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Banga v. Allstate Insurance Co.

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF CALIFORNIA


September 22, 2009

KAMLESH BANGA, PLAINTIFF,
v.
ALLSTATE INSURANCE COMPANY AND DOES 1 THROUGH 10 INCLUSIVE, DEFENDANTS.

ORDER AND FINDINGS AND RECOMMENDATIONS

Presently pending for decision before this court are: (1) the motion of defendant Allstate Insurance Company to dismiss plaintiff's complaint, Dckt. No. 13; and (2) the motion of plaintiff for leave to file a Second Amended Complaint, Dckt. No. 22.*fn1 These matters were submitted for decision on the papers. Dckt. Nos. 16, 28.

I. PROCEDURAL ISSUES

The following procedural matters require initial consideration. After filing her original complaint, and in response to defendant's motion to dismiss, plaintiff filed a First Amended Complaint. Dckt. No. 14. The First Amended Complaint makes de minimis changes to the original complaint (e.g., breaking larger paragraphs into subparts, dropping a dollar amount in plaintiff's claim for punitive damages, and adding general references to the California Consumer Credit Reporting Agencies Act), but is premised on the same factual allegations and causes of action. The court ordered that plaintiff's First Amended Complaint be disregarded pending the court's decision on defendant's motion to dismiss, and directed plaintiff to file an opposition on or before October 1, 2008. Dckt. No. 15. Two problems beset this order. First, the order failed to acknowledge plaintiff's right to file an amended complaint, "as a matter of course," prior to being served with a responsive pleading. See Fed. R. Civ. P. 15(a)(1)(A) (plaintiff may amend her complaint "once as a matter of course before being served with a responsive pleading"), and Rule 7(a) (motion to dismiss is not a responsive pleading for purposes of Rule 15(a)). To correct this problem, the portion of the October 1, 2008 Order that states the amended complaint will be "disregarded" is vacated.

The second problem is that on October 6, 2008, plaintiff requested a ten-day extension of time within which to file her opposition to defendant's motion to dismiss, Dckt. No. 22, and on October 10, 2008, she filed her opposition, Dckt. No. 23, which is premised on her motion for leave to file a Second Amended Complaint (together with her proposed Second Amended Complaint), Dckt. No. 22.*fn2 Given that Rule 15(a) permits the procedure that plaintiff followed, simply amending her complaint as a "matter of course," apparently in an attempt to moot the motion, and that she acted promptly to seek an extension of time following the court's order of October 2, 2008, plaintiff's request for an additional ten days for filing her opposition to the motion to dismiss is reasonable and is hereby granted. See Fed. R. Civ. P. 6(b)(1)(B) ("the court may, for good cause, extend the time . . . on motion made after the time has expired if the party failed to act because of excusable neglect"); Pioneer Inv. Services Co. v. Brunswick Assoc. Ltd. P'ship, 507 U.S. 380, 391-392, 395 (1993) (in "determining what sorts of neglect will be considered 'excusable,' . . . the determination is at bottom an equitable one, taking account of all relevant circumstances surrounding the party's omission"). Accordingly, the time for filing plaintiff's opposition is extended through the date that it was filed, October 10, 2009. Additionally, her motion for leave to file a Second Amended Complaint, filed the same day, shall be considered in conjunction with her opposition to the motion to dismiss.

Finally, the First Amended Complaint, which is substantively identical to plaintiff's original complaint, shall be the operative complaint for purposes of evaluating the instant motion to dismiss.

II. DEFENDANT'S MOTION TO DISMISS A. BACKGROUND

Plaintiff's allegations rest on the fact that on September 8, 2006, defendant Allstate Insurance Company ("Allstate"), upon renewing plaintiff's homeowner's policy, increased plaintiff's premium from $1477 to $2124. Plaintiff's principal allegation, pursuant to the Fair Credit Reporting Act, 15 U.S.C. §§1681 et seq., is that Allstate took an "adverse action" in underwriting plaintiff's renewal policy, based on information contained in a consumer report, and without providing notice to plaintiff.*fn3 Plaintiff alleges the same facts pursuant to her claim under Cal. Bus. & Prof. Code § 17200. Plaintiff seeks "economic, compensatory, exemplary and punitive damages and all the relief as provided by law, attorney's fees if plaintiff retains an attorney during the pendency of this action, equitable relief, [and] the costs and disbursements of this action." First Amended Complaint ("FAC"), at 4.

Defendant moves to dismiss for failure to state a claim, on the ground that plaintiff's claims fail to provide a private right of action.

