Opinion
No. 04cv0946 PJK/RLP.
August 22, 2005
ORDER
THIS MATTER comes on for consideration of Defendant Fremont Investment Loan Company's Second Motion for Summary Judgment filed June 8, 2005 (Doc. 73). Upon consideration thereof,
(1) Background. In their complaint, Plaintiffs contend that Defendant Fremont violated the Equal Credit Opportunity Act ("ECOA") by failing to provide them with written notice about its refusal to extend credit to Plaintiffs within thirty days of the loan application. 15 U.S.C. § 1691(d)(1) (2)(A). Plaintiffs allege that a denial of credit constitutes "adverse action" under the ECOA. 15 U.S.C. § 1691(d)(6). Specifically, they maintain that Fremont failed to (1) notify the Plaintiffs in writing of the refusal to extend credit, (2) provide a statement of specific reasons for the credit denial, and (3) disclose the Plaintiffs' right to receive a statement of reasons for the denial and how to obtain one. Doc. 1 at 8 (¶ 47) 10 (¶ 57). They seek actual and punitive damages, plus costs and attorneys' fees. Doc. 1 at 10 (¶ 58).
Plaintiffs also contend that Fremont violated the Fair Credit Reporting Act ("FCRA") by failing to extend them credit. Plaintiffs allege that the denial of credit constitutes "adverse action" under 15 U.S.C. § 1681a(k). The FCRA violation presumably pertains to 15 U.S.C. § 1681m(a), which requires notice of "any adverse action with respect to any consumer that is based in whole or in part on any information contained in a consumer report." Doc. 1 at 11 (¶ 62). Notice goes beyond the adverse action — it includes information concerning the consumer reporting agency furnishing the report and advice of the right to obtain the report and dispute it. 15 U.S.C. § 1681m(a)(1)-(3). Plaintiffs maintain that Fremont obtained the Salazar's credit reports and that Fremont's actions were willful, grossly negligent or alternatively negligent. Doc. 1 at 10-11 (¶¶ 59, 63).
Defendant Fremont contends that it mailed two statements of credit denial, termination or change containing the reason for credit denial (insufficient value or type of collateral), and complied with both Acts. Plaintiffs contend that they never received such statements. They seek actual or statutory damages, plus costs and attorneys' fees. Doc. 1 at 11 (¶ 64).
(2) Prior Summary Judgment Motion. The court previously denied a motion for summary judgment in favor of Fremont (Doc. 62), because important evidence supporting the motion was contained in Fremont's reply (Doc. 56). See Beaird v. Seagate Tech., Inc., 145 F.3d 1159, 1164 (10th Cir. 1998). Fremont understandably included that information in its reply after Plaintiffs responded to the initial summary judgment motion arguing that (1) affiant Scott Meier (an AVP Operations Manager at Fremont) lacked personal knowledge about Fremont's mailing procedures, (2) Fremont had no procedures to ensure proper mailing procedure, (3) Fremont's procedures were inadequate because no signed certification letter indicated that a second pre-disclosure was sent to the Plaintiffs, and (4) the mailbox rule creating a rebuttable presumption that a letter was received does not apply because Fremont failed in its proof that the credit denial notices were mailed to the Plaintiffs. Doc. 53. In affidavits attached to the initial response, the Plaintiffs stated: "We have never received any documents, by mail or fax, from Fremont Investment Loan Company." Id. Pl. Ex. 1 at ¶ 5 (Lucille V. Salazar aff.), Pl. Ex. 2 at ¶ 5 (Henry A. Salazar aff.). Plaintiffs also stated that they did not receive a pre-disclosure package, or any statements of credit denial.
(3) Summary Judgment Standard. Fremont has moved again for summary judgment, and this time it is warranted after evaluating the parties' submissions in accordance with Fed.R.Civ.P. 56(c) and the standards set forth in Celotex Corp. v. Catrett, 477 U.S. 317 (1986), and Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986). Fremont contends that it satisfied its notification requirements under the law and that Plaintiffs' affidavits of non-receipt do not create a genuine issue of material fact. Plaintiffs have not responded to the additional evidence brought to the fore in this second summary judgment motion, instead relying upon their previous response and the legal arguments concerning the meaning of Regulation B and the presumption of receipt under the common law mailbox rule. Doc. 75.
(4) Uncontroverted Facts. Here are the uncontroverted operative facts:
• On December 29, 2003, Plaintiffs signed a loan application for a $212,500 residential real estate loan with Fremont. Doc. 56, Ex. A, Meier Supp. Aff. ¶ 9 Ex. A.
• In connection with that loan application, Fremont generated a "Statement of Credit Denial, Termination or Change" dated January 22, 2004, indicating that the reason for denial was insufficient value or type of collateral. Doc. 56, Ex. A, Meier Supp. Aff. ¶ 2(b) Ex. B. That statement also provided contact information for Fremont if the Plaintiffs had any questions regarding the notice. Id. Meier Supp. Aff., Ex. B.
