Folkes, et al v. Equifax Information Services, LLC, et al

Filing 32

MEMORANDUM OPINION AND ORDER directing that Alabama Telco's 18 motion to dismiss is DENIED in part and GRANTED in part as follows: (1) With regard to Plaintiffs' FCRA claim against Alabama Telco (Count I), the 18 motion is DENIED; (2) With regard to Plaintiffs' state-law invasion-of-privacy claim against Alabama Telco (Count III), the motion is GRANTED. Signed by Chief Judge William Keith Watkins on 5/9/13. (scn, )

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF ALABAMA
SOUTHERN DIVISION
KENNETH WAYNE FOLKES, et al.,
Plaintiffs,
v.
EQUIFAX INFORMATION
SERVICES LLC, et al.,
Defendants.

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) CASE NO. 1:12-CV-900-WKW
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MEMORANDUM OPINION AND ORDER
In today’s America, there exists an entire statutory scheme devoted to
protecting people’s credit reports against inaccuracies – the Fair Credit Reporting Act
(the “FCRA”), 15 U.S.C. § 1681 et seq. Plaintiffs Cindy and Kenneth Wayne Folkes
invoke that statute, along with Alabama law, against Defendant Alabama Telco Credit
Union (“Alabama Telco”) for allegedly failing to investigate inaccuracies in their
credit report. Alabama Telco moves to dismiss (Doc. # 18), and its motion is due to
be denied in part and granted in part.
I. JURISDICTION AND VENUE
Subject matter jurisdiction is exercised under 28 U.S.C. §§ 1331 and 1367.
Personal jurisdiction and venue are uncontested.

II. STANDARD OF REVIEW
A Rule 12(b)(6) motion to dismiss tests the sufficiency of the complaint against
the legal standard set forth in Rule 8: “a short and plain statement of the claim
showing that the pleader is entitled to relief,” Fed. R. Civ. P. 8(a)(2). When
evaluating a motion to dismiss pursuant to Rule 12(b)(6), the court must take “the
factual allegations in the complaint as true and construe them in the light most
favorable to the plaintiff.” Pielage v. McConnell, 516 F.3d 1282, 1284 (11th Cir.
2008). However, “the tenet that a court must accept as true all of the allegations
contained in a complaint is inapplicable to legal conclusions.” Ashcroft v. Iqbal, 556
U.S. 662, 663 (2009).
“To survive a motion to dismiss, a complaint must contain sufficient factual
matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Iqbal,
556 U.S. at 678 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
“Determining whether a complaint states a plausible claim for relief [is] . . . a
context-specific task that requires the reviewing court to draw on its judicial
experience and common sense.” Id. at 663 (alteration in original) (citation omitted).
“[F]acial plausibility” exists “when the plaintiff pleads factual content that allows the
court to draw the reasonable inference that the defendant is liable for the misconduct
alleged.” Id. (citing Twombly, 550 U.S. at 556). The standard also “calls for enough
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fact to raise a reasonable expectation that discovery will reveal evidence” of the claim.
Twombly, 550 U.S. at 556. While the complaint need not set out “detailed factual
allegations,” it must provide sufficient factual amplification “to raise a right to relief
above the speculative level.” Id. at 555.
III. FACTUAL BACKGROUND
Cindy and Kenneth Wayne Folkes filed for bankruptcy in 2006. After they
completed a payment plan, the bankruptcy judge discharged their debts, including a
debt owed to Defendant Alabama Telco Credit Union. It was September 2011, and
the Folkeses were ready for a fresh start.
But their credit report was stuck in the past. Equifax, a credit reporting agency,
continued to report an outstanding balance on the Folkeses’ debt to Alabama Telco.
When Ms. Folkes complained, Equifax checked with Alabama Telco, and Alabama
Telco assured Equifax the information was accurate. Again and again Ms. Folkes
tried to correct the inaccuracy. Each time, she met the same result. So the Folkeses’
credit report remained uncorrected.
The inaccuracy had a profound effect on the Folkses.

They suffered

humiliation and embarrassment; they grew fearful, anxious, and frustrated; they were
angry, upset, and emotionally distressed; they experienced other negative emotions.

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(Doc. # 1 ¶ 48.) They filed this suit against four Defendants1 – one of which was
Alabama Telco – on October 15, 2012. Alabama Telco now moves to dismiss both
the claims against it.
IV. DISCUSSION
The complaint accuses Alabama Telco of violating the FCRA (Count I) and
committing the state-law tort of invasion of privacy (Count III). This opinion will
address each in turn.
A.

The Folkeses’ FCRA claim survives.
Alabama Telco argues that the Folkeses’ failure-to-investigate claim under the

FCRA should be dismissed for two reasons: (1) It is barred by the language of the
FCRA, and (2) It is precluded by the Bankruptcy Code. Neither argument warrants
dismissal of that claim.
1.

The FCRA does not bar the Folkeses’ failure-to-investigate claim.

The parties agree the Folkeses cannot hold Alabama Telco liable for a violation
of its statutory duty to provide accurate information. See 15 U.S.C. § 1681s-2(a)
(imposing duty of accuracy on information furnishers); id. § 1681s-2(c)(1) (limiting

1

Two Defendants (Security Credit Services, LLC, and Experian Information Solutions,
Inc.) have been dismissed by agreement (Docs. # 28, 31), and one (Equifax Information
Services, LLC) answered the complaint rather than moving to dismiss it (Doc. # 24).
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liability for breaches of the duty of accuracy). If the Folkeses sued Alabama Telco for
violating that duty, then dismissal would indeed be proper.
But as the Folkeses point out, they did not sue Alabama Telco for breaching its
duty of accurate reporting; Alabama Telco stands accused of failing to properly
investigate reports of inaccuracies. See 15 U.S.C. § 1681s-2(b) (creating a duty to
investigate disputed information). According to the Folkeses, breach of that duty does
give rise to a private right of action, and Alabama Telco concedes the point through
silence. See also Green v. RBS Nat’l Bank, 288 F. App’x. 641, 642 (11th Cir. 2008)
(noting “[t]he FCRA does provide a private right of action for a violation of §
1681s–2(b)”). Accordingly, Alabama Telco’s first basis for dismissal is unpersuasive.
2.

