United States v. 2010-12-16 | 09-15030 | Noemia Carvalho V. Equifax Information Services, |…

FOR PUBLICATION
UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
 NOEMIA CARVALHO, on behalf of
herself and other similarly situated No. 09-15030
people, D.C. No. Plaintiff-Appellant, 5:08-cv-01317-JF
v.  ORDER AND
EQUIFAX INFORMATION SERVICES, AMENDED
LLC; EXPERIAN INFORMATION OPINION
SOLUTIONS, INC.; TRANSUNION LLC,
Defendants-Appellees. 
Appeal from the United States District Court
for the Northern District of California
Jeremy D. Fogel, District Judge, Presiding
Argued and Submitted
February 11, 2010—San Francisco, California
Filed August 18, 2010
Amended December 16, 2010
Before: Diarmuid F. O’Scannlain, Stephen S. Trott and
Richard A. Paez, Circuit Judges.
Opinion by Judge O’Scannlain
20189

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COUNSEL
Scott D. Kalkin, Roboostoff & Kalkin, San Francisco, Cali-
fornia, argued the cause for the plaintiff-appellant. Ron Boch-
ner, Law Offices of Ron Bochner, Santa Clara, California,
filed the briefs.
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Stephen J. Newman, Stroock & Stroock & Lavan LLP, Los
Angeles, California; Barry Goheen, King & Spalding LLP,
Atlanta, Georgia; and Meir Feder, Jones Day, New York,
New York, argued the cause for the defendants-appellees and
filed a brief. With them on the brief were Lewis P. Perling,
King & Spalding LLP, Atlanta, Georgia; Brian C. Frontino
and Darius K. Zolnor, Stroock & Stroock & Lavan LLP, Los
Angeles, California; and Deanna L. Johnston and Nathaniel P.
Garrett, Jones Day, San Francisco, California.
ORDER
The opinion filed on August 18, 2010, is amended as fol-
lows:
At pages 12121-22 of the slip opinion, replace:
<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>
with
<A CRA is not required as part of its reinvestigation
duties to provide a legal opinion on the merits.
Indeed, determining whether the consumer has a
valid defense “is a question for a court to resolve in
a suit against the [creditor,] not a job imposed upon
consumer reporting agencies by the FCRA.” DeAn-
drade, 523 F.3d at 68. Nor is a CRA obligated not
to report any information about the disputed item
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simply because the consumer asserts a legal defense.
“[T]he>
At page 12123 of the slip opinion, lines 16-17, replace
<show any inaccuracy as a matter of law> with <make a
prima facie case of inaccurate reporting>.
With these amendments, the panel has unanimously voted
to deny the petition for rehearing. Judges O’Scannlain and
Paez have voted to deny the petition for rehearing en banc,
and Judge Trott has so recommended. The full court has been
advised of the petition for rehearing en banc, and no judge has
requested a vote on whether to rehear the matter en banc. Fed.
R. App. P. 35.
The petition for rehearing and the petition for hearing en
banc are DENIED. No further petitions for hearing or rehear-
ing en banc may be filed.
The motion by the National Consumer Law Center and
National Association of Consumer Advocates to file a brief of
amici curiae in support of Carvalho’s petition for rehearing
and for rehearing en banc is DENIED as moot.
OPINION
O’SCANNLAIN, Circuit Judge:
We must decide whether a credit reporting agency is liable
for a disputed credit report under California’s Consumer
Credit Reporting Agencies Act.
I
A
In October 2001, Noemia Carvalho received medical treat-
ment from Bayside Medical Group, Inc. (“Bayside”), in
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Pleasanton, California. Prior to receiving her treatment, Car-
valho signed the following agreement (“Agreement”):
Bayside Medical Group, Inc., will bill your insur-
ance as a courtesy to you. If your insurance does not
pay the claim within 90 days of the date of service,
the balance of your account will be your responsibil-
ity. . . . I hereby authorize my insurance company to
pay benefits directly to Bayside Medical Group, Inc.,
and I am financially responsible for non-covered ser-
vices.
As a result of her treatment, Carvalho incurred charges
amounting to $118.
For reasons that remain unclear,1 Bayside received no pay-
ment from her insurance company within the ninety days pro-
vided in the Agreement. Bayside sent Carvalho a bill for $118
in January 2002, as well as a “final notice” in March 2003.
