Heaton v. Social Finance, Inc., No. 3:2014cv05191 - Document 90 (N.D. Cal. 2015)
Court Description: Order denying 73 Motion for Summary Judgment. Signed by Hon. Thelton E. Henderson on 10/15/2015. (tehlc1S, COURT STAFF) (Filed on 10/15/2015)
Download PDF
<![CDATA[
Heaton v. Social Finance, Inc. Doc. 90 1 2 3 UNITED STATES DISTRICT COURT 4 NORTHERN DISTRICT OF CALIFORNIA 5 6 SHAWN HEATON, et al., Plaintiffs, 7 8 9 10 v. SOCIAL FINANCE, INC., et al., Case No. 14-cv-05191-TEH ORDER DENYING DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT Defendants. United States District Court Northern District of California 11 12 This matter is before the Court on Defendants’ motion for summary judgment, filed 13 on September 11, 2015. After carefully reviewing the parties’ written arguments, the 14 Court finds this matter suitable for resolution without oral argument, pursuant to Civil 15 Local Rule 7-1(b), and now VACATES the October 19, 2015 hearing. Defendants’ 16 motion for summary judgment is DENIED for the reasons set forth below. 17 18 19 BACKGROUND Defendant SoFi Lending is a wholly-owned subsidiary of Defendant SoFi. Mot. for 20 Summary Judgment (“MSJ”) at 2 (Docket No. 73). SoFi Lending operates the loan 21 website www.SoFi.com. Id. Plaintiffs Shawn Heaton (“Heaton”) and Anna Ahlborn 22 (“Ahlborn”) each visited Defendants’ website and had slightly different experiences. 23 Both Plaintiffs registered for the website by visiting the registration page. Joint 24 Statement of Undisputed Material Facts (“UMF”) at 3-4 (Docket No. 75). The phrase “this 25 inquiry will not affect your credit score” appeared on the registration page. Plaintiffs’ 26 Opposition to MSJ (“Opp’n”) at 4 (Docket No. 80). After registration, Plaintiffs were 27 confronted with the website’s “consents” page, and given an option to click a hyperlink to 28 Dockets.Justia.com 1 expand and view the “credit disclosure.” UMF at 29-30; Pls. Ex. 3 at 2 (Docket No. 81-3). 2 The credit disclosure, once expanded, contained the following language: “You are authorizing us today for purposes of this loan application, and in addition, so that we can determine your eligibility for a separate personal loan, and from time to time if and when we approve you for a loan, to carry out the following: -Investigate your credit worthiness, and to obtain credit information, including a consumer credit report, and other information about you from others, such as credit reporting agencies…” 3 4 5 6 7 Ou Decl. Ex. G at 2 (Docket No. 77-7). When Heaton checked the box agreeing to the 9 credit disclosure – which had a heading titled “Soft Credit Pull Authorization and Final 10 Submit” – and clicked a button labeled “Submit,” a soft inquiry1 was performed on his 11 United States District Court Northern District of California 8 credit in order to prequalify him for certain loan products. MSJ at 4. Ahlborn clicked a 12 button labeled “Start Application” after having clicked “Continue” to navigate away from 13 the consents page. Id. at 5. After she entered her total student loan amount and clicked 14 “Start,” a soft inquiry was performed on her credit. Id. After leaving the “consents” page, Heaton started an application for a “Student 15 16 Loan Refi.” Opp’n at 5. He decided not to select any of the products for which he was 17 prequalified, he navigated back to the home page and began the same process for a 18 personal loan. Id. The next choice Heaton encountered was to “Select an Amount” – text 19 which appeared next to a display box in which the website had pre-filled the amount of 20 $10,000 and displayed partial terms for different loan options. Ou Decl. Ex. L (Docket 21 No. 77-12). Heaton clicked “Request Amount,” and a hard inquiry was performed on his 22 credit. MSJ at 6-7. After entering her total loan amount and having a soft inquiry performed on her 23 24 credit, Ahlborn was also shown a screen with partial loan terms for different loan products. 