B. LEGAL STANDARDS

On a motion to dismiss, the court construes the pleading in the light most favorable to plaintiff and resolves all doubts in plaintiff's favor. Parks School of Business, Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). The complaint's factual allegations are accepted as true. Church of Scientology of California v. Flynn, 744 F.2d 694 (9th Cir. 1984). The court may, without converting a motion to dismiss into a motion for summary judgment, consider facts established by exhibits attached to the complaint. Durning v. First Boston Corp., 815 F.2d 1265, 1267 (9th Cir. 1987); United States v. Ritchie, 342 F. 3d 903, 907-908 (9th Cir. 2003). The court may also consider facts which may be judicially noticed, Mullis v. United States Bankruptcy Ct., 828 F.2d 1385, 1388 (9th Cir. 1987); and matters of public record, including pleadings, orders, and other papers filed with the court, Mack v. South Bay Beer Distributors, 798 F.2d 1279, 1282 (9th Cir. 1986).

To survive dismissal for failure to state a claim pursuant to Rule 12(b)(6), a complaint must contain more than a "formulaic recitation of the elements of a cause of action;" it must contain factual allegations sufficient to "raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 1965 (2007). "'The pleading must contain something more than a statement of facts that merely creates a suspicion of a legally cognizable right of action.'" Id., quoting 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235-236 (3d ed. 2004) (internal punctuation omitted). Rather, a complaint must plead "enough facts to state a claim to relief that is plausible on its face." Weber v. Department of Veterans Affairs, 521 F.3d 1061, 1065 (9th Cir. 2008) (quoting Bell, at 127 S.Ct. at 1974). Factually unsupported claims framed as legal conclusions, and mere recitations of the legal elements of a claim, do not give rise to a cognizable claim for relief. See Ashcroft v. Iqbal, ___ U.S. ___, 129 S.Ct. 1937, 1951 (May 18, 2009) (citing Twombly, 550 U.S. at 555).

The court is mindful of plaintiff's pro se status. Pro se pleadings are held to a less stringent standard than those drafted by lawyers. Haines v. Kerner, 404 U.S. 519, 520-21 (1972). Unless it is clear that no amendment can cure its defects, a pro se litigant is entitled to notice and an opportunity to amend the complaint before dismissal. Lopez v. Smith, 203 F.3d 1122, 1127-28 (9th Cir. 2000) (en banc); Noll v. Carlson, 809 F.2d 1446, 1448 (9th Cir. 1987). However, although the court has an obligation to construe the pleadings of a pro se litigant liberally, Bretz v. Kelman, 773 F.2d 1026, 1027 n.1 (9th Cir. 1985) (en banc), the court's liberal interpretation of a pro se complaint may not supply essential elements of a claim that are not plead. Pena v. Gardner, 976 F.2d 469, 471 (9th Cir. 1992); Ivey v. Bd. of Regents of Univ. of Alaska, 673 F.2d 266, 268 (9th Cir. 1982). Furthermore, "[t]he court is not required to accept legal conclusions cast in the form of factual allegations if those conclusions cannot reasonably be drawn from the facts alleged." Clegg v. Cult Awareness Network, 18 F.3d 752, 754-55 (9th Cir. 1994). Neither need the court accept unreasonable inferences, or unwarranted deductions of fact. Western Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981).

C. DISCUSSION

1. Fair Credit Reporting Act, 15 U.S.C. § 1681m

Plaintiff's first cause of action alleges that Allstate "took an adverse action" by increasing her homeowner's policy premium based on information contained in a consumer report, and then "willfully failed to notify plaintiff of the adverse action." FAC, at 3, ¶¶ 13, 14. Both matters are alleged to be in violation of 15 U.S.C. § 1681m of the Fair Credit Reporting Act ("FCRA"). Based on these allegations, plaintiff seeks damages pursuant to 15 U.S.C. § 1681n, which sets forth the parameters for assessing a consumer's actual and punitive damages based on willful noncompliance with the FCRA, as well as costs and attorney fees.

The only applicable provision of Section 1681m is subdivision "(a)," which sets forth the "[d]uties of users taking adverse actions on basis of information contained in consumer reports." An "adverse action" is defined to include "a denial or cancellation of, an increase in any charge for, or a reduction or other adverse or unfavorable change in the terms of coverage or amount of, any insurance, existing or applied for, in connection with the underwriting of insurance." 15 U.S.C. §1681a(k)(1)(B)(I). The duties associated with taking an adverse action require that the "user" of consumer reports provide notice to the consumer of the adverse action and of the consumer's right to obtain a copy of the subject report and to dispute the report with the consumer reporting agency. 15 U.S.C. § 1681m(a).*fn4

