[00:00:03] Speaker 01:
Yes, thank you very much and good morning, your honors.

[00:00:06] Speaker 01:
May it please the court?

[00:00:08] Speaker 01:
My name is James Risved.

[00:00:09] Speaker 01:
I'm an attorney with the Consumer Justice Law Firm representing the appellants Jessica and Corey Davis.

[00:00:15] Speaker 01:
This matter comes to the Ninth Circuit on appeal from Grant of Summary Judgment in favor of PNC Bank, disposing of appellants' causes of actions under the Federal Fair Credit Reporting Act and ancillary claims under California's Rosenthal Act.

[00:00:32] Speaker 01:
Generally speaking, the issues before the Ninth Circuit on appeal largely relate to questions of accuracy or rather inaccuracy of PNC Bank's credit reporting with respect to an automobile loan taken out by the Davises in mid-2021 with PNC Bank's predecessor in interest, BBVA.

[00:00:52] Speaker 04:
As Your Honor is likely know, under the FCRA... Council, why don't you tell me how the record indicates that the loan was paid off?

[00:01:01] Speaker 01:
Certainly.

[00:01:01] Speaker 01:
So ultimately, some of the foundational issues that arose throughout the course of discovery are that PNC at all times has insisted on trying to turn this case into a

[00:01:13] Speaker 01:
sort of neat and tidy math problem where simple arithmetic can dispose of the questions of fact.

[00:01:20] Speaker 01:
The issues that we identified are that ultimately the documents that PNC has produced lack any reliability sufficient to actually understand how the accounting... Let me ask it again, counsel.

[00:01:32] Speaker 04:
Let me say it this way.

[00:01:34] Speaker 04:
Does Melissa Jones's declaration indicates that the loan was paid off?

[00:01:41] Speaker 01:
Yeah, so Melissa Jones's declaration indicates that gravity lending received a payoff amount quote from BBVA or dealer track a third party software and that ultimately gravity lending paid that amount plus an additional $150 to account for any overages and additional accrued interest things of that nature.

[00:02:01] Speaker 00:
I thought counsel that the record reflects that when you add up just a question of mathematics, right?

[00:02:08] Speaker 00:
If we agree with the district court's calculations, then you lose in this case.

[00:02:12] Speaker 00:
So mathematically, I thought that the total payments is still less than the amount of the original loan, even excluding interest.

[00:02:21] Speaker 01:
Well, and the foundational issue, Your Honor, is that ultimately we don't have any understanding of how BBVA accounted for payments or how BBVA accounted for any of the information prior to the acquisition.

[00:02:35] Speaker 03:
But don't we know the amount of the original loan that's undisputed and the amount of payments that your clients made?

[00:02:43] Speaker 01:
We do, but there are ultimately, Your Honor, issues surrounding other foundational questions of the accounting.

[00:02:49] Speaker 01:
For instance, the GAAP refund amount of $600 never accounted for anywhere within any of the accounting documents that PNC has produced.

[00:02:57] Speaker 01:
Therefore, we have no understanding as to whether or not that $600 was accounted for by BBVA.

[00:03:03] Speaker 04:
So some employee put in that figure after it was transferred, correct?

[00:03:09] Speaker 04:
And which figure are you referring to, Your Honor?

[00:03:12] Speaker 04:
The 600 figure.

[00:03:13] Speaker 01:
Our understanding, or at least the way that Discovery bore out in this case, is that following the acquisition of BBVA's United States banking holdings by PNC, at some point this mystery $650.85 figure was added to the accounting for that loan and then retroactively backdated to a date prior to the payoff payment being made.

[00:03:37] Speaker 01:
When I questioned PNC Bank's corporate representative, who presumably prepared specifically to discuss this figure, he had no knowledge about whether or not that line item would have retroactively added that $650.85 or subtracted that from the amount of the loan.

[00:03:55] Speaker 01:
So ultimately, the issues surrounding the math, again,

[00:03:59] Speaker 01:
The accounting here is anything but neat and tidy.

[00:04:02] Speaker 04:
So do we know how, I mean, here's the question.

[00:04:05] Speaker 04:
So do we know how that was added, number one?

[00:04:09] Speaker 04:
And number two, if we don't know that, then isn't it a question of fact as to how that figure was added to this amount so that we can then do the math?

