United States District Court, D. Minnesota
Mark
L. Vavreck, Gonko & Vavreck PLLC, and Thomas J. Lyons,
Jr., Consumer Justice Center PA, for Plaintiff.
Ernest
P. Wagner, Maurice Wutscher LLP, Eric Tsai, Maurice Wutscher
LLP, and Eldon J. Spencer, Jr. and Thomas C. Atmore, Leonard,
O'Brien, Spencer, Gale & Sayre Ltd., for Defendant.
MEMORANDUM OPINION AND ORDER
SUSAN
RICHARD NELSON, UNITED STATES DISTRICT JUDGE
The
Court has discussed the background of this Fair Credit
Reporting Act (“FCRA”) litigation in two prior
orders, and therefore assumes both parties' familiarity
with the relevant facts and legal principles. (See
Summ. J. Order [Doc. No. 61][2]; Order Granting Pl.'s Request
to Move for Reconsideration [Doc. No. 76].) After carefully
considering the parties' letter briefs on the issue of
reconsideration, the Court has been persuaded that it erred
in not granting Plaintiff Charles Hrebal (hereinafter
“Hrebal”) partial summary judgment on his FCRA
claim. The Court accordingly grants Hrebal summary judgment
under 15 U.S.C. § 1681o, on grounds that
Defendant Mr. Cooper negligently violated 15 U.S.C. §
1681s-2(b)(1) when it repeatedly failed to report
Hrebal's mortgage delinquency as “disputed”
in response to the at-issue ACDVs. However, a jury trial
remains necessary to determine (1) what, if any,
“actual damages” Hrebal suffered as a result of
this FCRA violation[3]; (2) whether Mr. Cooper
“willfully” or “recklessly” committed
this legal violation; and (3) if the answer to (2) is yes,
what, if any, “punitive damages” should be levied
on Mr. Cooper.
The
Court reaches this decision for two key reasons.
First, after carefully re-reviewing
the factual record, the Court is now convinced that there are
no material factual disputes for a jury to resolve with
respect to liability. The FCRA imposes liability on
“furnishers” of consumer credit information, like
Mr. Cooper, who fail to report that a loan delinquency is
“disputed, ” if a “reasonable
investigation” could have uncovered that a
borrower's dispute with that delinquency was “bona
fide” or “potentially meritorious.”
(See Summ. J. Order at 20.) This is so because
reporting that a delinquency is, in fact, disputed may be
necessary to prevent the dissemination of “materially
misleading” consumer credit information. (Id.
at 20, 25.)[4]
Here,
there is no dispute (1) that Mr. Cooper received at least
three official dispute notifications from Hrebal (by way of
the credit reporting agencies (“CRAs”)), all of
which showed that Hrebal disputed Mr. Cooper reporting him as
delinquent on his mortgage, especially in light of his recent
Chapter 13 bankruptcy discharge; (2) that, although Mr.
Cooper could have looked through Hrebal's pre-2014
servicing notes (from when a different company serviced
Hrebal's mortgage) and gleaned that Hrebal's dispute
stemmed from a legitimate and longstanding “proof of
claim error, ” neither agent who responded to
Hrebal's dispute notifications did so[5]; (3) that Mr.
Cooper did not raise Hrebal's dispute with an internal
“specialized bankruptcy department, ” despite
having had the ability to do so; (4) that Mr. Cooper instead
confirmed Hrebal's delinquency three times, in a
confusing and inconsistent manner, based solely on a cursory
review of the company's recent payment history records;
(5) that, in so doing, Mr. Cooper did not, in any way, affirm
the legitimacy of Hrebal's dispute, despite having codes
that explicitly allowed its agents to do so; and (6) that
this reporting gave the impression that Hrebal had fallen
behind on his mortgage immediately after emerging from his
Chapter 13 bankruptcy, even though Hrebal had not missed a
mortgage payment in over five years, and any delinquency in
his account stemmed more from internal confusion on his
mortgage servicer's part than from financial
irresponsibility on Hrebal's part.
These
facts emphatically support a finding that Mr. Cooper
negligently violated the FCRA, in that a “reasonable
investigation” of the at-issue ACDVs would have
resulted in Mr. Cooper discovering that Hrebal's dispute
was, at the least, “bona fide, ” which should
then have resulted in Mr. Cooper reporting Hrebal's
delinquency as “disputed” to the CRAs, with one
of the company's “dispute” codes.
(See Summ. J. Order at 9 (describing such codes).)