However, as defendant contends, there appears to be no federal private right of action pursuant to 15 U.S.C. § 1681m, based on the express preclusion of 15 U.S.C. § 1681m(h)(8).*fn5 See Perry v. First Nat'l Bank, 459 F.3d 816, 823 (7th Cir. 2006) ("The unambiguous language of § 1681m(h)(8) demonstrates that Congress intended to preempt private causes of action to enforce § 1681m"); id. at 822 ("every district court considering this issue -- save one -- has found that 15 U.S.C. § 1681m(h)(8) bars private enforcement of § 1681m in its entirety"). Although the Ninth Circuit has not addressed this issue, the majority of decisions by this Circuit's district courts are consistent in concluding that Section 1681m provides no private cause of action. See, e.g., Putkowski v. Irwin Home Equity Corp., 423 F. Supp.2d 1053, 1061-1062 (N.D. Cal. 2006) ("§1681m(h)(8) . . . expressly provides that there is no private right of action for violations of § 1681m") (citing, inter alia, Phillips v. New Century Financial Corp., 2006 WL 517653, 4 (C.D. Cal. 2006) ("Congress eliminated the private right of action under section 1681m through the passage of FACTA [Fair and Accurate Credit Transactions Act of 2003]"); White v. E-Loan, Inc., 409 F. Supp.2d 1183, 1184-1187 (N.D. Cal. 2006) (all private right of action under Section 1681m barred by Section 1681m(h)(8))); see also Grab v. American Lawyers Co., 2007 WL 842045 (D. Hawai'i, 2007) (assuming without deciding that there is no private right of action under Section 1681m, pursuant to retroactivity analysis); Hogan v. PMI Mortg. Ins. Co., 2006 WL 1310461 (N.D. Cal. 2006) (same); but see Kubbany v. Trans Union, LLC, 2009 WL 1844344, 2 (N.D. Cal. 2009) (construed "use of 'section' instead of 'subsection' in § 1681m(h)(8) was a drafting error," thus only private actions under § 1681m(h) are precluded).

The court is persuaded by the reasoning set out in this growing weight of authority and concludes that plaintiff has no private right of action pursuant to 15 U.S.C. § 1681m. Accordingly, the first cause of action in plaintiff's First Amended Complaint should be dismissed with prejudice.

2. California Business & Professions Code § 17200

Plaintiff's second cause of action alleges that "Allstate's failure to provide a notice of adverse action is an unlawful, unfair, fraudulent practice that constitutes unfair business practice under [California] Business and Professions Code Section 17200." FAC, at 4, ¶ 19. Section 17200 of the California Business and Professions Code generally proscribes unfair business practices in California.*fn6 The Ninth Circuit has made clear, however, that this statutory tort cause of action must be premised on an otherwise cognizable claim that defendant has violated a law, or engaged in conduct which is in inherently unscrupulous or injurious to the public. As explained by the Ninth Circuit in Glenn K. Jackson, Inc. v. Roe, 273 F.3d 1192, 1203 (9th Cir. 2001):

In Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal.4th 163 [](1999), the court held that § 17200 "does not proscribe specific practices. Rather . . . it defines 'unfair competition' to include 'any unlawful, unfair or fraudulent business act or practice.' . . . Its coverage is 'sweeping, embracing anything that can properly be called a business practice and that at the same time is forbidden by law.' " Id. at 180 []. The tort encompasses practices which offend established public policy or that are immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers. Podolsky v. First Healthcare Corp., 50 Cal. App. 4th 632 [] (1996). The Cel-Tech Court warned, however, that the breadth of § 17200 does not give a plaintiff license to "plead around" the absolute bars to relief contained in other possible causes of action by recasting those causes of action as ones for unfair competition. Cel-Tech at 182 [].

Thus, in order to state a claim pursuant to § 17200, plaintiff must allege conduct that comes within the prohibition of the statute. Roe, 273 F.3d at 1203. As explained in Webb v. Smart Document Solutions, LLC, 499 F.3d 1078, 1082 (9th Cir. 2007), "[s]section 17200 [] is a broad statute designed to remedy violations of other laws, both state and federal." Id. (emphasis added).*fn7 See also Textron Financial Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 118 Cal.App.4th 1061, 593-594 (2004), and cases cited therein (Section 17200 claim is not cognizable based upon conduct that otherwise fails to give rise to a private right of action under the state Unfair Insurance Practices Act).

Pursuant to these authorities, plaintiff does not state a claim under § 17200. The only predicate claim she asserts is Section 1681m of the FCRA, for which there is no private right of action. Accordingly, plaintiff fails to state a claim under Section 17200 and the second, and last, cause of action in plaintiff's First Amended Complaint must also be dismissed.

3. California Consumer Credit Reporting Agencies Act

Finally, although not presented as a separate cause of action, plaintiff alleges generally that defendant "willfully and knowingly violated plaintiff's rights" under the California Consumer Credit Reporting Agencies Act. FAC, at 4; see also id. at 1 ("[t]his lawsuit involves the . . . California Consumer Credit Reporting Agencies Act ('CCCRA')"). Such general references fail to state a cause of action.

D. DEFENDANT'S MOTION TO DISMISS MUST BE GRANTED

Based on the foregoing, this court finds that plaintiff's First Amended Complaint fails to state a cognizable claim against defendant Allstate. Accordingly, defendant's motion to dismiss, Dckt. No. 13, should be granted. However, for the reasons discussed below, the dismissal should be with leave to amend.

