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Moran v. The Screening Pros, LLC

United States Court of Appeals, Ninth Circuit

May 14, 2019

Gabriel Felix Moran, Plaintiff-Appellant,
The Screening Pros, LLC, a California corporation, Defendant-Appellee.

          Submitted August 23, 2018 [*]

          Appeal from the United States District Court for the Central District of California No. 2:12-cv-05808-SVW-AGR Stephen V. Wilson, District Judge, Presiding

          Deepak Gupta and Peter Conti-Brown, Gupta Beck PLLC, Washington D.C.; Meredith Desautels, Lawyers' Committee for Civil Rights of the San Francisco Bay Area, San Francisco, California; Joshua E. Kim, A New Way of Life Reentry Project, Los Angeles, California; Devin H. Fok, Law Offices of Devin H. Fok, Alhambra, California; Craig Davis, Law Offices of Craig Davis, San Francisco, California; for Plaintiff-Appellant.

          Michael J. Saltz, Colby A. Petersen, and Blair Schlecter, Jacobson Russell Saltz Nassim & de la Torre LLP, Los Angeles, California, for Defendant-Appellee.

          Keith Bradley and Nandan M. Joshi, Attorneys; David M. Gossett, Assistant General Counsel; To-Quyen Truong, Deputy General Counsel; Meredith Fuchs, General Counsel; Consumer Financial Protection Bureau, Washington, D.C.;

          Theodore (Jack) Metzler, Attorney; John F. Daly, Deputy General Counsel for Litigation; Jonathan E. Neuchterlein, General Counsel; Office of the General Counsel, Federal Trade Commission, Washington, D.C.; for Amici Curiae Consumer Financial Protection Bureau and Federal Trade Commission.

          Alison S. Hightower and Rod M. Fliegel, Littler Mendelson P.C., San Francisco, California, for Amicus Curiae National Multifamily Resident Information Council.

          Karen K. McCay and Helene Simvoulakis-Panos, Pahl & McCay APLC, San Jose, California, for Amicus Curiae California Apartment Association.

          Tanya Koshy, East Bay Community Law Center, Berkeley, California, for Amici Curiae East Bay Community Law Center; Asian Americans Advancing Justice - Asian Law Caucus; American Civil Liberties Union of Southern California; Bay Area Legal Aid; The California Reinvestment Coalition; The Center for Employment Opportunities; Drug Policy Alliance; Ella Baker Center; The University of California Hastings Civil Justice Clinic; Housing and Economic Rights Advocates; Legal Action Center; Legal Services for Prisoners with Children; The National Consumer Law Center; The National Employment Law Project; The National Housing Law Project; Public Good; Rubicon Programs; and Safer Foundation.

          Before: ANDREW J. KLEINFELD, MILAN D. SMITH, JR., and JACQUELINE H. NGUYEN, Circuit Judges.

         SUMMARY [**]

         Consumer Reporting

         The panel reversed the district court's judgment in favor of the defendant in an action under the federal Fair Credit Reporting Act and California's Investigative Consumer Reporting Agencies Act and Unfair Competition Law.

         After being denied housing due to disclosures appearing in a tenant screening report, Gabriel Moran brought suit against The Screening Pros, LLC. The district court dismissed in part and granted summary judgment in part.

         The district court held that the ICRAA, which regulates "investigative consumer reports," was unconstitutionally vague as applied to tenant screening reports due to the ICRAA's overlap with California's Consumer Credit Reporting Agencies Act. The panel concluded that the district court's holding was foreclosed by Connor v. First Student, Inc., 423 P.3d 953 (Cal. 2018), and The Screening Pros' new arguments in favor of dismissal of the ICRAA claims were waived. The panel reversed and remanded to the district court to consider the merits of the ICRAA claims and to decide whether Moran stated a UCL claim predicated on The Screening Pros' alleged ICRAA violations.

         Reversing as to the FCRA claims, the panel held that 15 U.S.C. § 1681c(a) permits consumer reporting of a criminal charge for only seven years following the date of entry of the charge, rather than the date of disposition. Further, the dismissal of a charge does not constitute an adverse item and may not be reported after the reporting window for the charge has ended. The panel concluded that Moran sufficiently stated claims pursuant to the FCRA because the tenant screening report's inclusion of a 2000 charge fell outside of the permissible seven-year window. The panel remanded for further proceedings.