Neither Carvalho nor any insurer paid the bill.
Thereafter, Bayside assigned the debt to Credit Consulting
Services (“CCS”), a collection agency. CCS sent Carvalho a
series of dunning letters threatening to report the debt to three
major credit reporting agencies—Equifax Information Ser-
vices, LLC (“Equifax”), Experian Information Solutions, Inc.
(“Experian”), and TransUnion LLC (“TransUnion”) (collec-
tively, “CRAs”)—if she did not pay the bill. Despite these
warnings, Carvalho still did not pay the bill or arrange for
payment by her insurer. Accordingly, CCS reported the debt
to the CRAs.
After Carvalho noticed the debt on her credit report,2 her
1As the district court noted, the parties dispute whether Carvalho was
insured by Blue Cross or Blue Shield (if at all), and whether Bayside
billed the correct insurer. See Carvalho v. Equifax Info. Servs. LLC, 588
F. Supp. 2d 1089, 1091 (N.D. Cal. 2008).
2The debt appeared on her consolidated credit report under the heading
“Collection Accounts,” with a listing of the creditor (CCS), opening date
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attorney sent CCS a letter in September 2004 explaining that
the debt arose from a bill her insurance company “wrongfully
refused to pay” and requesting that CCS “immediately inves-
tigate and correct the information that is erroneously appear-
ing on her credit report.” CCS responded that Bayside “bills
insurance as a courtesy only and the individual is responsible
for non covered services,” and that Carvalho’s “insurance was
billed and coverage denied.” CCS concluded that it “reported
this account correctly” and that any problem “should be
resolved between Ms. Carvalho and her insurance company.”
That same month, Carvalho also sent letters to the three
CRAs requesting that they investigate—or, in industry par-
lance, “reinvestigate”—the CCS debt on her credit report. The
letters stated: “I dispute the above item on my enclosed Credit
Report. These bills arose out of the medical treatment I was
covered for by Blue Cross of California. For some reason that
is unknown to me, they did not pay these medical bills.” The
letters requested that the above-quoted passage be added to
Carvalho’s credit report.
Pursuant to their standard procedures, the CRAs each sent
an electronic Consumer Dispute Verification (“CDV”) form
to CCS with a cursory description of the dispute and a request
that CCS verify the account information. CCS responded by
reporting that the information was “accurate,” and the CRAs
each updated Carvalho’s credit report to indicate that the
information about the CCS debt had been verified but was
disputed by Carvalho. In addition, Equifax added Carvalho’s
statement to her report. The CRAs each sent Carvalho notices
explaining that they had verified the information as correct
and describing further steps she could take if unsatisfied with
the outcome of the reinvestigation.
(08/03), reported date (09/03), past due amount ($118), and present status
(“collection”).
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In April 2005, Carvalho sent the CRAs new letters request-
ing “a description of how [the CCS] item was verified.” In
addition, she requested that the CRAs include a statement on
her credit report similar to the one she had sent in her prior
letter. Equifax mailed Carvalho a boilerplate description of its
procedures for verifying disputed items. Experian and Trans-
Union construed Carvalho’s letter as a request for another
reinvestigation, which also resulted in CCS’s verification of
the item. Although Experian and TransUnion added Carval-
ho’s statement to her credit report, neither complied with her
request for a description of how they had verified the debt.
In June 2005, Carvalho submitted another round of letters
to the CRAs renewing her dispute over the CCS item.
According to the letters, she “learned that the [Bayside] bill
may have been paid if [Bayside] had timely and properly sub-
mitted my bill to Blue Shield.”3 Both Equifax and Experian
launched new reinvestigations, with the same outcome as
before. TransUnion informed Carvalho that it considered her
dispute “frivolous” and would not conduct any further rein-
vestigation absent “court papers or a recent, authentic letter
from the creditor(s) that explains what information should be
updated.”
In February 2006, Carvalho’s attorney sent letters to the
CRAs explaining that there was “clear evidence” that the CCS
item was “wrong” because “Bayside failed to timely and
properly request payment from Blue Cross of California,
instead improperly seeking payment from Blue Shield.”
According to the letters, “Carvalho’s credit score has suffered
due to this entry and caused her home to be refinanced at a
rate higher than necessary due to its inclusion.” The letters
demanded that the entry be removed from Carvalho’s credit
report and that she be paid $25,000 plus attorney’s fees.
