Soghomonian v. U.S.

• Decision Date: 29 July 2003
• Docket Number: No. CV F 99-5773 AWU DKB.,CV F 99-5773 AWU DKB.
• Citation: 278 F.Supp.2d 1151
• Parties: Raffi SOGHOMONIAN and Deborah Garabedian, Plaintiffs, v. THE UNITED STATES of America, the Internal Revenue Service, Fidelity National Title Insurance Company, Trans Union LLC, and Does 1-50, inclusive, Defendants.
• Court: U.S. District Court — Eastern District of California

278 F.Supp.2d 1151

Raffi SOGHOMONIAN and Deborah Garabedian, Plaintiffs, v. THE UNITED STATES of America, the Internal Revenue Service, Fidelity National Title Insurance Company, Trans Union LLC, and Does 1-50, inclusive, Defendants.

No. CV F 99-5773 AWU DKB.

United States District Court, E.D. California.

July 29, 2003.

COPYRIGHT MATERIAL OMITTED

Stephen Roy Cornwell, Cornwell and Sample, Fresno, CA, for Raffi Soghomonian, Deborah Garabedian, plaintiffs.

Michael J Desmond, United States Department of Justice, Tax Division, Washington DC, for Internal Revenue Service, defendant.

Margery Q Lee, Fidelity National Title, Insurance Company, Legal Division, Walnut Creek, Brian P Stewart, Law Offices of Mark Schiffman, Irvine, CA, for Fidelity Nat. Title Ins. Co. of Cal., defendant.

Brian M Russ, Crowell and Moring, Irvine, for Trans Union Corporation, defendant.

ORDER DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT

ISHII, District Judge.

In this case, plaintiffs are Raffi Soghomonian ("Raffi") and Deborah Garabedian ("Deborah") (collectively "Plaintiffs"). They have sued defendants the United States and the Internal Revenue Service ("IRS"), Fidelity National Title Insurance Company ("Fidelity"), and Trans Union LLC ("Trans Union") (collectively "Defendants").

The only remaining defendant in this action, Trans Union, has moved for summary judgment on the only remaining claim—Plaintiff's eighth claim for relief against Trans Union under the federal Fair Credit Reporting Act ("FCRA"), 15 U.S.C. section 1681 et seq. Hearing on Trans Union's motion was previously set for June 9, 2003. By order filed June 3, 2003, the court vacated the hearing on Trans Union's motion for summary judgment and took the matter under submission as of that date. See L.R. 78-230(h).

For the reasons set forth below the court now issues this order denying Trans Union's motion in its entirety.¹

DISCUSSION

The facts and procedural background of this case, as well as the parties' arguments in connection with the present motion, are well known to the parties and to the court. They will therefore not be recited here except as necessary to rule on the present motion.

The following issues are discussed in the same order as presented in Trans Union's moving papers.

I. Negligent Violation of the FCRA

Trans Union's argument that it cannot be held liable for negligent violation of the FCRA is rejected.

Trans Union's assertion that it cannot be held liable on a theory of negligent FCRA violation is based on two main contentions, each of which contains several sub-arguments. These main arguments are discussed separately below.

A. Failure to investigate tax liens

Trans Union's first main argument (or set of arguments) centers upon Trans Union's alleged failure to adequately and nonnegligently investigate the status of the tax liens which had been imposed upon the property of Raffi.

Trans Union contends, first, that it complied with the requirement that it follow "reasonable procedures" with respect to the status of these tax liens as set forth in the caselaw interpreting the FCRA because (1) Plaintiffs submitted only one notice of dispute to Trans Union regarding the tax liens, and this notice of dispute "referenced, but did not identify by number," the Certificates of Non-Attachment of Federal Tax Liens ("CNAs") issued by the IRS which pertained to these tax liens; (2) in investigating this dispute Trans Union "faced an unusually complex and difficult task" because the documents Plaintiffs provided Trans Union to prove that the tax liens were invalid, the CNAs just mentioned, appeared to be "informal and unofficial," lacked a "seal or recording information," and were, in Trans Union's words, "extremely rare" and unknown to the company that Trans Union relied upon to conduct the reinvestigation of the status of the tax debt; (3) any confusion in this case is largely attributable to the IRS itself inasmuch as the IRS issued three different sets of notices of federal tax liens with respect to the subject property, all based on the same underlying tax liabilities; (4) related to the argument numbered (2), above, the CNAs were unknown to the company that Trans Union relied upon to verify the status of the tax debt, and this company "simply did not know to look for them"; and (5) eventually—indeed, only "a few months after" receiving Plaintiffs' statement of dispute regarding the tax liens—Trans Union was able to "confirm the status" of the tax liens with an IRS representative named Frank Guido, and thereafter permanently removed the tax liens from Raffi's credit report.² In addition, Trans Union claims that even if some of the tax liens had been extinguished by the CNAs, it is undisputed that other tax liens remained on the subject properties for which the IRS had not issued CNAs. Therefore, Trans Union argues, the information contained in the credit reports was substantially accurate: the dollar amounts associated with the tax liens were correct, and the only inaccuracies concerned the dates of the liens' issuance and the serial numbers of the liens themselves. In these circumstances, Trans Union asserts that "it was impressive that Trans Union was able to resolve plaintiffs' dispute as quickly as it did." The court rejects each of these arguments.

