Court Opinion

ID: 4445115
Source: CourtListenerOpinion
Date Created: 2019-10-08 18:00:31.395809+00
Date Added: 2024-06-11T14:53:15.973998
License: Public Domain

FOR PUBLICATION

   UNITED STATES COURT OF APPEALS
        FOR THE NINTH CIRCUIT

 RICHARD ZABRISKIE; KRISTIN                     Nos. 17-15807
 ZABRISKIE,                                          17-16000
            Plaintiffs-Appellees,
                                                 D.C. No.
                  v.                        2:13-cv-02260-SRB

 FEDERAL NATIONAL                            ORDER AND
 MORTGAGE ASSOCIATION,                     AMENDED OPINION
         Defendant-Appellant.

        Appeals from the United States District Court
                 for the District of Arizona
         Susan R. Bolton, District Judge, Presiding

           Argued and Submitted October 18, 2018
                 San Francisco, California

                    Filed January 9, 2019
                   Amended October 8, 2019

 Before: J. Clifford Wallace and Susan P. Graber, Circuit
      Judges, and Robert S. Lasnik, * District Judge.

    *
      The Honorable Robert S. Lasnik, United States District Judge for
the Western District of Washington, sitting by designation.
2        ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

                             Order;
                   Opinion by Judge Wallace;
                    Dissent by Judge Lasnik

                          SUMMARY **

                  Fair Credit Reporting Act

     The panel filed (1) an order amending its prior opinion,
denying panel rehearing, and denying, on behalf of the court,
rehearing en banc; and (2) an amended opinion and dissent.
In its amended opinion, the panel reversed the district court’s
judgment in favor of the plaintiffs in an action under the Fair
Credit Reporting Act.

    The plaintiffs alleged that the Federal National Mortgage
Association, or Fannie Mae, falsely communicated to
potential mortgage lenders, via its proprietary software,
called Desktop Underwriter, that the plaintiffs had a prior
foreclosure on a mortgage account. Prior to a jury trial, the
district court ruled, on partial summary judgment, that
Fannie Mae was a “consumer reporting agency” within the
meaning of the FCRA. The panel held that Fannie Mae was
not a consumer reporting agency because, even if it
assembled or evaluated consumer information through
Desktop Underwriter, it did not act with the purpose of
furnishing consumer reports to third parties. Rather, its
purpose was to facilitate a transaction between the lender
and itself.

    **
       This summary constitutes no part of the opinion of the court. It
has been prepared by court staff for the convenience of the reader.
        ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N                3

    The panel reversed and remanded with instructions to
enter judgment in favor of Fannie Mae. It also vacated an
award of attorney’s fees and costs to the plaintiffs.

    Dissenting, Judge Lasnik wrote that when, in addition to
reviewing the relevant data and issuing a recommendation
on whether it would purchase the loan, Fannie Mae also
reported that plaintiffs had a prior foreclosure, it took on the
role, and the responsibilities, of a consumer reporting
agency.

                         COUNSEL

Deanne E. Maynard (argued), Brian E. Matsui, and Seth W.
Lloyd, Morrison & Foerster LLP, Washington, D.C.;
Michael B. Miller, Morrison & Foerster LLP, New York,
New York; for Defendant-Appellant.

Sylvia A. Goldsmith (argued), Goldsmith & Associates,
LLC, Rocky River, Ohio; Paul B. Mengedoth, Mengedoth
Law PLLC, Scottsdale, Arizona; Jennifer D. Bennett, Public
Justice P.C., Oakland, California; for Plaintiffs-Appellees.

Dinita L. James, Gonzalez Law, LLC, Tempe, Arizona, for
Amicus Curiae Federal Housing Finance Agency.

Christian Schreiber, Chavez & Gertler LLP, Mill Valley,
California, for Amici Curiae National Association of
Consumer Advocates and National Consumer Law Center.

Jonathan Weissglass, Law Office of Jonathan Weissglass,
Oakland, California, for Amici Curiae Consumer Law
Scholars.
4      ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

John G. Albanese, Berger Montague PC, Minneapolis,
Minnesota, for Amici Curiae East Bay Community Law
Center, Rubicon Programs, William E. Morris Institute for
Justice, National Resource Center on Domestic Violence,
National Housing Law Project, National Consumer Law
Center, Greater Boston Legal Services Cori & Re-Entry
Project, Massachusetts Law Reform Institute, Human Rights
at Home Clinic & Harvard Legal Aid Bureau.

Seth E. Mermin and Hanne Jensen, Center for Consumer
Law & Economic Justice, UC Berkeley School of Law,
Berkeley, California, for Amicus Curiae UC Berkeley
Center for Consumer Law & Economic Justice.

Catherine Ruckelshaus, National Employment Law Project,
New York, New York, for Amici Curiae National
Employment Law Project, JustLeadershipUSA, Towards
Justice, Legal Action Center, and Community Service
Society of New York.

Robert Ferguson, Attorney General; Shannon Smith, Senior
Counsel; Amy Teng, Assistant Attorney General; Office of
the Attorney General, Seattle, Washington; Kevin G.
Clarkson, Attorney General, Anchorage, Alaska; Xavier
Becerra, Attorney General, Sacramento, California; Clare E.
Connors, Attorney General, Honolulu, Hawaii; Ellen F.
Rosenblum, Attorney General, Salem, Oregon; for Amici
Curiae States of Alaska, California, Hawaii, Oregon, and
Washington.

Christian Schreiber, Olivier Schreiber & Chao LLP, San
Francisco, California, for Amici Curiae National
Association of Consumer Advocates, United States Public
Interest Research Group Education Fund, Inc., Americans
       ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N             5

for Financial Reform Education Fund, Center for
Responsible Lending, and Consumer Reports.

Emmy L. Levens, Cohen Milstein Sellers & Toll PLLC,
Washington, D.C., for Amicus Curiae Public Rights Project
and Supporting Cities.

                         ORDER

   The opinion filed on January 9, 2019, and published at
912 F.3d 1192, is amended by the opinion and dissent filed
concurrently with this order.