The Bankruptcy Code does not preclude the Folkeses’ failure-toinvestigate claim.

Next, Alabama Telco argues that the Folkses’ FCRA claim is precluded by
Section 524 of the Bankruptcy Code, which enjoins creditors from attempting to
collect discharged debts. In support of its position, Alabama Telco cites the Ninth
Circuit’s decision in Walls v. Wells Fargo Bank, N.A., 276 F.3d 502 (9th Cir. 2002).
In Walls, the plaintiff sued a creditor for trying to collect a discharged debt in
violation of Section 524 and the Fair Debt Collections Practices Act (the “FDCPA”).
The court held that the Bankruptcy Code precluded the FDCPA claim because
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allowing relief under both statutes “would circumvent the remedial scheme of the
Code under which Congress struck a balance between the interests of debtors and
creditors by permitting (and limiting) debtors’ remedies for violating [Section 524]
to contempt.” Id. at 510. Thus, according to Walls, the FDCPA offers no relief for
attempts to collect debts discharged in bankruptcy.
But as it applies to the FCRA, the Eleventh Circuit has never endorsed the
rationale of Walls, and the Seventh Circuit rejected it, see Randolph v. IMBS, Inc., 368
F.3d 726, 732–733 (7th Cir. 2004) (Easterbrook, J.) (distinguishing Walls and
concluding the Bankruptcy Code does not “repeal or curtail” consistent portions of the
FCRA). Further, even courts bound to follow the Walls decision uniformly hold its
reasoning does not extend to claims under the FCRA. See, e.g., King v. Bank of Am.,
N.A., No. C-12-04168, 2012 WL 4685993, at *9 (N.D. Cal. Oct. 1, 2012)
(distinguishing Walls and finding the Bankruptcy Code does not preclude claims
under the FCRA). To the best of the court’s knowledge, no court has ever held the
Bankruptcy Code conflicts with the FCRA such that one must take priority over the
other. Cf. In re Potes, 336 B.R. 731, 733 (Bankr. E.D. Va. 2005) (“[T]here is no
express provision in either the Fair Credit Reporting Act or the Bankruptcy Code that
[suggests] either [supersedes] the other. They co-exist.”).

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“[W]here two statutes are capable of co-existence, it is the duty of the courts,
absent a clearly expressed congressional intention to the contrary, to regard each as
effective.” Ruckelshaus v. Monsanto Co., 467 U.S. 986, 1018 (1984). Alabama Telco
identifies no conflict between the Bankruptcy Code and the FCRA that suggests they
cannot coexist in peace; nor does it point to any clear expression of a congressional
intent that Section 524 should preclude the FCRA. Accordingly, the court finds that
the Bankruptcy Code does not preclude the Folkses’ FCRA claim.2
B.

The Folkeses’ invasion-of-privacy claim is due to be dismissed.
The FCRA expressly preempts state-law torts based on the kind of conduct

Alabama Telco is accused of. 15 U.S.C. § 1681t(b)(1)(F); Sigler v. RBC Bank (USA),
712 F. Supp. 2d 1265, 1269 (M.D. Ala. 2010) (“By its terms, 15 U.S.C. §
1681t(b)(1)(F) explicitly preempts all state laws in the areas covered by
§ 1681s-2[.]”). The parties agree that provision applies to preempt the Folkeses’ statelaw invasion-of-privacy claim against Alabama Telco.
2

(See Doc. # 25, at 3

A contrary ruling would put Mr. Metcalf (the Folkeses’ counsel) in a pickle. Several
years ago, he represented a different client against creditors who continued reporting a debt
discharged in bankruptcy. See Norman Applied Card Sys., Inc. (In re Norman), Adv. Pro. No.
06–1133, 2006 WL 2818814, at *1 (Bankr. M.D. Ala. Sept. 29, 2006). In that case, Mr. Metcalf
took the approach Alabama Telco suggests and treated the creditors’ conduct as a violation of
Section 524. Id. Although Judge Sawyer entertained the challenge, he was troubled that the
debtor had “resorted . . . in the first instance” to the bankruptcy court and had not first “availed
himself of remedies under the Fair Credit Reporting Act.” Id. Mr. Metcalf took the hint, and he
now proceeds exactly as Judge Sawyer suggested: The Folkeses are availing themselves of
remedies under the FCRA instead of resorting to the bankruptcy court in the first instance.
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(“Plaintiffs agree that Count III, as to [Alabama Telco] only, should be dismissed.”).
Accordingly, and uncontroversially, that claim is due to be dismissed.
V. CONCLUSION
It is therefore ORDERED that Alabama Telco’s motion to dismiss (Doc. # 18)
is DENIED in part and GRANTED in part as follows:
(1)

With regard to Plaintiffs’ FCRA claim against Alabama Telco (Count I),
the motion (Doc. # 18) is DENIED;

(2)

With regard to Plaintiffs’ state-law invasion-of-privacy claim against
Alabama Telco (Count III), the motion is GRANTED.

DONE this 9th day of May, 2013.
/s/ W. Keith Watkins
CHIEF UNITED STATES DISTRICT JUDGE

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