• The loan application was resubmitted by a verbal request from a loan broker on January 23, 2004. Doc. 56, Ex. A, Meier Supp. Aff. ¶ 10.
• In connection with the resubmission, Fremont generated a "Statement of Credit Denial, Termination or Change" dated January 23, 2004, indicating that the reason for the denial is insufficient value or type of collateral. Doc. 56, Ex. A, Meier Supp. Aff. ¶ 2(c) Ex. C. That statement also provided contact information for Fremont if the Plaintiffs had any questions regarding the notice. Id. Meier Supp. Aff., Ex. B.
• Fremont denied credit based upon an appraisal decision regarding the type of collateral; it was not a creditworthiness type of decision. Doc. 56, Ex. A, Meier Supp. Aff. ¶ 12 Ex. B C.
(5) More Uncontroverted Facts Concerning Fremont's Mail Procedures. Fremont contends that it mailed the two credit denial notices to the Plaintiffs at their last known address of Route 1, Box 18 AA, Glorietta, New Mexico 87535, postage prepaid on the dates above. Doc. 56, Ex. A, Meier Supp. Aff. ¶¶ 13-14. Fremont maintains that the credit denial notices were generated and mailed in accordance with the following procedure:
• Credit denial notices are prepared by the loan underwriter, printed out and sent to the Post Closing Department. Doc. 56, Ex. B, De Yulia Aff. ¶ 10(a). The notices are then verified by another employee within the Post Closing Department, placed into an envelope, and deposited in a centralized mail collection basket. Id. ¶¶ 10(b)-(d). Mail is picked up from the basket four times daily, run through a postage meter, placed in a mailroom collection box, and picked up between 5:00-5:30 p.m. daily. Doc. 56, Ex. C, Sigman Aff. ¶¶ 3(a)-(d). A bonded collection service delivers the mail to the local post office. Id. ¶ 3(e).
• Concerning returned mail procedures, returned mail is sent to a manager who sorts it and forwards it to the appropriate production team. Doc. 56, Ex. B, De Yulia Aff. ¶ 12(a). If the mail was sent to an incorrect address, the address is corrected, and the mail is sent to the correct address in accordance with the above. Id. ¶ 12(b). If the problem cannot be determined, the returned mail is placed in the customer's file. Id. Plaintiffs' file at Fremont has no evidence of returned mail. Id. ¶ 13.
• Fremont routinely audits its mail procedures and those procedures are regulated for compliance with the ECOA by the FDIC, which has not criticized Fremont's mailroom or mailing procedures concerning mailing credit denials. Id. ¶¶ 11, 14-15.
The affidavit uses the term "pipeline team member."
(6) Summary Judgment Is Proper on the FCRA Claim. One of the primary purposes of summary judgment is to dispose of factually unsupported claims. Celotex, 477 U.S. at 323-24. Fremont is entitled to summary judgment on the FCRA claim because it is uncontroverted that the decision to deny credit to the Plaintiffs was not based in whole or in part upon any credit reports, rather the decision was based upon insufficient value of the collateral. This uncontroverted fact is corroborated by the credit denial notices which so indicate, and do not check a box indicating a decision based in whole or in part upon a credit report. Notice under the FCRA is required when there is "any adverse action with respect to any consumer that is based in whole or in part on any information contained in a consumer report." 15 U.S.C. § 1681m(a).
Plaintiffs do not respond directly to this point. In their response to the initial motion for summary judgment, Plaintiffs recognized the requirement of some link between the adverse action and a credit report but stated "Fremont has not argued that it did not obtain the Salazars' credit reports." Doc. 53 at 7 (emphasis supplied). The words of the statute urged by the Plaintiffs as a basis for liability do not condition notice merely on obtaining a credit report, and Plaintiffs have put forth no evidence to controvert Fremont's explanation of the denial. See Mayberry v. Ememessay, Inc., 201 F. Supp. 2d 687, 696 (W.D. Va. 2002) (where creditor notified consumer that denial of credit was taken based upon a deficiency in plaintiff's income, and not based upon any information in credit report, dismissal of § 1681m(a) claim was warranted); see also Fischl v. Gen'l Motors Acceptance Corp., 708 F.2d 143, 149 (5th Cir. 1983) ("Disclosure is not conditioned upon the creditor's consideration of derogatory or negative information in a consumer report in arriving at an adverse decision, so long as that decision is attributable wholly or in part to information in the report.").