    With these amendments, Judges Wallace and Graber
have voted to deny Appellees’ petition for panel rehearing.
Judge Lasnik has voted to grant it. Judge Graber has voted
to deny Appellees’ petition for rehearing en banc, and Judge
Wallace has so recommended.             Judge Lasnik has
recommended granting it.

    The full court has been advised of the petition for
rehearing en banc, and no judge of the court has requested a
vote on it.

    Appellees’ petition for panel rehearing and rehearing en
banc is DENIED. No further petitions for panel rehearing
or rehearing en banc may be filed.
6       ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

                        OPINION

WALLACE, Circuit Judge:

    Richard and Kristin Zabriskie sued the Federal National
Mortgage Association (Fannie Mae) under the Fair Credit
Reporting Act (FCRA). The district court, on cross-motions
for summary judgment, held that Fannie Mae was a
“consumer reporting agency” within the meaning of FCRA.
We have jurisdiction under 28 U.S.C. § 1291, and we
reverse.

                             I.

    Fannie Mae is a government-sponsored entity that
Congress created in 1938. Its mission is to provide liquidity
and “stability in the secondary market for residential
mortgages.” 12 U.S.C. § 1716. To fulfill its mission, Fannie
Mae purchases certain mortgage loans from lenders.
Specific guidelines and requirements, detailed in a publicly
available manual known as the “Selling Guide,” dictate
which loans Fannie Mae will purchase. Lenders can use the
Selling Guide to determine whether Fannie Mae will
purchase the loans that they originate. Using the Selling
Guide to evaluate a loan’s eligibility for purchase is called
“manual underwriting.”

    Lenders also have the option to automate the
underwriting process through Fannie Mae’s proprietary
software, called Desktop Underwriter (DU).               DU
automatically applies the guidelines and requirements
dictated in the Selling Guide. Fannie Mae licenses DU to
many different lenders. DU allows a lender to enter
information about the borrower and the property that is the
subject of the loan. The lender can also contract with credit
bureaus—like Equifax, TransUnion, and Experian—to pay
        ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N               7

for and import the borrower’s credit report into DU. The
lender then uses DU to underwrite the loan. DU analyzes all
the inputted or imported information, and it generates a
report, called DU Findings, on a loan’s eligibility for
purchase by Fannie Mae. Besides initially creating and then
updating the computer code comprising DU, no individual
or entity at Fannie Mae is involved in the process of
generating DU Findings.

    Relevant to the Zabriskies, the Selling Guide states that
Fannie Mae will not purchase a loan for a certain period after
a borrower experiences a “significant derogatory event,”
such as a foreclosure. For example, Fannie Mae will not
purchase a loan if the borrower experienced a foreclosure
within the past seven years. It will not purchase a loan if the
borrower experienced a preforeclosure or short sale within
the past two years.

    The Zabriskies had a “significant derogatory event”—a
short sale after defaulting on their prior mortgage. After
waiting two years, they attempted to refinance their current
mortgage, and a number of lenders used DU to ascertain
whether a loan to the Zabriskies would be eligible for
purchase by Fannie Mae. Three of the eight DU Findings
created in evaluating the Zabriskies’ prospective loan
incorrectly stated that the loan was ineligible due to a
foreclosure reported within the last seven years. It is
undisputed that the Zabriskies did not have a prior
foreclosure within the last seven years before the DU
Findings were generated.

   The Zabriskies sued Fannie Mae, arguing that it “falsely
communicated to multiple of the Zabriskies’ potential
mortgage lenders through its electronic platform that they
had a prior foreclosure on a mortgage account.” They sued
under FCRA, which requires a consumer reporting agency
8       ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

to follow “reasonable procedures to assure maximum
possible accuracy” of consumer information. 15 U.S.C.
§ 1681e(b).

    On cross-motions for summary judgment, the district
court held that Fannie Mae acts as a consumer reporting
agency when it licenses DU to lenders and that it is therefore
subject to FCRA. The case went to trial, and the jury was
instructed that “[i]n connection with its actions in this case
Fannie Mae is a ‘consumer reporting agency,’ [and] the DU
findings are ‘consumer reports.’” The jury returned a verdict
for the Zabriskies, awarding $30,000 in damages. The
district court also awarded the Zabriskies $652,711.72 in
attorney’s fees and $68,312.18 in costs.              See id.
§ 1681o(a)(2) (shifting fees and costs to the plaintiff “in the
case of any successful action to enforce any liability under”
FCRA).

  On appeal, Fannie Mae argues that it is not liable under
FCRA because it is not a consumer reporting agency.

                              II.

    We review a district court’s summary judgment de novo.
Curley v. City of North Las Vegas, 772 F.3d 629, 631 (9th
Cir. 2014). We must “determine, viewing the evidence in
the light most favorable to the nonmoving party, whether
there are any genuine issues of material fact and whether the
district court correctly applied the substantive law.” Id.
When cross-motions for summary judgment are at issue, we
evaluate “each motion separately, giving the nonmoving
party in each instance the benefit of all reasonable
inferences.” ACLU of Nev. v. City of Las Vegas, 466 F.3d
784, 790–91 (9th Cir. 2006) (internal quotation marks
omitted).
        ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N                 9

                              III.

                               1.

    FCRA defines a consumer reporting agency as “any
person which . . . [1] regularly engages in whole or in part in
the practice of assembling or evaluating consumer credit
information or other information on consumers [2] for the
purpose of furnishing consumer reports to third parties.”
15 U.S.C. § 1681a(f). Without question, Fannie Mae is a
"person" under FCRA. Id. § 1681a(b) (“The term ‘person’
means any individual, partnership, corporation, trust, estate,
cooperative, association, government or governmental
subdivision or agency, or other entity”). While the parties
dispute both elements of the statutory definition, we only
address the second element. We therefore assume, without
deciding, that Fannie Mae assembles or evaluates consumer
information.

    To be a consumer reporting agency, Fannie Mae must
assemble or evaluate consumer information with “the
purpose of furnishing consumer reports to third parties.” Id.
§ 1681a(f). A “consumer report” is any communication by
a consumer reporting agency “bearing on a consumer’s
credit worthiness, credit standing, credit capacity, character,
general reputation, personal characteristics, or mode of
living which is used or expected to be used or collected in
whole or in part for the purpose of serving as a factor in
establishing the consumer’s eligibility” for credit, insurance,
employment, or other statutorily enumerated reasons. Id.
§ 1681a(d)(1).

