CARVALHO v. EQUIFAX INFORMATION SERVICES, LLC

(collecting cases). In her deposition, when asked whether "$25,000 apiece" would be insufficient "to resolve the damages on behalf of the persons that are similarly situated," Carvalho answered, "That's correct." From this testimony, Equifax could reasonably determine for the first time that the amount in controversy was at least $25,000 per class member, or $12.5 million total.

Because the notice of removal was filed within thirty days of Carvalho's deposition testimony, which was "other paper from which it may first be ascertained that the case is . . . removable," 28 U.S.C. § 1446(b), we conclude that the denial of Carvalho's motion to remand was proper.

Because we conclude that Equifax timely removed the case, we need not consider its argument that Carvalho waived any procedural defects by failing to make a timely objection.

III

Carvalho next contends that the state superior court erred in granting CCS's general demurrer without leave to amend.

A

Although CCS was served with the notice of appeal as well as Carvalho's briefs in this appeal, CCS did not file an answering brief or join the CRAs' answering brief Nevertheless, the CRAs argue on CCS's behalf that we lack jurisdiction over this part of the appeal because "Carvalho's opportunity to appeal the Superior Court's dismissal has long since expired" under the California Rules of Court.

CCS's failure to file a brief does not compel a ruling in Carvalho's favor, given that the only sanction for failure to file an answering brief is forfeiture of oral argument. See Fed.R.App.P. 31(c); see also Brown Bag Software v. Symantec Corp., 960 F.2d 1465, 1478 (9th Cir. 1992).

"After removal, the federal court takes the case up where the State court left it off." Granny Goose Foods, Inc. v. Teamsters, 415 U.S. 423, 436, 94 S.Ct. 1113, 39 L.Ed.2d 435 (1974) (internal quotation marks omitted). "The federal court . . . treats everything that occurred in the state court as if it had taken place in federal court." Butner v. Neustadter, 324 ?.2d 783, 785 (9th Cir. 1963). Consequently, an order entered by a state court "should be treated as though it had been validly rendered in the federal proceeding." Id. at 786. "[F]ederal rather than state law governs the future course of proceedings." Granny Goose Foods, 415 U.S. at 437, 94 S.Ct. 1113.

We treat the superior court's order sustaining the demurrer as a validly rendered dismissal pursuant to Federal Rule of Civil Procedure 12(b). See Gardner v. UICI, 508 F.3d 559, 563 n. 5 (9th Cir. 2007) ("Under California practice, a general demurrer to a complaint is the equivalent of a motion to dismiss under Fed.R.Civ.P. 12(b) in federal practice."). Under federal law, such a dismissal as to only one of several defendants is appealable when, as here, it has merged into the final judgment. See Fed.R.Civ.P. 54(b); Am. Ironworks Erectors, Inc. v. N. Am. Constr. Corp., 248 F.3d 892, 897-98 (9th Cir. 2001). Therefore, we reject the contention that we lack jurisdiction over this part of the appeal. See Reilly v. Waukesha Cnty., 993 F.2d 1284, 1287 (7th Cir. 1993) ("Now that the case is before us, we may examine all of the antecedent interlocutory rulings, including those rendered by the state judge and absorbed into the district court's final judgment.").

B

On the merits, Carvalho contends that the superior court erred in concluding that the FCRA "preempts all state law causes of action against furnisher[s] of information such as CCS."

1

The FCRA provides that "[n]o requirement or prohibition may be imposed under the laws of any State . . . relating to the responsibilities of persons who furnish information to consumer reporting agencies." 15 U.S.C. § 1681t(b)(1)(F). Nevertheless, it expressly saves from preemption "section 1785.25(a) of the California Civil Code." Id. § 1681t(b)(1)(F)(ii). Section 1785.25(a), in turn, provides that "[a] person shall not furnish information on a specific transaction or experience to any consumer credit reporting agency if the person knows or should know the information is incomplete or inaccurate."