(7) Summary Judgment Granted on the ECOA Claims. The issue concerning the ECOA is whether Plaintiffs' statements that they never received the credit denial notices from Fremont is sufficient to create a genuine issue of material fact on the ECOA claim. The ECOA provides that a creditor "shall notify" an applicant of its action on a completed application within thirty days. 15 U.S.C. § 1691(d)(1). Where adverse action is taken, a creditor may satisfy its obligation to provide a statement of reasons by "providing statements of reasons in writing as a matter of course to applicants against whom adverse action is taken." 15 U.S.C. § 1691(d)(2)(A). Regulation B in pertinent part requires a creditor to notify an applicant within thirty days after receiving a completed application concerning the creditor's adverse action on the application. 12 C.F.R. § 202.9(a)(1). An adverse action notification "shall be in writing and shall contain a statement of the action taken." 12 C.F.R. § 202.9(a)(2).
Fremont argues that it has satisfied the notice requirements on its proof that it sent the adverse action notices. Fremont candidly admits that it "has not controverted, and has no ability to controvert, Plaintiffs' statement[s] that they did not receive the notices." Doc. 76 at 7. Fremont relies upon a line of authority under the Fair Debt Collection Practices Act, specifically 15 U.S.C. § 1692g(a), requiring debt collectors to send a written notice to debtors. See Mahon v. Credit Bureau of Placer County, Inc., 171 F.3d 1197, 1201 (9th Cir. 1999);Damsel v. Shapiro Felty, L.L.P., No. 01AP-107, 2001 WL 1045523, at *3 (Ohio Ct.App. 2001). Unlike a requirement of notification, § 1692g(a) requires the debt collector in certain circumstances "send the consumer a written notice." Thus, it is not surprising that cases construing § 1692g(a) hold that actual receipt by the debtor is not required; the debt collector need only show that it sent the notice. Mahon, 171 F.3d at 1201; Damsel, 2001 WL 1045523, at *3.
Notwithstanding this obvious distinction, the court agrees with Fremont that in these circumstances it has complied with its obligation to provide adverse action notices to Plaintiffs. Mailing is certainly a way of giving notice and thereby satisfying the requirement of the ECOA. After time for discovery, Plaintiffs have not controverted Fremont's facts that tend to show that the adverse action notices were in fact mailed. The court recognizes that the presumption of receipt under the mailbox rule probably does not apply in these circumstances — it is a rebuttable presumption that drops out upon competent evidence of nonreceipt. See Crude Oil Corp. of Am. v. Commissioner, 161 F.2d 809, 810 (10th Cir. 1947) (describing mailbox rule); see also Sorrentino v. IRS, 383 F.3d 1187, 1189 (10th Cir. 2004) (separate opinion of Baldock, J.) (same),id. at 1197 (Seymour, J., dissenting) (same), petition for cert. filed, 73 U.S.L.W. 3632 (2005). The Tenth Circuit has suggested in the immigration context that the presumption cannot be defeated where the party claiming non-receipt does not provide sworn evidence as to why he did not receive notice mailed to the address he provided. Gurung v. Ashcroft, 371 F.3d 718, 721 (10th Cir. 2004). Here, however, we have the Plaintiffs' affidavits of non-receipt but no sworn evidence as to why the items were not received. Fremont suggests that it would not contest non-receipt in a trial, notwithstanding that receipt or non-receipt is usually contested. Doc. 76 at 7. See Nunley v. City of Los Angeles, 52 F.3d 792, 796-97 (9th Cir. 1995) (once presumption drops out, decision requires careful weighing of the evidence); In re Yoder Co., 758 F.2d 1114, 1118-1120 (6th Cir. 1985) (denial of receipt rebuts presumption of receipt); Thele v. Sunrise Chevrolet, Inc., No. 03-C-2626, 2004 WL 1194751 at *7-8 (N.D. Ill. May 28, 2004) (presumption of receipt was uncontroverted thus defeating similar ECOA claim).
Essentially, this is an issue of who should bear the risk of non-receipt where it is uncontroverted the lender complied with procedures for mailing the adverse action notices. Though the regulations require that a creditor "shall notify an applicant" and "shall provide a notice that is substantially similar" to certain prescribed language, 12 C.F.R. § 202.9(a)(1) (b)(1), the court disagrees with the Plaintiffs that the drafters of the regulations "intended that the fact finder must decide between competing claims concerning the consumer's receipt of the notice," Doc. 75 at 3, at least where the facts are uncontroverted that the creditor mailed a compliant notice and the consumers did not receive it.
