisto estimated Plaintiff’s annual property taxes

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would be approximately $3,800.00 per year, and on that basis estimated that

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Plaintiff’s total monthly mortgage payment would be $2,211.02. 1 (Id.; Opp’n 6.)

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Once the loan closed, Callisto sold Plaintiff’s loan to CitiMortgage, and CitiMortgage

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became the successor in interest to Callisto’s duties and obligations. (UF 2.)

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Plaintiff began making her mortgage payments in November 2008. The same

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month, the County of Los Angeles charged CitiMortgage for the first property tax

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payment, which was $8,957.04 instead of the originally estimated $3,800.00. (UF 5.)

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As a result, CitiMortgage raised Plaintiff’s impound account payment from $398.00 to

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$1,285.00 to reflect this increase. (UF 7.)

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notified Plaintiff that her mortgage payments would increase from $2,211.02 to

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$3,098.612 on March 1, 2009, to reflect the increased escrow payments. (UF 6–7.)

On January 23, 2009, CitiMortgage

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In February 2009, after receiving her March 2009 bill reflecting the increased

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mortgage payments, Plaintiff called CitiMortgage to dispute the increase in payments.

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(UF 11–12.) Meanwhile, Plaintiff ignored the change to her bills and continued

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paying the original, lower monthly payment. (UF 14.) While CitiMortgage maintains

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that it never told Plaintiff to pay this lower amount (UF 13), Plaintiff contends that she

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was informed over the phone that she should be paying $2,211.02 instead of

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$3,098.61. (Gauci Depo. 75:19–24.) Regardless, when Plaintiff paid less than the

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$3,098.61 payment allegedly due, CitiMortgage would allocate Plaintiff’s lower

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payment to an “unapplied funds” account; once the unapplied funds accumulated to

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the sufficient amount, CitiMortgage would post a full payment to Plaintiff’s impound

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Comprising $398.00 for the escrow account and $1,813.02 for principal and interest.
Comprising the new $1,285.00 for the escrow account and the original $1,813.02 for principal and
interest.
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account.

(UF 15.)

Proceeding in this fashion, CitiMortgage ultimately deemed

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Plaintiff a delinquent payer and reported Plaintiff to the CRAs as such. (UF 16;

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Opp’n 7.)

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Plaintiff contends that the County incorrectly assessed the property taxes based

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on an inflated property value. (Pl.’s Statement of Genuine Disputes 9–10, 16–17.)

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Notwithstanding her dispute regarding the propriety of the property tax increase,

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Plaintiff admits that CitiMortgage correctly calculated her new escrow and mortgage

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payments based on the disputed property tax increase. (Id.) Plaintiff also admits that

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she must pay CitiMortgage for the property taxes that CitiMortgage paid to the

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Country. (UF 21.) At the same time, however, Plaintiff insists that she should have

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paid the initially estimated amount escrow payments. (Pl.’s Statement of Genuine

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Disputes 9–10, 16–17.)

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After CitiMortgage reported to the CRAs that Plaintiff was past due on

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payments, the CRAs downgraded Plaintiff’s credit rating to delinquent, which

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Plaintiff contends prevented her from obtaining other loans to purchase other

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properties or refinance her existing loans. (Opp’n 7.) While Plaintiff repeatedly

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communicated with the CRAs to contest CitiMortgage’s report in an effort to clear her

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records, her credit rating status remained the same, even after the CRAs conducted

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reinvestigations. (UF 30–39.) According to Plaintiff, while she reported her dispute

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with CitiMortgage to the CRAs, the CRAs’ investigations were “cursory and not

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responsive to [Plaintiff’s] concerns.” (Opp’n 7.)

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As a result, Plaintiff brought this lawsuit against CitiMortgage and the CRAs in

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Los Angeles County Superior Court on December 16, 2010. On February 15, 2011,

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Defendants removed the action to this Court. (ECF No. 1.) Plaintiff alleges that the

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CRAs violated the Fair Credit Reporting Act (“FCRA”) by failing to properly

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investigate her credit history before lowering her rating and by failing to alter her

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rating after Plaintiff provided them with additional information. (SAC ¶¶ 26–27.)

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The CRAs now move for summary judgment on Plaintiff’s FCRA claims. (ECF

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No. 67.)
III.

