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Shaw v. Experian Information Solutions, Inc.

United States Court of Appeals, Ninth Circuit

May 29, 2018

John T. Shaw, on behalf of himself and all others similarly situated; Kenneth Coke; Raymond Rydman, Plaintiffs-Appellants,
v.
Experian Information Solutions, Inc., Defendant-Appellee.

          Argued and Submitted April 10, 2018 Pasadena, California

          Appeal from the United States District Court No. 3:13-CV-01295-JLS-BLM for the Southern District of California Janis L. Sammartino, District Judge, Presiding

          Guerino John Cento (argued), Cento Law LLC, Indianapolis, Indiana; Matthew J. Zevin, Stanley Law Group, San Diego, California; for Plaintiffs-Appellants.

          Adam Wiers (argued), Jones Day, Chicago, Illinois; Kelly V. O'Donnell, Jones Day, San Diego, California; for Defendant-Appellee.

          Before: MARY M. SCHROEDER and MILAN D. SMITH, JR., Circuit Judges, and GERSHWIN A. DRAIN, [*] District Judge.

         SUMMARY[**]

         Fair Credit Reporting Act

         The panel affirmed the district court's summary judgment in favor of defendant Experian Information Solutions, Inc., in an action brought under the Fair Credit Reporting Act.

         Plaintiffs alleged that Experian, a consumer reporting agency, violated the FCRA in the manner in which it reported short sales on their real property.

         The panel held that plaintiffs' reasonable procedures and reasonable reinvestigation claims under 15 U.S.C. §§ 1681e and 1681i failed because plaintiffs' credit reports were accurate.

         Plaintiffs' failure to disclose claim under § 1681g failed because Experian clearly and accurately disclosed to them all information that Experian recorded and retained that might be reflected in a consumer report.

         Plaintiffs' request for statutory damages under § 1681n failed because they did not show a willful violation by Experian.

          OPINION

          M. SMITH, CIRCUIT JUDGE.

         Plaintiffs-Appellants John Shaw, Kenneth Coke, and Raymond Rydman (collectively, Appellants) brought this action against Defendant-Appellee Experian Information Solutions, Inc. (Experian), alleging violations of the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681, et seq. Between 2010 and 2011, each Appellant executed a short sale on real property that he owned. Appellants brought this action against Experian because of the manner in which Experian reported those short sales. The district court granted summary judgment in favor of Experian on all claims. We affirm.

         First, we hold that Appellants' reasonable procedures and reasonable reinvestigation claims fail because Appellants' credit reports were accurate. Second, Appellants' failure to disclose claim fails because Experian clearly and accurately disclosed to Appellants all information that Experian recorded and retained that might be reflected in a consumer report. Third, Appellants' request for statutory damages under 15 U.S.C. § 1681n fails because they have not shown a willful violation by Experian.

         FACTUAL AND PROCEDURAL BACKGROUND

         I. Credit Reporting Industry

         Experian is a consumer reporting agency (CRA) as defined by the FCRA. 15 U.S.C. § 1681a(f). CRAs receive credit information about borrowers and consumers from data furnishers, such as mortgage lenders and credit card companies. Furnishers generally report their data to CRAs using an agreed-upon format, known as Metro 2. Furnishers' Metro 2 reporting requirements are specified in the Credit Reporting Resource Guide (CRRG), which is published by the Consumer Data Industry Association (CDIA), a CRA trade association.

         Once CRAs receive credit information from furnishers, they compile and distribute the information to subscribers through credit reports, and to consumers through consumer disclosures.[1] Even though it receives its data input in the standardized Metro 2 format, each CRA uses its own proprietary coding format to analyze and report credit information to subscribers. Experian provides credit reports to approximately 15, 000 subscribers. It delivers its credit reports in a proprietary computer-generated format that displays credit information "in segments and bits and bytes, " but Experian provides technical manuals that enable subscribers to read and understand the credit reports they receive. Subscribers cannot read Experian's reports without these technical manuals.

         II. Short Sales

         A short sale is a real estate transaction in which the property serving as collateral for a mortgage is sold for less than the outstanding balance on the secured loan, and the mortgage lender agrees to discount the loan balance because of a consumer's economic distress. A short sale is a derogatory credit event that furnishers report to CRAs in a particular manner. By 2009, the CRRG instructed furnishers to report short sales to CRAs using an Account Status Code of "13 or 61-65, as applicable, " a Special Comment of "AU (Account paid in full for less than the full balance), " and a Current Balance and Amount Past Due amount of zero. An Account Status Code of 13 indicates a "[p]aid or closed account/zero balance, " while 61 through 65 indicates the account was paid in full and there was a "voluntary surrender, " "collection account, " "repossession, " "charge-off, " or "foreclosure . . . started."

         When Experian receives data reporting a short sale, it must translate the data into its proprietary coding before it can export the data. Experian's technical manual describes how it codes short sales:

• Account type: A mortgage-related account, such as a first mortgage or home equity line of credit.
• "Account condition" and "payment status" code: 68, which corresponds to a Special Comment of "Acct legally paid in full for less than the full balance." The 68 automatically populates a 9 into the first position on the payment history grid to display the "Settled" status.
• Payment history grid showing the final status ("Settled") in the first digit, followed by 24 months of payment history information.
• Date in 25th month in the payment history grid corresponds to the date the furnisher reported the "Settled" ...

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