The U.S. Court of Appeals for the Seventh Circuit affirmed a trial court’s dismissal, on separate grounds, of a borrower’s FCRA claims because the borrower lacked standing. In addition, the Seventh Circuit held that the borrower’s affidavit made conclusory statements with documentary support and was therefore insufficient to defeat the lender’s motion for summary judgment.
A copy of the opinion in Foster v. PNC Bank, National Association is available at: Link to Opinion.
The plaintiff borrower was a real estate developer who relied on loans to operate his real estate development business. A dispute arose between the borrower and his lender regarding a $1.1 million mortgage loan.
The borrower and lender disputed the scope of certain insurance coverage for the Florida property, whether certain insurance coverage was sufficient to satisfy the terms of the loan, and whether timely payments for insurance premiums were made by the borrower. The lender asserted that the borrower did not comply with the terms of the loan and the lender was forced to obtain additional insurance coverage and assess the cost of the additional insurance coverage to the borrower. The borrower allegedly did not pay the increased insurance premiums and disputed that the additional insurance was required.
The lender notified various credit reporting agencies of the borrower’s late payments. The borrower disputed these payments were late and filed a formal dispute with the credit reporting agencies. The borrower alleged that based on the lender’s notification of the credit reporting agencies, the borrower’s credit score decreased. Because of the decrease in his credit score, this allegedly prevented the borrower from obtaining a new loan, purchasing new property, and refinancing his loans, and resulted in the borrower being forced to sell certain property and forego rental income.
The borrower sued the lender for various claims including alleging that the lender violated the federal Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq, by failing to investigate the dispute the borrower filed with the credit reporting agencies, and for breach of contract relating to the lender’s decision to obtain force-placed insurance coverage, breach of implied duty of good faith and fair dealing, and a breach of fiduciary duty for allegedly mishandling the loan’s escrow account. The lender filed a counterclaim to obtain a judgment on the loan.
The trial court granted summary judgment for the lender and dismissed the borrower’s claims. The borrower appealed.
THE SUMMARY JUDGMENT AFFIDAVITS
The borrower argued that the trial court erred by properly considering the evidence in the borrower’s affidavit filed in opposition to the lender’s motion for summary judgment. The Seventh Circuit noted that trial courts may find affidavits as insufficient or conclusory at the summary judgment stage without making specific findings about the litigant’s credibility. Credibility determinations are normally reserved for in-person testimony.
Throughout his affidavit, the Court noted, the borrower made numerous allegations but failed to support these allegations with documentary evidence. For example, the borrower averred in his affidavit that he provided proof of flood insurance to the lender and that he was current on his loan payments. However, the borrower did not support these averments with documentary evidence. As result, the Seventh Circuit agreed that the borrower’s affidavit lacked the substance to rebut the lender’s affidavit and cause a genuine issue of a material fact.
In support of its motion for summary judgment, the lender also filed an affidavit. The borrower argued that the lender’s affidavit was faulty because the corporate representative who signed the affidavit did not have sufficient personal knowledge. However, because the borrower did not challenge the validity of the lender’s affidavit at the trial court level, the Seventh Circuit ruled that he waived this argument.
Even if the borrower did not waive this claim, the Appellate Court held that the borrower’s arguments were without merit because the lender submitted a properly authenticated business record under Fed. R. of Evidence 803(6) and 901(b)(1). Under these rules, the corporate representative only needs to personally know of the procedure utilized by the lender to create and maintain the documents relied upon in the affidavit. The Court of Appeals affirmed the propriety of the lender’s affidavit and rejected all of the borrower’s arguments about the invalidity of lender’s affidavit.
THE FCRA CLAIM FAILED FOR LACK OF STANDING
The borrower also argued that the trial court erred when it dismissed his FCRA claim against the lender. The Seventh Circuit affirmed the trial court’s decision to dismiss the borrower’s FCRA claim but on separate grounds. The Court of Appeals sua sponte held that the borrower lacked standing to even bring the FCRA claim against the lender because the borrower’s injury was not fairly traceable to the alleged violation.
As you may recall, a plaintiff must show an injury beyond just a statutory violation. See Spokeo, Inc. v. Robins, 578 U.S. 330, 341–42 (2016). At the summary judgment stage of litigation, a plaintiff can meet this standard by establishing specific facts that show “a concrete and particularized injury that is both fairly traceable to the challenged conduct and likely redressable by a judicial decision. Spuhler v. State Collection Serv., Inc., 983 F.3d 282, 284 (7th Cir. 2020) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992)).
Once a party pleads an injury, they are still required to prove causation that shows “that the defendant’s actual action has caused the substantial risk of harm.” Remijas v. Neiman Marcus Group, LLC, 794 F.3d 688, 696 (7th Cir. 2015) (quoting Clapper v. Amnesty Int’l USA, 568 U.S. 398, 414 n.5 (2013)).
The borrower’s alleged damages occurred when the lender received two notices of the borrower’s dispute from the credit reporting agencies in January of 2012. The borrower alleged that due to the lender’s failure to investigate this dispute and properly respond, the borrower’s credit score dropped and he was injured.
However, the Seventh Circuit noted that the alleged injury was related to a decrease in his credit score in 2011. Therefore, this injury could not be fairly traced to a failure of the lender to reasonably investigate credit reporting disputes in January of 2012. Therefore, the Seventh Circuit affirmed the dismissal of the borrower’s FCRA claim for lack of standing.
THE COMMON LAW CLAIMS ALSO FAILED
The borrower also argued that the trial court erred by dismissing his breach of contract and breach of fiduciary duty claims. In support of his argument, the borrower asserted that he did not receive certain contractually required notices from the lender and was forced to sell valuable possessions for less than market value as a result.
The Seventh Circuit found the language of the mortgage deemed service of the notices by the lender to be effective upon mailing. Additionally, the Court held that the evidence proffered by the borrower was too speculative to meet the required elements of a breach of contract claim, and Florida law prohibits standalone claims for breach of the implied duty of good faith and fair dealing without alleging a breach of an express contract term. Ins. Concepts & Design, Inc. v. Healthplan Servs., Inc., 785 So. 2d 1232, 1234 (Fla. Ct. App. 2001).
Last, the borrower argued that the lender’s counterclaim for a judgment on the loan should not have been granted. The Court held this argument was without merit because the borrower only generally stated that he remained in compliance with the terms of the loan while separately admitting that the lender returned his partial payments for two years.
The Court affirmed the trial court’s ruling on all grounds but vacated the judgment as to the FCRA claim and remanded with instructions for the trial court to dismiss the FCRA claim on the separate ground that the borrower lacked standing because the injury was not fairly traceable to the alleged violation.