[00:04:18] Speaker 01:
Yes, ultimately, Your Honors, I would agree that it is a question of fact.

[00:04:22] Speaker 01:
To answer your first question, no.

[00:04:24] Speaker 01:
To date, PNC has never been able to explain how that mystery figure wound up into this accounting or the significance of that mystery figure as it relates to the accounting of this loan.

[00:04:36] Speaker 01:
So our ultimate contention is, yes, Your Honor, I agree.

[00:04:39] Speaker 01:
It is a question of fact for the jury to decide whether or not.

[00:04:43] Speaker 00:
But I go back to my original question.

[00:04:45] Speaker 00:
If it's a question of mathematics, then the court can also

[00:04:48] Speaker 00:
do the addition.

[00:04:50] Speaker 00:
None of us went to law school because we're very good at mathematics, but I think we can do basic.

[00:04:55] Speaker 00:
So giving your summary judgment, so you do get the benefit of inferences in your favor, if we take the disputed amount, add that to the total amount paid, would that exceed the original loan amount plus interest?

[00:05:17] Speaker 00:
I don't think it does.

[00:05:19] Speaker 01:
Well, and ultimately, not accounting for the $600 gap refund, there are still questions about how that accounting would have shaken out, how interest would have been accrued with respect to that $600 gap refund.

[00:05:31] Speaker 01:
And there are also other foundational questions that circumstantially seem to evidence PNC, or at least BBVA, treated this loan as having been satisfied.

[00:05:43] Speaker 01:
The terms of the loan agreement make clear that when a payment is received,

[00:05:47] Speaker 01:
It is always applied in a very specific manner.

[00:05:51] Speaker 01:
Principal or outstanding interest first, then any remaining... But maybe it was a mistake.

[00:05:56] Speaker 04:
Maybe it was a mistake.

[00:05:57] Speaker 04:
And maybe they said this was paid off and it really wasn't.

[00:06:02] Speaker 04:
And here we have someone from Penalty coming in and correcting what is or what is not owed.

[00:06:09] Speaker 04:
And ultimately then, the judge did the correct math here.

[00:06:13] Speaker 04:
Why isn't that right?

[00:06:15] Speaker 01:
Well, I think ultimately not having any of the documents from BBVA and not having any of the accounting for how BBVA tallied up this loan, how they made whatever determination they made as to a payoff quote, we don't and fundamentally cannot know

[00:06:30] Speaker 01:
Whether BBVA gave a different amount because they came to some conclusion that that was the correct amount owed and they disposed of the loan at that point and then PNC sort of retroactively fixed it.

[00:06:42] Speaker 01:
Those are foundational questions PNC has no idea about because they concede that they have no information about the manner in which this loan was treated prior to their acquisition of BBVA.

[00:06:53] Speaker 00:
Before you run out of time, Council, let me move you on to another issue because under the statute, it can be a basis for liability can arise from false information or misleading information.

[00:07:07] Speaker 00:
Did you preserve the misleading theory?

[00:07:09] Speaker 01:
Yes, Your Honor.

[00:07:10] Speaker 01:
And in fact, I think probably the central issue here on appeal is that ultimately the district court judge refused to consider questions about whether or not PNC Bank's reporting was misleading based on the district court's view that appellants had not sufficiently pleaded allegations to support such a cause of action in the text of their complaint.

[00:07:32] Speaker 01:
I think that this court's holding in Gorman makes clear that inaccurate information under the FCRA consists of two subsets of information, as Your Honor just noted, information that's patently incorrect and... So your argument for preservation is really just... And I did find a couple of passing, pretty conclusory references in the complaint.

[00:07:54] Speaker 00:
You're saying that that's enough?

[00:07:55] Speaker 00:
Did you do anything during discovery or the litigation of this case?

[00:07:59] Speaker 00:
to suggest to opposing counsel that that was an alternative theory that you were going to try the case on.

[00:08:06] Speaker 01:
So I would respond by saying, number one, yes, that the question as to whether PNC's reporting was misleading has at all times been front and center and been subject to discussions in both mediation.

[00:08:20] Speaker 01:
It was the context, or there were contextual questions about whether PNC's reporting was misleading throughout PNC's deposition and throughout experience deposition as well.

