United States District Court, N.D. California
ORDER GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND
RE: DKT. NO. 18
PHYLLIS J. HAMILTON United States District Judge.
Experian Information Solutions, Inc.'s motion to dismiss
came on for hearing before this court on March 1, 2017.
Plaintiff Lucille Olsen appeared through her counsel, Elliot
Gale. Defendant Experian Information Solutions, Inc. appeared
through its counsel, Ben Lee. Having read the papers filed by
the parties and carefully considered their arguments and the
relevant legal authority, and good cause appearing, the court
hereby rules as follows.
Chapter 13 Bankruptcy
13 bankruptcy allows debtors with regular income to
“repay creditors in part, or in whole, over the course
of a three-to-five-year period.” In re
Blendheim, 803 F.3d 477, 485 (9th Cir. 2015). Under
Chapter 13, the debtor proposes a debt repayment plan that
must comply with a number of statutory requirements.
Id. at 485-86. “A Chapter 13 debtor seeking a
discharge typically proposes a plan in which the discharge is
granted at the end of the proceeding, after the debtor
completes all required payments under the plan.”
Id. at 486. If the Chapter 13 plan satisfies all of
the statutory requirements, the bankruptcy court approves or
“confirms” the plan. 11 U.S.C. § 1325(a);
In re Flores, 735 F.3d 855, 857 (9th Cir. 2013).
debtor makes the payments under the confirmed plan, the
bankruptcy court will grant a discharge of the debts, which
“releases debtors from personal liability on claims and
enjoins creditors from taking any action against the
debtor.” Blendheim, 803 F.3d at 486-87.
“Many debtors, however, fail to complete a Chapter 13
plan successfully.” Harris v. Viegelahn, 135
S.Ct. 1829, 1835 (2015). If the debtor fails to make the
required payments, he may either “convert [the] Chapter
13 case to a [bankruptcy] case under a different chapter,
” or dismiss the action. Blendheim, 803 F.3d
at 487. The effect of dismissal is to restore the legal
status quo prior to the Chapter 13 filing: “dismissal
returns to the creditor all the property rights he held at
the commencement of the Chapter 13 proceeding and renders him
free to exercise any nonbankruptcy collection
remedies.” Id. at 487.
complaint in this case is one of more than two hundred
similar actions in this district filed by the Sagaria Law,
P.C. firm against consumer credit reporting agencies in late
2016. All of these cases employ the same form complaint, with
about a dozen paragraphs individualized for each plaintiff.
The remainder of the complaint, including the causes of
action, is copied nearly verbatim in each case.
in these cases are individuals who filed for Chapter 13
bankruptcy and allege that their debts were reported
inaccurately in light of their confirmed Chapter 13 plan.
Experian Information Solutions, Inc.
(“Experian”), Equifax, Inc.
(“Equifax”), or both credit reporting agencies
(“CRAs”) are named as defendants. Also named as
defendants in most of the cases are “furnishers”
of credit information, such as Chase Bank USA, N.A.
(“Chase”) and Bank of America, N.A.
complaint accuses CRAs and furnishers of “ignor[ing]
credit reporting industry standards for accurately reporting
bankruptcies.” Compl. ¶ 7. Allegedly, this
inaccurate reporting is an effort to perpetuate the
“myth” that filing for bankruptcy ruins
consumers' credit scores for years. Compl. ¶¶
complaint explains in some detail how a consumer's FICO
credit score is calculated, and how the score derives from
information that furnishers report to CRAs. Compl.
¶¶ 20-36. Plaintiff then describes the Metro 2
credit reporting standards promulgated by the Consumer Data
Industry Association (the “Metro 2 standards” or
“CDIA guidelines”), which plaintiff alleges is
the “industry standard for accurate credit
reporting.” Compl. ¶¶ 37-52. The Metro 2
standards have different “CII indicator” codes
that are used to note the filing and discharge of Chapter 7
and 13 petitions. Compl. ¶¶ 55-62. Plaintiff
alleges that the CII indictor “D” is used when a
Chapter 13 petition has been filed, but no discharge yet
entered. Compl. ¶ 59.
complaint alleges that, prior to the confirmation of a
Chapter 13 plan, the “accepted credit reporting
standard” is to “report the outstanding balance
amount as of the date of filing” of the bankruptcy
petition, and to note the bankruptcy filing with CII
indicator code D. Compl. ¶¶ 73, 75, 76-77.
