Carvalho v. Equifax Info. Serv., LLC

• Citation: 629 F.3d 876
• Decision Date: 16 December 2010
• Docket Number: No. 09-15030,09-15030
• Parties: Noemia CARVALHO, on behalf of herself and other similarly situated people, Plaintiff-Appellant, v. EQUIFAX INFORMATION SERVICES, LLC; Experian Information Solutions, Inc.; TransUnion LLC, Defendants-Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

629 F.3d 876

Noemia CARVALHO, on behalf of herself and other similarly situated people, Plaintiff-Appellant,

v.EQUIFAX INFORMATION SERVICES, LLC; Experian Information Solutions, Inc.; TransUnion LLC, Defendants-Appellees.

No. 09-15030.

United States Court of Appeals,Ninth Circuit.

Argued and Submitted Feb. 11, 2010.

Filed Aug. 18, 2010.

Amended Dec. 16, 2010.

Scott D. Kalkin, Roboostoff & Kalkin, San Francisco, CA, argued the cause for the plaintiff-appellant. Ron Bochner, Law Offices of Ron Bochner, Santa Clara, CA, filed the briefs.

Stephen J. Newman, Stroock & Stroock & Lavan LLP, Los Angeles, CA; Barry Goheen, King & Spalding LLP, Atlanta, GA; and Meir Feder, Jones Day, New York, NY, argued the cause for the defendants-appellees and filed a brief. With them on the brief were Lewis P. Perling, King & Spalding LLP, Atlanta, GA; Brian C. Frontino and Darius K. Zolnor, Stroock & Stroock & Lavan LLP, Los Angeles, CA; and Deanna L. Johnston and Nathaniel P. Garrett, Jones Day, San Francisco, CA.

Appeal from the United States District Court for the Northern District of California, Jeremy D. Fogel, District Judge, Presiding. D.C. No. 5:08-cv-01317-JF.

Before: DIARMUID F. O'SCANNLAIN, STEPHEN S. TROTT and RICHARD A. PAEZ, Circuit Judges.

ORDER

The opinion filed on August 18, 2010 , is amended as follows:

At pages 12121-22 of the slip opinion, replace:

we cannot say that a CRA reporting factually correct information about the disputed debt is misleading potential creditors. Indeed, it would be misleading to potential creditors to delete such information because "the>

with

Indeed, determining whether the consumer has a valid defense "is a question for a court to resolve in a suit against the [creditor,] not a job imposed upon consumer reporting agencies by the FCRA." DeAndrade, 523 F.3d at 68. Nor is a CRA obligated not to report any information about the disputed item simply because the consumer asserts a legal defense. "[T]he>

At page 12123 of the slip opinion, lines 16-17 , replace with .

With these amendments, the panel has unanimously voted to deny the petition for rehearing. Judges O'Scannlain and Paez have voted to deny the petition for rehearing en banc, and Judge Trott has so recommended. The full court has been advised of the petition for rehearing en banc, and no judge has requested a vote on whether to rehear the matter en banc. Fed. R.App. P. 35.

The petition for rehearing and the petition for hearing en banc are DENIED. No further petitions for hearing or rehearing en banc may be filed.

The motion by the National Consumer Law Center and National Association of Consumer Advocates to file a brief of amici curiae in support of Carvalho's petition for rehearing and for rehearing en banc is DENIED as moot.

O'SCANNLAIN, Circuit Judge:

OPINION

We must decide whether a credit reporting agency is liable for a disputed credit report under California's Consumer Credit Reporting Agencies Act.

I

A

In October 2001, Noemia Carvalho received medical treatment from Bayside Medical Group, Inc. ("Bayside"), in Pleasanton, California. Prior to receiving hertreatment, Carvalho signed the following agreement ("Agreement"):

Bayside Medical Group, Inc., will bill your insurance as a courtesy to you. If your insurance does not pay the claim within 90 days of the date of service, the balance of your account will be your responsibility.... I hereby authorize my insurance company to pay benefits directly to Bayside Medical Group, Inc., and I am financially responsible for non-covered services.

As a result of her treatment, Carvalho incurred charges amounting to $118.

For reasons that remain unclear,¹ Bayside received no payment from her insurance company within the ninety days provided in the Agreement. Bayside sent Carvalho a bill for $118 in January 2002, as well as a "final notice" in March 2003. Neither Carvalho nor any insurer paid the bill.

Thereafter, Bayside assigned the debt to Credit Consulting Services ("CCS"), a collection agency. CCS sent Carvalho a series of dunning letters threatening to report the debt to three major credit reporting agencies—Equifax Information Services, LLC ("Equifax"), Experian Information Solutions, Inc. ("Experian"), and TransUnion LLC ("TransUnion") (collectively, "CRAs")—if she did not pay the bill. Despite these warnings, Carvalho still did not pay the bill or arrange for payment by her insurer. Accordingly, CCS reported the debt to the CRAs.

