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Mora v. Harley-Davidson Credit Corp.


July 7, 2009


The opinion of the court was delivered by: Oliver W. Wanger United States District Judge


(DOC. 8)


Plaintiff Luis Manuel Mora ("Mora") filed this class action lawsuit against Defendant Harley-Davidson Credit Corporation ("HDCC") in the Superior Court of the State of California, County of Merced, on August 19, 2008. Plaintiff alleges HDCC violated California's Rees-Levering Automobile Sales Finance Act ("ASFA"), California Civil Code § 2981 et seq., and Unfair Competition Law, California Business and Professions Code § 17200 et seq., when it sent customers notices of its intent to dispose of repossessed vehicles that were defective under California law and attempted to collect deficiencies from debtors that were legally prohibited because HDCC failed to strictly comply with ASFA's notice provisions. On September 26, 2008, Defendant HDCC filed a notice of removal pursuant to 28 U.S.C. §§ 1332, 1441, and 1446 and the Class Action Fairness Act of 2005 ("CAFA").

Before the court for decision is Defendant's motion to dismiss, or in the alternative, motion to strike Plaintiff's claims to the extent they are based on alleged false reporting to credit reporting agencies. The motions are based on the ground that such claims are expressly preempted by the Fair Credit Reporting Act ("FCRA"), codified at 15 U.S.C. § 1681 et seq. Plaintiff opposes, arguing FCRA does not preempt the claims and Plaintiff's state claims are based on state consumer protection laws that are unrelated to FCRA.


Plaintiff entered into a conditional sales contract to purchase a new 2006 Harley-Davidson motorcycle with financing arranged through Defendant HDCC. As a financed sale of a motor vehicle, Plaintiff asserts this transaction is controlled exclusively in California by ASFA. The selling dealer sold and assigned its interest in the sales contract to lienholder HDCC. Plaintiff contends that the motorcycle was plagued by defects that the dealer was unable to repair after numerous attempts. He voluntarily surrendered it to HDCC in August 2007.

Plaintiff alleges that on September 4, 2007, HDCC sent Plaintiff a notice of intent to dispose of a repossesed vehicle that failed to comply with ASFA and applicable provisions of the California Commercial Code. Plaintiff argues that, under ASFA, if a lender fails to give a legally compliant notice before it sells or disposes of a repossessed or surrendered vehicle, it loses its right to any deficiency owed from the buyer and is prohibited from claiming or asserting any deficiency. Accordingly, Plaintiff claims HDCC has no legal right to attempt to collect any claimed deficiency from him and a purported class of similarly situated former owners of Harley-Davidson motorcycles financed by HDCC. HDCC has both attempted to collect and successfully collected a claimed deficiency from Plaintiff.

Plaintiff seeks to represent a class of "all persons from whom HDCC and its associates, affiliates, and subsidiaries claims it is owed a deficiency that was invalid due to HDCC's defective NOTICE(S) and its failure to comply with the notice requirements of Rees-Levering." (Doc. 1-2, Complaint at 8.) Plaintiff asserts that the allegedly defective notice he received is a standard notice HDCC sends as a matter of common business practice to persons claimed to be liable to HDCC under its conditional sales contract covering HDCC repossessed vehicles. (Id. at 7.) Plaintiff asserts that, at least four years prior to the date of his complaint, HDCC has regularly collected and attempted to collect deficiencies from proposed class members in violation of ASFA. (Id.) Plaintiff is "unable to state the precise number of potential members of the proposed class because that information is in the sole possession of HDCC." (Id. at 8.) Plaintiff believes the size of the proposed class is "at least in the hundreds." (Id.)

Plaintiff seeks: 1) a declaration that HDCC did not comply with AFSA and has no right to assert any deficiency claim against any class member, 2) damages in the form of recovery for all class members of payments made to HDCC on the deficiency claims, compensation for damage to the credit records of class members, and actual damages, 3) an injunction prohibiting HDCC from future collection efforts and forcing it to disgorge profits, 4) to set aside judgments HDCC successfully sought and obtained against class members who it claimed owed a deficiency, and 5) attorney's fees.