Moreover, the letters demanded yet another reinvestigation.
3Carvalho contends on appeal that Blue Cross was her insurer. There is
no explanation in the record why her letter referenced Blue Shield.
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The CRAs once again contacted CCS, which verified the
information as accurate, and updated Carvalho’s credit report
accordingly.
B
On July 24, 2006, Carvalho filed a class action complaint
against CCS and the three CRAs in the Monterey County
Superior Court. The complaint alleged various violations of
the California Consumer Credit Reporting Agencies Act
(“CCRAA”), Cal. Civ. Code § 1785.1 et seq., including the
CRAs’ failure to conduct a proper reinvestigation of Carval-
ho’s dispute; the CRAs’ failure to provide a sufficient
response to her request for a description of the procedures
they used to verify the CCS item; CCS’s failure to cooperate
in the reinvestigation; and CCS’s reporting of a debt it knew
or should have known to be illegitimate. The complaint
sought to certify two classes:
1. California consumers seeking injunctive relief
against consumer credit reporting agencies’ rein-
vestigation procedures which, as presently con-
stituted, fail to comply with the [CCRAA] in
that they fail [to] meet the requirements of that
statute, including, but not limited to, the fact that
they fail to allow for review and consideration
of all relevant information provided by the Con-
sumer in the reinvestigation process; [and]
2. California consumers seeking injunctive relief
against the consumer credit reporting agencies,
who pursuant to the [CCRAA] requested, but
did not receive, an adequate description of the
procedure used to determine the accuracy and
completeness of the disputed information.
The prayer for relief sought class certification, an injunction,
damages (including punitive damages), attorney’s fees, and
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costs. However, the complaint did not plead a specific amount
of damages.
The superior court granted CCS’s demurrer to the com-
plaint without leave to amend on grounds that the federal Fair
Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681t(b)(1)(F),
preempted Carvalho’s CCRAA claims against CCS.
On March 7, 2008, Equifax filed a notice of removal in the
District Court for the Northern District of California alleging
that the case met the $5 million amount-in-controversy
requirement under the Class Action Fairness Act of 2005
(“CAFA”), 28 U.S.C. § 1332(d). Equifax maintained that its
notice of removal was timely because it did not become aware
that the case met the requirement until Carvalho revealed in
her depositions on February 6 and March 4, 2008, that the
amount in controversy was at least $12.5 million (i.e.,
$25,000 times 500 potential plaintiffs). Carvalho moved to
remand, arguing that CAFA’s amount-in-controversy require-
ment was not met and that the notice of removal was
untimely. The district court denied the motion.
Carvalho moved for class certification as well as for leave
to amend her complaint to add causes of action for negligent
violation of the CCRAA’s reinvestigation provision and will-
ful violation of the FCRA’s reinvestigation provision. The
three CRAs each filed a motion for summary judgment. The
district court granted the motions for summary judgment,
denied as moot Carvalho’s motion for class certification, and
denied as futile her motion to amend her complaint. See Car-
valho v. Equifax Info. Servs., LLC, 588 F. Supp. 2d 1089
(N.D. Cal. 2008). This appeal timely followed.
II
Carvalho first urges that this case was untimely removed
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from state court and claims that the district court erroneously
denied her motion to remand.4
A
[1] CAFA at 28 U.S.C. § 1332(d), “vests district courts
with original jurisdiction of any civil action in which, inter
alia, the amount in controversy exceeds the sum or value of
$5,000,000, exclusive of interest and costs, and in which the
aggregate number of proposed plaintiffs is 100 or greater, and
any member of the plaintiff class is a citizen of a state differ-
ent from any defendant.” Lowdermilk v. U.S. Bank Nat’l
Ass’n, 479 F.3d 994, 997 (9th Cir. 2007) (internal quotation
marks omitted). Such actions may be removed from state
court pursuant to 28 U.S.C. § 1453(b). The timeliness of
removals pursuant to CAFA is governed by 28 U.S.C.
§ 1446(b), which provides:
The notice of removal of a civil action or proceed-
ing shall be filed within thirty days after the receipt
by the defendant, through service or otherwise, of a
copy of the initial pleading setting forth the claim for
relief upon which such action or proceeding is based,
or within thirty days after the service of summons
upon the defendant if such initial pleading has then
been filed in court and is not required to be served
on the defendant, whichever period is shorter.