25 A “soft” inquiry does not appear on a consumer’s credit report and does not affect his/her credit score. Conversely, a “hard” inquiry does appear on a credit report, and may negatively affect a consumer’s credit score, especially if many hard inquiries are performed within a short period of time. Defendants differentiate between the two types of inquiries by using two different subscriber identification codes when ordering reports from credit reporting agency Experian. MSJ at 6. 2 1 26 27 28 1 Opp’n at 6; Ou Decl. Ex. V (Docket No. 77-22). At the top of the screen was the 2 statement: “Choose your product now, or you can choose your product later.” Id. As in 3 Heaton’s case, the website had pre-selected one of the products for Ahlborn, and after she 4 clicked a button either stating “Choose Now” or “Choose Later,” a hard inquiry was 5 performed on her credit. Opp’n at 7. Plaintiff Heaton’s credit score was 756 on July 5, 2014. Pls. Ex. 19 (Docket No. 6 7 81-19). Defendants performed the hard inquiry on his credit on July 9, 2014. On August 8 18, 2014, Heaton applied for a credit card with Credit One Bank, and was denied. Second 9 Amended Complaint (“SAC”) ¶ 79 (Docket No. 65). One of the reasons for the denial was that there were too many inquiries on his credit. Id. Plaintiff Ahlborn alleges that her 11 United States District Court Northern District of California 10 credit score also decreased due to the hard inquiry performed by Defendants. Id. ¶ 107. Plaintiffs filed suit on November 24, 2014, claiming that Defendants mislead 12 13 consumers by assuring them that any inquiries performed by Defendants would be soft 14 credit pulls and not affect their credit, all while intending to perform hard pulls. Plaintiffs 15 contend that Defendants knew that the language on their website caused this confusion for 16 consumers – evidenced by numerous complaints on their social media accounts, through 17 the Better Business Bureau and directly to their customer service department – but chose 18 not to correct it for the sake of improving their numbers. Pls. Exs. 5-7, 12, 16. Plaintiffs contend that Defendants violated the Fair Credit Reporting Act 19 20 (“FCRA”), 15 U.S.C. §§ 1681 et seq., the California Consumer Credit Reporting Agencies 21 Act (“CCRAA”), Cal. Civ. Code §§ 1785.1 et seq., and California’s Unfair Competition 22 Law (“UCL”), Cal. Bus. & Prof. Code §§ 17200 et seq. Defendants moved for summary 23 judgment on June 18, 2015 (Docket No. 50), and then renewed the motion on September 24 11, 2015 (Docket No. 73) in response to Plaintiffs’ Second Amended Complaint. 25 26 // 27 // 28 // 3 1 2 LEGAL STANDARD Summary judgment is appropriate when there is no genuine dispute as to material 3 facts and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). 4 Material facts are those that may affect the outcome of the case. Anderson v. Liberty 5 Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute as to a material fact is “genuine” if there 6 is sufficient evidence for a reasonable jury to return a verdict for the nonmoving party. Id. 7 The Court may not weigh the evidence and must view the evidence in the light most 8 favorable to the nonmoving party. Id. at 255. The Court’s inquiry is “whether the 9 evidence presents a sufficient disagreement to require submission to a jury or whether it is 10 United States District Court Northern District of California 11 so one-sided that one party must prevail as a matter of law.” Id. at 251-52. A party seeking summary judgment bears the initial burden of informing the Court 12 of the basis for its motion, and of identifying those portions of the pleadings and discovery 13 responses that “demonstrate the absence of a genuine issue of material fact.” Celotex 14 Corp. v. Catrett, 477 U.S. 317, 323 (1986). Where the moving party will have the burden 15 of proof at trial, it must “affirmatively demonstrate that no reasonable trier of fact could 16 find other than for the moving party.” Soremekun v. Thrifty Payless, Inc., 509 F.3d 978, 17 984 (9th Cir. 2007). However, on an issue for which its opponents will have the burden of 18 proof at trial, the moving party can prevail merely by “pointing out . . . that there is an 19 absence of evidence to support the nonmoving party’s case.” Celotex, 477 U.S. at 325. If 20 the moving party meets its initial burden, the burden shifts to the opposing party, who must 21 “set out specific facts showing a genuine issue for trial” to defeat the motion. Fed. R. Civ. 22 P. 56(e)(2); Anderson, 477 U.S. at 256. 