A. Motion to Dismiss Pursuant to Fed. R. Civ. P. 12(b)(6)

A motion to dismiss under Rule 12(b)(6) tests the legal sufficiency of the complaint. Novarro v. Black, 250 F.3d 729, 732 (9th Cir. 2001). While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, it is required to contain "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1964-65 (2007); see also Gilligan v. Jamco Dev. Corp., 108 F.3d 246, 249 (9th Cir. 1997) (issue is not whether plaintiff will ultimately prevail, but whether claimant is entitled to offer evidence to support the claim). Dismissal is warranted under Rule 12(b)(6) where the complaint lacks a cognizable legal theory or where the complaint presents a cognizable legal theory yet fails to plead essential facts under that theory. Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530, 534 (9th Cir. 1984). In deciding a motion to dismiss, the court accepts as true all material factual allegations in the complaint and construes them in the light most favorable to the plaintiff. See Newman v. Sathyavaglswaran, 287 F.3d 786, 788 (9th Cir. 2002).

The court need not accept as true allegations that contradict facts which may be judicially noticed. See Mullis v. United States Bankruptcy Ct., 828 F.2d 1385, 1388 (9th Cir. 1987). For example, matters of public record may be considered, including pleadings, orders, and other papers filed with the court or records of administrative bodies, see Mack v. South Bay Beer Distributors, Inc., 798 F.2d 1279, 1282 (9th Cir. 1986), while conclusions of law, conclusory allegations, unreasonable inferences, or unwarranted deductions of fact need not be accepted. See Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001); see also Branch v. Tunnell, 14 F.3d 449, 453 (9th Cir. 1994) ("[A] document is not 'outside' the complaint if the complaint specifically refers to the document and if its authenticity is not questioned."). Allegations in the complaint may be disregarded if contradicted by facts established by exhibits attached to the complaint. Sprewell, 266 F.3d at 988. Thus when ruling on a motion to dismiss, the court may consider facts alleged in the complaint, documents attached to the complaint, documents relied upon but not attached to the complaint when authenticity is not contested, and matters of which the court may take judicial notice. Parrino v. FHP, Inc., 146 F.3d 699, 705-06 (9th Cir. 1988).

B. Motion to Strike Pursuant to Fed. R. Civ. P. 12(f)

Rule 12(f) provides that "redundant, immaterial, impertinent, or scandalous matter" may be stricken from any pleading. Fed. R. Civ. P. 12(f). A motion to strike is limited to pleadings. Sidney-Vinstein v. A.H. Robins Co., 697 F.2d 880, 885 (9th Cir. 1983). Motions to strike are disfavored and infrequently granted. Pease & Curren Refining, Inc. v. Spectrolab, Inc., 744 F.Supp. 945, 947 (C.D. Cal. 1990), abrogated on other grounds by Stanton Road Assocs. v. Lohrey Enters., 984 F.2d 1015 (9th Cir. 1993). Such motions should be granted only where it can be shown that none of the evidence in support of the allegation is admissible. Id.


Defendant moves to dismiss Plaintiff's claims to the extent they are based on allegations relating to Defendant's duties as a furnisher of information to credit reporting agencies. Plaintiff makes a number of allegations in his complaint related to HDCC's conduct in reporting information to credit reporting agencies. First, Plaintiff alleges:

Plaintiff is informed and believes that HDCC and/or its agents regularly report or communicate to consumer credit reporting organizations that purported herein are bad debts when, in fact, Plaintiff and other vehicles pursuant to the unlawful practices described deficiencies following disposition of repossessed similarly-situated persons are not liable for said deficiencies as a matter of law, as set forth above. (Doc. 1-2, Complaint at ¶12.) Plaintiff also contends that one of the questions of law and fact common to the proposed class is "whether HDCC falsely reported deficiencies as valid debts to credit reporting organizations." (Id. at ¶17.) Finally, Plaintiff asserts that class members "who have been subject to efforts by HDCC or its agents or successors to collect the invalid debts or who have had negative information on the invalid debts reported to credit reporting agencies are entitled to compensation for damage to their credit and/or other damages." (Id. at ¶21.) Defendant argues FCRA preempts any state claims related to furnishers of information to credit reporting agencies and their responsibilities.

