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Gugger v. USAA Federal Savings Bank

United States District Court, S.D. California

April 3, 2018

Paul Gugger, Plaintiff,
USAA Federal Savings Bank, Defendant.


          Hon. Anthony J. Battaglia United States District Judge

         Before the Court is an unsettled issue in the Ninth Circuit. While the parties spent the majority of the briefing arguing whether Form 1099-C cancels a debt, this case is actually very simple at its core. It turns on the Fair Credit Reporting Act's fourth element: whether the furnisher discovered inaccurate reported information during the course of an investigation. USAA submitted a declaration stating Gugger owed the debt and that it has a lien on his property. Gugger failed to submit any evidence proving otherwise. Thus, the Court GRANTS USAA's summary judgment motion. (Doc. Nos. 36, 39.)

         I. BACKGROUND

         Gugger filed his complaint, alleging USAA violated the Fair Credit Reporting Act, (“FCRA”), 15 U.S.C. § 1681, and the California Consumer Credit Reporting Agencies Act, (“CCRAA”), Cal. Civ. Code § 1785.25(f). The Court sua sponte dismissed the CCRAA claim, but allowed the FCRA claim to continue. (Doc. No. 26.) USAA issued Gugger a Form 1099-C with code “G” marked. (Doc. No. 1-3 at 4.) According to Gugger, the form- along with code “G” being checked-legally released him from any further obligation to pay the debt. (Id.) USAA then filed the Form 1099-C with the IRS, obligating Gugger to pay taxes on the debt-which he thought was discharged. When Gugger received his consumer credit report, he discovered the debt was still being reported. (Id. at 2.) Gugger then sent a written dispute to Trans Union regarding the inaccurate debt. (Id. at 4.) Trans Union forwarded the dispute to USAA, but the debt was not removed. (Id.) Gugger then sent a second written dispute to Trans Union. (Id.) Again, Trans Union forwarded the dispute to USAA, but the debt remained. (Id.) Instead, both Trans Union and USAA verified the disputed information as accurate. (Id. at 5.) Gugger claims this violated the Fair Credit Reporting Act.


         Summary judgment is appropriate under Federal Rule of Civil Procedure 56 if the moving party demonstrates the absence of a genuine issue of material fact and entitlement to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). A fact is material when, under the governing substantive law, it could affect the outcome of the case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A dispute is genuine if a reasonable jury could return a verdict for the nonmoving party. Id. A party seeking summary judgment bears the initial burden of establishing the absence of a genuine issue of material fact. Celotex Corp., 477 U.S. at 323. The moving party can satisfy this burden in two ways: (1) by presenting evidence that negates an essential element of the nonmoving party's case; or (2) by demonstrating the nonmoving party failed to establish an essential element of the nonmoving party's case on which the nonmoving party bears the burden of proving at trial. Id. at 322-23. If the moving party carries its initial burden, the burden of production shifts to the nonmoving party to set forth facts showing a genuine issue of a disputed fact remains. Id. at 330. When ruling on a summary judgment motion, the court must view all inferences drawn from the underlying facts in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).


         At the crux of USAA's argument is its contention that not only was there never any intent to discharge Gugger's debt, it was actually never discharged. (Doc. No. 39.) Thus, USAA argues Gugger failed to prove the elements of an FRCA violation. (Id.) Gugger responds by primarily arguing that no discovery was done, and thus the summary judgment motion should be denied to allow discovery to take place. (Doc. No. 40.) He also contends he made a prima facie case under the FCRA. (Id. at 7.)

         A. Gugger's Argument for Discovery

         Twice Gugger argues, in his opposition, that the summary judgment motion should be dismissed, as Gugger does not have the benefit of discovery. USAA notes that Gugger waived the right to discovery by agreeing to stay discovery pending the resolution of the MSJ. (Doc. No. 43 at 6.) USAA argues, “Gugger cannot now decide to argue that the Motion should be denied on the grounds that he has not had the opportunity for discovery.” (Id.) Indeed.

         First, in distinguishing case law favorable to defendants, Gugger argues “[b]ut, most of these cases are decided on summary judgment and AFTER the parties have had the benefit of discovery . . . [t]his case has NOT had the benefit of discovery.” (Doc. No. 40 at 7.) On the next page, Gugger complains that “[p]erhaps predictably, the Defendant now dumps quite a bit of new information, documents, declaration, and discovery into their Motion with no opportunity for the Plaintiff's objections or cross. This alone suggests this Motion for Summary Judgment should be dismissed to give the parties the benefit of discovery.” (Id. at 8.)

         However, during a case management conference with Judge Schopler, the parties proposed a stay of discovery until this summary judgment motion was adjudicated. (Case Management Conference at 1:01-16, Gugger v. USAA Federal Savings Bank, 17-cv-1518-AJB-AGS, Doc. No. 33.) Judge Schopler specifically asked plaintiff's attorney, “[i]s that something the plaintiffs would join in Mr. Charity?” (Id. at 1:25-29.) To which he replied, “yeah, it's fine . . . we're fine with that.” (Id. at 1:30-34.)

         It appears Gugger is talking out of both sides of his mouth. He cannot agree to stay discovery-allowing USAA to file this motion-only to turn around and use that as a basis to deny it. Case law cited by USAA is more generous than the Court needs to be. In those cases, the Ninth Circuit held the District Court did not err ruling on a summary judgment motion when plaintiff failed to request a continuance for additional discovery. (Doc. No. 41 at 6 (citing THI-Hawaii, Inc. v. First Commerce Financial Corp., 627 F.2d 991, 993-94 (9th Cir. 1980); British Airways Bd. V. Boeing Co., 585 F.2d 946, 954-55 (9th Cir. 1978)).) However, here, Gugger did not only fail to request a continuance, he proactively agreed to a discovery stay. If Gugger surely needed discovery, there is a specific rule in federal procedure that applies to a factual scenario in which a plaintiff opposing a summary judgment cannot provide facts. Federal Rule of Civil Procedure 56(d) states that if a party submits, by “affidavit or declaration, ” that it “cannot present facts essential to justify its opposition, ” the Court may stay the motion until such facts can be obtained. Gugger filed nothing of the sort. To boot, at oral argument the Court asked Gugger's attorney why he agreed to a stay if he needed discovery. Gugger's attorney responded that it was his view that defendant needed discovery more than plaintiff did. (Motion for Summary Judgment Hearing, Mar. 20, 2018, unofficial transcript, at 4.)

         The Court finds it surprising Gugger would agree to forego discovery in light of his arguments made in opposition to USAA's dismissal motion, case precedence, and this Court's order denying the motion to dismiss. In that order, this Court stated, “[h]ere, Gugger asserts his claims on the pleadings without the opportunity to conduct discovery, which favors denying USAA's motion to dismiss.” (Doc. No. 26 at 5.) Moreover, the Court distinguished USAA's champion case, F.D.I.C. v. Cashion, noting “the Court is unable to rely on Cashion, as this case is not before the court on a motion for summary judgment, but on a motion to dismiss.” (Id. at 6; 720 F.3d 169, 170 (4th Cir. 2013).) This Court also adduced it was possible that circumstantial evidence, as well as a Form 1099-C, could show the debt was actually cancelled; concluding “[t]hus, it is possible that Gugger can discover evidence indicating his debt was actually cancelled.” (Id. (summarizing Cashion's analysis) (emphasis added).) Yet, again, ...

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