Toby Nelson vs. Chase Manhattan - he won

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
TOBY D. NELSON,
No. 00-15946
Plaintiff-Appellant,
D.C. No.
v. CV-99-00290-
CHASE MANHATTAN MORTGAGE JBR(RLH)
CORP.,
OPINION
Defendant-Appellee.
Appeal from the United States District Court
for the District of Nevada
Johnnie B. Rawlinson, District Judge, Presiding
Argued and Submitted
January 16, 2002--San Francisco, California
Filed March 1, 2002
Before: Alfred T. Goodwin, John T. Noonan and
Stephen S. Trott, Circuit Judges.
Opinion by Judge Noonan
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COUNSEL
Richard J. Rubin, Santa Fe, New Mexico, and Michael D.
Gliner, Las Vegas, Nevada, for the plaintiff-appellant.
Gerald D. Waite and Nikki Baker, Kummer Kaempfer Bonner
& Renshaw, Las Vegas, Nevada, for the defendant-appellee.
John F. Daly, Federal Trade Commission, Washington, D.C.,
for the amicus in support of the appellant.
_________________________________________________________________
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OPINION
NOONAN, Circuit Judge:
Toby D. Nelson ("Nelson") appeals the judgment of the
district court for the District of Nevada dismissing his suit
under the Fair Credit Reporting Act, 15 U.S.C. §§ 1681-
1681u ("the FCRA") for failure to state a cause of action
against the defendant Chase Manhattan Mortgage Corporation
("Chase"). Holding that section 1681s-2(b) does create a
cause of action for a consumer against a furnisher of credit
information, we reverse the judgment of the district court.
FACTS
According to his complaint and attached exhibits, Nelson
on February 2, 1995 became a co-signatory with Anthony
Proietti ("Proietti") on a mortgage loan of $119,950 from
Chase. On February 15, 1998, Proietti declared bankruptcy.
Nelson continued to pay the amounts due on the mortgage in
a timely manner.
Nelson, however, experienced difficulty in obtaining
financing after Proietti's bankruptcy. In September 1998, Nelson
asked Experian Information Solutions, Inc. ("Experian")
for his credit profile. Experian provided him with a report
referring to the account with Chase. Regular payments were
shown made up to January 8, 1997, with a balance of
$110,011 then showing. The report stated: "As of 2/15/98 this
account is included in a discharge through bankruptcy chapter
7, 11 or 12."
On December 2, 1998, Nelson wrote Experian requesting
it to investigate "disputed matters" in the credit report. Nelson
stated that he had never declared bankruptcy and that the
bankruptcy noted was that of the co-obligor. He asked for
deletion of the bankruptcy reference. He copied this letter to
Chase.
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On January 4, 1998, Chase wrote Nelson stating:"At the
time we receive notice of a bankruptcy filing, we are required
to note the appropriate account is in bankruptcy, regardless of
whether the account is current or past due, to prevent contact
with the party[ies] involved in violation of the bankruptcy
laws . . . . This status is not a reflection of which of the borrowers
actually filed bankruptcy, but merely a statement that
the account itself is affected by the bankruptcy filing." Chase
went on to say that prudent lenders should follow up on the
report and determine whether the consumer in question "had
actually filed the bankruptcy action." Chase apologized for
"any inconvenience" to Nelson. It promised to inform credit
bureaus that "the account has been affected by a bankruptcy
filed by one, but not all, of the borrowers."
Nelson continued to have difficulties getting credit. On
March 5, 1999, Nelson received a report from Equifax showing
his credit history with the notation "included in bankruptcy
8/98," opposite the entry for Chase. On March 6, 1999,
U.S. Bank of Minneapolis denied his application for a truck
loan "due to bankruptcy filing on your credit bureau report."
On March 7, 1998, Nelson wrote Equifax, like Experian a
credit reporting agency ("CRA"), disputing this report and
requesting an investigation.
PROCEEDINGS
On March 8, 1999, Nelson filed this suit against Chase,
which ultimately moved to dismiss his third amended complaint.
On April 14, 2000, the district court granted the motion
to dismiss. The court ruled that the FCRA, 18 U.S.C.§ 1681s-
2(b) did not create a private action.
Nelson appeals.
ANALYSIS
The FCRA was enacted in 1970. It was prefaced with
a congressional finding that "unfair credit methods undermine
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the public confidence which is essential to the continued functioning
of the banking system." 15 U.S.C. § 1681(a)(1). Section
1681n provides: "Any person who willfully fails to
comply with any requirement imposed under this subchapter
with respect to any consumer is liable to that consumer in an
amount equal to the sum of any actual damages sustained by
the consumer . . . or damages of not less than $100 or more
than $1,000" plus reasonable attorney's fees. In similar terms,
§ 1681o establishes comparable liability for negligent noncompliance.
That with these words Congress created a private
right of action for consumers cannot be doubted. That right is
to sue for violation of any requirement "imposed with respect
to any consumer." What we have to decide is whether sections
1681n and 1681o permit suit against a furnisher of credit
reporting information that violates the duties imposed under
section 1681s-2. Inspection of this section in its entirety is
necessary.
Section 1681s-2(a) begins with a flat prohibition in
(1)(A) directed against "[a] person" furnishing information
"relating to a consumer" to a CRA "if the person knows or
consciously avoids knowing that the information is inaccurate."