A. Federal Pre-emption

State law is pre-empted under the Supremacy Clause of Article VI of the United States Constitution in three circumstances. First, Congress can define explicitly the extent to which its enactments pre-empt state law. See Shaw v. Delta Air Lines, Inc., 463 U.S. 85, 95-98 (1983). Pre-emption fundamentally is a question of congressional intent, see Schneidewind v. ANR Pipeline Co., 485 U.S. 293, 299 (1988), and "when Congress has made its intent known through explicit statutory language, the courts' task is an easy one." English v. General Elec. Co., 496 U.S. 72, 78-79 (1990).

Second, in the absence of explicit statutory language, state law is pre-empted where it regulates conduct in a field that Congress intended the Federal Government to occupy exclusively. Id. Such an intent may be inferred from a "scheme of federal regulation ... so pervasive as to make reasonable the inference that Congress left no room for the States to supplement it," or where an Act of Congress "touch[es] a field in which the federal interest is so dominant that the federal system will be assumed to preclude enforcement of state laws on the same subject." Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947). The Supreme Court has emphasized that where the field Congress is said to have pre-empted includes areas that have "been traditionally occupied by the States," congressional intent to supersede state laws must be "'clear and manifest.'" Jones v. Rath Packing Co., 430 U.S. 519, 525 (1977) (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. at 230).

Finally, state law is pre-empted to the extent that it actually conflicts with federal law. The Supreme Court has found pre-emption where it is impossible for a private party to comply with both state and federal requirements, see Florida Lime & Avocado Growers, Inc. v. Paul, 373 U.S. 132, 142-143 (1963), or where state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." Hines v. Davidowitz, 312 U.S. 52, 67 (1941).

B. As Applied to FCRA

FCRA sets forth its relationship to state law in § 1681t, entitled "Relation to State laws":

(a) In general

Except as provided in subsections (b) and (c) of this section, this subchapter does not annul, alter, affect, or exempt any person subject to the provisions of this subchapter from complying with the laws of any State with respect to the collection, distribution, or use of mitigation of identity theft, except to the extent that any information on consumers, or for the prevention or subchapter, and then only to the extent of the those laws are inconsistent with any provision of this inconsistency.

15 U.S.C. § 1681t(a).

FCRA provides for general exceptions to § 1681t(a) in § 1681t(b):

(b) General exceptions. No requirement or prohibition may be imposed under the laws of any State--

(1) with respect to any subject matter regulated under-- (F) section 1681s-2 of this title, relating to the responsibilities of persons who furnish that this paragraph shall not apply-- information to consumer reporting agencies, except (i) with respect to section 54A(a) of chapter effect on September 30, 1996); or 93 of the Massachusetts Annotated Laws (as in (ii) with respect to section 1785.25(a) of the September 30, 1996).

California Civil Code (as in effect on 15 U.S.C. § 1681t(b)(1)(F).

From these sections, it is clear that while generally the FCRA does not preempt state law, it sets forth exceptions that do provide for preemption in certain cases. Specifically, no "requirement or prohibition" under state law can be imposed regarding the subject matter regulated under 15 U.S.C. § 1681s-2, which relates to "the responsibilities of persons who furnish information to consumer reporting agencies." 15 U.S.C. § 1681s-2 reads in part:

(a) Duty of furnishers of information to provide accurate information

(1) Prohibition

(A) Reporting information with actual knowledge of errors

A person shall not furnish any information relating to a consumer to any consumer reporting agency if the person knows or has reasonable inaccurate. cause to believe that the information is