Although
Mr. Cooper argues that liability remains a jury question
because of other facts in the record (see Mr. Cooper
Br. [Doc. No. 81] at 1-3), upon close inspection, the Court
finds that these facts are either immaterial, or go to the
question of Mr. Cooper's “mens rea, ”
i.e., whether Mr. Cooper acted
recklessly/intentionally, rather than to liability per
se. For instance, in its brief in opposition, Mr. Cooper
focuses heavily on the facts that it (allegedly) “never
told [Hrebal] his loan was current, ”[6] and, indeed, gave
Hrebal a chance to correct any error in his account in its
“Response to the Bankruptcy Trustee's Notice of
Final Cure.” (Id.) However, that Mr. Cooper
might have been consistent in its pre-ACDV responses to
Hrebal, or that it might have attempted to abide by proper
bankruptcy procedures in providing Hrebal notice of his
delinquency, only shows that Mr. Cooper's post-ACDV
failure to discover the root of Hrebal's dispute, and
then acknowledge the “potentially meritorious”
nature of that dispute, may have arisen from mere, one-off
“negligence, ” rather than from a reckless or
intentional disregard for the FCRA's provisions.
(Accord Summ. J. Order at 21, 30
(“[I]nconsistent responses in the face of numerous
requests from [the consumer] and inquiries from the
CRAs” may evince a furnisher's “willfulness
in failing to comply with the FCRA.”) (quoting
Schaffhausen v. Bank of America, N.A., 393 F.Supp.2d
853, 859 (D. Minn. 2004).)
As
such, although Mr. Cooper has raised serious legal arguments
in this case, which the Court discussed at length in its
summary judgment opinion, there are simply no
factual disputes for a jury to resolve at trial, at
least with respect to liability under 15 U.S.C. §
1681o.
Second,
apart from the lack of material factual disputes, a
re-examination of the relevant case law, including the new
cases cited by Hrebal in his motion for reconsideration,
convinces the Court that it is not as unprecedented for a
Court to grant a plaintiff summary judgment on a 15 U.S.C.
§ 1681o claim as it originally believed.
(See Summ. J. Order at 29 n.17.) Notably, in the
last four years alone, at least four federal district courts
have granted a plaintiff partial summary judgment under the
“failure to report a debt as disputed” theory of
liability discussed herein, while reserving the issues of
“mens rea” and “actual damages” for
trial. See Long v. Pendrick Capital Partners, LLC,
__ F.Supp.3d __, 2019 WL 1255300, at *7-9 (D. Md. Mar. 18,
2019); Wood v. Credit One Bank, 277 F.Supp.3d 821,
853-55 (E.D. Va. 2017); Ballinger v. Ocwen Loan Servs.,
LLC, No. 15-cv-252 (JAJ/HCA), Doc. No. 190 at 12-15
(S.D. Iowa Sept. 25, 2017); Vasquez-Estrada v. Collecto,
Inc., No. 14-cv-1422 (ST), 2015 WL 6163971, at *5-6 (D.
Or. Oct. 20, 2015); cf. Marchisio v. Carrington Mortg.
Servs., LLC, 919 F.3d 1288, 1302 (11th Cir. 2019)
(affirming district court's grant of partial summary
judgment to plaintiff-consumer because furnisher plainly
“failed to conduct a reasonable investigation”
into consumer's dispute). The Court was not aware of this
law at the time it rendered its summary judgment decision.
Moreover,
although Mr. Cooper argues that these cases all involved
furnishers reporting debts that were “indisputably
unenforceable” (Mr. Cooper Br. at 4), and are therefore
distinguishable from this action (because the Court declined
to definitively determine the enforceability of the at-issue
mortgage arrears, see Summ. J. Order at 15-17), the
Court finds that that is not exactly right. Rather, in most
of these cases, the defendant furnisher argued that it
was entitled to collect a debt that the consumer was
disputing, as Mr. Cooper is here. Nevertheless, those courts
held, because a “reasonable investigation” would
have uncovered that the consumer's dispute was, at the
least, “bona fide, ” the furnisher still needed
to mark the debt as “disputed.” See,
e.g., Wood, 277 F.Supp.3d at 854-55 (ruling
that it is “materially misleading” to continually
report a dispute as “resolved” when the consumer,
through the filing of ACDVs, “continue[s] to dispute
the validity of” the at-issue debt); see also
Saunders v. Branch Banking & Trust Co., 526 F.3d
142, 150 (4th Cir. 2008) (noting that “a disputed debt
differs materially from an undisputed debt even if the
consumer would not succeed at a trial of the
dispute”) (emphasis added).
Thus,
this case law further supports the conclusion that, upon
reconsideration, partial summary judgment is warranted
here.[7]
Consequently,
based on the submissions and the entire file and proceedings
herein, IT IS HEREBY ORDERED that
Hrebal's Motion for Reconsideration [Doc. No. 77] is
GRANTED. The Court accordingly enters
partial summary judgment in Hrebal's favor, in the manner
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