     Fannie Mae argues that, even if it assembles or evaluates
consumer information as a result of DU, it does not do so for
the purpose of furnishing consumer reports to third parties.
It argues that its only purpose is to “facilitat[e] a transaction
10      ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

between the lender and Fannie Mae.” We agree with Fannie
Mae.

    “Purpose” means “something set up as an object or end
to be attained,” or “intention.” Merriam-Webster Online
Dictionary, https://www.merriam-webster.com/dictionary/
purpose (last visited Nov. 20, 2018). And “‘purpose’
corresponds loosely with the common-law concept of
specific intent.” United States v. Bailey, 444 U.S. 394, 405
(1980). By its plain meaning, therefore, FCRA applies to an
entity that assembles or evaluates consumer information
with the intent to provide a consumer report to third parties.
See Kidd v. Thomson Reuters Corp., 925 F.3d 99, 104 (2d
Cir. 2019) (“The meaning of ‘for the purpose of’ in
§ 1681a(f) is therefore plain: A ‘consumer reporting
agency’ is an entity that intends the information it furnishes
to constitute a ‘consumer report.’” (citation omitted)).

    This interpretation aligns with 2010 guidance from the
Federal Trade Commission.           That guidance provides
examples of when an entity acts “for the purpose of
furnishing consumer reports to third parties.” Id. at 106,
quoting Fed. Trade Comm’n, 40 Years of Experience with
the Fair Credit Reporting Act, 2011 WL 3020575, at *23
(2011). The guidance explains that a creditor does not
become a consumer reporting agency merely by
“communicating consumer report information about a loan
applicant” to “an actual or potential loan insurer or guarantor
to determine whether” that entity will provide insurance or a
guarantee. Fed. Trade Comm’n, 2011 WL 3020575, at *23.
There, “the creditor’s purpose”—its specific intent—“is to
use the report information to consummate the loan
transaction for which the consumer applied.” Id. Like the
Second Circuit, we conclude that the guidance is “helpful
        ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N             11

and, as it tracks the language of the statute, persuasive.”
Kidd, 925 F.3d at 106.

     The Zabriskies argue that we must interpret “purpose”
objectively to encompass “the end result” or effect on
consumers of issuing DU Findings. See W. Watersheds
Project v. Interior Bd. of Land Appeals, 624 F.3d 983, 987
(9th Cir. 2010) (determining the purpose of an adjudication
by considering the adjudication’s “end result”); Ass’n des
Eleveurs de Canards et d’Oies du Quebec v. Harris,
729 F.3d 937, 947 (9th Cir. 2013) (interpreting the phrase
“force feeding a bird for the purpose of enlarging the bird’s
liver beyond normal size” to cover “the objective nature of
the force feeding”). Because some lenders will inevitably
use DU Findings to determine whether to issue a loan in the
first place—i.e., to determine whether a consumer is
creditworthy—the Zabriskies argue that Fannie Mae acts for
the purpose of furnishing consumer reports to third parties.

    This argument ignores FCRA’s text, which defines a
consumer reporting agency as a “person” that performs
certain acts “for the purpose of furnishing consumer reports
to third parties.” 15 U.S.C. § 1681a(f). That is, the “person”
must have an intent to furnish consumer reports to third
parties. In contrast, Canards and Western Watersheds
considered the “purpose” of an inanimate process, rather
than of an actor capable of possessing specific intent.

    Western Watersheds addressed whether the plaintiff’s
administrative appeal of an agency’s decision to issue
grazing permits “was an adjudication for the purpose of
granting or renewing a license.” 624 F.3d at 986 (internal
quotation marks omitted). We held that it was, reasoning
that the statutory text at issue required “interpreting the
‘purpose’ of an adjudication to be defined by the objective
nature of the agency action in question, rather than the
12      ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

subjective motives of the challenging party.” Id. at 987; see
also id. (“The more natural reading of whether an
adjudication is ‘for the purpose of granting or renewing a
license’ looks to what the end result of the adjudication
ultimately will be, which in this case is the renewal or non-
renewal of a grazing permit”).

    Similarly, Canards addressed a challenge to a California
statute that prohibited selling any product that was “the
result of force feeding a bird for the purpose of enlarging the
bird’s liver beyond normal size.” 729 F.3d at 947, quoting
Cal. Health & Safety Code § 25982. The plaintiffs argued
that “purpose” referred to a farmer’s subjective intent in
feeding his birds, rendering the statute unconstitutionally
vague. Id. We disagreed because “for the purpose of” in the
statute modified the phrase “force feeding a bird.” Id. “The
natural reading of ‘force feeding a bird for the purpose of
enlarging the bird’s liver beyond normal size’ is a
description of the objective nature of the force feeding,
rather than the subjective motive of the farmer.” Id. (citation
omitted). Neither an adjudication nor a force-feeding is a
“person” capable of possessing specific intent. Thus,
Canards and Western Watersheds do not control.

    Here, Fannie Mae provides DU for the same reason it
provides the Selling Guide: to help lenders determine
whether Fannie Mae will purchase the loans that they
originate. Cf. 12 U.S.C. § 1716 (limiting Fannie Mae’s
purpose to the secondary market for residential mortgages).
DU’s output is exclusively based on information provided to
it by lenders and credit bureaus. DU contains no evaluation
or new information about the borrower’s creditworthiness
         ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N                     13

that was not already provided by the lender or credit bureau. 1
There is nothing in the record to suggest that Fannie Mae
assembles or evaluates consumer information—assuming
that it does so—with any specific intent other than to
determine a loan’s eligibility for later purchase by Fannie
Mae. Fannie Mae’s purpose is not to furnish a consumer
report to lenders.

    The Zabriskies highlight how lenders use DU before a
loan is originated and how Fannie Mae has a separate
process and internal software to determine whether to
purchase an actual loan. They argue that these facts belie the
true purpose of DU, which is to furnish a consumer report to
lenders. This argument is unpersuasive. That Fannie Mae
makes both a predictive and an actual determination of a
loan’s eligibility for purchase does not change our analysis.
The goal of either determination is the same: to convey to
lenders whether Fannie Mae will purchase the loan.