After Carvalho noticed the debt on her credit report,² her attorney sent CCS a letter in September 2004 explaining that the debt arose from a bill her insurance company "wrongfully refused to pay" and requesting that CCS "immediately investigate and correct the information that is erroneously appearing on her credit report." CCS responded that Bayside "bills insurance as a courtesy only and the individual is responsible for non covered services," and that Carvalho's "insurance was billed and coverage denied." CCS concluded that it "reported this account correctly" and that any problem "should be resolved between Ms. Carvalho and her insurance company."

That same month, Carvalho also sent letters to the three CRAs requesting that they investigate—or, in industry parlance, "reinvestigate"—the CCS debt on her credit report. The letters stated: "I dispute the above item on my enclosed Credit Report. These bills arose out of the medical treatment I was covered for by Blue Cross of California. For some reason that is unknown to me, they did not pay these medical bills." The letters requested that the above-quoted passage be added to Carvalho's credit report.

Pursuant to their standard procedures, the CRAs each sent an electronic Consumer Dispute Verification ("CDV") form to CCS with a cursory description of the dispute and a request that CCS verify the account information. CCS responded by reporting that the information was "accurate," and the CRAs each updated Carvalho's credit report to indicate that the information about the CCS debt had been verified but was disputed by Carvalho. In addition, Equifax added Carvalho's statement to her report. The CRAs each sent Carvalho notices explaining that they had verified the information as correct and describingfurther steps she could take if unsatisfied with the outcome of the reinvestigation.

In April 2005, Carvalho sent the CRAs new letters requesting "a description of how [the CCS] item was verified." In addition, she requested that the CRAs include a statement on her credit report similar to the one she had sent in her prior letter. Equifax mailed Carvalho a boilerplate description of its procedures for verifying disputed items. Experian and TransUnion construed Carvalho's letter as a request for another reinvestigation, which also resulted in CCS's verification of the item. Although Experian and TransUnion added Carvalho's statement to her credit report, neither complied with her request for a description of how they had verified the debt.

In June 2005, Carvalho submitted another round of letters to the CRAs renewing her dispute over the CCS item. According to the letters, she "learned that the [Bayside] bill may have been paid if [Bayside] had timely and properly submitted my bill to Blue Shield." ³ Both Equifax and Experian launched new reinvestigations, with the same outcome as before. TransUnion informed Carvalho that it considered her dispute "frivolous" and would not conduct any further reinvestigation absent "court papers or a recent, authentic letter from the creditor(s) that explains what information should be updated."

In February 2006, Carvalho's attorney sent letters to the CRAs explaining that there was "clear evidence" that the CCS item was "wrong" because "Bayside failed to timely and properly request payment from Blue Cross of California, instead improperly seeking payment from Blue Shield." According to the letters, "Carvalho's credit score has suffered due to this entry and caused her home to be refinanced at a rate higher than necessary due to its inclusion." The letters demanded that the entry be removed from Carvalho's credit report and that she be paid $25,000 plus attorney's fees. Moreover, the letters demanded yet another reinvestigation. The CRAs once again contacted CCS, which verified the information as accurate, and updated Carvalho's credit report accordingly.

B

On July 24, 2006, Carvalho filed a class action complaint against CCS and the three CRAs in the Monterey County Superior Court. The complaint alleged various violations of the California Consumer Credit Reporting Agencies Act ("CCRAA"), Cal. Civ.Code § 1785.1 et seq. , including the CRAs' failure to conduct a proper reinvestigation of Carvalho's dispute; the CRAs' failure to provide a sufficient response to her request for a description of the procedures they used to verify the CCS item; CCS's failure to cooperate in the reinvestigation; and CCS's reporting of a debt it knew or should have known to be illegitimate. The complaint sought to certify two classes:

1. California consumers seeking injunctive relief against consumer credit reporting agencies' reinvestigation procedures which, as presently constituted, fail to comply with the [CCRAA] in that they fail [to] meet the requirements of that statute, including, but not limited to, the fact that they fail to allow for review and consideration of all relevant information provided by the Consumer in the reinvestigation process; [and]

2. California consumers seeking injunctive relief against the consumercredit reporting agencies, who pursuant to the [CCRAA] requested, but did not receive, an adequate description of the procedure used to determine the accuracy and completeness of the disputed information.

The prayer for relief sought class certification, an injunction, damages (including punitive damages), attorney's fees, and costs. However, the complaint did not plead a specific amount of damages.

The superior court granted CCS's demurrer to the complaint without leave to amend on...