Because the private right of action to enforce section 1785.25(a) is found in sections 1785.25(g) and 1785.31, which are not expressly saved from preemption under the FCRA, some courts have held that FCRA preempts private consumer actions against furnishers under California law. ( See, e.g., Lin v. Universal Card Servs. Corp., 238 F.Supp.2d 1147, 1152-53 (N.D.Cal. 2002)). However, we recently rejected this view in Gorman v. Wolpoff Abramson, LLP, 584 F.3d 1147 (9th Cir. 2009). There, we concluded that the provisions creating a private right of action do not constitute a "requirement or prohibition" within the meaning of 15 U.S.C. § 1681t(b)(1)(F) because they merely provide a vehicle for enforcing actual requirements or prohibitions. Id. at 1170-71. Moreover, we concluded that it was highly unlikely that Congress "explicitly retained the portions of the California statutory scheme that create obligations, without leaving in place any enforcement mechanism." Id. at 1170. Therefore, we held that "the private right of action to enforce California Civil Code section 1785.25(a) is not preempted by the FCRA." Id. at 1173.

2

Relying primarily on Gorman, Carvalho argues that her CCRAA claims against CCS should be reinstated. Her complaint made two allegations against CCS: first, that CCS failed to cooperate with and complete an investigation in response to a reinvestigation inquiry from a consumer credit reporting agency, and second, that CCS willfully violated the CCRAA by reporting a debt it knew to be illegitimate.

In her opposition to CCS's demurrer, Carvalho defended only her claim that CCS had failed to assist in the reinvestigation. Nowhere did she mention her claim that CCS had knowingly reported inaccurate information, which is a violation of section 1785.25(a). "A plaintiff who makes a claim . . . in his complaint, but fails to raise the issue in response to a defendant's motion to dismiss . . ., has effectively abandoned his claim, and cannot raise it on appeal." Walsh v. Nev. Dep't of Human Res., 471 F.3d 1033, 1037 (9th Cir. 2006). Because Carvalho failed to raise her section 1785.25(a) inaccuracy claim in response to the demurrer, we conclude that she has abandoned it.

We are left with Carvalho's claim of inadequate investigation. California Civil Code § 1785.25(f) requires furnishers who receive notice of a dispute to complete an investigation and to review relevant information. Section 1785.25(f), however, is not expressly saved from preemption by the FCRA. Gorman holds only that the FCRA does not preempt section 1785.25(a) claims against furnishers. See 584 F.3d at 1173. Because section 1785.25(a) is/the only substantive CCRAA furnisher provision specifically saved by the FCRA, Carvalho's section 1785.25(f) claim is preempted. Therefore, we discern no reason to disturb the order sustaining the demurrer without leave to amend.

Carvalho's complaint erroneously cites section 1785.25(d), which requires furnishers to report the closure of open-end credit accounts.

IV

Carvalho next claims that the CRAs violated the CCRAA's reinvestigation provision, Cal. Civ. Code § 1785.16, which, provides in relevant part:

If the completeness or accuracy of any item of information contained in his or her file is disputed by a consumer, and the dispute is conveyed directly to the consumer credit reporting agency by the consumer or user on behalf of the consumer, the consumer credit reporting agency shall within a reasonable period of time and without charge, reinvestigate and record the current status of the disputed information before the end of the 30-business-day period beginning on the date the agency receives notice of the dispute from the consumer or user, unless the consumer credit reporting agency has reasonable grounds to believe and determines that the dispute by the consumer is frivolous or irrelevant, including by reason of a failure of the consumer to provide sufficient information, as requested by the consumer credit reporting agency, to investigate the dispute.

Id. § 1785.16(a). After completing a reinvestigation, the CRA must provide the consumer with written notice of any results, including "a notice that, if requested by the consumer, a description of the procedure used to determine the accuracy and completeness of the information shall be provided." Id. § 1785.16(d). The CRA must send such description "not later than 15 days after receiving a request from the consumer." Id.