This prohibition is reinforced in subsection (1)(B) by a
prohibition of furnishing inaccurate information after notice
of actual inaccuracy from the affected consumer. Subsection
(2) imposes a duty on regular furnishers of credit information
to correct and update the information they provide so that the
information is "complete and accurate." Subsection (3)
imposes a duty on such furnishers to notify CRAs if a consumer
disputes the information furnished. Subsection (4)
obliges furnishers to notify the CRA of the closure of a consumer's
account, and subsection (5) imposes a similar obligation
to notify the CRA of delinquent accounts.
Most of the provisions of § 1681s-2(a) are for the protection
of consumers. There would be no doubt that a consumer
could sue for their violation under sections 1681n & o
were it not for §§ 1681s-2(c) and (d). Subsection (c) expressly
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provides that sections 1681n & o "do not apply to any failure
to comply with subsection (a) of this section, except as provided
in section 1681s(c)(1)(B) of this title." The referenced
section permits certain suits by States for damages. This limitation
on liability and enforcement is reinforced by subsection
(d) of § 1681s-2, which provides that subsection (a) "shall be
enforced exclusively under section 1681s of this title by the
Federal agencies and officials and the State officials identified
in that section." Consequently, private enforcement under
§§ 1681n & o is excluded.
We turn to subsection 1681s-2(b). This section specifies
what happens after a CRA receives notice "pursuant to section
1681i(a)(2) . . . of a dispute with regard to the completeness
or accuracy of information provided by a person " to the
CRA. The person, i.e., the furnisher of the disputed information,
has four duties: to conduct an "investigation with respect
to the disputed information;" to review all relevant information
provided by the CRA; to report the results of its investigation
to the CRA; and if the investigation finds the
information is incomplete or inaccurate to report those results
"to all [nationwide] consumer reporting agencies to which the
person furnished the information."
Chase argues that as consumers are unmentioned by name
in § 1681s-2(b), this section does not impose a requirement
"with respect to any consumer," so the private right of action
under §§ 1681n & o do not apply to § 1681s-2(b). The argument
has a specious plausibility. It overlooks the fact that the
notice which starts the process provided by (b) is notice of a
dispute as to the accuracy or completeness of information
"contained in a consumer's file." See 15 U.S.C.
§ 1681i(a)(1)(A). The information to be investigated does not
exist in the air. It is hard to say that, when information in a
consumer's file is the issue, there is no requirement "with
respect to a consumer." The information is disputed by the
consumer. See id. Its completeness or accuracy is of prime
concern to the consumer.
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This reading of the statute might be challenged by the
observation that § 1681s-2(a) carefully prevents a consumer
from suing a furnisher of even information known by the furnisher
to be inaccurate. If Congress didn't want the irresponsible
furnisher privately sued under (a), why should Congress
have provided for private suit under (b)? This doubt chimes
with the argument that subsections (c) and (d) of§ 1681s-2
don't mention (b) because (b) creates no private right of
action at all.
The answer to the objection was given in oral argument
by counsel for amicus Federal Trade Commission, as follows.
It can be inferred from the structure of the statute that Congress
did not want furnishers of credit information exposed to
suit by any and every consumer dissatisfied with the credit
information furnished. Hence, Congress limited the enforcement
of the duties imposed by § 1681s-2(a) to governmental
bodies. But Congress did provide a filtering mechanism in
§ 1681s-2(b) by making the disputatious consumer notify a
CRA and setting up the CRA to receive notice of the investigation
by the furnisher. See 15 U.S.C. § 1681i(a)(3) (allowing
CRA to terminate reinvestigation of disputed item if CRA
"reasonably determines that the dispute by the consumer is
frivolous or irrelevant"). With this filter in place and opportunity
for the furnisher to save itself from liability by taking the
steps required by § 1681s-2(b), Congress put no limit on private
enforcement under §§ 1681n & o.
This answer is strengthened by the amendment of
§§ 1681n & o effected in 1996. Before amendment, §§ 1681n
& o provided for suit against a CRA or against a user of credit
information, but not against a furnisher. When the statute was
amended, "any person" was made open to suit. See Pub.L.
104-208 at § 2412; 110 Stat. 3009 at §2412 (1996) ("section
616 of the [FCRA] . . . is amended by striking`Any consumer
reporting agency or user of information which' and inserting
`(a) IN GENERAL, any person who' "). As counsel for the
FTC observed, there are involved in any credit transaction
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only the consumer, the CRAs, the user of the credit reports
and the furnishers of the credit information. As consumers
would not be made subject to suit by consumers, and as CRAs
and users were already suable, who else except furnishers
could Congress have had in mind when it introduced"any
person" into the statute? Where, other than under§ 1681s-
2(b) would furnishers be suable by consumers? In oral argument,
counsel for Chase conceded that Chase had no answers
to these questions. We cannot suppose that Congress made an
amendment without a purpose.
That purpose, to provide some private remedy to injured
consumers, coheres with what we see as a primary purpose
for the FCRA, to protect consumers against inaccurate and
incomplete credit reporting. The statute has been drawn with
extreme care, reflecting the tug of the competing interests of
consumers, CRAs, furnishers of credit information, and users
of credit information. It is not for a court to remake the balance
struck by Congress, or to introduce limitations on an
express right of action where no limitation has been written
by the legislature.
REVERSED and REMANDED.
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