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Fair v. Experian Information Solutions, Inc.

United States District Court, N.D. California

March 29, 2017

JEREMY FAIR, Plaintiff,
v.
EXPERIAN INFORMATION SOLUTIONS, INC., et al., Defendants; STEVEN DAHLEN, Plaintiff,
v.
EXPERIAN INFORMATION SOLUTIONS, INC., et al., Defendants; PHILLIP MARINO, Plaintiff,
v.
EXPERIAN INFORMATION SOLUTIONS, INC., et al., Defendants; AARON SMITH, Plaintiff,
v.
EXPERIAN INFORMATION SOLUTIONS, INC., et al., Defendants; JOSHUA HEATH, Plaintiff,
v.
EXPERIAN INFORMATION SOLUTIONS, INC., et al., Defendants. Docket Nos. 48, 19, 10

          ORDER ON MOTIONS TO DISMISS

          CLAUDIA WILKEN United States District Judge

         Before the Court are multiple motions to dismiss.[1] In Dahlen, No. 16-cv-5714, Defendant Experian Information Solutions, Inc. moves to dismiss (Docket No. 19). Dahlen has filed an opposition and Experian has filed a reply. In Marino, No. 16-cv-6367, Defendant RoundPoint Mortgage Servicing Corporation moves to dismiss (Docket No. 10). Marino has filed an opposition and RoundPoint has filed a reply. After these cases were consolidated, Experian also moved to dismiss Marino's Complaint, simply incorporating by reference the motions to dismiss that it filed in Fair and Dahlen (Docket No. 48). Having considered the parties' papers and oral argument, the Court GRANTS Defendants Experian and RoundPoint's Motions to Dismiss and grants leave to amend.

         BACKGROUND

         The Complaints of Plaintiffs Dahlen and Marino are nearly identical and the Court summarizes their allegations here. Dahlen filed for Chapter 13 bankruptcy in October 2012 and Marino did so in June 2014. Chapter 13 of the Bankruptcy Code allows individuals receiving regular income to obtain relief from their debts under a repayment plan that, if confirmed and fully carried out, discharges the individual's debts according to the plan. Bullard v. Blue Hills Bank, 135 S.Ct. 1686, 1690 (2015). Dahlen's plan was confirmed in January 2013 and Marino's plan was confirmed in August 2014. Neither Plaintiff alleges that he has successfully paid off his debts or that his debts have been discharged. Dahlen alleges that, under his plan, unsecured creditors are allowed a zero percent disbursement of their filed claims; Marino alleges 10.22 percent.

         Both Plaintiffs ordered a three-bureau credit report from Experian in March 2016. Dahlen noticed that six different account descriptions on his report contained "inaccurate, misleading, or incomplete information that did not comport with credit reporting industry standards" and, specifically, that the documents "continued to report Plaintiff's accounts with past due balances, " inaccurate balances, or accounts in collections or charged off. Dahlen, No. 16-cv-5714, Docket No. 1, Compl. ¶ 93. Marino noticed that three different account descriptions on his report stated past due or inaccurate balances. Marino, No. 16-cv-6367, Docket No. 1, Compl. ¶ 106.

         Both Plaintiffs disputed these alleged inaccuracies by mail with the three consumer reporting agencies (CRAs) Experian, Equifax, and TransUnion, LLC. Both Plaintiffs' letters stated that they had filed for bankruptcy and that their creditors were "not reporting the bankruptcy accurately or worse not at all;" "requested each Creditor investigate the proper way to report Plaintiff's bankruptcy;" and noted that they believed that after they filed for bankruptcy their accounts should not be reported with past due balance or any late payments, or as charged off, sold or transferred. Dahlen, No. 16-cv-5714, Docket No. 1, Compl. ¶ 95; Marino, No. 16-cv-6367, Docket No. 1, Compl. ¶ 108. Both Plaintiffs allege that each CRA received their dispute letters and forwarded the information to each data furnisher or, in the alternative, that the CRAs did not forward their disputes.

         Later in 2016, both Plaintiffs ordered a second credit report to ensure that their accounts had been updated. Dahlen did so in July and Marino did so in September. Dahlen "was pleased to notice a significant amount of the inaccuracies had been updated or removed" in his second report. Dahlen, No. 16-5714, Compl. ¶ 98. His Equifax score had risen sixty-eight points and his TransUnion score had risen seventy-six points. Marino does not specify whether his score changed. However, some of the alleged inaccuracies in the first reports were still present in the second. Dahlen alleges his second report included a debt owed to Defendant Wells Fargo Bank, N.A. as charged off, even though Wells Fargo failed to file a proof of claim in his bankruptcy proceeding and the trustee accordingly would not pay Wells Fargo. He alleges Wells Fargo did not comply with the Metro-2 industry standard by reporting this debt as charged off. Marino alleges that in his second report RoundPoint inaccurately reported a "failure to pay" on his account in the twenty-four month payment history even though he "has never missed a payment to Defendant." Marino, No. 16-cv-6367, Docket No. 1, Compl. ¶ 111. He also asserts that RoundPoint did not comply with the Metro-2 industry standard by reporting a failure to pay.

         LEGAL STANDARD

         A complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a). On a motion under Rule 12(b)(6) for failure to state a claim, dismissal is appropriate only when the complaint does not give the defendant fair notice of a legally cognizable claim and the grounds on which it rests. Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) . In considering whether the complaint is sufficient to state a claim, the court will take all material allegations as true and construe them in the light most favorable to the plaintiff. NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th Cir. 1986). However, this principle is inapplicable to legal conclusions; "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, " are not taken as true. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 555).