III. PLAINTIFF'S MOTION FOR LEAVE TO FILE A SECOND AMENDED COMPLAINT

A. BACKGROUND

Plaintiff seeks leave to file a Second Amended Complaint that adds the new factual allegation that "defendant Allstate falsely reported to a credit report agency that in the year of 2005, plaintiff had filed two fire claims." Proposed Second Amended Complaint ("SAC"), at ¶ 15. Plaintiff avers that she filed only filed one fire-related claim. Id. at ¶ 10. In her new proposed complaint,*fn8 plaintiff asserts the following legal claims: (1) "Violations of the Fair Credit Reporting Act, Violations of California Consumer Credit Reporting Act;" (2) "Violations of the Fair Credit Reporting Act, Violations of California Civil Code Section 1785.26(b)(c);" (3) "Tortious Interference with Credit Expectancy;" (4) "Defamation;" (5) "Unfair Business Practices Act, Disgorgement of Profits;" and (6) "Intentional Infliction of Emotional Distress."

B. LEGAL STANDARDS

"Federal Rule of Civil Procedure 15(a) provides for the amendment of pleadings by leave of court and notes that such leave "shall be freely given when justice so requires." Fed. R. Civ. P. 15(a). This rule is applied with "extreme liberality." Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1051 (9th Cir. 2003). However, the grant or denial of a motion to amend is committed to the discretion of the district court, and the court may decline to grant leave where there is "any apparent or declared reason" for doing so. Foman v. Davis, 371 U.S. 178, 182 [] (1962); see also Lockman Found. v. Evangelical Alliance Mission, 930 F.2d 764, 772 (9th Cir. 1991). The Ninth Circuit has interpreted Foman as identifying "four factors relevant to whether a motion for leave to amend pleadings should be denied: undue delay, bad faith or dilatory motive, futility of amendment, and prejudice to the opposing party." United States v. Webb, 655 F.2d 977, 980 (9th Cir. 1981). The enumerated factors are not of equal weight. Id. (citing Howey v. United States, 481 F.2d 1187 (9th Cir. 1973)). Rather, "[p]rejudice is the touchstone of the inquiry under rule 15(a)." Eminence Capital, 316 F.3d at 1052. Absent prejudice, there is a presumption under Rule 15(a) in favor of granting leave to amend. Id. The party opposing leave to amend bears the burden of showing prejudice." DCD Programs, Ltd. v. Leighton, 833 F.2d 183, 187 (9th Cir. 1987); Serpa v. SBC Telecommunications, Inc., 318 F. Supp.2d 865, 870 (N.D. Cal. 2004).

C. DISCUSSION

1. First Cause of Action: "Violations of the Fair Credit Reporting Act, Violations of California Consumer Credit Reporting Act"

Plaintiff alleges only generally that "Allstate falsely reported to the credit reporting agency that in the year of 2005, plaintiff had filed two fire claims. . . . Allstate's furnishing of this false and defamatory information to credit reporting agencies [] violated plaintiff's rights afforded to her under the Fair Credit Report Act (FCRA), 15 U.S.C. § 1681 et seq, and the California Consumer Credit Reporting Act." SAC, at ¶ 15.

Defendant identifies the pertinent provisions under the FCRA as: (I) 15 U.S.C. § 1681s -2(a), which requires that a furnisher of information to a consumer reporting agency ("CRA") provide accurate information; and (ii) 15 U.S.C. § 1681s-2(b), which sets forth the duties of a furnisher of information upon notice from a CRA that such information is disputed by a consumer. As defendant points out, there is no private right of action under that section.

a. No Private Right of Action Pursuant to FCRA Section 1681-2(a)

There is no private right of action under section 1681s-2(a). See 15 U.S.C. §§ 1681s-2(c),*fn9 and 1681s-2(d);*fn10 see also Gorman v. Wolpoff & Abramson, LLP, 552 F.3d 1008, 1014 (9th Cir. 2009) ("[d]uties imposed on furnishers under subsection (a) are enforceable only by federal or state agencies") (citing Nelson v. Chase Manhattan Mortgage Corp., 282 F.3d 1057, 1060 (9th Cir. 2002) ("Congress limited the enforcement of the duties imposed by § 1681s-2(a) to governmental bodies")); Marshall v. Swift River Academy, LLC, 327 Fed.Appx. 13, 14 (9th Cir. 2009) ("we have at least twice specifically held that consumers may not maintain an action for violation of Section 1681s-2(a)") (citing Gorman and Nelson); see also Krieg v. Allstate Financial Services, 2007 WL2974065, *1 (9th Cir. Oct. 12, 2007) ("there is no private right of action for violations of 15 U.S.C. § 1681s-2(a)"); accord, Pinson v. Equifax Credit Information Services, Inc., 316 Fed.Appx. 744, 751 (10th Cir. 2009) (section 1681s- 2(a) provides no private cause of action).