                                  2.

    The Zabriskies urge us to construe FCRA liberally so
that the statutory definition of consumer reporting agency
encompasses Fannie Mae. It is true that FCRA’s “consumer
oriented objectives support a liberal construction” of the
statute. Guimond v. Trans Union Credit Info. Co., 45 F.3d
1329, 1333 (9th Cir. 1995) (citation omitted). FCRA “was
crafted to protect consumers from the transmission of
inaccurate information about them” and “to establish credit
reporting practices that utilize accurate, relevant, and current

    1
     The dissent highlights that “DU reported a foreclosure that did not
appear in any data previously submitted.” The “foreclosure” message in
DU meant that a consumer’s credit report included a certain Manner of
Payment code provided by a credit bureau.
14      ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

information in a confidential and responsible manner.” Id.
(citations omitted).

    But “it is quite mistaken to assume . . . that whatever
might appear to further [a] statute’s primary objective must
be the law.” Henson v. Santander Consumer USA Inc.,
137 S. Ct. 1718, 1725 (2017) (internal quotation marks
omitted). Rather than “presume” that “any result consistent
with [a party’s] account of the statute’s overarching goal
must be the law,” we must “presume more modestly instead
that the legislature says what it means and means what it
says.” Id. (internal quotation marks and alterations omitted);
see also United States v. Albertini, 472 U.S. 675, 680 (1985)
(interpreting a statute “must begin with the language
employed by Congress and the assumption that the ordinary
meaning of that language accurately expresses the legislative
purpose” quoting Park ‘N Fly, Inc. v. Dollar Park & Fly,
Inc., 469 U.S. 189, 194 (1985)). Under the plain meaning of
the statute, even if Fannie Mae engages in assembling or
evaluating consumer information, it does not do so for the
purpose of furnishing a consumer report to lenders.

    Aspects of FCRA’s statutory scheme suggest that
Congress intended to exclude Fannie Mae from the
definition of consumer reporting agency. See King v.
Burwell, 135 S. Ct. 2480, 2496 (2015) (“A fair reading of
legislation demands a fair understanding of the legislative
plan”). FCRA imposes several duties on consumer reporting
agencies, one of which is to follow “reasonable procedures
to assure maximum possible accuracy” of consumer
information. 15 U.S.C. § 1681e(b). The Zabriskies contend
that Fannie Mae violated this duty.
        ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N              15

    If we were to hold that Fannie Mae is a consumer
reporting agency, it would be required to comply with the
other FCRA duties to borrowers. Indeed, FCRA also
requires consumer reporting agencies to provide a variety of
disclosures to consumers. See, e.g., id. § 1681g(a) (duty to
disclose information in the consumer’s file and the source of
that information upon request); id. § 1681g(c)(2) (duty to
provide a summary of rights with respect to any written
disclosure made as required by FCRA); id. § 1681h(c) (duty
to provide trained personnel to explain to the consumer any
information given to him). That interpretation would
contradict Congress’s design for Fannie Mae to operate only
in the secondary mortgage market, to deal directly with
lenders, and not to deal with borrowers themselves. See
12 U.S.C. §§ 1716, 1719. FCRA itself appears to make a
distinction between Fannie Mae and consumer reporting
agencies. See 15 U.S.C. § 1681g(g)(1)(B)(ii) (stating that a
mortgage lender should disclose a credit score generated by
Fannie Mae using the procedures applicable to credit scores
not obtained from consumer reporting agencies).

                             IV.

    We hold that Fannie Mae is not a consumer reporting
agency because, even if it assembles or evaluates consumer
information through DU, it does not do so for the purpose of
furnishing consumer reports to third parties. Accordingly,
the district court erred by granting the Zabriskies’ motion for
summary judgment and by denying Fannie Mae’s cross-
motion on this issue. We reverse and remand with
instructions to enter judgment in favor of Fannie Mae.
Because Fannie Mae is not liable under FCRA, we also
vacate the award of attorney’s fees and costs to the
Zabriskies.
16      ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

   REVERSED in part, VACATED in part, and
REMANDED. Costs on appeal awarded to Defendant-
Appellant.

LASNIK, District Judge, dissenting:

    The Fair Credit Reporting Act (FCRA) was the “product
of congressional concern over abuses in the credit reporting
industry.” Guimond v. Trans Union Credit Info. Co., 45 F.3d
1329, 1333 (9th Cir. 1995) (citing St. Paul Guardian
Insurance Co. v. Johnson, 884 F.2d 881, 883 (5th Cir.
1989)). Its “legislative history . . . reveals that it was crafted
to protect consumers from the transmission of inaccurate
information about them . . .” Id. (citing Kates v. Croker
National Bank, 776 F.2d 1396, 1397 (9th Cir. 1985)). This
case arose because the Federal National Mortgage
Association (Fannie Mae) issued reports stating that the
Zabriskies had a prior foreclosure when they did not. As a
result of the error, they were unable to secure refinancing of
the mortgage on their house between May 2012 and August
2013. This is exactly the kind of harm that the Act was
designed to prevent.

     I. Background

    Eight Desktop Underwriter (DU) Findings were
generated at the request of lenders who were considering
making a loan to the Zabriskies. The reports were based in
part on credit information generated by the consumer
reporting agencies Equifax, TransUnion and Experian. The
credit information contained Manner of Payment (MOP)
Codes, which indicate whether an account is current or past
due. There was no uniformity in the industry on how these
Codes were used, however, and Fannie Mae knew this. It
        ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N             17

also knew that there was no Code for a short sale. Despite
the lack of uniformity and the lack of a short sale code,
Fannie Mae programmed DU so that an MOP Code 9 would
always be interpreted as a “collection or charge-off” and
would trigger a message stating that DU had identified a
foreclosure or a deed-in-lieu of one.