         When granting a motion to dismiss, the court is generally required to grant the plaintiff leave to amend, even if no request to amend the pleading was made, unless amendment would be futile. Cook, Perkiss & Liehe, Inc. v. N. Cal. Collection Serv. Inc., 911 F.2d 242, 247 (9th Cir. 1990). In determining whether amendment would be futile, the court examines whether the complaint could be amended to cure the defect requiring dismissal "without contradicting any of the allegations of [the] original complaint." Reddy v. Litton Indus., Inc., 912 F.2d 291, 296 (9th Cir. 1990) .

         DISCUSSION

         Both Plaintiffs bring two causes of action, one under the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq., [2] and one under the California Consumer Credit Reporting Agencies Act (CCRAA), California Civil Code section 1785.1 et seq. Dahlen and Marino bring the FCRA claim against their respective creditors, Wells Fargo and RoundPoint (Creditor Defendants). Dahlen also brings a FCRA claim against Experian and Equifax, and Marino brings it against Experian (CRA Defendants). Both Plaintiffs bring their CCRAA claim against only their respective Creditor Defendants. Wells Fargo answered Dahlen's Complaint. Equifax has neither moved to dismiss Dahlen's Complaint nor answered it.

         Both Plaintiffs' claims as described in their Complaints depend primarily on the legal theory that it is inaccurate under the FCRA and the CCRAA to report a consumer's delinquent debts after the consumer's bankruptcy plan has been confirmed. However, "courts in this district have consistently held that it is not misleading or inaccurate to report delinquent debts that have not been discharged." Blakeney v. Experian Info. Sols., Inc., 2016 WL 4270244, at *5 (N.D. Cal.) (collecting cases); see also Jaras v. Experian Info. Sols., Inc., 2016 WL 7337540, at *3 (N.D. Cal.); Mortimer v. Bank of Am., Nat'l Ass'n, 2013 WL 1501452, at *4 (N.D. Cal.). "[E]ven if a confirmation order constitutes a final judgment, it constitutes a final judgment only as to 'the manner in which the debtor will discharge his financial obligations, ' not the legal validity of the debt." Jaras, 2016 WL 7337540, at *4 (citation omitted); see also Mestayer v. Experian Info. Sols., Inc., 2016 WL 631980, at *3 (N.D. Cal.); Biggs v. Experian Info. Sols., Inc., 2016 WL 5235043, at *2 (N.D. Cal.); Adkins v. Experian Info. Sols., Inc., 2016 WL 6841700, at *2 (N.D. Cal.). Furthermore, "[i]f a debtor fails to comply with the Chapter 13 plan, the debtor's bankruptcy petition may be dismissed and the debtor will then owe the entirety of the debt." Jaras, 2016 WL 7337540 at *4 (citing 11 U.S.C. § 1307(c)(6)). "While it might be good policy in light of the goals of bankruptcy protection to bar reporting of late payments while a bankruptcy petition is pending, neither the bankruptcy code nor the FCRA does so." Mortimer v. JP Morgan Chase Bank, Nat'l Ass'n, 2012 WL 3155563, at *3 (N.D. Cal.).

         Both Plaintiffs also point out that reporting a delinquency during the pendency of a bankruptcy proceeding violates certain credit industry reporting standards. However, neither Plaintiff alleges that this is inherently inaccurate under the FCRA or provides any authority to that effect, and case law indicates the contrary. See Mestayer, 2016 WL 631980, at *4 (finding CCCRA inaccurate reporting claim failed in part because plaintiff "failed to point to any authority indicating that a failure to comply with an industry standard is a failure to comply with the law"); Mortimer v. Bank of Am., Nat'l Ass'n, 2013 WL 1501452, at *12; Giovanni v. Bank of Am., Nat'l Ass'n, 2013 WL 1663335, at *6 (N.D. Cal.).

         Because the CCRAA is substantially based on the FCRA, judicial interpretation of the latter is persuasive as to the former, and the rule that it is not inaccurate to report delinquent debts prior to discharge applies in the CCRAA context. Blakeney, 2016 WL 4270244, at *6. Accordingly, to the extent Plaintiffs' claims rely on this theory they fail as a matter of law.

         At the hearing, Plaintiffs' counsel explained that the only inaccuracy Dahlen now wishes to allege is a failure to report the fact of his bankruptcy. Courts in this district have indicated that this may constitute an inaccuracy under the FCRA. See Poster v. Experian Info. Sols., Inc., 2017 WL 264401 at *6 (N.P. Cal.); Connors v. Experian Info. Sols., Inc., 2017 WL 168493, at *5 (N.P. Cal.); Keller v. Experian Info. Sols., Inc., 2017 WL 130285, at *8 (N.P. Cal.); Pevincenzi v. Experian Info. Sols., Inc., 2017 WL 86131 (N.P. Cal.). Counsel conceded that Marino does not allege that RoundPoint failed to report the fact of his bankruptcy; his theory is an inaccuracy unrelated to his bankruptcy. It is not clear whether Marino wishes to allege that Experian failed to report the fact of his bankruptcy.

         I. Fair Credit Reporting Act

         A. Pefendants' State of Mind

         The FCRA creates a private right of action only for willful or negligent noncompliance with its requirements. §§ 1681n (willful), o (negligent); Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147, 1154 (9th Cir. 2009). A plaintiff may recover actual or statutory damages, as well as punitive damages and attorneys' fees, for willful noncompliance, § 1681n, but only actual damages for negligent noncompliance, § 1681o.

         1. Willfulness

         A plaintiff may demonstrate "willfulness" by showing a "reckless disregard" of statutory duty. Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 56-60 (2007) . Willfulness "may be alleged generally." Fed.R.Civ.P. 9(b). As noted above, both Plaintiffs plead generally that ...


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