[00:08:30] Speaker 01:
So that fact,

[00:08:31] Speaker 01:
Imputed to PNC by knowledge of its counsel has been front and center throughout this litigation for going on two years now The other item I would note your honor and I would just take issue slightly with the phrasing is that Ultimately, I don't believe this to be an alternative theory of liability I think that the text of Gorman makes clear that either the patently incorrect or the materially misleading standard is

[00:08:55] Speaker 01:
Those are two subsets of inaccurate information.

[00:08:58] Speaker 03:
In other words, when a consumer... If we disagree with you on your math, then what was materially misleading?

[00:09:05] Speaker 03:
The failure to report a dispute?

[00:09:07] Speaker 03:
Is that what made it materially misleading?

[00:09:10] Speaker 01:
I think the failure to report the dispute and additionally the failure to provide any sort of context in PNC's reporting as to the potential role of BBVA and or PNC

[00:09:22] Speaker 01:
Or even arguably gravity lending ultimately PNC has no knowledge about what those communications between gravity lending and BBVA were but The the fact is credit reporting and the credit reporting system exists So that creditors can communicate with other creditors and prospective creditors about a but if PNC is

[00:09:44] Speaker 03:
Got out the calculator and ran the math and said, they still owe us $700, $800.

[00:09:51] Speaker 03:
This whole thing about a dispute, although the communications have been unclear, it's not a bona fide dispute that we need to report.

[00:09:58] Speaker 03:
Why isn't that correct?

[00:10:01] Speaker 01:
Certainly, Your Honor.

[00:10:02] Speaker 01:
And ultimately, I know the portion of PNC's responding brief that you're referring to.

[00:10:07] Speaker 01:
I think the issue is that PNC fundamentally misunderstands Saunders and the meritorious dispute standard.

[00:10:14] Speaker 01:
PNC's brief seems to intimate that the concept of a meritorious dispute refers to a dispute literally being successful.

[00:10:23] Speaker 01:
In other words, in order for a furniture to be obligated to report the existence of a meritorious dispute, it would therefore follow that the consumer must have been

[00:10:33] Speaker 01:
successful or likely to be successful in their dispute.

[00:10:37] Speaker 01:
That is not what Saunders says.

[00:10:39] Speaker 01:
Saunders says that if ultimately there is a question for the jury to decide about the dispute, in the case of Saunders, the issue was the consumer clearly hadn't paid and it was agreed that the consumer had not paid.

[00:10:52] Speaker 01:
Nonetheless, because of the conduct of the creditor, which by the way is virtually identical to the conduct of PNC here,

[00:11:01] Speaker 03:
In that case... That conduct being misleading the borrower into thinking that they had paid it off?

[00:11:07] Speaker 01:
Correct.

[00:11:07] Speaker 01:
And on multiple instances in both Saunders and here, there's a communication from the creditor saying, you're good, you don't owe us, you're fine.

[00:11:15] Speaker 01:
Ultimately, what Saunders says is, if a consumer's conduct

[00:11:19] Speaker 01:
and their derogatory or delinquent payments under the FCRA are not as a product of that consumer's financial irresponsibility, then failing to include information about a bona fide dispute, which in that case, the court said, if there is a basis for the jury to conclude that consumer was excused or justified in withholding payment,

[00:11:42] Speaker 01:
similar to the conduct here, almost identical, then in that case, Saunders says, you have to report to someone it's more than just this person being a deadbeat.

[00:11:52] Speaker 01:
It's that they had a legitimate gripe with the amount that they purportedly owed.

[00:11:57] Speaker 00:
Did you want to save a little time for rebuttal, Counsel?

[00:11:59] Speaker 01:
I do.

[00:11:59] Speaker 01:
I'll be saving three minutes for rebuttal, Your Honors.

[00:12:02] Speaker 01:
Thank you very much.

[00:12:10] Speaker 02:
Good morning, Your Honor.

[00:12:11] Speaker 02:
It's Brian Pano appearing on behalf of the respondent, PNC Bank.

[00:12:16] Speaker 02:
I don't want to regurgitate the briefs.

[00:12:18] Speaker 02:
I can tell by the court's line of questioning that the court is very familiar with the facts.