Neither the statute nor the regulation expressly condition the obligation upon receipt of the notice, and civil liability is premised upon non-compliance with the ECOA resulting in a violation. See 15 U.S.C. § 1691e(a) (f); 12 C.F.R. § 202.17(b)(2). 12 C.F.R. § 202.17(c) provides that the failure to comply with § 202.9 "is not a violation if it results from an inadvertent error. On discovering an error under §§ 202.9 and 202.10, the creditor shall correct it as soon as possible." See also 12 C.F.R. § 202.2(s) (" Inadvertent error means a mechanical, electronic, or clerical error that a creditor demonstrates was not intentional and occurred notwithstanding the maintenance of procedures reasonably adapted to avoid such errors."); 12 C.F.R. pt. 202, Supp. I, § 202.17 (" Inadvertent errors. Inadvertent errors include, but are not limited to, clerical mistake, calculation error, computer malfunction, and printing error. An error of legal judgment is not an inadvertent error under the regulation.") (official staff interpretation). Here, Plaintiffs have not identified an error by Fremont, let alone an inadvertent one. Moreover, to the extent that an inadvertent error on the creditor's part is excused, the creditor cannot be held responsible for the inadvertent errors of the post office over which it has no notice of or control.
Moreover, the purpose of the ECOA would not be well-served by a test of actual receipt given the facts and circumstances of this case. See Thompson v. Galles Chevrolet Co., 807 F.2d 163, 168 (10th Cir. 1986) (facts and circumstances must be considered in applying ECOA regulations). Although Plaintiffs make the assertion that "[a]n adverse action notice by Fremont might have enabled the Salazars to take steps to overcome any perceived impediments to their obtainment of a loan" and that "they might have chosen to shop elsewhere for a loan and perhaps with a different broker," Doc. 75 at 2, this is argument by counsel, not summary judgment evidence. Thomas v. Wichita Coca-Cola Bottling Co., 968 F.2d 1022, 1024 (10th Cir. 1992). It is insufficient to meet Fremont's summary judgment evidence (credit denial was based on collateral, not creditworthiness) and Fremont's assertion that Plaintiffs have no proof of actual damages resulting from non-receipt. See Doc. 56 at 6-7; Celotex, 477 U.S. at 323.
Two of Plaintiffs' arguments deserve mention. In their initial response, Plaintiffs pointed out that Fremont's two files on the Salazars each contained a pre-disclosure package and an adverse action notice. Doc. 53 at 5. Fremont requires its employees to sign a certification letter that the pre-disclosure package was mailed to the consumer. Id. Although the certification letter is signed by a Fremont employee concerning the first pre-disclosure package, according to Plaintiffs "no one at Fremont signed the certification letter for the second predisclosure package." Id. (emphasis omitted). The court does not find this fact to create a genuine issue of material fact — the issue in this case concerns the adverse action notices, not the second pre-disclosure package. Cf. Mahon, 171 F.3d at 1202 (fact that subsequent letters may have been returned as undeliverable did not controvert creditor's statement that letter in question had not been returned).
Plaintiffs argue that Jones v. Citibank, 844 F. Supp. 437 (N.D. Ill. 1994), illustrates that a trial is necessary where a consumer provides an affidavit of non-receipt that would rebut the mailbox rule's presumption of receipt, even if the creditor established regular mailing. Jones dealt with creditor's limitations defense concerning when a consumer knew or should have known of the creditor's denial of a loan. Although the court concluded that "[w]hen a plaintiff unequivocally denies receipt of the letter, there is a genuine issue of a material fact," id. at 442, that court's discussion must be read against the issue under consideration — when the Plaintiffs received notice. As stated above, though receipt of notice certainly demonstrates compliance with a duty to notify, the absence of receipt in the circumstances of this case does not equate to a violation of the ECOA.
Finally, Plaintiffs have moved for leave to file a statement of additional authority (Doc. 78), and that motion will be granted. Plaintiffs rely upon Reynolds v. Hartford Financial Services Group, Inc., Nos. 03-35695, 04-35279, 2005 WL 1840054 (9th Cir. Aug. 4, 2005), a case broadly holding that the FCRA "requires that an insurance company send the consumer an adverse action notice whenever a higher rate is charged because of credit information it obtains, regardless of whether the rate is contained in an initial policy or an extension or renewal of a policy and regardless of whether the company has previously charged the consumer a lower rate." Id. at *1. The case had a number of subsidiary holdings, but Plaintiffs draw the court's attention to the following in the statement of facts: "The parties dispute whether Hartford Fire actually sent an adverse action notice to Reynolds, but that is a question of fact for the fact-finder." Id. at *4. Reynolds contains no analysis or development of this statement in the context of a properly supported summary judgment motion. Moreover, this statement would be dicta, as the court later ruled that Hartford Fire's notice would be inadequate as a matter of law. Id. at *10. Reynolds does not illuminate the issues in this case.
NOW, THEREFORE, IT IS ORDERED, ADJUDGED and DECREED that:
(1) Defendant Fremont Investment Loan Company's Second Motion for Summary Judgment filed June 8, 2005 (Doc. 73), is granted.
(2) Plaintiffs' Motion for Leave to File Statement of Additional Authority filed August 10, 2005 (Doc. 78), is granted.
(3) The October 17, 2005, pretrial conference and December 12, 2005 trial are vacated.