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LEGAL STANDARD

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Summary judgment is appropriate when, after adequate discovery, the

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evidence—viewed in the light most favorable to the nonmoving party—demonstrates

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that there is no genuine issue as to any material fact and the moving party is entitled to

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judgment as a matter of law. Fed. R. Civ. P. 56(c). A disputed fact is “material”

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where the resolution of that fact might affect the outcome of the suit under the

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governing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1968). An issue

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is “genuine” if the evidence is sufficient for a reasonable jury to return a verdict for

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the nonmoving party. Id. Evidence the Court may consider includes the pleadings,

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discovery and disclosure materials, and any affidavits on file.

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P. 56(c)(2). Where the moving party’s version of events differs from the nonmoving

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party’s version, “courts are required to view the facts and draw reasonable inferences

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in the light most favorable to the party opposing the summary judgment motion.”

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Scott v. Harris, 550 U.S. 372, 378 (2007) (internal quotation marks omitted).

Fed. R. Civ.

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The moving party bears the initial burden of establishing the absence of a

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genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323–24 (1986).

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The moving party may satisfy that burden by “showing—that is, pointing out to the

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district court—that there is an absence of evidence to support the nonmoving party’s

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case.” Id. at 325.

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Once the moving party has met its burden, the nonmoving party “must do more

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than simply show that there is some metaphysical doubt as to the material facts.”

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Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Rather,

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the nonmoving party must go beyond the pleadings and identify specific facts that

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show a genuine issue for trial. Id. at 587; Celotex, 477 U.S. at 323–34; Liberty Lobby,

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477 U.S. at 248. Only genuine disputes over facts that might affect the outcome of the

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suit will properly preclude the entry of summary judgment. Anderson, 477 U.S. at

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248; see also Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 919 (9th Cir.

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2001) (finding that the non-moving party must present specific evidence from which a

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reasonable jury could return a verdict in its favor). A genuine issue of material fact

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must be more than a scintilla of evidence, or evidence that is merely colorable or not

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significantly probative. Addisu v. Fred Meyer, 198 F.3d 1130, 1134 (9th Cir. 2000).

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Further, it is not the task of the district court “to scour the record in search of a

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genuine issue of triable fact. [Courts] rely on the nonmoving party to identify with

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reasonable particularity the evidence that precludes summary judgment.” Keenan v.

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Allan, 91 F.3d 1275, 1279 (9th Cir. 1996) (quoting Richards v. Combined Ins. Co., 55

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F.3d 247, 251 (7th Cir. 1995)); see also Carmen v. S.F. Unified Sch. Dist., 237 F.3d

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1026, 1031 (9th Cir. 2001) (“The district court need not examine the entire file for

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evidence establishing a genuine issue of fact, where the evidence is not set forth in the

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opposing papers with adequate references so that it could conveniently be found.”).

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Finally, the evidence presented by the parties must be admissible. Fed. R. Civ.

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P. 56(e). Conclusory or speculative testimony in affidavits and moving papers is

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insufficient to raise genuine issues of fact and defeat summary judgment. Thornhill’s

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Publ’g Co. v. GTE Corp., 594 F.2d 730, 738 (9th Cir. 1979). Conversely, a genuine

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dispute over a material fact exists if there is sufficient evidence supporting the claimed

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factual dispute, requiring a judge or jury to resolve the differing versions of the truth.

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Anderson, 477 U.S. at 253.

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IV.

DISCUSSION

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Plaintiff’s sole claim against the CRAs alleges willful violations of the FCRA.

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Plaintiff contends that the CRAs failed to follow reasonable procedures to assure

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maximum possible accuracy of Plaintiff’s credit report in violation of 15 U.S.C.

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§ 1681e(b) and failed to conduct a reasonable investigation of Plaintiff’s disputes in

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violation of 15 U.S.C. § 1681i(a). (SAC ¶¶ 86–124.)

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The CRAs move for summary judgment on grounds that (1) Plaintiff’s credit

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report was accurate; (2) Plaintiff’s dispute over the CitiMortgage reporting is an

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impermissible collateral attack on her dispute with CitiMortgage; and (3) pursuant to

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the FCRA, the CRAs conducted reasonable reinvestigations and maintained

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reasonable procedures to assure maximum possible accuracy of Plaintiff’s credit

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report. Plaintiff argues that material issues of triable fact exist as to each of the above

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grounds sufficient to deny the CRAs’ Motion.