23 At the summary judgment stage, the Court must view the evidence in the light most 24 favorable to the nonmoving party. See Leslie v. Grupo ICA, 198 F.3d 1152, 1158 (9th Cir. 25 1999). If evidence produced by the parties is conflicting, the judge must assume the truth 26 of the nonmoving party’s evidence with respect to that fact. Id. 27 28 4 1 DISCUSSION 2 I. There Are Triable Issues of Material Fact as to Whether Defendants Violated 3 the Applicable Statutes 4 The FCRA provides, in pertinent part: “A person shall not use or obtain a consumer 5 report for any purpose unless … the consumer report is obtained for a purpose for which 6 the consumer report is authorized to be furnished under this section….” 15 U.S.C. § 7 1681b(f). The statute enumerates several permissible purposes for which a consumer 8 reporting agency may furnish a consumer report, including “to a person which it has 9 reason to believe … intends to use the information in connection with a credit transaction involving the consumer…” 15 U.S.C. § 1681b(a)(3). The CCRAA has a similar 11 United States District Court Northern District of California 10 provision, found in California Civil Code Section 1785.11. 12 13 A. Whether There Was a Credit Transaction (Permissible Purpose) 14 Defendants first claim that they are not in violation of the FCRA because they had a 15 permissible purpose for conducting the hard inquiries: namely, the “credit transaction” 16 purpose. Defendants argue that both Plaintiffs initiated credit transactions by requesting 17 loan amounts and loan products. However, the cases Defendants cite in support of this 18 argument involve facts that evidence the plaintiffs’ intent to have their credit pulled, either 19 because the plaintiff specifically requested financing or completed a loan application. See 20 Stergiopoulos v. First Midwest Bancorp, Inc., 427 F.3d 1043, 1047 (7th Cir. 2005) 21 (plaintiffs requested financing at a car dealership; issue was whether the credit transaction 22 applied to the particular defendant lender); Huertas v. Citigroup, Inc., No. 13-2050- 23 RMB/JS, 2015 WL 2226012 at *1 (D.N.J. Aug. 21, 2014) (“[i]t is undisputed that Plaintiff 24 applied for both credit cards”); Baker v. Trans Union LLC, No. 07-8032-PCT-JAT, 2008 25 WL 4838714 at * (D. Ariz. Nov. 19, 2009) (“[plaintiff] does not dispute that she applied 26 for a mortgage”).2 27 2 28 Notably, these cases are not binding authority on this Court. Furthermore, the Baker case involved a motion to dismiss, not a summary judgment motion; thus, the requisite factual 5 1 Here, the facts are far from undisputed as to whether Plaintiffs’ actions on 2 Defendants’ website constituted a credit transaction, or whether such action simply 3 constituted “comparison shopping” behavior, which the Federal Trade Commission 4 (“FTC”) has stated is not enough to rise to the level of a credit transaction under the 5 FCRA. See Letter from David Medine to Karen Coffey (Feb. 11, 1998), 1998 WL 6 34323748 at *1 (FTC Staff Op. Ltr.) (credit transaction initiated by consumer only when 7 the consumer “clearly understands that he or she is initiating the purchase”). Therefore, 8 genuine issues of material fact exist as to whether a permissible purpose for conducting 9 hard inquiries on Plaintiffs’ credit existed. 