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Chavez v. Experian Information Solutions, Inc.

United States District Court, N.D. California, San Jose Division

April 25, 2017

SOPHIA CHAVEZ, Plaintiff,
v.
EXPERIAN INFORMATION SOLUTIONS, INC., et al., Defendants.

          ORDER GRANTING MOTIONS TO DISMISS FIRST AMENDED COMPLAINT WITH LEAVE TO AMEND [RE: ECF 23, 27]

          BETH LABSON FREEMAN United States District Judge

         Defendants Experian Information Solutions, Inc. (“Experian”) and Credit One Bank, N.A. (“Credit One”) move to dismiss Plaintiff Sophia Chavez's first amended complaint (“FAC”), which asserts violations of the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681 et seq., and the California Consumer Credit Reporting Agencies Act (“CCRAA”), California Civil Code § 1785.25(a). For reasons discussed below, the motions are GRANTED WITH LEAVE TO AMEND.

         I. BACKGROUND[1]

         Plaintiff filed for Chapter 13 bankruptcy protection on June 12, 2015 and her plan was confirmed on September 23, 2015. FAC ¶¶ 93, 97, ECF 18. On March 2, 2016, Plaintiff “ordered a three bureau report from Experian Information Solutions, Inc. to ensure proper reporting by Plaintiff's Creditors.” Id. ¶ 98. She alleges that this report (“March 2016 Credit Report”) included four different tradelines containing inaccurate, misleading, or incomplete information. Id. ¶ 99. Plaintiff neither attaches a copy of the March 2016 Credit Report nor provides specifics regarding the alleged inaccuracies contained therein. Id. She asserts only that “multiple trade lines continued to report Plaintiff's accounts with past due balances, inaccurate balances, in collections, and/or charged off. Some accounts even failed to register that Plaintiff was making payments on the account through Plaintiff's Chapter 13 plan.” Id.

         Plaintiff disputed the inaccurate tradelines via certified mail sent to three different credit reporting agencies (“CRAs”), Experian, Equifax, Inc., and TransUnion, LLC on June 15, 2016. FAC ¶ 100. Each CRA received Plaintiff's dispute letter and in turn notified the entities that had furnished the disputed information (“furnishers”) by means of automated credit dispute verifications (“ACDVs”). Id. ¶ 102.

         Plaintiff ordered a second three bureau report from Experian on July 21, 2016 (“July 2016 Credit Report”). Id. ¶ 103. That report revealed that three furnishers, including Credit One, were continuing to report her accounts inconsistently with industry standards. Id. ¶¶ 103-08. For example, Credit One was reporting Plaintiff's account as “charged off and in collections, despite the Court Ordered treatment of its claim under the terms of Plaintiff's Chapter 13 plan of reorganization.” Id. ¶ 108.

         Plaintiff filed this action on August 12, 2016, asserting violations of the FCRA and CCRAA against multiple CRAs and furnishers. Compl., ECF 1. Experian and Credit One now move to dismiss the FAC under Federal Rule of Civil Procedure 12(b)(6).

         II. LEGAL STANDARD

         “A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted ‘tests the legal sufficiency of a claim.'” Conservation Force v. Salazar, 646 F.3d 1240, 1241-42 (9th Cir. 2011) (quoting Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001)). When determining whether a claim has been stated, the Court accepts as true all well-pled factual allegations and construes them in the light most favorable to the plaintiff. Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681, 690 (9th Cir. 2011). However, the Court need not “accept as true allegations that contradict matters properly subject to judicial notice” or “allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008) (internal quotation marks and citations omitted). While a complaint need not contain detailed factual allegations, it “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when it “allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

         III. EXPERIAN'S MOTION TO DISMISS

         The FAC contains two claims, one for violation of the FCRA (Claim 1) and the other for violation of the CCRAA (Claim 2). Although the label of the CCRAA claim indicates that it is asserted against “Defendants, ” it is clear from the body of the FAC that the CCRAA claim is not asserted against Experian. Accordingly, only the FCRA claim is asserted against Experian. Experian moves to dismiss for failure to state a claim upon which relief may be granted.

