184 F.Supp.3d 726
D. Minnesota2016Background
- Plaintiff Julie M. Dunnigan, a Minnesota homeowner, applied to refinance under HARP in 2013; lenders used Freddie Mac’s Loan Prospector (LP) automated underwriting and received Feedback Certificates showing a "Caution" Risk Class and apparent recent delinquency. Dunnigan alleges LP used the date her bankruptcy discharge was reported (2013) rather than the actual discharge date (2008), producing false/misleading output that caused multiple refinance denials.
- Dunnigan claims LP is proprietary software provided by Freddie Mac, which (she alleges) assembles/evaluates consumer credit information, charges fees to lenders, and transmits Feedback Certificates across interstate commerce.
- After denials, Dunnigan repeatedly disputed the Feedback Certificates with Freddie Mac, which she alleges misattributed the error to Equifax and failed to provide documentation; she alleges time, expense, credit harm, and emotional distress.
- Causes of action: two FCRA claims (failure to follow reasonable procedures to assure maximum possible accuracy; failure to conduct reasonable reinvestigation) and state-law claims (defamation, negligence, fraud, negligent misrepresentation, intentional infliction of emotional distress).
- Freddie Mac moved to dismiss: arguing it is not a consumer reporting agency (CRA) under the FCRA, LP materials are outside the FCRA, and that common-law tort claims fail for lack of duty, reliance, or damages.
- District Court: denied dismissal of the FCRA claims (without prejudice) to allow discovery on whether Freddie Mac is a CRA; dismissed negligence and negligent misrepresentation claims with prejudice; dismissed fraud claim without prejudice for failure to plead intent with Rule 9(b) particularity.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Freddie Mac is a CRA under the FCRA | LP assembles/evaluates credit data, furnishes Feedback Certificates to lenders for a fee and via interstate commerce, so Freddie Mac qualifies as a CRA | Freddie Mac licenses LP to lenders who perform the assembly/evaluation; Freddie Mac does not create consumer reports or act as a CRA | FCRA claims survive dismissal for now; court declined to resolve CRA status at 12(b)(6) and permitted discovery on the issue |
| Whether court may consider Freddie Mac’s LP User Agreement and Guide on motion to dismiss | N/A (Plaintiff disputes authenticity/completeness) | Freddie Mac urged consideration of those documents to show LP’s operation and contractual allocation of roles | Court refused to consider those extrinsic documents at motion-to-dismiss stage because they are not embraced by the complaint and their authenticity is disputed |
| Whether state-law claims are preempted/subject to FCRA §1681h(e) qualified immunity | Plaintiff seeks to pursue defamation, negligence, fraud, etc., arising from same conduct as FCRA claims | Freddie Mac argues FCRA preempts state-law claims and provides qualified immunity except for false information made with malice or willful intent to injure | Court declined to decide preemption now; held preemption/qualified immunity requires a fuller record and may be addressed at summary judgment |
| Viability of negligence / negligent misrepresentation / fraud claims under Minnesota law | Dunnigan alleges statutory and common-law duties breached, reasonable reliance on Freddie Mac’s representations, and pecuniary damages from pursuing remedies against Equifax | Freddie Mac argues no common-law duty (no special relationship), statutory duties cited do not create private causes of action, and fraud lacks particularized factual allegations of intent and damages | Negligence and negligent misrepresentation dismissed with prejudice (no duty); fraud dismissed without prejudice for failure to plead intent/particularity under Rule 9(b), but reliance and damages were sufficiently alleged at pleading stage |
Key Cases Cited
- Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (establishes plausibility pleading standard)
- Ashcroft v. Iqbal, 556 U.S. 662 (complaints must contain more than conclusory allegations)
- Zabriskie v. Federal National Mortgage Association, 109 F. Supp. 3d 1178 (D. Ariz. 2014) (denying motion to dismiss; Fannie Mae could be a CRA based on automated underwriting software)
- Thornton v. Equifax, 619 F.2d 700 (8th Cir. 1980) (discusses FCRA preemption and the malice/willfulness exception)
- Roers v. Countrywide Home Loans, 728 F.3d 832 (8th Cir. 2013) (lenders owe no general duty of care to borrowers absent a special relationship)