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The outcome of this Motion turns on the threshold issue whether Plaintiff’s

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credit reports were accurate within the meaning of FCRA. The remaining issues—

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whether the CRAs’ reporting and reinvestigation procedures were reasonable—are

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typically jury questions inappropriate for resolution on a motion for summary

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judgment. Accordingly, the Court considers only whether Plaintiff’s credit reports

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were accurate under the FCRA.

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A.

LEGAL STANDARD FOR FCRA CLAIMS

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The purpose of the FCRA is to protect consumers from circulation by consumer

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credit reporting agencies of inaccurate information about consumers to lending

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institutions.

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Plaintiff in this case asserts two claims. First, Plaintiff alleges that the CRAs violated

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§ 1681e(b) by failing to follow reasonable procedures to assure maximum possible

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accuracy of the consumer’s credit report. Second, Plaintiff alleges that the CRAs

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violated § 1681i(a) by failing to conduct reasonable reinvestigation of information

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disputed by the consumer.

15 U.S.C. § 1681.

As a consumer bringing actions under FCRA,

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To establish a prima facie violation under § 1681e(b), a plaintiff must first

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present evidence demonstrating that a credit reporting agency prepared a report

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containing inaccurate information. Guimond v. Trans Union Credit Info. Co., 45 F.3d

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1329, 1333 (9th Cir. 1995) (citing Cahlin v. General Motors Acceptance Corp., 936

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F.2d 1151, 1156 (11th Cir. 1991)). If the plaintiff establishes an inaccuracy, a credit

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reporting agency can nonetheless escape liability by establishing that it followed

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reasonable procedures. Id. The reasonableness of the procedures and whether the

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credit reporting agency followed those procedures will be jury questions in the

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overwhelming majority of cases. Id. If the plaintiff fails to satisfy the initial burden

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of showing inaccuracy, the plaintiff has not established a violation of § 1681e(b) as a

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matter of law, and a court need not inquire further as to the reasonableness of the

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procedures adopted by the credit reporting agency. Cahlin, 936 F.2d at 1156.

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To proceed on a claim under § 1681i(a), a plaintiff must show that her credit

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report contained an actual inaccuracy. Carvalho v. Equifax Info. Servs., LLC, 629

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F.3d 876, 890 (9th Cir. 2010).

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inaccuracy, courts may properly grant summary judgment in favor of credit reporting

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agency defendants. See id. at 892.

When the plaintiff fails to establish an actual

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Accurate reporting by a credit reporting agency is thus a complete defense to

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claims under both § 1681e(b) and § 1681i(a). If a plaintiff fails to show that the

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plaintiff’s credit report was inaccurate, summary judgment should be granted to the

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credit reporting agency defendant. However, if a plaintiff does overcome that initial

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threshold, the next questions with respect to the reasonableness of a credit reporting

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agency’s reporting and reinvestigation procedures are for a jury to decide, and

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summary judgment should be denied.

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B.

WHETHER PLAINTIFF’S CREDIT REPORTS WERE INACCURATE UNDER THE

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FCRA

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The Court turns now to the threshold issue whether Plaintiff has established that

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the CRAs’ credit reports were inaccurate within the meaning of the FCRA.

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Legal standard under the FCRA

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In the Ninth Circuit, credit reports are considered accurate under the FCRA

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where the credit reporting agencies correctly report information furnished by the

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creditor, even when there is a pending legal dispute between plaintiff and creditor as

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to the validity of the debt. In Carvalho, the Ninth Circuit explained the standard for

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considering whether a consumer’s credit report was inaccurate within the meaning of

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the FCRA.

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agencies. In deciding the threshold question whether the consumer plaintiff’s credit

There, the plaintiff filed FCRA claims against the credit reporting

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report was accurate, the Ninth Circuit adopted a “patently incorrect or materially

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misleading” standard. Carvalho, 629 F.3d at 890.

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The Carvalho court found no patent error in the plaintiff’s credit report because

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all of the relevant facts—including the ownership of the debt, the amount past due,

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and the listed dates—were correctly reported. Id. However, the plaintiff claimed the

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inaccuracy was latent, arguing that even if technically accurate, the credit report was

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misleading because she was not legally obligated to pay the debt. Id. The plaintiff

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contended that credit reporting agencies unfairly maligned the creditworthiness of

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innocent consumers by reporting disputed debts without undertaking a searching

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inquiry into the plaintiff’s legal defenses to payment. Id.