A

The district court held that "[because there is no genuine dispute that Plaintiffs credit report was factually accurate, Defendants are entitled to judgment as a matter of law." Carvalho, 588 F.Supp.2d at 1100. Carvalho contends that inaccuracy is not a required element of a reinvestigation claim under the CCRAA. She also argues that the item on her credit reports referencing the CCS collection account was inaccurate.

"Our duty as a federal court in this case is to ascertain and apply the existing California law." Munson v. Del Taco, Inc., 522 F.3d 997, 1002 (9th Cir. 2008) (per curiam) (internal quotation marks omitted). We are bound by pronouncements of the California Supreme Court on applicable state law, but in the absence of such pronouncements, we follow decisions of the California Court of Appeal unless there is convincing evidence that the California Supreme Court would hold otherwise. Id.

The California courts have yet to consider whether a plaintiff must demonstrate that a disputed item is inaccurate to obtain relief for a violation of the CCRAA's reinvestigation provisions. However, because the CCRAA "is substantially based on the Federal Fair Credit Reporting Act, judicial interpretation of the federal provisions is persuasive authority and entitled to substantial weight when interpreting the California provisions." Olson v. Six Rivers Nat'l Bank, 111 Cal. App.4th 1, 3 Cal.Rptr, 3d 301, 309 (2003) (internal citations omitted).

The FCRA provide in relevant part:

[I]f the completeness or accuracy of any item of information contained in a consumer's file at a consumer reporting agency is disputed by the consumer and the consumer notifies the agency directly, or indirectly through a reseller, of such dispute, the agency shall, free of charge, conduct a reasonable reinvestigation to determine whether the disputed information is inaccurate and record the current status of the disputed information, or delete the item from the file . . . before the end of the 30-day period

beginning on the date on which the agency receives the notice of the dispute from the consumer or reseller. 15 U.S.C. § 1681i(a)(1)(A). In addition, the FCRA contains provisions similar to those of the CCRAA with respect to consideration of all relevant materials submitted by the consumer, id. § 1681i(a)(4), and provision of a description of the procedure used to determine the accuracy and completeness of the disputed information, id. § 1681i(a)(6)-(7).

Although the FCRA's reinvestigation provision, 15 U.S.C. § 1681i, does not on its face require that an actual inaccuracy exist for a plaintiff to state a claim, many courts, including our own, have imposed such a requirement. See DeAndrade v. Trans Union LLC, 523 F.3d 61, 67 (1st Cir. 2008) (collecting cases). In Dennis v. BEH-1, LLC, 520 F.3d 1066 (9th Cir. 2008), we held that a plaintiff filing suit under section 1681i must make a "prima facie showing of inaccurate reporting." Id. at 1069. The inaccuracy requirement comports with the purpose of the FCRA, which is "to protect consumers from the transmission of inaccurate information about them." Gorman, 584 F.3d at 1157 (internal quotation marks omitted). Because we believe California courts would find Dennis persuasive, we conclude that unless Carvalho has raised a genuine issue as to whether the disputed item was inaccurate, her CCRAA section 1785.16 claims fail as a matter of law.

In Dennis, we did not define what constitutes an inaccurate report. Later, in Gorman, we explained that an item on a credit report can be "incomplete or inaccurate" within the meaning of the FCRA's furnisher investigation provision, 15 U.S.C. § 1681s-2(b)(1)(D), "because it is patently incorrect, or because it is misleading in such a way and to such an extent that it can be expected to adversely affect credit decisions." 584 F.3d at 1163 (internal quotation marks omitted). The California Court of Appeal has expounded a very similar concept of inaccuracy in the context of FCRA and CCRAA provisions requiring that credit reporting agencies adopt procedures to assure the "maximum possible accuracy" of credit reports. See 15 U.S.C. § 1681e(b); Cal. Civ. Code § 1785.14(b). For example, in Cisneros v. U.D. Registry, Inc.,. 39 Cal.App.4th 548, 46 Cal.Rptr.2d 233 (1995), the court concluded that "a report violates the[se] statutes when it is misleading or incomplete, even if it is technically accurate." Id. at 254.

