United States District Court, N.D. California
ORDER GRANTING MOTIONS TO DISMISS WITH LEAVE TO AMEND
RE: DKT. NOS. 35, 41, 63
PHYLLIS J. HAMILTON United States District Judge.
Chase Bank USA, N.A. and Equifax, Inc.'s motions to
dismiss came on for hearing before this court on March 1,
2017. Plaintiffs Leslie and Louis Burrows appeared through
their counsel, Elliot Gale. Defendant Chase Bank USA, N.A.
appeared through its counsel, Andrew Soukup and Megan
Rodgers. Defendant Equifax, Inc. appeared through its
counsel, Thomas Quinn. Former defendant Bank of America, N.A.
appeared through its counsel, Alice Miller, and has joined
Chase's motion. Dkt. 61.Defendant Asset Acceptance LLC
appeared through its counsel, Thomas Landers, and has joined
Chase's motion. Dkt. 59. Non-moving 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
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.
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. Plaintiffs then describe the Metro 2
credit reporting standards promulgated by the Consumer Data
Industry Association (the “Metro 2 standards” or
“CDIA guidelines”), which plaintiffs allege 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. Plaintiffs
allege 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, plaintiffs allege 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. Plaintiffs allege 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.
matter consists of two consolidated actions, one brought by
plaintiff Leslie Burrows and the other brought by her husband
Louis Burrows. In the lead case, Leslie Burrows filed for
Chapter 13 bankruptcy protection on December 31, 2013. Compl.
¶ 87. She ordered credit reports from the CRAs on March
17, 2016, and filed a dispute letter with the CRAs alleging
inaccuracies with respect to her accounts with Chase, Asset
Acceptance LLC, BANA, and Commerce Bancshares. Compl.
¶¶ 105, 107-108, 112- 115. On September 27, 2016,
plaintiff ordered a second set of credit reports, but found
that the inaccuracies remained. Compl. ¶ 111. The
complaint does not contain any specific allegation regarding
credit score impact.
Burrows filed for Chapter 13 bankruptcy protection jointly
with his wife on December 31, 2013. No. 16-06356-PJH, Compl.
¶ 87. The Burrows' Chapter 13 plan was confirmed on
June 25, 2014. See No. 2:13-bk-40239-VZ Dkt. 32
(Bankr. C.D. Cal.). Louis ordered credit reports from the
CRAs and filed a dispute letter on the same dates as his
wife, and he alleges the same inaccuracies with respect to
the BANA and Commerce Bancshares accounts. No. 16-06356-PJH
Compl. ¶¶ 105, 107, 110-112.
assert 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 furnishers and CRAs
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 CRAs and furnishers to
“comport with industry standards.” The second
cause of action under CCRAA is made only against the
furnishers, alleging that they “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).
seek dismissal on three different grounds. First, they argue
that plaintiffs are judicially estopped from asserting their
claims because they failed to disclose the claims as a
contingent asset in the bankruptcy court. Second, they argue
that the complaint fails to plead an “inaccuracy”
in reporting that is actionable under FCRA as a matter of
law. Third, they argue that the complaint fails to
sufficiently allege either actual or statutory damages.
estoppel is an equitable doctrine that precludes a party from
gaining an advantage by asserting one position, and then
later seeking an advantage by taking a clearly inconsistent
position.” Hamilton v. State Farm Fire & Cas.
Co., 270 F.3d 778, 782 (9th Cir. 2001). The Supreme
Court has articulated three factors to guide the court's
discretion: (1) whether a party's later position is
“clearly inconsistent”' with its earlier
position; (2) whether that party has succeeded in persuading
a court to accept its earlier position; and (3) whether the
party seeking to assert an inconsistent position would derive
an unfair advantage or impose an unfair detriment on the
opposing party if not estopped. New Hampshire v.
Maine, 532 U.S. 742, 750-51 (2001).
bankruptcy context, the Ninth Circuit has adopted “a
basic default rule: If a plaintiff-debtor omits a pending (or
soon-to-be-filed) lawsuit from the bankruptcy schedules and
obtains a discharge (or plan confirmation), judicial estoppel
bars the action.” Ah Quin v. Cnty. of Kauai
Dep't of Transp., 733 F.3d 267, 271 (9th Cir. 2013).
The logic is straightforward: by not listing the lawsuit in
the bankruptcy schedules, the debtor represented that the
asset did not exist. The bankruptcy court accepted that
position in its ...