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Rara v. Experian Information Solutions, Inc.

United States District Court, N.D. California

March 20, 2017

JENNIFER RARA, Plaintiff,
v.
EXPERIAN INFORMATION SOLUTIONS, INC., et al., Defendants.

          ORDER GRANTING MOTION TO DISMISS WITH LEAVE TO AMEND RE: DKT. NO. 24, 46

          PHYLLIS J. HAMILTON United States District Judge

         Defendant Equifax, Inc.'s motion to dismiss came on for hearing before this court on March 1, 2017. Plaintiff Jennifer Rara appeared through her counsel, Elliot Gale. Defendant Equifax, Inc. appeared through its counsel, Thomas Quinn. Non-moving defendant Experian Information Solutions, Inc. appeared through its counsel, Ben Lee. Defendant Bank of America, N.A. appeared through its counsel, Alice Miller. Defendant Schools First Credit Union did not appear. 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.

         BACKGROUND

         A. Chapter 13 Bankruptcy

         Chapter 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).

         If the 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.

         B. The Complaint

         The 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.

         Plaintiffs 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. (“BANA”).

         The 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. ¶¶ 3-7.

         The 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.

         The 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.

         Rara filed for Chapter 13 bankruptcy protection on October 22, 2015. Compl. ¶ 87. Rara's Chapter 13 plan was confirmed on March 2, 2016. See No. 2:15-bk-26246-SK Dkt. 20 (Bankr. C.D. Cal.). She ordered credit reports from the CRAs on March 20, 2016, and filed a dispute letter. Compl. ¶¶ 105, 107-108. On September 22, 2016, she ordered a second set of credit reports, Compl. ¶ 110, but found that the inaccuracies remained. The complaint does not make any specific allegation regarding credit score impact.

         Plaintiff 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 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.”

         DISCUSSION

         A. Legal Standard

         A 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. 8(a)(2).

         A 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).

         Legally 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).

         B. Legal Analysis

         Defendant 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, defendant argues that the complaint fails to sufficiently allege either actual or statutory ...


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