If the case stated by the initial pleading is not
removable, a notice of removal may be filed within
thirty days after receipt by the defendant, through
service or otherwise, of a copy of an amended plead-
ing, motion, order or other paper from which it may
4Carvalho’s reply brief also contends that the CRAs “waived their right
to move by delay.” Because she did not raise this argument in her opening
brief, she has waived it. See United States v. Alcan Elec. & Eng’g, Inc.,
197 F.3d 1014, 1020 (9th Cir. 1999).
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first be ascertained that the case is one which is or
has become removable . . . .
[2] To summarize, section 1446(b) identifies two thirty-
day periods for removing a case. The first thirty-day removal
period is triggered “if the case stated by the initial pleading
is removable on its face.” Harris v. Bankers Life & Cas. Co.,
425 F.3d 689, 694 (9th Cir. 2005). The second thirty-day
removal period is triggered if the initial pleading does not
indicate that the case is removable, and the defendant receives
“a copy of an amended pleading, motion, order or other
paper” from which removability may first be ascertained. 28
U.S.C. § 1446(b).
If the notice of removal was untimely, a plaintiff may move
to remand the case back to state court. See id. §§ 1447(c),
1453(c)(1); Kelton Arms Condo. Owners Ass’n v. Homestead
Ins. Co., 346 F.3d 1190, 1191-92 (9th Cir. 2003).
B
Carvalho argues that by the time Equifax received her com-
plaint in October 2006, it should have been aware that the
case was removable based on the $25,000 settlement demand
she made in February 2006, as well as a civil case cover sheet5
served with the complaint indicating “unlimited jurisdic-
tion”—i.e., an amount demanded exceeding $25,000. See Cal.
Civ. Proc. §§ 85, 88. According to Carvalho, Equifax should
have been able do the math to determine that the aggregate
amount in controversy exceeded $5 million ($25,000 per
plaintiff x 500 potential plaintiffs = $12.5 million). Conse-
quently, Carvalho contends that the March 2008 removal was
untimely under section 1446(b).
5Under the California Rules of Court, “[t]he first paper filed in an action
or proceeding shall be accompanied by a case cover sheet,” and such
cover sheet must be served with a copy of the complaint where, as here,
the action is designated “complex.” Cal. R. Ct. 3.220(a).
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[3] Because the face of the initial pleading—Carvalho’s
superior court complaint—lacked any indication of the
amount in controversy, it did not trigger this first thirty-day
removal period. Hence, we consider only whether the demand
letter or civil cover sheet triggered the second thirty-day
removal period.
1
[4] Carvalho argues that the settlement demand she made
in February 2006 put Equifax on notice of the amount in con-
troversy. We have held that a demand letter sent during the
course of the state court action can constitute “other paper”
within the meaning of section 1446(b) if it reflects a reason-
able estimate of the plaintiff’s claim. See Babasa v. Lens-
Crafters, Inc., 498 F.3d 972, 975 (9th Cir. 2007). Here, how-
ever, the demand letter was sent to Equifax several months
before Carvalho even filed her complaint.
[5] It is axiomatic that a case cannot be removed before its
inception. If the second paragraph of section 1446(b) were
meant to include as “other paper” a document received by the
defendant months before receipt of the initial pleading, the
requirement that the notice of removal “be filed within thirty
days after receipt by the defendant” of the “other paper”
would be nonsensical. Moreover, that the second paragraph
lists “an amended pleading, motion, order”—all documents
which logically cannot predate the initial pleading—before
“or other paper” leads us to conclude that “other paper” does
not include any document received prior to receipt of the ini-
tial pleading. See United States v. Williams, 553 U.S. 285, 294
(2008) (noting that “the commonsense canon of noscitur a
sociis . . . counsels that a word is given more precise content
by the neighboring words with which it is associated”).
Accordingly, we conclude that any document received prior
to receipt of the initial pleading cannot trigger the second
thirty-day removal period.