         Concurring in part and dissenting in part, Judge Kleinfeld joined in Parts I and II of the analysis, addressing the ICRAA and UCL claims. Dissenting from Part III, addressing the FCRA claims, Judge Kleinfeld wrote that the dismissal of the charge was reportable under the plain language of the statute.



         After being denied housing due to disclosures appearing in a tenant screening report, Plaintiff-Appellant, Gabriel Moran brought suit against Defendant-Appellee, The Screening Pros (TSP), alleging violations of the federal Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681, California's Investigative Consumer Reporting Agencies Act (ICRAA), Cal. Civ. Code § 1786, and California's Unfair Competition Law (UCL), Cal. Bus. & Prof. Code § 17200.

         The district court dismissed all but one cause of action and granted summary judgment on the remaining FCRA claim. We reverse the district court on all claims and remand for further proceedings.


         TSP provides tenant screening reports to property owners who desire to know certain information about potential tenants of their properties. The reports include both general character and creditworthiness information. In February 2010, Moran applied for housing with Maple Square Apartments (Maple Square), an affordable housing development. At Maple Square's request, TSP prepared a tenant screening report on Moran (Report), which disclosed four criminal matters in his background: a May 16, 2000 misdemeanor charge for being under the influence of a controlled substance (2000 Charge), dismissed on March 2, 2004; two June 2006 charges for burglary and forgery, dismissed that same month; and a June 2006 conviction for misdemeanor embezzlement from an elder dependent adult. After reviewing the Report, Maple Square denied Moran's rental application due to his 2006 embezzlement conviction and, Moran alleges, the three dismissed charges.

         In 2012, Moran instituted this action against TSP alleging six claims pursuant to the ICRAA, [1] two claims pursuant to the UCL, [2] and three claims pursuant to the FCRA.[3] The Report's inclusion of the 2000 Charge, later dismissed in 2004, served as the predicate offense of most of these claims.

         TSP moved to dismiss ten of the eleven claims, but did not seek dismissal of one claim pursuant to § 1681i of the FCRA-failure to reinvestigate disputed consumer information. The district court granted the motion for all ICRAA claims because it determined that the ICRAA was unconstitutionally vague as applied to tenant screening reports. The district court also granted dismissal of the UCL claims because it concluded that injunctive and restitutionary relief were not available to Moran. The court initially granted in part and denied in part the motion to dismiss the FCRA claims. Specifically, the court denied the motion for Moran's claim that TSP violated the FCRA by including Moran's 2000 Charge because more than seven years had passed since the charge was entered. On reconsideration, the district court reversed itself, and dismissed all of the challenged FCRA claims because it determined that the reporting period for a criminal charge begins on the "date of disposition" instead of the date of entry. The district court granted summary judgment on the remaining FCRA claim given its ruling that the Report "did not contain any obsolete information in violation of [§] 1681c." Moran timely appealed.

         This case first came before us in 2012. After oral argument and submission of the case, we stayed proceedings pending the California Supreme Court's decision in Connor v. First Student Inc., 423 P.3d 953 (Cal. 2018), because Connor addressed the question of whether the ICRAA is unconstitutionally vague due to a partial overlap with the Consumer Credit Reporting Agencies Act (CCRAA), Cal. Civ. Code § 178. Once the state proceedings concluded, the parties filed supplemental briefs discussing Connor. Upon receipt of the supplemental briefing, we again took this case under submission.


         We have jurisdiction pursuant to 28 U.S.C. § 1291. We review de novo a district court's dismissal for failure to state a claim. Dougherty v. City of Covina, 654 F.3d 892, 897 (9th Cir. 2011). We also review de novo issues of statutory construction. Ileto v. Glock, Inc., 565 F.3d 1126, 1131 (9th Cir. 2009). When California law is at issue, "[o]ur duty as a federal court . . . 'is to ascertain and apply the existing California law.'" Munson v. Del Taco, Inc., 522 F.3d 997, 1002 (9th Cir. 2008) (quoting Mangold v. Cal. Pub. Utils. Comm'n, 67 F.3d 1470, 1479 (9th Cir. 1995)). "We are bound by pronouncements of the California Supreme Court on applicable state law." Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 889 (9th Cir. 2010) (citing Munson, 522 F.3d at 1002).