It is clear from these authorities that plaintiff's general allegations of Allstate failing to furnish accurate information to one or more consumer reporting agencies do not state a claim under Section 1681s-2(a).

b. Claim Stated Pursuant to FCRA Section 1681s-2(b)

However, another provision of this statute, § 1681s-2(b), does create a private right of action. To state a claim under section 1681s-2(b), plaintiff must allege that she notified the credit reporting agency of her dispute, that the credit reporting agency investigated and found plaintiff's claim valid, and that Allstate nonetheless continued to rely on or provide the allegedly inaccurate information. See Nelson v. Chase Manhattan Mortgage Corp., 282 F.3d at 1060;*fn11 cited with approval in Gorman, 552 F.3d at 1014. "There is only a private right of action to enforce 15 U.S.C. § 1681s-2(b), and that right is triggered only when a furnisher of information receives notice of a dispute from a credit reporting agency that has itself received notice of a dispute from a consumer." Pineda v. GMAC Mortg., LLC, 2009 WL 1202885, 4 (C.D. Cal. 2009) (citing Gorman, 552 F.3d at 1014); See also, Krieg, 2007 WL2974065, at 1;*fn12 Roybal v. Equifax, 405 F. Supp.2d 1177, 1180 (E.D. Cal. 2005)*fn13; Weseman v. Wells Fargo Home Mortg., Inc., 2009 WL 1270252, 3 (D. Or. 2009) ("for [plaintiff] to state a claim under the FCRA against Wells Fargo as a furnisher of credit information, she must show that she contacted a CRA and that the CRA, in turn, determined the claim was viable and contacted Wells Fargo, thereby triggering Wells Fargo's duty to investigate"); Peasley v. Verison Wireless LLC, 364 F. Supp.2d 1198 (S.D. Cal. 2005) (direct notification to CRA, not furnisher, required for standing); Gonzalez v. Ocwen Financial Services, Inc., 2003 WL 23939563, *3 (N.D. Cal. Dec. 2, 2003) (same).

Notwithstanding defendant's contentions to the contrary, plaintiff's proposed Second Amended Complaint sets forth the essential elements of this cause of action. She alleges that she "contacted ChoicePoint and disputed that she had not filed two claims as it was listed on her credit report. Credit reporting agency in turn contacted Allstate to verify the disputed information. Allstate informed that the information was correct. Credit reporting agency informed plaintiff that the information was accurate and it would not amend the report but advised plaintiff that she could add a statement of dispute in her credit report." Id.; FAC, at 12, ¶ 11. Thus, plaintiff alleges that she reported her dispute to a CRA, which in turn notified Allstate, and Allstate unsatisfactorily responded that its previously furnished information was accurate. She also alleges that Allstate continued to rely on, and support the further dissemination of, such information. Necessarily implicit in these assertions is the allegation that Allstate failed to meet its obligations under Section 1681s-2(b).*fn14 As the Ninth Circuit stated in Gorman, "the pertinent question is [] whether the furnisher's procedures were reasonable in light of what it learned about the dispute from the description in the CRA's notice of dispute." 552 F.3d at 1017. These procedures include a reasonable investigation pursuant to § 1681s-2(b)(1)(A). Drew v. Equifax Information Services, LLC 2009 WL 595459, 8 (N.D. Cal. 2009) (citing Gorman). Here, plaintiff's proposed Second Amended Complaint sets forth, though implicitly, a prima facie claim pursuant to 15 U.S.C. § 1681s-2(b), based on defendant's alleged failure to comply with the procedures therein.

c. Claim Stated Pursuant to Cal. Civ. Code § 1785.25(a)

Although plaintiff only generally cites the California Consumer Credit Reporting Act ("CCRA") in her first cause of action, the state statutory basis for this claim is, as defendant notes, California Civil Code section 1785.25(a). That statute provides:

A person shall not furnish information on a specific transaction or experience to any consumer credit reporting agency if the person knows or should know the information is incomplete or inaccurate.

A furnisher of such improper information may be liable to the consumer for actual and punitive damages, as well as injunctive relief, Cal. Civ. Code §1785.31, unless the furnisher can establish that it nonetheless had in place reasonable procedures to comply with statute, id., at § 1725.25(g).

Defendant contends that there is no private right of action pursuant to Cal. Civ. Code § 1785.25(a). However, following defendant's briefing in this case, the Ninth Circuit concluded the opposite in Gorman, 552 F.3d at 1029-1032. The court relied on the express language of 15 U.S.C. §1681t(b)(1)(F), which provides for the general preemption of state law claims on matters that "require or prohibit" a matter regulated by Section 1681s-2, with the express exception of, inter alia, Cal. Civ. Code § 1785.25(a).*fn15 After rejecting several arguments that would support defendant's position herein, the Gorman court concluded as follows:

Because the plain language of the preemption provision does not apply to private rights of action, and because the likely purpose of the express exclusion was precisely to permit private enforcement of these provisions, we hold that the private right of action to enforce Cal. Civ. Code section 1785.25(a) is not preempted by the FCRA.