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We also reject Carvalho’s suggestion that a pre-complaint
document containing a jurisdictional clue can operate in tan-
dem with an indeterminate initial pleading to trigger some
kind of hybrid of the first and second removal periods. In
Harris, we held that the first thirty-day removal period comes
into play only if removability is ascertainable from “examina-
tion of the four corners of the applicable pleadings, not
through subjective knowledge or a duty to make further inqui-
ry.” 425 F.3d at 694. We adopted this “bright-line approach”
to “avoid[ ] the spectre of inevitable collateral litigation over
. . . whether defendant had subjective knowledge, or whether
defendant conducted sufficient inquiry.” Id. at 697. We would
eviscerate our holding in Harris if we required defendants to
rely on pre-complaint documents to ascertain whether a case
stated by an indeterminate initial pleading is actually remov-
able.
[6] Consequently, the February 2006 demand letter did not
trigger a thirty-day removal period under section 1446(b).
2
[7] Carvalho also argues that Equifax could have ascer-
tained the aggregate amount in controversy from the civil
cover sheet’s invocation of “unlimited” jurisdiction. Assum-
ing without deciding that a civil cover sheet can constitute
“other paper” within the meaning of section 1446(b), we are
unpersuaded that this particular cover sheet affirmatively
revealed that the aggregate amount in controversy exceeds $5
million. The checked “Unlimited” box on the cover sheet
merely indicates that the “[a]mount demanded exceeds
$25,000.” Nothing in the cover sheet indicates that the
amount demanded by each putative class member exceeds
$25,000. Cf. Abrego Abrego v. Dow Chem. Co., 443 F.3d 676,
689 (9th Cir. 2006).
[8] Had Equifax removed the case based on this indetermi-
nate cover sheet alone, “it may well have subjected itself to
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fees and costs, and potentially Rule 11 sanctions, for filing a
baseless notice of removal.” Durham v. Lockheed Martin
Corp., 445 F.3d 1247, 1251 (9th Cir. 2006). Because we nei-
ther require nor encourage defendants to remove prematurely
based on such indeterminate papers, see Harris, 425 F.3d at
697-98, we conclude that the civil cover sheet did not trigger
the second thirty-day removal period.
C
The CRAs note that removal was timely because it was
Carvalho’s deposition testimony which provided the first indi-
cation in this case that the amount in controversy exceeds $5
million, and Equifax removed within thirty days of the depo-
sition. In her opening brief, Carvalho did not contest that the
deposition revealed that her case satisfies CAFA’s amount-in-
controversy requirement. Therefore, she has waived any argu-
ment to the contrary. See Miller v. Fairchild Indus., Inc., 797
F.2d 727, 738 (9th Cir. 1986).
[9] In any event, we agree with the district court that Car-
valho’s deposition testimony triggered the second thirty-day
removal period. Like a response to interrogatories, see Dur-
ham, 445 F.3d at 1251, a plaintiff’s response to deposition
questions can constitute “other paper” within the meaning of
section 1446(b), see, e.g., Peters v. Lincoln Elec. Co., 285
F.3d 456, 466 (6th Cir. 2002) (collecting cases). In her depo-
sition, when asked whether “$25,000 apiece” would be insuf-
ficient “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.
[10] 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
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. . . removable,” 28 U.S.C. § 1446(b), we conclude that the
denial of Carvalho’s motion to remand was proper.6
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.7 Neverthe-
less, the CRAs argue on CCS’s behalf that we lack jurisdic-
tion 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.
[11] “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 (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 F.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.
6Because 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.
7CCS’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).
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[12] 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 anteced-
ent 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 con-
sumer reporting agencies.” 15 U.S.C. § 1681t(b)(1)(F). Nev-
ertheless, 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 transac-
tion or experience to any consumer credit reporting agency if
the person knows or should know the information is incom-
plete or inaccurate.”
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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 vehi-
cle 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 Califor-
nia 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 com-
plaint 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 reinvestiga-
tion. Nowhere did she mention her claim that CCS had know-
ingly 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 defen-
dant’s motion to dismiss . . . , has effectively abandoned his
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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.
[13] We are left with Carvalho’s claim of inadequate
investigation. California Civil Code § 1785.25(f) requires fur-
nishers who receive notice of a dispute to complete an investi-
gation and to review relevant information.8 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 substan-
tive 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 sustain-
ing the demurrer without leave to amend.
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 infor-
mation 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 begin-
ning on the date the agency receives notice of the
8Carvalho’s complaint erroneously cites section 1785.25(d), which
requires furnishers to report the closure of open-end credit accounts.