         I. ICRAA Claims

         In 1975, California enacted two statutory schemes: the CCRAA and the ICRAA. Cal. Civ. Code §§ 1785, 1786. The California legislature passed these statutes (which are modeled after the FCRA) to ensure that reporting agencies "exercise their grave responsibilities with fairness, impartiality, and a respect for the consumer's right to privacy." Cal. Civ. Code §§ 1785.1(c), 1786(b). The CCRAA regulates "consumer credit reports," defined as "any written, oral or other communication of any information by a consumer credit reporting agency bearing on a consumer's credit worthiness, credit standing, or credit capacity." Cal. Civ. Code § 1785.3(c). The ICRAA regulates "investigative consumer reports," originally defined as "a consumer report in which information on a consumer's character, general reputation, personal characteristics, or mode of living is obtained through personal interviews." Cal. Civ. Code § 1786.2(c) (1975). The statutes were intended to cover separate information: the CCRAA governed creditworthiness, while the ICRAA governed character information. Cal. Civ. Code §§ 1785.3(c) (1975), 1786.2(c) (1975).

         In 1998, the California legislature broadened the definition of investigative consumer reports to include consumer reports "obtained through any means," not just through personal interviews. Cal. Civ. Code § 1786.2(c). This expanded the reach of the ICRAA, and some consumer reports, including tenant screening reports, now qualified as both "consumer credit reports" and "investigative consumer reports."

         Against this statutory backdrop, TSP argued that the ICRAA is unconstitutionally vague as applied to tenant screening reports due to the ICRAA's overlap with the CCRAA. Relying on California Court of Appeal decisions Ortiz v. Lyon Mgmt. Grp., Inc., 69 Cal.Rptr.3d 66, 75 (Ct. App. 2007) and Trujillo v. First Am. Registry, Inc., 68 Cal.Rptr.3d 732, 740 (Ct. App. 2007), TSP argued before the district court that it was not clear whether the ICRAA or the CCRAA governed tenant screening reports, which contained both creditworthiness and character information. Without the benefit of Connor, the district court agreed with TSP, and held that this lack of clarity rendered the ICRAA unconstitutionally vague as applied to tenant screening reports.

         The California Supreme Court authoritatively foreclosed this argument in Connor. Connor recognized the overlap between the ICRAA and CCRAA but held that "[a]ny partial overlap between the statutes does not render one superfluous or unconstitutionally vague. They can coexist because both acts are sufficiently clear . . . ." 423 P.3d at 959 (citing United States v. Batchelder, 442 U.S. 114, 123 (1979)). While Connor analyzed this issue as applied to employer background checks, we find that it has equal force in the context of tenant screening reports. The California Supreme Court specifically disapproved Ortiz-a case that held that the ICRAA was unconstitutionally vague as applied to tenant screening reports-finding that it failed to give meaning to the 1998 ICRAA amendment and instead "relied on the history of [the ICRAA and the CCRAA] as originally enacted." Id. at 958. Connor's analysis and disapproval of Ortiz compels a similar outcome for tenant screening reports.

         In its supplemental brief, TSP raises two arguments for the first time to support the district court's dismissal of the ICRAA claims. First, TSP asserts that Moran's ICRAA claims are preempted by the FCRA, 15 U.S.C § 1681t(b). Second, TSP argues that the ICRAA, Cal. Civ. Code § 1786.52(a), prohibits lawsuits for the same act or omission addressed in pending claims pursuant to the FCRA.

         "Generally, an appellee waives any argument it fails to raise in its answering brief." United States v. Dreyer, 804 F.3d 1266, 1277 (9th Cir. 2015) (en banc); see Clem v. Lomeli, 566 F.3d 1177, 1182 (9th Cir.2009). Yet, we have "discretion to make an exception to waiver under three circumstances: (1) 'in the "exceptional" case in which review is necessary to prevent a miscarriage of justice or to preserve the integrity of the judicial process,' (2) 'when a new issue arises while appeal is pending because of a change in the law,' and, (3) 'when the issue presented is purely one of law and either does not depend on the factual record developed below, or the pertinent record has been fully developed.'" Ruiz v. Affinity Logistics Corp., 667 F.3d 1318, 1322 (9th Cir. 2012) (citing Bolker v. Comm'r, 760 F.2d 1039, 1042 (9th Cir. 1985)).

         TSP creatively contends that we should exercise our discretion under the second exception to consider these new arguments because they were only possible post-Connor. According to TSP, Connor "expressly confirms that [the] ICRAA was amended in 1998" after Congress expanded the FCRA and added a preemption provision which applies here. Connor also "mak[es] [the] ICRAA applicable for the first time since this case was filed." We find both arguments meritless, and TSP's new arguments waived.

