McCalmont v. Federal National Mortgage Association

1 WO [5] 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA [8] 9 James McCalmont, et al., No. CV-13-02107-PHX-JJT 10 Plaintiffs, ORDER 11 v. 12 Federal National Mortgage Association, et al., [13] 14 Defendants. 15 At issue is Plaintiffs’ Motion to Vacate Costs Taxed (Doc. 168, Mot.), to which 16 Defendant filed a Response (Doc. 170, Resp.) and Plaintiff filed a Reply (Doc. 171, Reply). 17 I. BACKGROUND 18 Plaintiffs filed a Complaint (Doc. 1) in October 2013 alleging that a prior short sale 19 of their home was later reported as a foreclosure in Defendant’s automated Desktop 20 Underwriter system (“DU”), resulting in the denial of Plaintiffs’ later applications for home 21 mortgage loans. After years of litigation in this and related matters, the Ninth Circuit held 22 in a separate case that Defendant is not a Consumer Reporting Agency (“CRA”) and thus 23 is not subject to the relevant provision of the Fair Credit Reporting Act (“FCRA”). See 24 Zabriskie v. Fed. Nat’l Mortgage Ass’n, 912 F.3d 1192 (9th Cir. 2019). Based on the Ninth 25 Circuit’s ruling in Zabriskie, the Court granted Defendant’s Motion for Summary 26 Judgment in this case. (Doc. 153.) 27 On March 15, 2019, after considering Plaintiffs’ objections, the Clerk entered 28 judgment on taxable costs against Plaintiffs in the amount of $4,898.90—about $2,000 less 1 than Defendant originally requested. (Doc. 166). Plaintiffs now move to vacate the taxable 2 costs in their entirety. 3 II. LEGAL STANDARD 4 Federal Rule of Civil Procedure 54(d)(1) provides that “[u]nless a federal statute, 5 these rules, or a court order provides otherwise, costs—other than attorney’s fees—should 6 be allowed to the prevailing party.” The Rule “creates a presumption in favor of awarding 7 costs to a prevailing party, but vests in the district court discretion to refuse to award costs.” 8 Ass’n of Mexican-American Educ. v. California, 231 F.3d 572 , 591 (9th Cir. 2000). The 9 Court’s discretion “is not without limits.” Id. Rather, the Court “must specify reasons for 10 its refusal to award costs.” Id. (internal citation omitted). 11 Appropriate reasons for the Court to deny costs include: “(1) the substantial public 12 importance of the case, (2) the closeness and difficulty of the issues in the case, (3) the 13 chilling effect on future similar actions, (4) the plaintiff’s limited financial resources, and 14 (5) the economic disparity between the parties.” Escriba v. Foster Poultry Farms, Inc., 743 15 F.3d 1236 , 1247–48 (9th Cir. 2014). These five indicators are not “‘an exhaustive list of 16 good reasons for declining to award costs,’ but rather a starting point for analysis.” Id. 17 (quoting Ass’n of Mexican-American Educ., 231 F.3d at 591). 18 III. ANALYSIS 19 While the Court’s review is not necessarily limited to the five considerations in 20 Escriba, both parties seem to agree that those are dispositive in this matter, and indeed the 21 Court reaches its conclusion based on those indicators alone. 22 1. Substantial Public Importance 23 The Court finds that the first factor—the public importance of the case—weighs in 24 Plaintiffs’ favor. While Defendant argues that the case does not reflect an issue of public 25 importance, in part because “Plaintiffs’ constitutional or civil rights were [not] at issue,” 26 that is not a requirement for substantial public importance. (Resp. at 2.) Cases do not have 27 to pertain to constitutional or civil rights in order to be a matter of public importance. See [28] 1 Ass’n of Mexican-American Educ., 231 F.3d at 593 (“Nor are we attempting to create an 2 exhaustive list of ‘good reasons’ for declining to award costs.”). 3 Defendant also argues that the issue is not of public importance because “DU was 4 adjusted in 2013 (before Plaintiffs’ lawsuit was filed) to enable lenders to instruct DU to 5 disregard foreclosure information after validating the applicant had only a short sale.” 6 (Resp. at 3.) But while Defendant’s decision to change its DU policy is important in 7 evaluating the third indicator—the potential chilling effect on future actions—it is not 8 relevant to the Court’s analysis of what constitutes an issue of substantial public 9 importance. Plaintiffs should not be prejudiced because a policy that allegedly caused them 10 harm has since been remedied, at least in part. At the time of his suit, the DU policy had 11 been a matter of public importance because it affected other people seeking home financing 12 in the same way it affected Plaintiffs. While the Court is not persuaded by Plaintiffs’ 13 argument that the sheer volume of amicus briefs in the pending Ninth Circuit en banc 14 review renders this matter important, it is persuaded by the fact that this issue affected 15 many consumers and, by implication, the nationwide housing market. Thus, the first 16 indicator weighs in Plaintiffs’ favor. 