This provision requires a furnisher who receives notice of a dispute to report the results of its investigation to consumer reporting agencies "if the investigation finds that the information is incomplete or inaccurate." 15 U.S.C. § 1681s-2(b)(1)(D) (emphasis added).

"We generally adhere to the maxim of statutory construction that similar terms appearing in different sections of a statute should receive the same interpretation." United States v. Nordbrock, 38 F.3d 440, 444 (9th Cir. 1994); see also Chiang v. Verizon New Eng. Inc., 595 F.3d 26, 37 (1st Cir. 2010) (deeming the term "inaccurate" in section 1681i(a) to be "essentially the same" as the term "incomplete or inaccurate" in section 1681s-2(b)). Moreover, we operate under the assumption that California courts would interpret the FCRA and CCRAA consistently. See Olson, 3 Cal. Rptr.3d at 309. Accordingly, in considering whether Carvalho's credit report was inaccurate within the meaning of the CCRAA, we are guided by Gorman's "patently incorrect or materially misleading" standard.

B

Carvalho's credit reports reflected a CCS collection account with $118 past due. Carvalho does not contend that the CCS collection account does not pertain to her, that the amount past due is too high or low, or that any of the listed dates are wrong. Indeed, she concedes that "[a]ll the data that shows in my credit report is correct" on its face. Because all of the relevant facts were correctly reported, there was no patent error in Carvalho's credit report.

Carvalho's claimed inaccuracy, however, is latent. She contends that even if technically accurate, the CCS item was misleading because she was not legally obligated to pay the Bayside bill until Bayside had properly billed her insurer, as allegedly required by the Agreement, and potential creditors would mistakenly assume from the derogatory item that she is uncreditworthy.

Carvalho's reading of the Agreement is dubious at best, given that conditions precedent "are not favored by the law, and are to be strictly construed against one seeking to avail himself of them," Antonelle v. Kennedy Shaw Lumber Co., 140 Cal. 309, 73 P. 966, 968 (1903), and, in any event, the Agreement merely states that her insurer would be billed "as a courtesy."

Black's Law Dictionary defines "creditworthy" as "financially sound enough that a lender will extend credit in the belief default is unlikely." Black's Law Dictionary 426 (9th ed. 2009) (emphasis added). Under this definition, a consumer who avails herself of a good or service but defaults on payment would be considered less creditworthy than one who does not, regardless of how legally sound her reasons for default are. That she defaulted is certainly relevant to potential creditors and is precisely the type of information that a credit report is meant to supply. See Cal. Civ. Code § 1785.3(c) (defining "consumer credit report" as "any . . . communication of any information by a consumer credit reporting agency bearing on a consumer's credit worthiness, credit standing, or credit capacity").

Nevertheless, Carvalho contends that credit reporting agencies unfairly malign the creditworthiness of innocent consumers by reporting disputed debts without undertaking a searching inquiry into the consumer's legal defenses to payment. In other words, she believes consumers should be deemed innocent until proven guilty by a proper reinvestigation under the FCRA and CCRAA. The fundamental flaw in Carvalho's conception of the reinvestigation duty is that credit reporting agencies are not tribunals. They simply collect and report information furnished by others. Because CRAs are ill equipped to adjudicate contract disputes, courts have been loath to allow consumers to mount collateral attacks on the legal validity of their debts in the guise of FCRA reinvestigation claims. See Saunders v. Branch Banking Trust Co. Of Va., 526 F.3d 142, 150 (4th Cir. 2008).