         Connor was not needed to prove that the California legislature amended the ICRAA in 1998. A cursory review of the statute's legislative history clearly shows the adoption of the 1998 amendment, which TSP itself cited in its answering brief. Thus, TSP was clearly aware of all facts and law needed to make its federal preemption argument at the time of initial briefing, and it should have done so if it wished to argue that point.

         Alternatively, TSP claims that the ICRAA was not applicable after Ortiz and Trujillo, [4] so it did not think it necessary to present other statutory arguments. Prior to Connor, no California Supreme Court decision bound a federal court to find the ICRAA unconstitutionally vague. "In the absence of such a decision, a federal court must predict how the highest state court would decide the issue using intermediate appellate court decisions, decisions from other jurisdictions, statutes, treatises, and restatements as guidance." In re Kirkland, 915 F.2d 1236, 1239 (9th Cir. 1990). We were obligated to conduct an independent analysis framed by the doctrine of "constitutional doubt" that requires a "statute [] be construed, if fairly possible, so as to avoid . . . the conclusion that it is unconstitutional." Almendarez-Torres v. United States, 523 U.S. 224, 237 (1998) (quoting United States v. Jin. Fuey Moy, 241 U.S. 394, 401 (1916)). The ICRAA, then, remained potentially applicable in federal court, even as applied to tenant screening reports, and TSP should have raised alternate statutory arguments at the time of initial briefing.

         Since the district court's holding is now foreclosed by Connor, and TSP's new arguments are waived, we reverse and remand to the district court to consider the merits of Moran's ICRAA claims.

         II. UCL Claims

         The UCL regulates competition by prohibiting "any unlawful, unfair or fraudulent business act or practice." Cal. Bus. & Prof. Code § 17200. Even though "the scope of conduct covered by the UCL is broad, the remedies are limited" to injunctive and restitutionary relief. Theme Promotions, Inc. v. News Am. Mktg. FSI, 546 F.3d 991, 1008 (9th Cir. 2008) (citing Korea Supply Co. v. Lockheed Martin Corp., 63 P.3d 937, 943 (Cal. 2003)). Moran sought both forms of relief. The district court dismissed Moran's claim for injunctive relief holding that the FCRA preempts this remedy for a UCL claim predicated on an FCRA violation. The district court also dismissed his claim for restitutionary relief because disgorgement of profits is not an authorized remedy under the UCL.

         While Moran does not appeal these conclusions, he argues instead that the UCL claims were also predicated on TSP's alleged ICRAA violations. The district court did not address these arguments, and instead, only analyzed Moran's UCL claims after concluding that the ICRAA was unconstitutionally vague. Since we hold that the ICRAA is not unconstitutionally vague, we remand for the district court to decide in the first instance whether Moran has stated a UCL claim.

         III. FCRA Claims

         Moran appeals the district court's dismissal of his FCRA claims based upon the Report's inclusion of Moran's 2000 Charge. While both parties agree that the 2000 Charge is classified as an "adverse item of information" and thus falls under § 1681c(a)(5), they disagree on which date triggers the seven-year reporting window-the date of entry of charge or the date of dismissal of charge-and thus, whether inclusion of the 2000 Charge was proper. The district court recognized that this was an issue of first impression and while initially holding that the date of entry triggered the window, the court later found the "date of disposition" or date of dismissal to be the appropriate trigger. We disagree, and hold that the district court's initial holding was correct: the date of entry triggers the seven-year window for a criminal charge. Thus, we find that TSP improperly included the 2000 Charge in its Report since more than seven years had passed since its date of entry, but we make no finding as to willful noncompliance.[5]

         A. Background of the FCRA

         Congress enacted the FCRA with the express purpose of ensuring that consumer reporting agencies (CRAs) provide information "in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information." 15 U.S.C. § 1681(b). The FCRA seeks to protect consumers by limiting the type of information a CRA may disclose about an individual. See Guimond v. Trans Union Credit Info. Co., 45 F.3d 1329, 1333 (9th Cir. 1995) ("The legislative history of the FCRA reveals that it was crafted to protect consumers from the transmission of inaccurate information about them . . . .").

         The relevant portion of the original 1970 statute provided:

[N]o consumer reporting agency may make any consumer report containing any of the following ...

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