    In April 2008, the Zabriskies had a successful short sale
of their home, meaning that the home was sold for less than
the debt secured by the property and the lien holder agreed
to accept less than the full amount owed. The short sale was
reported on all of the reports obtained from the consumer
reporting agencies, with remarks indicating that the creditor
had agreed to accept the sale amount in satisfaction of the
debt. The consumer reporting agencies coded the short sale
in various ways, including three uses of MOP Code 9. No
report mentioned a foreclosure, and the Zabriskies never had
one. Op. at 7. Fannie Mae ignored the consumer reporting
agencies’ remarks and the known ambiguity regarding the
use and meaning of MOP Codes and interpreted the three
instances of MOP Code 9 as evidence of a foreclosure.
Those three DU Findings correctly identified a short sale, but
also stated that DU had identified a foreclosure. The DU
Findings were issued to the lenders with “Refer with
Caution” recommendations. As a result of the DU Findings,
two lenders denied the Zabriskies’ loan applications, even
though Kristin Zabriskie had informed them that she and her
husband had executed a short sale, not a foreclosure.

    As the district court noted, had Fannie Mae simply
reviewed the relevant data and issued a recommendation on
whether or not it would purchase the loan, there would likely
be no plausible claim under the FCRA. But when Fannie
Mae took the additional step of reporting that the Zabriskies
had a prior foreclosure—i.e., reporting consumer credit
18       ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

information—it took on the role, and the responsibilities, of
a consumer reporting agency.

     II. Congress’s Intention With Regard To Fannie Mae

    As the majority correctly points out, the FCRA
differentiates between Fannie Mae and consumer reporting
agencies in § 1681. Op. at 15; see 15 U.S.C.
§§ 1681g(1)(B)(ii); 1681(1)(C) (distinguishing between a
credit score “generated by an automated underwriting
system used by [Fannie Mae]” and one “provided by a
consumer reporting agency”). However, this is in a section
of the Act from whose application Fannie Mae and DU
Findings     are    already     expressly     excluded.     Id.
§ 1681g(g)(1)(G) (“As used in this subsection, the term
“person” does not include [Fannie Mae]”); id.
§ 1681g(f)(2)(A) (excluding DU Findings from the
definition of a “credit score”). Fannie Mae is referred to as
something other than a consumer reporting agency because,
for the purposes of this section, it is excluded from the
definition of a consumer reporting agency. For all other
purposes and sections, however, Fannie Mae is a “person”
that may, depending on its activities, be subject to the FCRA.
Id. § 1681a; see Op. at 9. This Court has previously rejected
the majority’s conclusion that Fannie Mae cannot be a
consumer reporting agency, albeit in an unpublished
memorandum. 1 “Reading [§ 1681g] in context, [the Court]
[saw] no indication that Congress intended to exclude Fannie
Mae from the definition of “consumer reporting agency,”

     1
        See Ninth Circuit Rule 36-3 (providing that unpublished
dispositions “are not precedent” except when relevant under the “law of
the case” doctrine or for claim or issue preclusion). The memorandum
disposition was a reversal of the district court’s decision in McCalmont
v. Fed. Nat. Mortg. Ass’n, No. 2:13-CV-2107-HRH, 2014 WL 3571700,
at *5 (D. Ariz. July 21, 2014).
         ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N                        19

and [declined] to read such an intent into the statute.”
McCalmont v. Fed. Nat’l Mortg. Ass’n, 677 F. App’x 331,
(Mem) 332 (9th Cir. 2017). The fact that Fannie Mae is
explicitly excluded from § 1681g but not excluded or even
referred to anywhere else in the Act supports the McCalmont
holding. “When Congress includes particular language in
one section of a statute but omits it in another section of the
same Act, it is generally presumed that Congress acts
intentionally and purposely in the disparate inclusion or
exclusion.” Barnhart v. Sigmon Coal Co., 534 U.S. 438, 452
(2002) (quoting Russello v. United States, 464 U.S. 16, 23
(1983)).

    The purpose of the FCRA was to “protect consumers
against inaccurate and incomplete credit reporting.” Gorman
v. Wolpoff & Abramson, LLP, 584 F.3d 1147, 1155–56 (9th
Cir. 2009) (citing Nelson v. Chase Manhattan Mortg. Corp.,
282 F.3d 1057, 1060 (9th Cir. 2002)). “[T]he legislative
record includes pages of discussion of how such inaccuracies
may harm consumers . . .” Robins v. Spokeo, Inc., 867 F.3d
1108, 1114 (9th Cir. 2017), cert. denied, 138 S. Ct. 931, 200
L. Ed. 2d 204 (2018). Fannie Mae’s issuance of a “Refer
with Caution” recommendation does not automatically
prevent a loan from being made, but Fannie Mae is aware
that many lenders elect not to manually underwrite loans
when they receive a cautionary recommendation from DU.2

    2
       A “Refer with Caution” recommendation indicates that the loan
does not meet Fannie Mae’s standards. As DU’s recommendation is
based upon an evaluation of the same credit data on which a lender bases
its decision on whether or not to issue a loan, it is understandable that a
lender would interpret Fannie Mae’s rejection as an indication that
something about the borrower or the loan makes it a risky transaction.
Moreover, the recommendation means that Fannie Mae is unlikely to
purchase the loan. That means that the lender’s capital will be tied up,
rendering it unable to issue more loans. This is why most lenders choose
20      ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

Given the real world consequences of Fannie Mae’s
consumer credit reporting activities and the absence of any
indication that Congress meant to exclude Fannie Mae from
the FCRA’s reach except where it did so explicitly, there is
no reason to suspect that Congress intended for the type of
inaccuracies that occurred in this case to proliferate
unchecked. See Banneck v. HSBC Bank USA, N.A., No. 15-
CV-02250-HSG, 2016 WL 3383960, at *5 (N.D. Cal. June
20, 2016) (noting that “Fannie Mae’s DU software caused
widespread problems in the credit reporting industry.”). As
the majority acknowledges, Op. at 13, the Act’s “consumer
oriented objectives support a liberal construction of [it].”
Guimond, 45 F.3d 1329, 1333 (9th Cir. 1995) (citing Kates,
776 F.2d at 1397).