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dispute from the consumer or user, unless the con-
sumer 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 suffi-
cient 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 “[b]ecause there is no genuine
dispute that Plaintiff’s credit report was factually accurate,
Defendants are entitled to judgment as a matter of law.” Car-
valho, 588 F. Supp. 2d at 1100. Carvalho contends that inac-
curacy 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 inaccu-
rate.
“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 quo-
tation 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 evi-
dence that the California Supreme Court would hold other-
wise. Id.
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[14] 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 inter-
pretation of the federal provisions is persuasive authority and
entitled to substantial weight when interpreting the California
provisions.” Olson v. Six Rivers Nat’l Bank, 3 Cal. Rptr. 3d
301, 309 (Ct. App. 2003) (internal citations omitted).9
[15] 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).
9The FCRA provides in relevant part:
[I]f the completeness or accuracy of any item of information con-
tained in a consumer’s file at a consumer reporting agency is dis-
puted 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 begin-
ning 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 com-
pleteness of the disputed information, id. § 1681i(a)(6)-(7).
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Because we believe California courts would find Dennis per-
suasive, we conclude that unless Carvalho has raised a genu-
ine 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),10 “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 deci-
sions.” 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 pro-
cedures 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.,
46 Cal. Rptr. 2d 233 (Ct. App. 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.
[16] “We generally adhere to the maxim of statutory con-
struction 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 inac-
curate” 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
10This 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).
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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 mis-
leading” standard.
B
[17] 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.
[18] 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,11 and potential credi-
tors would mistakenly assume from the derogatory item that
she is uncreditworthy.
Black’s Law Dictionary defines “creditworthy” as “finan-
cially 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 con-
sumer 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
11Carvalho’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. Ken-
nedy & Shaw Lumber Co., 73 P. 966, 968 (Cal. 1903), and, in any event,
the Agreement merely states that her insurer would be billed “as a courte-
sy.”
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default are. That she defaulted is certainly relevant to poten-
tial 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 agen-
cies unfairly malign the creditworthiness of innocent consum-
ers by reporting disputed debts without undertaking a
searching inquiry into the consumer’s legal defenses to pay-
ment. In other words, she believes consumers should be
deemed innocent until proven guilty by a proper reinvestiga-
tion 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 reinvestiga-
tion 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 mort-
gage 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.
[19] We agree that reinvestigation claims are not the
proper vehicle for collaterally attacking the legal validity of
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consumer debts. “With respect to the accuracy of disputed
information, the CRA is a third party, lacking any direct rela-
tionship 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 rein-
vestigation.” Id. at 1156. A CRA is not required as part of its
reinvestigation duties to provide a legal opinion on the merits.
Indeed, determining whether the consumer has a valid defense
“is a question for a court to resolve in a suit against the [credi-
tor,] not a job imposed upon consumer reporting agencies by
the FCRA.” DeAndrade, 523 F.3d at 68. Nor is a CRA obli-
gated not to report any information about the disputed item
simply because the consumer asserts a legal defense. “[T]he
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 dis-
satisfied by a reinvestigation to file a brief explanatory state-
ment to be reported along with the disputed item. See 15
U.S.C. § 1681i(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 spe-
cific, disputed account.” Cahlin, 936 F.2d at 1160 n.23. Car-
valho 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
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explanatory statements. That Carvalho failed to do so is no
fault of the CRAs.
[20] Because Carvalho has failed to establish an element of
a prima facie reinvestigation claim—inaccuracy—we con-
clude that the district court properly granted summary judg-
ment to the CRAs.12
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.
[21] Under Federal Rule of Civil Procedure 15(a), leave to
amend shall be freely given when justice so requires. How-
ever, 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 defi-
ciencies by amendments previously allowed, undue prejudice
to the opposing party . . . , [and] futility of amendment.”
Foman v. Davis, 371 U.S. 178, 182 (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 amend-
ment.” Leadsinger, Inc. v. BMG Music Publ’g, 512 F.3d 522,
532 (9th Cir. 2008) (internal quotation marks omitted).
[22] Because we hold that Carvalho cannot make a prima
facie case of inaccurate reporting, we conclude that amend-
ment to include other claims requiring inaccuracy would be
12Given 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).
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futile. Therefore, the district court properly concluded that
“there was no need to prolong the litigation by permitting fur-
ther 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.
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