[00:12:24] Speaker 02:
As counsel's argument and briefs demonstrate, I think one of the fundamental issues here is

[00:12:33] Speaker 02:
whether or not the theory that PNC's credit reporting was materially misleading was properly pled and preserved.

[00:12:44] Speaker 02:
Our position, while Gorman may say, you know, credit reporting claim may lie where reporting is materially misleading, it doesn't, Gorman doesn't say that a plaintiff is absolved from the responsibility under Rule 8 from actually pleading facts to support that theory.

[00:13:03] Speaker 02:
And in this particular case, the very clear theory and singular theory that's pled throughout the complaint is that the credit reporting was patently inaccurate.

[00:13:18] Speaker 00:
In fact... The complaint does say patently false or misleading in several instances.

[00:13:24] Speaker 00:
So then the question is, how are you prejudiced by the course of the litigation in this case?

[00:13:32] Speaker 00:
lots and lots of statutes that really set up alternative claims where the discovery tactics and the litigation strategy would really be different if one side knows that the other side is advancing dual theories.

[00:13:52] Speaker 00:
But here, patently false and misleading, they're so close, they're like two sides of the same coin.

[00:13:58] Speaker 00:
Can you give us some insight into how you were prejudiced because that I think that's what the district court Thought that this came up in the course of summary judgment briefing and litigation So so your side didn't have enough time to pivot and prepare for that But I would think that in a case like this discovery would look pretty much the same Some of the discovery I would agree your honor would be the same but there are

[00:14:22] Speaker 02:
From a broader perspective, the pleaded theory shapes and informs a defendant's decisions throughout a case.

[00:14:31] Speaker 00:
Right, and that's a fair point, and that's what I'm trying to learn more about.

[00:14:37] Speaker 00:
Like, how did you shape your strategy any differently had you known that?

[00:14:41] Speaker 00:
So their theory is that, look, and it's not

[00:14:45] Speaker 00:
unsympathetic facts, right?

[00:14:47] Speaker 00:
Lots of us set up auto pay and then companies change and refinance and then eventually you just lose track of things.

[00:14:55] Speaker 00:
And so, you know, on the one hand, they said, well, I think my math is correct.

[00:15:01] Speaker 00:
And you say, well, no, my math is more correct.

[00:15:04] Speaker 00:
But having to fight with credit reporting that you think is inaccurate, I just can't imagine what you would have done differently in terms of defending this case.

[00:15:15] Speaker 02:
Well, I think it has to, I mean, for some examples, I think it first and foremost dictates the exposure analysis in the case.

[00:15:24] Speaker 02:
You know, any time a case comes across my desk, you look at the facts, they're pled, you compare it to your client's records.

[00:15:30] Speaker 00:
All right.

[00:15:31] Speaker 00:
So the settlement value assessment would be different.

[00:15:33] Speaker 00:
But what about the course of litigation?

[00:15:35] Speaker 02:
In the course of litigation, and as the district court noted, is without having pled that theory, we had no opportunity to test the theory.

[00:15:43] Speaker 02:
through motion practice.

[00:15:44] Speaker 02:
The first time it came up was in the context of the summary judgment motion.

[00:15:47] Speaker 02:
But fundamentally, from a discovery perspective, it shaped the scope and extent of discovery.

[00:15:54] Speaker 04:
Hold on.

[00:15:54] Speaker 04:
You were shocked, shocked that this was going to be their theory?

[00:15:58] Speaker 04:
I mean, how can that be the case?

[00:16:00] Speaker 04:
You knew exactly what their theory was because they'd been telling you throughout, hey, we paid this amount.

[00:16:06] Speaker 02:
This is wrong.

[00:16:11] Speaker 02:
I would disagree in the sense that the theory that was put in the complaint, and from my perspective, the theory that was advanced in discovery, including written discovery responses, was of a patently incorrect nature, not this materially misleading theory.

[00:16:27] Speaker 02:
And when we drafted the motion, we focused on the theory that was put in the complaint and was carried over into the written discovery responses.

[00:16:36] Speaker 02:
Had we understood the theory to have included the materially misleading

[00:16:41] Speaker 02:
theory, we would have expanded on discovery efforts.