Gorman, 552 F.3d at 1032; accord, Sanai v. Saltz, 170 Cal.App.4th 746, 776-778 (2d Dist. 2009).

The court therefore concludes that plaintiff has stated, again implicitly, in her proposed Second Amended Complaint a claim under California Civil Code section 1785.25(a), based on her allegation that Allstate furnished to a CRA information concerning plaintiff that Allstate knew or should have known was inaccurate.

2. Second Cause of Action: "Violations of the Fair Credit Reporting Act, Violations of California Civil Code Section 1785.26(b)(c)"

Plaintiff alleges that defendant failed to notify plaintiff, "pursuant to California Civil Code Section 1785.26(b)(c) and the Fair Credit Reporting Act," that it had furnished negative information about plaintiff to a CRA, and that defendant's actions were therefore "intentionally deceptive and malicious." SAC, at 4, ¶ 21.

As discussed in the context of plaintiff's First Amended Complaint, the notice requirement set forth in the FCRA, at 15 U.S.C. § 1681m(a), does not create a private right of action. Rather, pursuant to 15 U.S.C. § 1681m(h)(8), enforcement lies solely with federal agencies and officials.

Nor does it appear that plaintiff can state a "failure to notify" claim under state law. Plaintiff relies on California Civil Code Sections 1785.26(b) and (c). Section 1785.26(b) authorizes a "creditor" to "submit negative credit information concerning a consumer to a consumer credit reporting agency, only if the creditor notifies the consumer affected."

Subdivision (c) describes the timing and method of serving such notice to the consumer.*fn16

However, defendant Allstate is not a "creditor," and these provisions do not appear to create obligations for Allstate. Rather, as defendant points out, the "notice" statute within the CCRA that most closely conforms to plaintiff's instant challenge is California Civil Code Section 1785.20, which requires notification to the consumer for any adverse action based on a consumer credit report.*fn17 However, as defendant further notes, insurance companies are exempt from the requirements of Section 1785.20. See Cal. Insur. Code § 791.01(f) ("Insurance institutions, agents, insurance support organizations or any insurance transaction subject to this article shall be exempt from . . . Sections 1785.20 and 1786.40 of, the Civil Code.).

The court therefore concludes that plaintiff may not state either a federal or state claim based on defendant's alleged failure to notify plaintiff that it furnished negative information about plaintiff to a CRA. The second cause of action set forth in plaintiff's proposed Second Amended Complaint therefore fails to state a cognizable claim. Accordingly, leave to amend to add this cause of action must be denied.

3. Fifth Cause of Action: "Unfair Business Practices Act, Disgorgement of Profits"*fn18

Plaintiff alleges that defendant's furnishing of inaccurate information, and failure to notify plaintiff, constitute unfair business practices in violation of Cal. Bus. & Prof. Code § 17200. As discussed in the context of plaintiff's First Amended Complaint, a claim is cognizable under this statute only if premised on a predicate violation of law, or conduct that is inherently unscrupulous and injurious to the public. Plaintiff asserts in her proposed Second Amended Complaint that the predicate violation is premised on California Civil Code sections 1785.26(b) and (c). However, for the reasons previously stated, plaintiff does not state a claim under this statute. Nonetheless, based on the court's conclusions that plaintiff has stated prima facie claims under 15 U.S.C. § 1681s-2(b), and California Civil Code section 1785.25(a), plaintiff's Second Amended Complaint also states a claim, at least for pleading purposes, under section 17200.

4. Third, Fourth, and Sixth Causes of Action: State Common Law Claims

Plaintiff asserts in her third, fourth, and sixth causes of action, respectively, the state common law claims of "Tortuous Interference with Credit Expectancy," "Defamation," and "Intentional Infliction of Emotional Distress." SAC, at 4-7. Assuming without deciding that plaintiff's common law claims may be brought pursuant to § 1681h(e),*fn19 without preemption by § 1681t(b)(1)(F),*fn20 as recently assumed without decision by the Ninth Circuit in Gorman v. Wolpoff & Abramson, LLP, 552 F.3d 1008,*fn21 the court analyzes each of plaintiff's common law claims.

a. "Tortious Interference with Credit Expectancy"

Citing only section 266B of the Restatement Second of Torts (tortuous interference with contract, or with prospective economic advantage),*fn22 plaintiff alleges that Allstate owed a "duty of care to plaintiff" that it "intentionally" "breached . . . by submitting a false statement to credit reporting agencies," and that "[a]s a direct proximate result of Allstate's conduct, plaintiff had and continues to be deprived to have a good credit standing and [] all the benefits that a good credit standing offers," thus "tortuously interfer[ing] with her credit expectancy and [] undermin[ing] her creditworthiness, credit standing, and credit capacity among relatives, friends, and in the public eye." SAC, at ¶¶ 25, 26.