     III. Fannie Mae’s Purpose is to Furnish Consumer
          Reports to Third Parties

    The FCRA defines a consumer reporting agency as “any
person which . . . [1] regularly engages in whole or in part in
the practice of assembling or evaluating consumer credit
information or other information on consumers [2] for the
purpose of furnishing consumer reports to third parties”.
15 U.S.C. § 1681a(f). The majority assumes, without
deciding, that Fannie Mae assembles and evaluates
consumer information. It proceeds directly to the second
element, holding that the purpose of DU Findings is only to
inform lenders of whether or not Fannie Mae will purchase
a loan, so as to facilitate a transaction between the lender and
itself. Op at 9. With respect, I disagree.

    In an effort to show that Fannie Mae’s purpose is not to
furnish a consumer report to a third party, the majority finds

to simply deny a borrower’s application when Fannie Mae issues a
“Refer with Caution” rather than take a risk.
        ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N                21

that the DU Findings contain no “new information regarding
the borrower’s creditworthiness that wasn’t already
provided by the lender or credit bureau.” Id. at 12–13. That
is inaccurate. As the district court noted, it is undisputed that
DU reported a foreclosure that did not appear in any data
previously submitted.

    Furthermore, DU Findings do not consist only of a
recommendation on whether or not Fannie Mae will
purchase a loan. The Findings are generally five or six pages
long and include information about the loan, the property,
the consumer’s credit history and credit scores, any risk
factors, existing credit and liabilities, the consumer’s
employment and income, a proposed monthly payment,
guidance to lenders, and conditions for Fannie Mae’s
approval. This is far beyond a thumbs up or down indication.
It is “information . . . bearing on a consumer’s credit
worthiness.” 15 U.S.C. § 1681(d). And it is for that reason
that DU Findings is “used . . . for the purpose of serving as
a factor in establishing the consumer’s eligibility for . . .
credit.” Id. Lenders submit their requests for DU Findings
prior to their decisions on whether or not to issue a loan, and
use DU’s extensive credit risk assessment in making that
decision. The majority finds the chronology irrelevant, Op.
at 13, but even the individual responsible for DU stated that
the ability “to determine Fannie Mae’s eligibility before a
lender makes a particular loan . . . encourages the making of
more mortgage loans to borrowers.” DU Findings is, in
short, a consumer report. 15 U.S.C. § 1681(d). As Fannie
Mae is the entity that furnishes it, Fannie Mae is a consumer
reporting agency. Id. § 1681(f).

    Fannie Mae argues, that even if lenders do use DU
Findings to make decisions on whether or not to issue a loan,
that is not Fannie Mae’s purpose. Id. § 1681(f). Rather, its
22      ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

purpose is to facilitate a transaction between the lender and
potential borrower. Fannie Mae asserts that it is what the
Consumer Financial Protection Bureau (CFPB) calls a “joint
user” of the credit information. CFPB’s Supervision and
Examination Manual (Aug. 2018) (CFPB Manual) at 782.
As Fannie Mae and the lender “are jointly involved in the
decision to approve a consumer’s request for a product or
service,” they can share consumer credit information without
becoming consumer reporting agencies. Id. This is
unpersuasive. Fannie Mae’s participation ends at the point at
which it provides its consumer report to the lender. The
lender certainly uses Fannie Mae’s DU Findings in making
a decision on whether or not to issue a loan to a borrower,
but it does not in any way involve Fannie Mae as an entity
in that decision. Fannie Mae is no more a joint user than
Equifax or TransUnion.

    Nor does Fannie Mae’s role as an agent of the lender,
infra at 26, suggest otherwise. See Fed. Trade Comm’n,
40 Years of Experience with the Fair Credit Reporting Act,
2011 WL 3020575, at *24 (2011) (FTC Guidelines). Fannie
Mae cites only to a single out-of-circuit case that accepted
that argument. Weidman v. Fed. Home Loan Mortg. Corp.,
338 F. Supp. 2d 571, 575 (E.D. Pa. 2004) (“[Freddie Mac] is
sharing consumer reports with the lender, its principal, and
assisting the principal by evaluating the consumer’s credit
information. As a matter of law, [it] satisfies the definition
of a joint user, and is consequently not subject to the FCRA’s
provisions relating to consumer reporting agencies). It has
since been discredited. Adams v. Nat’l Eng’g Serv. Corp.,
620 F. Supp. 2d 319, 327 (D. Conn. 2009) (noting the limited
deference accorded to the FTC Guidelines, and finding the
FTC’s “joint user” exception contrary to Congress’s purpose
in enacting the FCRA). The majority also points out that the
FTC Guidelines state that a creditor does not “become a
        ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N              23

consumer reporting agency merely by ‘communicating
consumer report information about a loan applicant’ to ‘an
actual or potential loan insurer or guarantor to determine
whether’ that entity will provide insurance or a guarantee.”
Op. at 10 (quoting FTC Guidelines at *23). However, that
portion of the Guidelines applies only to the provision of
“consumer report information about a loan applicant to an
entity that must participate in the transaction in order for it
to be completed.” FTC Guidelines at *23 (emphasis added).
Fannie Mae does not suggest that its participation is
mandatory for the transaction to be completed. Indeed, it
(necessarily) argues the very opposite: that any bearing DU
Findings has on the lender’s decision is unintentional and
unanticipated.

     Ultimately, DU has three possible recommendations:
Approve/Eligible, Approve/Ineligible, and Refer with
Caution. Approve/Eligible means that the risk of the loan is
acceptable, and it is eligible for delivery to Fannie Mae.
Approve/Ineligible means that that the risk of the loan is
acceptable, but it is not eligible for delivery to Fannie Mae.
If Fannie Mae’s purpose were only to communicate whether
or not it will purchase a loan, or to facilitate a transaction,
two recommendations, Eligible or Ineligible, would suffice.
It is because Fannie Mae’s purpose is to furnish consumer
reports to third parties so that they may make informed
lending decisions that DU Findings includes two separate
recommendations with an “Approve” component, as
distinguished from the “Refer with Caution”
recommendation. This use of DU Findings by lenders is,
therefore, much more than an inadvertent “end result” or side
effect. Op. at 11 (citing W. Watersheds Project v. Interior
Bd. of Land Appeals, 624 F.3d 983, 987 (9th Cir. 2010)).
Fannie Mae “specifically intend[s]” to furnish a consumer
report. Kidd v. Thomson Reuters Corp., 925 F.3d 99, 103 (2d
24          ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

Cir. 2019). 3 Fannie Mae itself acknowledges that an
important part of its role in the market is to provide stability
and liquidity to mortgage lenders and “encourage[] the
making of more mortgage loans to borrowers.” It is,
therefore, a consumer reporting agency. 15 U.S.C.
§ 1681a(f).