[00:16:45] Speaker 02:
We would have pursued more extensive third-party... But I'm not hearing how.

[00:16:50] Speaker 00:
I'm not hearing how you would have expanded it.

[00:16:52] Speaker 00:
I mean, I take your point on sentiment value and all that, but in terms of litigation strategy, I just don't

[00:16:58] Speaker 00:
like what questions you would have asked, what factual areas were undeveloped because you think that they now have shifted theories on you, right?

[00:17:08] Speaker 00:
Do credit agencies have an obligation to report when an item's in dispute, in active dispute?

[00:17:19] Speaker 02:
So there is, and that's been touched on in this case, is that there was error in failing to report that there was a dispute.

[00:17:27] Speaker 02:
Our position is that unless it's a bona fide dispute, there's no reason to report the dispute.

[00:17:36] Speaker 02:
And one other fundamental issue in this case that I think is important to address is, and it's been touched on in some of the questions that the court has had, is really at bottom the appellants theory is

[00:17:52] Speaker 02:
It is an attack and a challenge to the validity of the debt, not on a factual basis, but on a legal basis.

[00:17:59] Speaker 02:
What is the legal consequence of PNC making a representation about the status of the debt?

[00:18:07] Speaker 02:
What is the legal consequence of PNC having provided, allegedly having, or its predecessor, excuse me, having provided a payoff quote that may have been erroneous or incorrect?

[00:18:20] Speaker 02:
legal determinations, and other circuits have recognized that the credit reporting system, including the dispute resolution system, is not designed to turn credit furnishers or even the bureaus, the credit reporting agencies, into fact-finders or tribunals.

[00:18:38] Speaker 02:
And that's essentially what the plaintiffs are seeking to do here.

[00:18:42] Speaker 02:
They're trying to impute onto PNC

[00:18:45] Speaker 02:
a duty to have essentially resolved a legal dispute as to whether or not certain conduct resulted in the legal satisfaction of the debt.

[00:18:55] Speaker 04:
What's your theory about why Gravity cut a check to BBVA for $58.69, $694.61, unless it was in fact to do a payoff?

[00:19:12] Speaker 02:
As we see here today, and I think I don't know I don't know how the payoff was not on BBVA letterhead the payoff was Generated in some capacity through through gravity we to this day don't know where those numbers came from But I don't think it's necessarily material because at the end of the day the provision of an erroneous payoff quote

[00:19:34] Speaker 02:
doesn't discharge or satisfy the underlying debt obligation.

[00:19:37] Speaker 03:
But doesn't it set you up for a bona fide dispute that you should have reported to the agencies?

[00:19:44] Speaker 02:
I would argue that that would be in the nature of a legal dispute, not a factual dispute.

[00:19:49] Speaker 02:
And for that reason, it falls at the end of the day that the credit reporting agencies are charged with conducting a reasonable investigation.

[00:19:59] Speaker 02:
And a reasonable investigation, as other circuits have recognized,

[00:20:02] Speaker 02:
entails, it requires the creditor to be able to verify something through objectively and reasonably available means.

[00:20:12] Speaker 02:
In this particular case, PNC was put in the position of essentially having to resolve a question of law as to the impact of certain conduct short of full payment of the loan.

[00:20:24] Speaker 02:
on the actual discharge.

[00:20:26] Speaker 03:
Are there any cases that have interpreted that bonafide dispute phrase in the way that you're arguing?

[00:20:33] Speaker 03:
That it's only supposed to consider factual disputes, not legal disputes?

[00:20:39] Speaker 02:
Well, the Fourth Circuit has recently issued an opinion in Roberts versus Carter Young where it touches on this and it refers to decisions from other circuits including the Eleventh Circuit

[00:20:52] Speaker 02:
There's a series of cases in the 11th Circuit involving holiday and timeshares and credit disputes relating to a specific provision within that contract that certain borrowers or consumers argued discharged or canceled the contract.

[00:21:10] Speaker 02:
And the court in the 11th Circuit in the holiday and line of cases touches on that standard.

[00:21:16] Speaker 02:
The dispute has to be something that a court

[00:21:20] Speaker 02:
furniture can resolve through objective and reasonably available information.

[00:21:27] Speaker 03:
And if we disagree with you that the complaint fails to allege this alternative theory, do we need to address this argument, or would that be something we would remand and let you all hash out in the district court?