For example, in DeAndrade, the dispute centered on whether the consumer had ratified an allegedly fraudulent mortgage. 523 F.3d at 68. The First Circuit concluded that "[w]hether the mortgage is valid turns on questions that can only be resolved by a court of law" and is "a legal issue that a credit agency such as Trans Union is neither qualified nor obligated to resolve under the FCRA." Id. The proper recourse for the consumer, therefore, was to resolve the issue in a suit against the creditor; "[i]f a court had ruled the mortgage invalid and Trans Union had continued to report it as a valid debt, then [the consumer] would have grounds for a potential FCRA claim." Id.

We agree that reinvestigation claims are not the proper vehicle for collaterally attacking the legal validity of consumer debts. "With respect to the accuracy of disputed information, the CRA is a third party, lacking any direct relationship with the consumer, and its responsibility is to `re investigate' a matter once already investigated in the first place." Gorman, 584 F.3d at 1156-57 (quoting 15 U.S.C. § 1681i(a)(1)). Hence, a consumer disputing the legal validity of a debt that appears on her credit report should first attempt to resolve the matter directly with the creditor or furnisher, which "stands in a far better position to make a thorough investigation of a disputed debt than the CRA does on reinvestigation." Id. at 1156. Until the consumer has successfully resolved the legal dispute in her favor — for example, by means of a judgment, arbitration award, or settlement — 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 very economic purpose for credit reporting companies would be significantly vitiated if they shaded every credit history in their files in the best possible light for the consumer." Cahlin v. Gen. Motors Acceptance Corp., 936 F.2d 1151, 1158 (11th Cir. 1991).

Both the FCRA and CCRAA allow consumers who are dissatisfied by a reinvestigation to file a brief explanatory statement to be reported along with the disputed item. See 15 U.S.C. § 16811(b)-(c); Cal. Civ. Code § 1785.16(f)-(g). "In this way, potential creditors have both sides of the story and can reach an independent determination of how to treat a specific, disputed account." Cahlin, 936 F.2d at 1160 n. 23. Carvalho complains that such an explanatory statement cannot obliterate the stain of a derogatory item on her credit report. While this may be true, it merely reinforces our view that a consumer who disputes the legal validity of an obligation should do so directly at the furnisher level. If successful, the consumer can clear her credit report without the need for any explanatory statements. That Carvalho failed to do so is no fault of the CRAs.

Because Carvalho has failed to establish an element of a prima facie reinvestigation claim — inaccuracy — we conclude that the district court properly granted summary judgment to the CRAs.

Given that we affirm the summary judgment, we need not address the propriety of the denial of class certification. See Skokomish Indian Tribe v. United States, 332 F.3d 551, 564 (9th Cir. 2003).

V

Finally, Carvalho appeals the district court's denial of her motion for leave to amend her complaint. The district court held that amendment would be futile because Carvalho's claims "clearly are foreclosed by the inaccuracy requirement of § 1681i and § 1785.16." Carvalho, 588 F.Supp.2d at 1100 n. 11.

Under Federal Rule of Civil Procedure 15(a), leave to amend shall be freely given when justice so requires. However, the district court may exercise its discretion to deny leave to amend due to "undue delay, bad faith or dilatory motive on part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party . . ., [and] futility of amendment." Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962). When the district court denies leave to amend because of futility of amendment, we will uphold such denial if "it is clear, upon de novo review, that the complaint would not be saved by any amendment." Leadsinger, Inc. v. BMG Music Publ'g, 512 F.3d 522, 532 (9th Cir. 2008) (internal quotation marks omitted).

Because we hold that Carvalho cannot show any inaccuracy as a matter of law, we conclude that amendment to include other claims requiring inaccuracy would be futile. Therefore, the district court properly concluded that "there was no need to pro-long the litigation by permitting further amendment." Lipton v. Pathogenesis Corp., 284 F.3d 1027, 1039 (9th Cir. 2002).

VI

For the foregoing reasons, the judgment of the district court is

AFFIRMED.