Post-confirmation, however, plaintiff alleges that the
balances should be updated to reflect the confirmed Chapter
13 plan. Reporting ongoing past due amounts and late
payments, instead of only indicator D, is “not
generally accepted as accurate by the credit reporting
industry.” Compl. ¶ 84. Plaintiff alleges that the
industry standard is to “report the balance owed under
the Chapter 13 plan terms, ” which is typically lower
than the original amount, and to “report a $0.00
balance” if the confirmed plan does not call for any
payments on that particular debt. Compl. ¶¶ 80-81.
filed for Chapter 13 bankruptcy protection on October 16,
2015. Compl. ¶ 87. Olsen's Chapter 13 plan was
confirmed on December 3, 2015. See No.
2:15-bk-25976-SK Dkt. 13 (Bankr. C.D. Cal.). She ordered
credit reports from the CRAs on March 17, 2016, and filed a
dispute letter with the CRAs alleging inaccuracies. Compl.
¶¶ 92, 94. On August 23, 2016, she ordered a second
set of credit reports, but found that the inaccuracies
remained and that her credit score had improved only
slightly. Compl. ¶¶ 97-98.
asserts two claims, one under the Fair Credit Reporting Act
(“FCRA”) and one under the California Consumer
Credit Reporting Agencies Act (“CCRAA”). The
first cause of action alleges that the furnisher and CRA
violated FCRA “by failing to conduct a reasonable
investigation and re-reporting misleading and inaccurate
information.” This cause of action relies repeatedly on
the alleged failure of the CRA and furnisher to
“comport with industry standards.” The second
cause of action under CCRAA is made only against the
furnisher, alleging that it “intentionally and
knowingly reported misleading and inaccurate account
information to the CRAs that did not comport with
well-established industry standards.”
motion to dismiss under Federal Rule of Civil Procedure
12(b)(6) tests for the legal sufficiency of the claims
alleged in the complaint. Ileto v. Glock, Inc., 349
F.3d 1191, 1199-1200 (9th Cir. 2003). To survive a motion to
dismiss for failure to state a claim, a complaint generally
must satisfy the requirements of Federal Rule of Civil
Procedure 8, which requires that a complaint include a
“short and plain statement of the claim showing that
the pleader is entitled to relief.” Fed.R.Civ.P.
complaint may be dismissed under Rule 12(b)(6) for failure to
state a claim if the plaintiff fails to state a cognizable
legal theory, or has not alleged sufficient facts to support
a cognizable legal theory. Balistreri v. Pacifica Police
Dep't, 901 F.2d 696, 699 (9th Cir. 1990). The court
is to “accept all factual allegations in the complaint
as true and construe the pleadings in the light most
favorable to the nonmoving party.” Outdoor Media
Group, Inc. v. City of Beaumont, 506 F.3d 895, 899-900
(9th Cir. 2007).
conclusory statements, not supported by actual factual
allegations, need not be accepted by the court. Ashcroft
v. Iqbal, 556 U.S. 662, 678-79 (2009). The allegations
in the complaint “must be enough to raise a right to
relief above the speculative level.” Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations
and quotations omitted). “A claim has facial
plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the
defendant is liable for the misconduct alleged.”
Iqbal, 556 U.S. at 678 (citation omitted).
“[W]here the well-pleaded facts do not permit the court
to infer more than the mere possibility of misconduct, the
complaint has alleged-but it has not
‘show[n]'-‘that the pleader is entitled to
relief.'” Id. at 679. In the event
dismissal is warranted, it is generally without prejudice,
unless it is clear the complaint cannot be saved by any
amendment. See Sparling v. Daou, 411 F.3d 1006, 1013
(9th Cir. 2005).
seeks dismissal on two different grounds. First, it argues
that the complaint fails to plead an “inaccuracy”
in reporting that is actionable under FCRA as a matter of
law. Second, it argues that the ...