10 United States District Court Northern District of California 11 B. Whether Defendant SoFi Violated the Applicable Statutes 12 Defendants argue that Defendant SoFi (as opposed to Defendant SoFi Lending) did 13 not violate the FCRA or CCRAA because Defendant SoFi did not procure any credit 14 report. This argument is unconvincing. The FCRA provisions apply not only to the 15 entities who specifically obtained the credit reports, but also “users” of such information. 16 See, e.g., 15 U.S.C. §§ 1681b(f), 1681q. Thus, even if SoFi did not personally request the 17 hard inquiry, they could still be liable under the FCRA, especially given that SoFi Lending 18 is a wholly-owned subsidiary of SoFi. Furthermore, Plaintiffs point to sufficient factual 19 disputes as to which Defendant initiated the request. See Opp’n at 26. For these reasons, 20 Defendant SoFi has not met its burden of showing “an absence of evidence to support the 21 nonmoving party’s case.” Celotex, 477 U.S. at 325. 22 Plaintiffs’ False Pretenses Claims under FCRA and CCRAA 23 C. 24 Defendants contend that they cannot be liable for obtaining information under false 25 pretenses when they had a statutory right to such information. However, as discussed 26 above, the issue of whether Defendants had a statutory right (i.e. whether they had a 27 28 showing is distinguishable. 6 1 permissible purpose for conducting the hard inquiries on Plaintiffs’ credit) remains an 2 issue for the finder of fact. Nevertheless, Defendants claim that summary judgment should 3 be granted on Plaintiffs’ false pretenses claims for several other reasons. 4 5 1. FCRA Section 1681q Defendants argue that Section 1681q (the FCRA’s false pretenses statute) does not 6 apply to the instant facts. Defendants contend that they could only be liable for false 7 pretenses based on the information communicated to Experian, the credit reporting agency, 8 and not statements they made directly to Plaintiffs, the consumers. This argument is 9 unpersuasive for two reasons. First, Defendants’ reading of the statute does not take into consideration the legislative purpose behind the FCRA. The FCRA is a consumer 11 United States District Court Northern District of California 10 protection statute, which must be construed liberally. Guimond v. Trans Union Credit 12 Info. Co., 45 F.3d 1329, 1333 (9th Cir. 1995). It would be contrary to the purpose of the 13 statute to arbitrarily limit protection only to certain situations of false pretenses. Second, 14 there is no language in the statute that specifically forecloses reading Section 1681q to 15 include obtaining permission (or any other permissible purpose) from the consumer using 16 false pretenses, but making no false statements to the credit reporting agency. The 17 language of the statute imposes criminal liability on “[a]ny person who knowingly and 18 willfully obtains information on a consumer from a consumer reporting agency under false 19 pretenses.” 15 U.S.C. § 1681q. This Court sees nothing in the plain language of the 20 statute that would limit liability to the factual scenarios suggested by Defendants, 21 especially when construing the FCRA liberally, as mandated by the Ninth Circuit. 22 23 2. CCRAA Section 1785.31(a)(3) Defendants argue that there can be no violation of Section 1785.31(a)(3) of the 24 California Civil Code for two reasons: (1) the section is not a substantive section and thus 25 cannot be violated; and (2) the section only applies to “natural persons,” and thus does not 26 apply to Defendants who are corporate entities. This Court agrees that while Section 27 1785.31 is a remedial statute, the section does in fact create a private right of action under 28 California law. See Sanai v. Salz, 170 Cal. App. 4th 746, 775 (2009). However, this Court 7 1 finds Defendants’ argument persuasive as a matter of law. Section 1785.31 as a whole is 2 not limited to violations by “natural persons,” but the language referring to false pretenses 3 is only found in the subsection prescribing penalties for violations by “natural persons.” 