[00:21:39] Speaker 02:
I think that the district court didn't address that particular issue.

[00:21:46] Speaker 02:
If my recollection is correct, I think this court potentially has the ability to resolve that question on appeal, but it certainly would be within this court's discretion to remand for the district court to actually make a determination on that particular aspect of the case.

[00:22:06] Speaker 02:
So unless the court has any other questions, I think I'll leave it at that.

[00:22:12] Speaker 00:
Thank you very much, counsel.

[00:22:19] Speaker 01:
Thank you, Your Honors.

[00:22:21] Speaker 01:
May it please the Court.

[00:22:22] Speaker 01:
I'll quickly go through a few items I wanted to address with respect to counsel's statements.

[00:22:26] Speaker 01:
Number one, Your Honor, I agree with you concerning the questions surrounding prejudice to PNC.

[00:22:33] Speaker 01:
Stated plainly, there is none.

[00:22:35] Speaker 01:
The district court asked PNC what the prejudice was at the motion for summary judgment hearing.

[00:22:40] Speaker 01:
They identified two things.

[00:22:41] Speaker 01:
Number one,

[00:22:42] Speaker 01:
We've already spent all this time on our summary judgment motion.

[00:22:45] Speaker 01:
Number two, perhaps we would have done something differently in discovery with the same vagueness that counsel just stated.

[00:22:52] Speaker 01:
The reality is the standard for arguing prejudice requires specificity.

[00:22:58] Speaker 01:
You must be specific with respect to what discovery.

[00:23:01] Speaker 01:
And in fact, I would argue the appellee brief demonstrates that there is no prejudice because

[00:23:06] Speaker 01:
PNC makes reference to, oh, we would have done some sort of discovery with the creditors to which Mr. and Mrs. Davis applied to see how they understood this misleading information.

[00:23:18] Speaker 01:
Erickson in the 11th Circuit is directly on point.

[00:23:21] Speaker 01:
The question of whether information is misleading under the FCRA is not a subjective standard.

[00:23:26] Speaker 01:
It is an objective standard.

[00:23:28] Speaker 01:
meaning what those creditors subjectively understood is irrelevant to the question of whether or not the information is misleading.

[00:23:35] Speaker 01:
It is relevant potentially to the question of the Davis's damages.

[00:23:39] Speaker 01:
We know that PNC would not have done discovery on the question of damages because they didn't.

[00:23:45] Speaker 01:
Ultimately, there is no prejudice at all.

[00:23:47] Speaker 01:
Dole in the Third Circuit also completely forecloses PNC's argument that while we spent this time on our MSJ briefing, Dole says that's insufficient for you to claim prejudice.

[00:23:59] Speaker 01:
I'll also note that the line of cases that counsel is referring to concerning readily and objectively verifiable, it all stems from Mater and CESA in the Second Circuit.

[00:24:09] Speaker 01:
These are consumer-friendly cases, and frankly, it's the first time I've ever heard a furniture or consumer reporting agency argue in favor of them, but I would agree that should be the standard objectively and readily verifiable as to whether information is inaccurate or not.

[00:24:25] Speaker 01:
However, as to your Honor's point,

[00:24:27] Speaker 01:
PNC is flat out wrong when it asserts that a dispute must be successful in order for it to be a meritorious dispute.

[00:24:36] Speaker 01:
The standard addressed under Saunders makes clear it does not necessitate that the consumer ultimately be successful.

[00:24:44] Speaker 01:
In fact, there's a holding in Saunders that explicitly says it matters not

[00:24:51] Speaker 01:
even if ultimately the consumer lost that dispute in a trial.

[00:24:57] Speaker 01:
The last thing I wanted to touch on is reverting back to prejudice.

[00:25:02] Speaker 01:
There is case law in circuit courts, the Fourth Circuit I know for certain Davis v. Piper aircraft, that flat out says if the allegations at issue were in the complaint, there is no prejudice.

[00:25:16] Speaker 01:
None of the allegations have changed, whether it's a

[00:25:19] Speaker 01:
incorrect information or materially misleading argument unless your honors have anything further all right thank you very much counsel to both sides for your argument this morning the matter submitted