Plaintiff contends that the FCRA was not intended to preempt the field. It is evident field pre-emption does not apply from § 1681t(a)'s command that "this subchapter does not annul, alter, affect, or exempt any person subject to the provisions of this subchapter from complying with the laws of any State" relating to collecting or distributing information on consumers except to the extent state laws are inconsistent with § 1681t. See Credit Data of Arizona, Inc. v. State of Arizona, 602 F.2d 195, 197 (9th Cir. 1979). Plaintiff further argues that FCRA plainly limits its preemption of state regulations "only to the extent of the inconsistency" with those regulations. This is inaccurate. The plain language of § 1681t(b)(1)(F) expressly preempts any state law relating to the duties of furnishers of information to consumer reporting agencies. In addition, while 15 U.S.C. §§ 1681t(b)(1)(F)(i) and (ii) exempt a specific Massachusetts law and California Civil Code § 1785.25(a) from such preemption, Plaintiff does not assert any claims under Massachusetts law or California Civil Code § 1785.25(a) and thus no exception applies here to the express pre-emption of state law relating to furnishers of information to consumer reporting agencies.

Here Plaintiff seeks damages for harm to class members' credit and possible injunctive relief, although the complaint is unclear as to the latter. Title 15 U.S.C. § 1681s-2(a) specifically requires furnishers of credit information to provide accurate information. Plaintiff alleges HDCC provided false and/or inaccurate reporting of class members' deficiencies to credit reporting agencies. Because FCRA regulates furnishers' provision of accurate information to credit agencies and Congress intended this to be exclusive, any state claim with respect to false or inaccurate reporting is pre-empted.

Plaintiff argues FCRA does not pre-empt state consumer statutes that are unrelated to credit reporting, like ASFA and the UCL. Here Plaintiff misses the point. Whether Plaintiff seeks relief under ASFA or the UCL, allegations of false reporting to credit agencies relate to "the responsibilities of persons who furnish information to consumer reporting agencies" as regulated under 15 U.S.C. § 1681s-2. To the extent Plaintiff asserts claims based on HDCC's alleged false reporting, such claims are expressly pre-empted by FCRA.

No Ninth Circuit or other circuit authority has been located that is directly on point. However, in dicta in Gorman, the Ninth Circuit took the position that all state law claims related to furnishers' reporting duties are expressly pre-empted: "Although § 1681t(b)(1)(F) appears to preempt all state law claims based on a creditor's responsibilities under § 1681s-2, § 1681h(e) suggests that defamation claims can proceed against creditors as long as the plaintiff alleges falsity and malice." Gorman v. Wolpoff & Abramson, LLP, 552 F.3d 1008, 1026 (9th Cir. 2009). A number of district courts have reached the same conclusion. See Howard v. Blue Ridge Bank, 371 F.Supp.2d 1139, 1144 (N.D. Cal. 2005) (finding UCL claim preempted because "Congress intended the FCRA to preempt state laws regarding the duties of furnishers and the remedies available against them, rather than allowing different liabilities for furnishers depending on the state of suit"); Roybal v. Equifax, 405 F.Supp.2d 1177, 1181 (E.D. Cal. 2005) (finding UCL claim, among others, pre-empted and stating "[o]n its face, the FCRA precludes all state statutory or common law causes of action that would impose any "requirement or prohibition" on the furnishers of credit information"); Jaramillo v. Experian Information Solutions, Inc., 155 F.Supp.2d 356, 361-62 (E.D. Pa.2001) ("it is clear from the face of section 1681t(b)(1)(F) that Congress wanted to eliminate all state causes of action 'relating to the responsibilities of persons who furnish information to consumer reporting agencies' "); Hasvold v. First USA Bank, 194 F.Supp.2d 1228, 1239 (D. Wyo. 2002) ("federal law under the FCRA preempts plaintiff's claims [for defamation and invasion of privacy] against the defendant relating to it as a furnisher of information"); Riley v. General Motors Acceptance Corp., 226 F.Supp.2d 1316, 1322 (S.D. Ala. 2002) (finding preemption of state tort claims for negligence, defamation, invasion of privacy and outrage, and acknowledging that "there is no question that the statutory prohibition precludes suits under state consumer protection laws").


For the reasons set forth above, Defendant's motion to dismiss and strike Plaintiff's claims as they relate to alleged false and/or inaccurate reporting by Defendant to credit reporting agencies is GRANTED.



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