         “Congress enacted [the] FCRA in 1970 to ensure fair and accurate credit reporting, promote efficiency in the banking system, and protect consumer privacy.” Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 52 (2007). To that end, the FCRA imposes specific obligations on CRAs, furnishers, and other categories of persons not at issue here. See generally 15 U.S.C. § 1681 et seq. Many of the obligations of CRAs are described in 15 U.S.C. § 1681i. That section provides that if a consumer disputes “the completeness or accuracy of any item of information, ” the CRA must “conduct a reasonable reinvestigation to determine whether the disputed information is inaccurate and record the current status of the disputed information, or delete the item.” 15 U.S.C. § 1681i(a)(1). In addition, the CRA must provide notification of the dispute to the furnisher of the information. 15 U.S.C. § 1681i(a)(2). Such notification by the CRA triggers the furnisher's obligation to conduct its own investigation. 15 U.S.C. § 1681s-2(b). The FCRA expressly creates a private right of action for willful or negligent noncompliance with these requirements. 15 U.S.C. § 1681n & o.

         Plaintiff's FCRA claim against Experian is subheaded “Failure to Reinvestigate Disputed Information.” FAC ¶¶ 120-21. Plaintiff alleges that after she “disputed the accounts mentioned above” - which the Court takes to mean the four trade lines in the March 2016 Credit Report referenced earlier in the FAC - Experian was required to conduct a reasonable investigation and to delete any information that was not accurate under 15 U.S.C. § 1681i-(a)(1). Id. ¶ 122. Plaintiff claims that “[t]he most basic investigation required each CRA to send all relevant information via an ACDV to the furnishers which they did not do.” Id. ¶ 123. Plaintiff alleges that because it did not send all relevant information to the furnishers, Experian “failed to conduct a reasonable investigation and failed to correct the misleading and or inaccurate statements.” Id. ¶ 124.

         In the alternative, Plaintiff alleges that Experian “has its own independent duty to conduct a reasonable investigation under 15 U.S.C. § 1681i(a)1.” FAC ¶ 125. Section 1681i(a)(1) does not impose a freestanding duty to investigate; a CRA's duties under that provision are triggered only “if the completeness or accuracy of any item of information . . . is disputed by the consumer and the consumer notifies the agency . . . of such dispute.” 15 U.S.C. § 1681i(a)(1) (emphasis added). Thus it is unclear what Plaintiff means by “own independent duty” to investigate. Plaintiff alleges that Experian “is not a passive entity” and that it “can and does suppress inaccurate information from being reported when DFs provide inaccurate information.” FAC ¶¶ 126-28. Plaintiff also alleges that Experian “would have known” that certain DFs were not following industry standards in their reporting. Id. ¶¶ 131-34. The Court understands these allegations to claim that regardless of what information was provided to Experian by furnishers, Experian had an independent duty to “suppress” that information if it did not comply with industry standards.

         Experian moves to dismiss the FCRA claim on three grounds. First, Experian asserts that Plaintiff has not alleged facts showing that Experian's credit reporting was inaccurate. Second, Experian argues that Plaintiff has not alleged facts showing an entitlement to damages under the FCRA. And third, Experian asserts that Plaintiff has not alleged any facts showing that Experian's response to her dispute letter regarding the March 2016 Credit Report was improper.

         A. Inaccuracy

         The Ninth Circuit has observed that “[a]lthough the FCRA's reinvestigation provision, 15 U.S.C. § 1681i, does not on its face require that an actual inaccuracy exist for a plaintiff to state a claim, many courts, including our own, have imposed such a requirement.” Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 890 (9th Cir. 2010).[2] “Thus, even if a . . . CRA fails to conduct a reasonable investigation or otherwise fails to fulfill its obligations under the FCRA, if a plaintiff cannot establish that a credit report contained an actual inaccuracy, then the plaintiff's claims fail as a matter of law.” Doster v. Experian Info. Sols., Inc., No. 16-CV-04629-LHK, 2017 WL 264401, at *3 (N.D. Cal. Jan. 20, 2017) (internal quotation marks and citation omitted).