17 2. Closeness and Difficulty of the Issues 18 The second indicator also weighs in Plaintiffs’ favor. As Plaintiffs point out, the 19 question in Zabriskie, which is largely identical to the question here, was difficult enough 20 to merit Ninth Circuit en banc review. Further, in the Court’s own experience, the issues 21 in this case were close and difficult to decide. 22 Defendant urges that the difficulty of the issues cannot weigh in any party’s favor 23 because “[w]hether [Defendant] was a [CRA] was not the only issue to be decided before 24 Plaintiff[s] could prevail,” and “a jury would still have needed to find that the foreclosure 25 notation in the DU findings was inaccurate and this inaccuracy caused the lenders to deny 26 Plaintiffs’ financing.” (Resp. at 3.) While this is a correct assessment of the case’s posture, 27 it does not render this case any less difficult to resolve. In fact, the baseline question of 28 Defendant’s status as a CRA was difficult to resolve. Further, Defendant cannot show that, 1 had the Court declared Defendant a CRA, the subsequent questions would have been any 2 easier to resolve. In fact, the Court is sure that those questions would have proven equally 3 difficult. 4 3. Chilling Effect on Future Similar Actions 5 Neither party presents the Court with sufficient argument on the question of whether 6 awarding Defendant costs in this case would chill future similar actions. Plaintiffs generally 7 declare that any award of costs would “have a chilling effect on consumers who would dare 8 to ever seek to clear their name in the future when [Defendant] falsely informs any potential 9 mortgage lenders about the contents of a consumer’s credit history.” (Mot. at 10.) 10 Defendant, on the other hand, argues that “with the law settled that [Defendant] is 11 not a [CRA], and the adjustments made to DU in 2013 . . . along with further revisions to 12 the software since that time, future lawsuits about the issues raised by Plaintiffs in this case 13 are extremely unlikely.” (Resp. at 4.) But Defendant cites no authority to support its 14 proposition that the only actions the Court should worry about chilling are identical actions 15 against the same Defendant regarding the same issue. Indeed, the Court is concerned about 16 chilling consumer protection actions against large financial clearinghouses similar to 17 Defendant. Further, the Court notes that if costs, which “might be considered modest when 18 compared to amounts sought in other, larger cases, even modest costs can discourage 19 potential plaintiffs who . . . earn low wages.” Escriba, 743 F.3d at 1249. For these reasons, 20 on balance, the third indicator weighs slightly in favor of Plaintiffs. 21 4. Plaintiffs’ Limited Financial Resources 22 While Defendant asserts that Plaintiffs are not of limited means, the Court cannot 23 be sure because Plaintiffs failed to proffer any evidence of their financial resources. 24 Characterizing Plaintiffs as “individual consumers with extraordinarily modest comparable 25 income” is not sufficient to show the Court that the $4, 898.90 of costs would render them 26 indigent. See id. at 1248 (“Costs are properly denied when a plaintiff ‘would be rendered 27 indigent should she be forced to pay’ the amount assessed”) (quoting Stanley v. Univ. of S. 28 Cal., 178 F.3d 1069, 1080 (9th Cir. 1999)). Due to Plaintiffs’ failure to provide any 1 || evidence to the contrary, this factor weighs in favor of Defendant. See Greene v. Buckeye 2|| Valley Fire Dep’t., No. CV-11-02351-PHX-NVW, 2013 WL 12160997 , at *1 (D. Ariz. July 16, 2013) (“[Plaintiff] is not obligated to provide any evidence of her financial 4|| situation, but... she has the burden to support her claim of an inability to pay Defendants’ || costs ... [and] without any evidence beyond her declaration, [the Court] cannot find that [Plaintiff] carried her burden.”). 7 5. Economic Disparity Between the Parties 8 While the Court cannot be sure of Plaintiffs’ exact financial position, it can be sure 9|| that there is great economic disparity between the parties. Plaintiffs assert that Defendant has “assets presently valued over [three] trillion dollars and net income of over $15 billion 11]) last year alone.” (Mot. at 9.) Defendant does not dispute this characterization. Instead, 12 || Defendant argues that “economic disparity alone is insufficient to deny costs, as economic 13 || disparity is commonplace in litigation.” (Resp. at 4 (citing Redwind v. W. Union, LLC, No. 3:14-CV-01699-AC, 2017 WL 1025184 , at *5 (D. Or. Mar. 16, 2017)).) The Court does 15} not dispute this point but has already found that three other indicators weigh in favor of Plaintiffs. The vast economic disparity between the parties is not the sole consideration, but it does weigh in Plaintiffs’ favor. 18 In sum, these factors weigh in favor of declining to award Defendant costs. 19 IT IS THEREFORE ORDERED granting Plaintiffs’ Rule 54(d)(1) Motion to 20 || Vacate Costs Taxed (Doc. 168) and vacating the Clerk’s taxation judgment (Doc. 166). 21 Dated this 14th day of August, 2019. ON 22 ‘woh: United StatesDistrict Judge [28] -5-