"The elements which a plaintiff must plead to state the cause of action for intentional interference with contractual relations are (1) a valid contract between plaintiff and a third party; (2) defendant's knowledge of this contract; (3) defendant's intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage." Pacific Gas & Electric Co. v. Bear Stearns & Co., 50 Cal.3d 1118, 1126 (1990) (citations omitted). "The tort of interference with prospective economic advantage protects the same interest in stable economic relationships as does the tort of interference with contract, though interference with prospective advantage does not require proof of a legally binding contract. The chief practical distinction between interference with contract and interference with prospective economic advantage is that a broader range of privilege to interfere is recognized when the relationship or economic advantage interfered with is only prospective." Id. (citations and fn. omitted). "To prevail on a cause of action for intentional interference with prospective economic advantage in California, a plaintiff must plead and prove (1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant's knowledge of the relationship; (3) the defendant's intentional acts designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the defendant's acts." Reeves v. Hanlon, 33 Cal.4th 1140, 1152, n. 6 (2004) (citation omitted).

The elements required to state a prima facie claim under either of these causes of action must also include the requirements that the subject information was both "false" and "furnished with malice or willful intent to injure such consumer." 15 U.S.C. § 1681h(e).

While plaintiff clearly alleges that defendant furnished false information, she does not allege, at least in this cause of action, that defendant did so with the wilful intent to injure plaintiff. Moreover, plaintiff does not assert, and provides no basis upon which to infer, that defendant's alleged conduct interfered with any contract plaintiff may have had with a third party, or with any pre-existing economic relationship plaintiff may have had with one or more of the insurers that later provided a disfavorable quote. The failure of plaintiff to allege that she had any pre-existing contractual or economic relationship that was disrupted by defendant's conduct, or that defendant acted with malice to disrupt such relationship, requires the finding that plaintiff fails to state a claim for "Tortious Interference with Credit Expectancy."

b. Defamation

In her fourth cause of action, plaintiff alleges, without citation to authority, that Allstate "furnished [a] defamatory statement to credit reporting agencies about plaintiff that she had filed two fire loss claims in the year of 2005," and that such "inaccurate information had and continues to be a substantial factor in precluding plaintiff from receiving the most favorable rate in buying insurance," as demonstrated by the reviews of plaintiff's credit history by "Farmers, Arrowhead Clarendon, California State Automobile Association and AIG Homeowners Insurance Program, et al." SAC, at ¶ 29. Plaintiff further alleges that "Allstate intended to cause harm to plaintiff's credit rating and credit worthiness and it actually harmed." Id.

The requirements for stating a claim of defamation by libel are set forth in California Civil Code Section 45. "Libel is a false and unprivileged publication by writing . . . which exposes any person to hatred, contempt, ridicule, or obloquy, or which causes him to be shunned or avoided, or which has a tendency to injure him in his occupation." Cal. Civ. Code § 45. "[T]o survive a motion to dismiss on a defamation claim, a plaintiff must allege: 1) a defendant; 2) intentionally published a statement of fact; 3) that is false; 4) unprivileged; and 5) has a natural tendency to injure (libel per se) or causes special damages." Steinmetz v. General Elec. Co., ___ F. Supp. ___, 2009 WL 2058792, 5 (S.D. Cal., July 13, 2009). Plaintiff must also prove, pursuant to 15 U.S.C. § 1681(e), "that the information was 'false' and 'furnished with malice or willful intent to injure.'" Gorman, 552 F.3d at 1028; Steinmetz, 2009 WL 2058792, 5 ("unless a plaintiff alleges a defendant acted with 'malice or willful intent to injure,' a state law defamation claim based on credit reporting activities is expressly preempted by the FCRA"). The appropriate standard for "malice" requires a showing that the publication was made with knowledge that it was false or with reckless disregard of its truth, the latter supported by a showing that defendant in fact entertained serious doubts as to the truth of the publication, rather than having had a good faith reason for believing the truth of the publication. Gorman, 552 F.3d at 1028, 1027 (citations omitted).

Plaintiff has met, though sketchily, these requirements for stating a prima facie defamation claim against Allstate. Plaintiff alleges that Allstate intentionally reported to a CRA that plaintiff filed two, rather than one, fire loss claims in 2005; that this information was false (and, implicitly, unprivileged); and that this publication caused special damages to plaintiff in the form of an increased premium by Allstate, and poorer rates offered by other insurers than would have been offered had Allstate's publication been accurate. Plaintiff further alleges that "Allstate intended to cause harm to plaintiff's credit rating and credit worthiness," SAC, ¶ 29, an allegation implicitly buttressed by Allstate's refusal to correct its report after being informed by the CRA of plaintiff's dispute.

Accordingly, the court finds that plaintiff has stated a prima facie claim for defamation against Allstate, pursuant to California common law and Section 1681(e) of the FCRA.

c. "Intentional Infliction of Emotional Distress"

In her sixth cause of action, plaintiff alleges that Allstate intentionally furnished false information to a CRA, resulting in a "highly offensive" "intrusion upon the plaintiff's private affairs," and causing plaintiff "deep humiliation, embarrassment, anguish, indignity, and anger along with serious financial and pecuniary harm arising from monetary losses relating to credit denials, excessive rate and out-of-pocket expenses including but not limited to, local or long distance telephone calls, postage, faxing and other related costs." SAC, at ¶ 37.