         In Carvalho, the Ninth Circuit noted that it previously had “explained that an item on a credit report can be ‘incomplete or inaccurate' within the meaning of the FCRA's furnisher investigation provision, 15 U.S.C. § 1681s-2(b)(1)(D), ‘because it is patently incorrect, or because it is misleading in such a way and to such an extent that it can be expected to adversely affect credit decisions.'” Carvalho, 629 F.3d at 890 (quoting Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147, 1163 (2009)). The Ninth Circuit went on to affirm “‘the maxim of statutory construction that similar terms appearing in different sections of a statute should receive the same interpretation, '” id. (quoting United States v. Nordbrock, 38 F.3d 440, 444 (9th Cir. 1994)), and to cite with approval a First Circuit case, Chiang, which the Ninth Circuit summarized as “deeming the term ‘inaccurate' in section 1681i(a) to be ‘essentially the same' as the term ‘incomplete or inaccurate' in section 1681s-2(b), ” id. (citing Chiang v. Verizon New Eng. Inc., 595 F.3d 26, 37 (1st Cir. 2010)). Relying on Carvalho, district courts have “applied this ‘patently incorrect or materially misleading' standard to claims arising under various provisions of the FCRA that involve the accuracy of information.” Prianto v. Experian Info. Sols., Inc., No. 13-CV-03461-TEH, 2014 WL 3381578, at *3 (N.D. Cal. July 10, 2014). In particular, courts in this district have applied the “patently incorrect or materially misleading” standard to the inaccuracy requirement under § 1681i. See, e.g., Banneck v. HSBC Bank USA, N.A., No. 15-cv-02250-HSG, 2016 WL 3383960, at *6 (N.D. Cal. June 20, 2016); Prianto, 2014 WL 3381578, at *3.

         Experian argues that the FAC does not satisfy this pleading standard. The Court agrees for the reasons discussed below.

         1. Three Bureau Report

         Perhaps the most obvious deficiency in Plaintiff's allegations against Experian is her failure to allege that the inaccuracies in the “three bureau” March 2016 Credit Report upon which her claim is based are attributable to Experian rather than one of the other CRAs. FAC ¶ 99. Plaintiff alleges that she obtained the March 2016 Credit Report after confirmation of her Chapter 13 plan, and that “multiple trade lines continued to report Plaintiff's accounts with past due balances, inaccurate balances, in collections, and/or charged off. Some accounts even failed to register that Plaintiff was making payments on the account through Plaintiff's Chapter 13 plan.” Id. ¶¶ 97-99. These allegations neither identify Experian as the reporting entity nor identify any particular past due balances or other trade lines in the March 2016 Credit Report that were inaccurate.

         Plaintiff argues that the requisite specificity is provided in paragraphs 106-08 of the FAC. Plaintiff does not allege that those allegations appeared in the March 2016 Credit Report upon which her claim is based, and in fact the referenced allegations follow directly after Plaintiff's description of how she obtained the July 2016 Credit Report. FAC ¶¶ 103-08. Plaintiff does not allege that she disputed the July 2016 Credit Report; she obtained the July 2016 Credit Report “to ensure Plaintiff's accounts had been updated.” Id. ¶ 103. Therefore inaccuracies in the July 2016 Credit Report cannot form the basis of her claim.

         Other courts in this district have dismissed FCRA claims based upon alleged inaccuracies in three bureau reports where no specificity is provided as to which CRA reported the inaccuracies in question. See, e.g., Doster, 2017 WL 264401, at *6 (“Plaintiff's FAC makes only general and unspecified allegations that her credit report, which was a three-bureau credit report, contained inaccuracies and that the CRAs reported misleading and inaccurate information, but the FAC does not allege any conduct that is specific to Experian.”). Because Plaintiff does not specify any particular inaccuracies that were ...


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