     IV. Fannie Mae Assembles and Evaluates Consumer
         Credit Data

            1. Liability of a Software Provider for the Software

    Having concluded that Fannie Mae’s purpose in issuing
DU Findings reports is to “furnish[] consumer reports to
third parties”, id., I turn now to the first element of the
FCRA’s definition of a consumer reporting agency; namely,
whether Fannie Mae “regularly engages in whole or in part
in the practice of assembling or evaluating consumer credit
information or other information on consumers”. Id. 4 I
conclude that it does. It is undisputed that DU uses reference
numbers provided by lenders to reach out to consumer
reporting agencies and pull credit data (i.e., assembling) and
that it then evaluates that data using algorithms established
by Fannie Mae (i.e., evaluating) to generate a report and
     3
       The Second Circuit’s decision in Kidd, to which the majority
refers, Op. at 10, concerned whether Thomson Reuters qualified as a
consumer reporting agency under the FCRA. The Second Circuit
concluded that it did not, as it did not specifically intend to furnish a
consumer report. Kidd, 925 F.3d at 103. It is worth noting that Thomson
Reuters had specifically “prohibit[ed] its subscribers from using its
software for any purpose covered by the FCRA, such as credit inquiries
or background checks related to employment, and ha[d] established
measures to prevent those uses of its reports.” Id. at 102.

     4
         The majority does not reach this portion of the definition. Op. at 9.
         ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N                      25

recommendation for the lenders. The issue is whether these
activities are attributable to Fannie Mae or whether the
lenders who subscribe to DU and request DU Findings are
the “persons” who are assembling and processing consumer
information for the purposes of the FCRA. 5

    First, it is worth noting that the FCRA itself makes
reference to “an automated underwriting system used by
[Fannie Mae] . . .” 15 U.S.C. § 1681g(g)(1)(A)(ii) (emphasis
added). See also Shaw v. Experian Info. Sols., Inc., 891 F.3d
749, 758 (9th Cir. 2018) (“[T]he record . . . indicates that the
inaccurate reporting of Appellants’ short sales was due to
Fannie Mae’s mistreatment of Experian’s coding . . .”)
(emphasis added).

    However, this issue has not yet received much attention
in the courts. In the only Ninth Circuit decision to consider
whether Fannie Mae assembles and evaluates consumer
credit information through DU, this Court found, on
identical facts, that the plaintiff’s complaint “contain[ed]
sufficient plausible allegations to raise the reasonable
inference that Fannie Mae . . . qualifies as a “consumer
reporting agency.” McCalmont, 667 F. App’x (Mem) at
332. 6 Fannie Mae also acknowledges that it has a continuing

    5
      There are references to the case file being “used internally by
Fannie Mae employees,” but appellees have not established that any
“individual or entity is involved in the process of generating DU
Findings.” Op. at 7.

    6
      Fannie Mae relies on two out-of-circuit cases. In the first, Barnes
v. DiTech.Com, No. 03-CV-6471, 2005 WL 913090 (E.D. Pa. Apr. 19,
2005), the parties agreed that Fannie Mae was not a consumer reporting
agency and the court erroneously held that even DU itself does not
evaluate credit data. Barnes at *4 no. 20, *5. The second, Thomas v.
Cendant Mortg., No. CIV.A. 03-1672, 2004 WL 2600772 (E.D. Pa. Nov.
26       ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

role in DU’s operations. It does not simply sell or license a
software program to third parties to do with as they please.
Rather, Fannie Mae enters into a Software Subscription
Agreement, which states that Fannie Mae is the “Licensee’s
agent” and “shall” obtain consumer credit data for the
purpose of evaluating the data and making an underwriting
recommendation. There are also several internal guides and
other documents 7 that suggest that Fannie Mae considers
itself to be processing the data when DU Findings are
requested. Id. Furthermore, the assembling and evaluating
takes place on Fannie Mae’s network. Lenders can only
access DU through a portal on www.FannieMae.com or an
integrated third-party loan origination system. Consumer
reporting agencies submit data over the “Fannie Mae
network.” They pay Fannie Mae $1 for each consumer
report, and a monthly fee for connectivity to the DU
platform. The evidence shows that lenders essentially
subscribe to a service provided by Fannie Mae rather than
simply purchasing a software program. In fact, it was Fannie
Mae that ultimately chose to resolve the inconsistency and
ambiguity in DU’s use of MOP Code 9 as indicating a
foreclosure. 8

15, 2004), was decided on a record that was less developed than the one
here. Neither case contained any evidence that the lender had relied on
DU’s results when making its lending decision. Thomas at *9; Barnes at
*5.

     7
     These include Fannie Mae’s “Credit Agencies System Integration
Guide,” Fannie Mae’s “Risk Analysis Scope Document (RASD) for
FMCA 2012 and Mortgage Scorecard Model 12.0.” and the Software
Subscription Agreement.
     8
       In 2013, Fannie Mae re-coded its software, allowing for the
identification of short sales in response to certain Remarks Codes and for
a lender to instruct DU to disregard an erroneous finding of a foreclosure.
        ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N             27