4 Cal. Civ. Code § 1785.31(a)(3) (“In the case of liability of a natural person for obtaining a 5 consumer credit report under false pretenses…”). Because the CCRAA does not have a 6 counterpart to FCRA Section 1681q, and Plaintiffs cite no persuasive authority in 7 opposition, this Court must read the plain language of the statute to mean that the 8 California Legislature only intended natural persons to be liable for violations on the basis 9 of false pretenses. Thus, Section 1785.31(a)(3) is an inappropriate vehicle for Plaintiffs’ 10 desired remedies. United States District Court Northern District of California 11 12 II. There Are Triable Issues of Material Fact as to Whether the Alleged Violations 13 Were Willful 14 “The elements of an FCRA claim depend on the relief that a plaintiff seeks.” Syed 15 v. M-I LLC, No. CV-14-742, 2015 WL 4344746 at *2 (E.D. Cal. Aug. 28, 2014). If the 16 plaintiff seeks actual damages, he or she only must allege that the defendant was negligent. 17 15 U.S.C. § 1681o(a). However, if the plaintiff seeks statutory and/or punitive damages 18 under Section 1681n, he or she must show that the defendant “willfully fail[ed] to comply” 19 with the statute. Id. at § 1681n(a). 20 In Safeco Insurance Company of America v. Burr, the United States Supreme Court 21 held that the term “willful” as used in the FCRA required a showing of conduct by a 22 defendant that was either willful or reckless. 551 U.S. 47, 57 (2007). According to the 23 Safeco Court, recklessness meant taking an “action entailing an unjustifiably high risk of 24 harm that is either known or so obvious that it should be known.” Id. at 68. Applying this 25 definition of recklessness, the Safeco Court went on to hold that merely showing that a 26 defendant’s understanding or interpretation of the FCRA’s statutory requirements was 27 erroneous is not enough to establish willfulness; rather, a plaintiff must alleged that the 28 8 1 defendant’s reading of the statute was “objectively unreasonable.” Id. at 69; see also Syed, 2 2014 WL 4344746, at *1-2. Defendants argue that, according to Safeco, the analysis for whether a defendant’s 3 reading of the FCRA was objectively unreasonable mirrors a qualified immunity analysis: 5 Plaintiffs must show that at the time of Defendants’ actions, there was “clearly 6 established” law – provided by a Court of Appeals or an official opinion from the FTC – 7 specifically stating that the interpretation used by Defendants was incorrect. Defendants 8 contend that if a statute is unclear and there is no precedential guidance as to what a valid 9 interpretation may be, a violation may not be considered willful. However, this reading 10 overstates Safeco’s holding. Holman v. Experian Info. Solutions, Inc., No. 11-0180-CW, 11 United States District Court Northern District of California 4 2013 WL 4873496, at *6 (N.D. Cal. Sept. 12, 2013) (“[T]he Safeco Court only mentions 12 qualified immunity once, in a parenthetical to a citation introduced by ‘Cf.’”). The Safeco 13 Court considered not only the “dearth of guidance and the less-than-pellucid statutory text” 14 to decide whether the defendant’s reading of the statute was reckless, but also considered 15 other factors, such as whether the defendant’s reading had “a foundation in the statutory 16 text,” and whether the defendant provided “a sufficiently convincing justification” for 17 adopting its interpretation.3 Safeco, 551 U.S. at 69-70. Here, triable issues remain as to whether Defendants’ belief that a permissible 18 19 purpose existed for initiating the hard inquiries was not “objectively unreasonable.” 20 Plaintiffs assert – and this Court agrees – that the issue of whether Defendants’ 21 interpretation was objectively reasonable is not appropriate for a summary judgment 22 motion. See Manuel v. Wells Fargo Bank, No. 14-CV-238, 2015 WL 4994538, at *18 23 (E.D. Va. Aug. 19, 2015) (denying summary judgment; holding that willfulness is a 24 question of fact for the jury). 