United States District Court, D. Arizona
Honorable John J. Tuchi United States District Judge
issue is Defendant's Motion for Summary Judgment (Doc.
107), to which Plaintiffs filed a Response (Doc. 137) and
Defendant filed a Reply (Doc. 147). Also at issue is
Plaintiffs' Motion for Partial Summary Judgment (Doc.
118), to which Defendant filed a Response (Doc. 133) and
Plaintiffs filed a Reply (Doc. 151).
James and Katherine McCalmont filed a Complaint (Doc. 1,
Compl.) on October 16, 2013, alleging that they were
“subjected to the repeated violation of and intentional
non-compliance with the Fair Credit Reporting Act, 15 U.S.C.
§ 1681 et seq.” (Compl. ¶ 1.)
Defendant, Federal National Mortgage Association
(“FNMA”), is a government-sponsored entity
created by Congress to purchase mortgage loans from lenders
and thereby help stabilize the market for residential
mortgages. Defendant licenses an automated underwriting
system known as Desktop Underwriter (“DU”).
(Compl. ¶¶ 18- 19; Answ. ¶ 19.) DU informs
lenders whether a prospective loan would be eligible for
purchase by Defendant.
who use DU input a consumer's “tri-merge”
credit report, which consists of the consumer's credit
reports from three of the top credit repositories in the
United States. (Compl. at ¶ 21.) From there, DU
generates a Findings Report that details the consumer's
credit and concludes whether or not a loan made to that
consumer would be eligible for purchase by Defendant. (Compl.
¶ 30.) A Findings Report that lists a “Refer with
Caution” rating indicates that Defendant would not
purchase the subject mortgage loan.
rating produced in a DU Findings Report is based on the
consumer's credit history-most relevant here, the program
considers whether a consumer has completed a short sale of a
property or whether a consumer's property has been
foreclosed upon. A loan to a consumer who made a short sale
of a mortgaged property may still be eligible for purchase by
Defendant, as long as the short sale occurred more than two
years before the consumer's current loan application. But
if the consumer previously had a property foreclosed upon, he
must wait seven years before any loan made to him becomes
eligible for purchase by Defendant. Any application before
those seven years are up would come back with a “Refer
with Caution” rating and “be ineligible for
delivery to [Defendant] as a DU loan.” Plaintiffs
allege that Defendant failed to distinguish between a
foreclosure and a short sale in its DU algorithm. (Compl.
¶¶ 74-83.) Indeed, Defendant responded to
widespread concern about this practice in 2013, when it
released “Desktop Underwriter Clarification.”
(Doc. 1-3, DU Clarification.) Defendant explained that DU
reviews “manner of payment” (“MOP”)
codes associated with important transactions in a
consumer's credit history as a way to determine the
rating in the DU Findings Report. (DU Clarification at 1.) A
foreclosure is indicated by MOP code 8 (foreclosure). And at
the time of Defendant's clarification, “no codes
provided in the credit report data received by DU 
specifically identify a preforeclosure
sale.” (DU Clarification.) Thus, Plaintiffs
allege that any consumer who engaged in a short sale had an
MOP code 8 appear on his DU Findings Report, indicating a
foreclosure that did not actually occur, and thereby
rendering any loan within seven years of the short sale
ineligible for purchase by Defendant. (Compl. ¶ 44.)
negotiated a short sale of their real estate in 2009. (Compl.
¶ 34.) After waiting the requisite two years to apply
for a new mortgage loan for a separate property, Plaintiffs
were denied conventional mortgage financing multiple times.
(Compl. ¶¶ 36- 52.) Plaintiffs allege that
“the ‘foreclosure' notation  was preventing
them from obtaining financing.” (Compl. ¶ 52.)
filed this action, seeking damages under 15 U.S.C. §
1681n and § 1681o, for both willful and negligent
violations of the Fair Credit Reporting Act
(“FCRA”). (Compl. ¶ 99.) In 2014, Defendant
moved to dismiss the case on the grounds that it is not
subject to the FCRA. (Doc. 23). District Judge Holland
granted Defendant's Motion and dismissed the case. (Doc.
38.) The Ninth Circuit later reversed. (Doc. 48.) The case
was remanded and assigned to District Judge Tuchi (Doc. 53.)
On March 21, 2018, Defendant filed a Motion for Summary
Judgment (Doc. 107). Plaintiffs subsequently filed their own
Motion for Partial Summary Judgment (Doc. 118).
Motion for Summary Judgment
Rule 56(c) of the Federal Rules of Civil Procedure, summary
judgment is appropriate when: (1) the movant shows that there
is no genuine dispute as to any material fact; and (2) after
viewing the evidence most favorably to the non-moving party,
the movant is entitled to prevail as a matter of law.
Fed.R.Civ.P. 56; Celotex Corp. v. Catrett, 477 U.S.
317, 322-23 (1986); Eisenberg v. Ins. Co. of N. Am.,
815 F.2d 1285, 1288-89 (9th Cir. 1987). Under this standard,
“[o]nly disputes over facts that might affect the
outcome of the suit under governing [substantive] law will
properly preclude the entry of summary judgment.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). A “genuine issue” of material fact arises
only “if the evidence is such that a reasonable jury
could return a verdict for the nonmoving party.”
considering a motion for summary judgment, the court must
regard as true the non-moving party's evidence, if it is
supported by affidavits or other evidentiary material.
Celotex, 477 U.S. at 324; Eisenberg, 815
F.2d at 1289. However, the non-moving party may not merely
rest on its pleadings; it must produce some significant
probative evidence tending to contradict the moving
party's allegations, thereby creating a material question
of fact. Anderson, 477 U.S. at 256-57 (holding that
the plaintiff must present affirmative evidence in order to
defeat a properly supported motion for summary judgment);
First Nat'l Bank of Ariz. v. Cities Serv. Co.,
391 U.S. 253, 289 (1968).
summary judgment motion cannot be defeated by relying solely
on conclusory allegations unsupported by factual data.”
Taylor v. List, 880 F.2d 1040, 1045 (9th Cir. 1989).
“Summary judgment must be entered ‘against a
party who fails to make a showing sufficient to establish the
existence of an element essential to that party's case,
and on which that party will bear the burden of proof at
trial.'” United States v. Carter, 906 F.2d
1375, 1376 (9th Cir. 1990) (quoting Celotex, 477
U.S. at 322).