Under the FCRA, a credit reporting agency is required to maintain reasonable procedures to assure the accuracy of information it disseminates, both with respect to the information contained in credit reports generally and with respect to the reinvestigation the agency is required to perform if a consumer disputes the contents of a report. See 15 U.S.C. §§ 1681e(b), 1681i; see also Thomas v. Trans Union LLC, 197 F.Supp.2d 1233, 1237-38 (D.Or.2002) (citations and quotations omitted). Based on the contents of Plaintiffs' currently-operative pleading— their first amended complaint—it appears that Plaintiffs' primary theory in this case, at least so far as negligence is concerned, is not that Trans Union failed to maintain reasonable procedures to prevent the appearance of incorrect information on their credit reports in the first place, but that Trans Union failed to take adequate steps after receiving Plaintiffs' statement of dispute.

As can be seen from the summary of Trans Union's arguments set forth in the previous paragraph, Trans Union's main defense in this case is one of "reasonableness"; Trans Union contends that it acted reasonably in its handling of Plaintiffs' dispute, particularly in light of the allegedly unusual—indeed, almost unheard of according to Trans Union—nature and physical appearance of the CNAs that Plaintiffs provided as proof that the tax debts were not theirs. In addition, Trans Union appears to contend that it should not be held liable for continuing to report the tax liens as unsatisfied after receiving Plaintiffs' notice of dispute because the CNAs were unknown to the company it depended upon to verify disputed information of this type, Hogan Information Services ("Hogan").

To the extent that Trans Union's argument is that it should not be held liable for the continuing appearance of the tax liens after Plaintiffs submitted a notice of dispute because Hogan was unfamiliar with CNAs, this argument is contrary to clearly established law. In order for this argument to prevail, Trans Union would have to establish that its reliance on Hogan was itself reasonable; if it was not reasonable, then Trans Union cannot be said to have used reasonable procedures to assure the accuracy of the information it continued to disseminate even after receiving notice of Plaintiffs' dispute. However, the caselaw is clear that a credit reporting agency does not act reasonably under the FCRA by deferring entirely to another source of information. The "grave responsibility" imposed by the FCRA's reinvestigation requirement "must consist of something more than merely parroting information received from other sources." Cushman v. Trans Union Corp., 115 F.3d 220, 225 (3d Cir. 1997) (quotations and brackets omitted). This is be especially true where, as here, the source which the reporting agency relies upon does not consider information supplied by the consumers in the course of "verifying" the disputed information. Moreover, as the Ninth Circuit has stated, the reasonableness of a credit reporting agency's procedures under the FCRA and whether the agency actually followed these procedures "will be jury questions in the overwhelming majority of cases." Guimond v. Trans Union Credit Info. Co., 45 F.3d 1329, 1333 (9th Cir.1995) (citation omitted). In this case, Plaintiffs not only submitted a statement of dispute with respect to the tax lien information, but they also provided proof to Trans Union that the tax liens had been extinguished. This proof came from the IRS itself in the form of the CNAs that Plaintiffs provided to Trans Union directly. Plaintiffs' act of providing copies of the CNAs to Trans Union went well beyond what was required of them under the FCRA; all that was required of them was that they notify Trans Union that they disputed the contents of their credit report, and Trans Union was required to perform a free reinvestigation of the disputed items and "record the current status of the disputed information, or delete the item[s] from the file," within 30 days of the date of Plaintiffs' dispute. 15 U.S.C. § 1681i(a)(1)(A). By providing Trans Union evidence that the tax debt was not valid at the same time they submitted their statement of dispute, Plaintiffs did all they could to ensure that Trans Union would comply with its duties under the FCRA. Yet Trans Union did not comply; it continued to report the tax liens as valid, even though they were not. In this case, a reasonable jury could well conclude that the measures taken by Trans Union were not sufficiently "reasonable" under the circumstances to excuse Trans Union from liability for failure to adequately respond to Plainti...