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Torion v. JPMorgan Chase Bank, N.A.

United States District Court, N.D. California

July 13, 2017

OSIAS TORION, Plaintiff,


          PHYLLIS J. HAMILTON United States District Judge

         Defendant's motion to dismiss plaintiff's first amended complaint came on for hearing before this court on June 28, 2017. Plaintiff Osias Torion appeared through his counsel, Elliot Gale. Defendant Chase Bank USA, N.A. (“Chase”), erroneously sued as JPMorgan Chase Bank, National Association, appeared through its counsel, Megan Rodgers and Emily Henn. Having read the papers filed by the parties and carefully considered their arguments and the relevant legal authority, the court hereby GRANTS the motion to dismiss WITH PREJUDICE, for the following reasons.


         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. Procedural History

         This case is one of over 200 similar actions in this district filed by the Sagaria Law firm against consumer credit reporting agencies and credit furnishers in 2016 and 2017. On March 20, 2017, this court dismissed a substantially similar complaint in Burrows v. Experian Info. Sols., Inc., No. 16-CV-06356-PJH, 2017 WL 1046973 (N.D. Cal. Mar. 20, 2017) (“Burrows”). Burrows described the factual context as follows:

Plaintiffs 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] . . . .
The complaint accuses CRAs and furnishers of “ignor[ing] credit reporting industry standards for accurately reporting bankruptcies.” Allegedly, this inaccurate reporting is an effort to perpetuate the “myth” that filing for bankruptcy ruins consumers' credit scores for years.
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. 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.” The Metro 2 standards have different “CII indicator” codes that are used to note the filing and discharge of Chapter 7 and 13 petitions. Plaintiffs allege that the CII indictor “D” is used when a Chapter 13 petition has been filed, but no discharge yet entered.
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. 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.”

Burrows, 2017 WL 1046973 at *1-*2 (citations omitted).

         The original complaint in this case was filed by Torion against Chase and Equifax, Inc. on January 26, 2017. Dkt. 1. Following this court's order in Burrows, Torion filed his first amended complaint (the “FAC”) on April 28, 2017. Dkt. 23. The parties subsequently stipulated to the dismissal of Equifax. Dkt. 34. Chase now moves to dismiss the FAC for failure to state a claim. Dkt. 25.

         C. The FAC's Allegations

         The FAC largely follows the template pleading used in these cases. However, the allegations regarding the reported debt balances (i.e., whether the amounts owed must be updated to reflect the lower amounts per the confirmed Chapter 13 plan) have been removed. Instead, the FAC focuses on two interrelated alleged inaccuracies: (1) that Chase “is reporting two accounts of Plaintiff's as being in collections and charged off despite the inclusion of the account in Plaintiff's chapter 13 bankruptcy filing, ” FAC ¶ 2; and (2) that Chase is “not following industry ...

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