    Fannie Mae finds support in the guidelines issued by the
FTC for its conclusion that it is the lenders who assemble
and evaluate credit information when they request DU
Findings. The FTC opined that “[a] seller of software to a
company that uses the software product to process credit
report information is not a [consumer reporting agency]
because it is not ‘assembling or evaluating’ any
information.’” FTC Guidelines at 29. The FTC’s opinion
was based on a staff letter. FTC Guidelines at 12–13, 29; see
Cast, FTC Informal Staff Opinion Letter (Oct. 27, 1997)
(FTC Letter). However, the situation considered by the FTC
is substantively different than that which gave rise to the
Zabriskies’ claims. First, as noted above, Fannie Mae does
not sell (or license) DU outright. It retains control over the
software product and, acting as the licensee’s agent, uses it
to assemble and evaluate credit report information upon a
lender’s request and pursuant to the terms of the Software
Subscription Agreement. Fannie Mae is not, therefore, a
“seller of software to a company that uses the software
product.” The FTC hypothetical also assumes that the
software provider would “no longer ha[ve] any connection
at all to the information.” FTC Letter. This is in stark
contrast to Fannie Mae, which retains a strong connection
with the processed information. The connection is not, as
appellees argue, a function of Fannie Mae’s continuing role
in designing and updating DU’s functionality. Rather, it is
because DU produces a recommendation on whether or not
Fannie Mae—the software provider itself—will ultimately
purchase the loan that its own software analyzed for
eligibility. Fannie Mae’s connection to and interest in the
DU Findings supports the conclusion Fannie Mae itself has
drawn: that it, rather than the lenders, uses DU to obtain
consumer credit information and generate a lending
recommendation.
28      ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

    Fannie Mae’s tool analogy is unpersuasive because it
does not take into account Fannie Mae’s acknowledged role
in fulfilling a request for DU Findings or its interest in those
Findings. To the extent DU can be analogized to a
mechanical tool such as a laser measurer, it would be as if
Fannie Mae allowed licensees to purchase access to
measurements obtained with the tool, but did the measuring
itself. The subscriber would identify the gap it wanted
measured, and Fannie Mae would point the laser, record the
findings, and provide a report including both the raw
measurements and a recommendation regarding whether the
distance was appropriate or inappropriate for a given use. In
this analogy, Fannie Mae has an interest in controlling the
measurement and evaluation process because, unless the
licensee can show error, Fannie Mae will ultimately rely on
its own readings and recommendations when determining
whether to, say, fund the licensee’s project. A company like
Google, on the other hand, does not act as a licensee’s agent
when its search engine is queried, nor does it have an interest
in the results generated by the search engine. Had Google
created DU, the district court would have had to consider
whether there was evidence that Google was the one
assembling and evaluating data at a customer’s request (as
opposed to the user independently using a program it
purchased or licensed) and/or whether DU produces an
output of any relevance to Google (which could give rise to
an inference that Google, rather than the customer, is
responsible for the evaluation on which it will ultimately
rely).

    Fannie Mae has characterized itself in this litigation as
nothing more than a software developer providing a
technological resource to lenders. It ignores its outsized role
in mortgage lending and mortgage markets, its control over
the use of the technology, and its keen interest in the
          ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N                         29

creditworthiness of the consumers whose information DU
assembles and evaluates. The characterization of Fannie
Mae as a software provider is a smokescreen, akin to Uber
Technologies, Inc.’s attempt to masquerade as a technology
company rather than a transportation company. O’Connor v.
Uber Techs., Inc., 82 F. Supp. 3d 1133, 1141 (N.D. Cal.
2015); see also Couser v. Pre-paid Legal Servs., Inc., 994 F.
Supp. 2d 1100 (S.D. Cal. 2014). Fannie Mae is not a
“technology company” in any real sense of the phrase: the
realities of Fannie Mae’s activities and interests related to
DU cannot be so easily brushed aside or hidden behind a
label. 9

         2. Manual Underwriting and the Granting of a
            Waiver

    The majority states that DU “automatically applies the
guidelines and requirements dictated by the Selling Guide”
to determine whether a loan is eligible for purchase by
Fannie Mae. Op. at 6. As the district court observed,
however, the Selling Guide directs lenders to consider
certain factors, but does not direct how they should be
considered. DU, on the other hand, applies Fannie Mae’s

    9
       The cases cited by appellants, none of which concern the FCRA,
are inapposite. In Zango, Inc. v. Kaspersky Lab, Inc., the Ninth Circuit
distinguished between a software user engaging in an activity and a
software engaging in the activity. 568 F.3d 1169, 1176 (9th Cir. 2009).
But it made no comment on whether the software provider was liable for
its software. Id. In Metro-Goldwyn-Mayer Studios Inc. v. Grokster, Ltd.,
the Supreme Court found the distributors of software products indirectly
liable for copyright infringement, in part because the direct infringers
were so numerous that “the only practical alternative [was] to go against
the distributor . . .” 545 U.S. 913, 928–30 (2005) (citing In re Aimster
Copyright Litig., 334 F.3d 643, 645–46 (7th Cir. 2003)). Here, there is
no one else “to go against.” Id. As the district court pointed out, if Fannie
Mae is not held liable, the Zabriskies are left with no recourse.
30       ZABRISKIE V. FED. NAT’L MORTGAGE ASS’N

proprietary algorithms to generate recommendations from
the factors. The district court correctly concluded that a
lender cannot replicate DU’s results simply by following the
Selling Guide. Id. Fannie Mae itself advises lenders that,
“[f]or a more precise or definitive recommendation for
determining whether to deliver a given mortgage to Fannie
Mae, the lender should submit the mortgage application to
DU.”

     It is for that reason that Fannie Mae treats the results of
a manual underwriting and DU Findings differently. In a
manual underwriting, because it is the lender who is engaged
in the evaluation, the lender is required to make various
representations and warranties to Fannie Mae. But when the
lender relies on DU, Fannie Mae waives those requirements.
If a lender manually underwriting a loan would always reach
the same result as DU, there would be no reason to have
additional requirements or to grant a waiver. The waiver
mechanism further indicates that it is Fannie Mae, rather
than the lender, who is engaged through DU in the
“assembling and evaluating” of information when a lender
submits a request for DU Findings. 15 U.S.C. § 1681a(f).

     V. Conclusion

    This Court has observed that, “given the ubiquity and
importance of consumer reports in modern life—in
employment decisions, in loan applications, in home
purchases, and much more—the real-world implications of
material inaccuracies in [the] reports seem patent on their
face.” Robins, 867 F.3d at 1114. To hold that Fannie Mae is
not a consumer reporting agency is to deny consumers any
sort of recourse from these grave and consequential errors.

     For the foregoing reasons, I must respectfully dissent.