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The Ninth Circuit squarely denied this argument and unmistakably stated that

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credit reporting agencies are neither qualified nor obligated to resolve such an issue.

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Id. at 891–92. “Because CRAs are ill equipped to adjudicate contract disputes, courts

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have been loath to allow consumers to mount collateral attacks on the legal validity of

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their debts in the guise of FCRA reinvestigation claims.” Id. at 891. Simply put, the

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credit reports are considered accurate when the credit reporting agencies correctly

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report information furnished by the creditor. See id. Indeed, that a consumer has

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defaulted “is certainly relevant to potential creditors and is precisely the type of

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information that a credit report is meant to supply,” regardless how legally sound the

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consumer’s reasons for default are. Id. at 891.

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2.

Plaintiff’s credit reports were accurate within the meaning of FCRA

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Plaintiff argues that “CMI had no right to have deemed Plaintiff a delinquent

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payer when CMI made the mistake of charging Plaintiff an incorrect amount of taxes.”

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(Opp’n 11.) In addition, because there is a pending dispute between CitiMortgage and

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Plaintiff as to the correct amount of Plaintiff’s debt, and because Plaintiff reported this

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dispute to the CRAs, the CRAs should have reinvestigated and restored her credit

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ratings. (Id.) Thus Plaintiff concludes that the CRAs violated the FCRA by failing to

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reasonably ensure the maximum possible accuracy of Plaintiff’s credit reports, and by

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failing to conduct reasonable reinvestigation after Plaintiff reported the dispute. (Id.)

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Plaintiff essentially contends that, after she informed the CRAs the ongoing

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dispute between her and CitiMortgage, the CRAs should have adjudicated that dispute

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before reporting her credit rating as delinquent. But Carvalho has squarely rejected

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this argument. Carvalho has clearly settled that, under the FCRA, a credit reporting

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agency’s job is to correctly report information furnished by the creditor, and credit

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reporting agencies are not supposed to adjudicate a consumer-creditor dispute in order

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to issue credit reports. See Carvalho, 629 F.3d at 891–92. When a credit reporting

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agency correctly reports the information furnished by the creditor, the credit report is

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considered as “accurate” within the meaning of the FCRA, even when there is an

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ongoing dispute as to the validity of the debt. Id. Under that circumstance, the

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consumer is obligated to pay the full amount on time; if she fails to do that and the

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creditor furnishes the information to the credit reporting agency, all the credit

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reporting agency needs to do is to correctly report the furnished information. Id. That

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is exactly what happened in this case: even though Plaintiff disputed the payments she

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owed to CitiMortgage, the CRAs did correctly report the information furnished by

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CitiMortgage. Therefore, CRAs’ credit reports are accurate within the meaning of

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FCRA.

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The FCRA affords Plaintiff no remedy in this case

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Carvalho advises that a consumer who disputes the legal validity of a debt

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should do so directly at the furnisher level. Carvalho, 629 F.3d at 891. Plaintiff’s

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proper recourse here is to resolve her dispute directly with CitiMortgage; only had a

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court ruled Plaintiff’s debt to CitiMortgage invalid and the CRAs had continued to

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report it as a valid debt would Plaintiff have had grounds for a FCRA claim against

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the CRAs. Id. at 891–92. However, because CRAs’ credit reports are considered

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accurate under the FCRA, and because Plaintiff has not resolved the dispute with

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CitiMortgage, the FCRA does not afford Plaintiff a remedy to restore her credit

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ratings.

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In sum, the material facts in this case reveal that the CRAs correctly reported

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information CitiMortgage furnished to them. Although Plaintiff disputes the amount

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of the debt on which CitiMortgage alleges Plaintiff defaulted, that dispute does not

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render the information the CRAs reported “inaccurate” under the FCRA. Further, the

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CRAs were not charged with resolving Plaintiff’s dispute with CitiMortgage. The

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Court therefore GRANTS the CRAs’ Motion for Summary Judgment. It is therefore

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not necessary to reach the question whether the CRAs’ reporting and reinvestigation

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procedures were reasonable.
V.

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CONCLUSION

For the reasons discussed above, the CRAs’ Motion for Summary Judgment is
GRANTED.

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IT IS SO ORDERED.

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April 30, 2012

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____________________________________
HON. OTIS D. WRIGHT, II
UNITED STATES DISTRICT JUDGE

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