To state a prima facie claim for intentional infliction of emotional distress, a plaintiff must allege: "(1) outrageous conduct by the defendant, (2) intention to cause or reckless disregard of the probability of causing emotional distress, (3) severe emotional suffering and (4) actual and proximate causation of the emotional distress." Cole v. Fair Oaks Fire Dept., 43 Cal.3d 148, 155, n. 7 (1987) (citing Agarwal v. Johnson, 25 Cal.3d 932 (1979)). Significantly, this tort imposes liability for "conduct exceeding all bounds usually tolerated by a decent society, of a nature which is especially calculated to cause, and does cause, mental distress. . . . Behavior may be considered outrageous if a defendant (1) abuses a relation or position which gives him power to damage the plaintiff's interest; (2) knows the plaintiff is susceptible to injuries through mental distress; or (3) acts intentionally or unreasonably with the recognition that the acts are likely to result in illness through mental distress." Id. (citations and internal quotations omitted).

Plaintiff's allegations fail to meet the high threshold required for making this claim. The allegation that Allstate falsely reported that plaintiff made two, rather than one, fire loss claims in 2005, cannot reasonably be described as "outrageous" conduct. The cases cited by defendant underscore this conclusion.*fn23 Moreover, plaintiff's general allegations of emotional distress and financial loss do not, on their face, rise to the required level. "Severe emotional distress" in this context "means substantial or enduring as distinguished from trivial or transitory. Severe emotional distress means, then, emotional distress of such substantial quantity or enduring quality that no reasonable man in a civilized society should be expected to endure it." Fletcher v. Western Nat'l Life Ins. Co., 10 Cal.App.3d 376, 397 (4th Dist. 1970).

The court concludes, therefore, that plaintiff fails to state a common law claim for intentional infliction of emotional distress.

D. PLAINTIFF SHOULD BE DIRECTED TO FILE A THIRD AMENDED COMPLAINT

In summary, this court finds that plaintiff's proposed Second Amended Complaint sets forth the elements for stating prima facie claims pursuant to 15 U.S.C. § 1681s-2(b), Cal. Civ. Code § 1785.25(a), Cal. Bus. & Prof. Code § 17200, and Cal. Civ. Code § 45. For this reason -- and the lack of persuasive evidence demonstrating undue delay, bad faith, futility of amendment or prejudice to defendant, see Foman, 371 U.S. at 182 -- plaintiff should be granted leave to file her proposed Second Amended Complaint. However, as set forth herein, articulation of these claims requires further amendment of plaintiff's pleading. See Noll v. Carlson, 809 F.2d 1446, 1448 (9th Cir.1987) (leave to amend should be liberally granted to pro se litigants unless it is clear that the deficiencies of the complaint cannot be cured by amendment). Accordingly, to pursue this action, plaintiff must file a Third Amended Complaint consistent with these findings and recommendations.

CONCLUSION

For the foregoing reasons, IT IS HEREBY ORDERED that:

1. Plaintiff's request for an extension of time, Dckt. No. 17, within which to file her opposition to defendant's motion to dismiss is granted and her opposition brief is deemed timely filed;

2. The portion of this court's order filed October 2, 2008, Dckt. No. 15, which states that "Plaintiff's amended complaint will therefore be disregarded," is vacated; and

3. The operative complaint in evaluating defendant's motion to dismiss, Dckt. No. 13, and plaintiff's opposition thereto, Dckt. No. 23, is plaintiff's First Amended Complaint, Dckt. No. 14.

Further, IT IS HEREBY RECOMMENDED that:

1. Defendant's Motion to Dismiss, Dckt. No. 13, be granted;

2. Plaintiff's First Amended Complaint be dismissed with leave to amend;

3. Plaintiff's motion for leave to file a Second Amended Complaint, Dckt. No. 22, be granted in part and denied in part, and the Clerk of Court be directed to file the complaint forthwith, subject to the limitations noted herein; and

4. Plaintiff be directed to file, within 30 days of the filing date of the district judge's order, a Third Amended Complaint setting forth only those claims identified herein, without the addition of any new claims.

These findings and recommendations are submitted to the United States District Judge assigned to the case, pursuant to the provisions of 28 U.S.C. § 636(b)(l). Within ten days after being served with these findings and recommendations, any party may file written objections with the court and serve a copy on all parties. Such a document should be captioned "Objections to Magistrate Judge's Findings and Recommendations." Failure to file objections within the specified time may waive the right to appeal the District Court's order. Turner v. Duncan, 158 F.3d 449, 455 (9th Cir. 1998); Martinez v. Ylst, 951 F.2d 1153 (9th Cir. 1991).


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