25 Here, although Defendants point to the purported “objectively reasonable” interpretation (that Plaintiffs’ activities on the website, Defendants fail to show that such an interpretation was their actual reading of the statute. See Haley v. TalentWise, Inc., No. 13-1915-MJP, 2014 WL 1648480, at *2 (W.D. Wash. Apr. 23, 2014); Singleton v. Domino’s Pizza, LLC, No. 11-1823, 2012 WL 245965, at *9 (D. Md. Jan. 25, 2012); Claffey v. River Oaks Hyundai, Inc., 494 F. Supp. 2d 976, 978-79 (N.D. Ill. 2007). 9 3 26 27 28 1 III. Defendants Failed to Meet Their Burden as to Plaintiffs’ UCL Claims 2 California’s Unfair Competition Law prohibits “unlawful, unfair or fraudulent 3 business act or practice and unfair, deceptive, untrue or misleading advertising.” Cal. Bus. 4 & Prof. Code § 17200. Defendants argue that summary judgment is warranted on 5 Plaintiffs’ UCL claims because (1) Plaintiffs do not have standing; (2) Defendants did not 6 make “unfair” or “fraudulent” statements; and (3) Defendants did not engage in “unlawful” 7 conduct. Defendants contend that Plaintiffs failed to establish private plaintiff standing. 8 Standing under California’s UCL is “substantially narrower” than Article III standing, as 10 the plaintiff must demonstrate a loss of money or property. Kwikset Corp. v. Super. Ct., 11 United States District Court Northern District of California 9 246 P.3d 877, 885-86 (Cal. 2011). Defendants contend that Plaintiffs’ allegations of lower 12 credit scores did not result in any monetary impact, and that because a drop in credit score 13 alone does not establish standing, summary judgment is warranted. It is true that 14 hypothetical and non-particularized injury is insufficient for UCL standing, and that in 15 some cases, a drop in credit score is too hypothetical. See Birdsong v. Apple, Inc., 590 16 F.3d 955, 960-61 (9th Cir. 2009). However, the majority of courts4 in this Circuit have 17 found that in some cases a decreased credit score can be sufficient for UCL standing, and 18 the Ninth Circuit has cited this with approval. Rubio v. Capital One Bank, 613 F.3d 1195, 19 1204 (9th Cir. 2010). Furthermore, Heaton’s credit card application with Credit One 20 Bank was denied due to too many inquiries, which was a direct result of the hard pull on 21 his credit. Thus, Plaintiffs have demonstrated sufficient injury under California’s UCL. 22 Defendants also contend that Defendants made no “unfair or fraudulent” 23 representations, and did not violated the FCRA or CCRAA to satisfy the unfair 24 competition law’s “unlawful” prong. However, these are issues of fact that are clearly in 25 dispute. Plaintiffs offer evidence that the credit disclosure was titled in a misleading way 26 4 27 28 E.g. White v. Trans Union, LLC, 462 F. Supp. 2d 1079, 1084 (C.D. Cal. 2006); Venugopal v. Digital Fed. Credit Union, No. 12-6067-ED, 2013 WL 1283436, at *5 (N.D. Cal. Mar. 27, 2013); Aho v. AmeriCredit Fin. Servs., Inc., No. 10-CV-1373, 2011 WL 2292810, at *2 (S.D. Cal. June 9, 2011). 10 1 and that a reasonable consumer would believe that Defendants would not make any hard 2 inquiries. Furthermore, Plaintiffs offer evidence that Defendants knew the practice was 3 misleading and purposefully failed to correct the website. Viewing the evidence in the 4 light most favorable to the non-moving party, triable issues remain as to Plaintiffs’ UCL 5 claims. Thus, summary judgment is inappropriate. 6 7 CONCLUSION 8 For the reasons set forth above, Defendants’ motion for summary judgment is 9 hereby DENIED. The parties shall appear for a case management conference on Monday, November 2, 2015, at 1:30pm. The parties shall file a joint case management statement 11 United States District Court Northern District of California 10 on or before October 26, 2015. 12 13 IT IS SO ORDERED. 14 15 16 Dated: 10/15/2015 _____________________________________ THELTON E. HENDERSON United States District Judge 17 18 19 20 21 22 23 24 25 26 27 28 11
]]>
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You
should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google
Privacy Policy and
Terms of Service apply.
