Scaife v. Experian Information Solutions Inc et al

Filing 79

MEMORANDUM OPINION. Signed by Judge Corey L. Maze on 4/26/2021. (SRD)

FILED
2021 Apr-26 PM 02:58
U.S. DISTRICT COURT
N.D. OF ALABAMA

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
EASTERN DIVISION
CHRISTOPHER SCAIFE, as
Guardian of ANDREW E.
SCAIFE,
Plaintiff,
v.
NATIONAL CREDIT
SYSTEMS, INC.,
Defendant.

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Case No.: 1:20-cv-00379-CLM

MEMORANDUM OPINION
When Andrew Scaife moved out of Maple Village Apartments, Maple Village
charged him around $734 for smoking damage and an outstanding water utility bill.
Andrew argues that he doesn’t owe Maple Village the full $734 because, Andrew
claims, Alabama law requires Maple Village to pay him $600 for not returning his
original security deposit or providing him with an itemization of damages.
But Andrew doesn’t sue Maple Village to determine whether it owes him
$600. Instead, Christopher Scaife, Andrew’s father and legal guardian, sues National
Credit Systems, Inc. (“NCS”) under the Fair Credit Reporting Act (“FCRA”) for
reporting that Andrew owed Maple Village about $734 and then failing to conduct
an investigation that would have revealed that Maple Village owed Andrew $600.
Christopher also says that NCS violated the Fair Debt Collection Practices Act
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(“FDCPA”) by failing to communicate with credit reporting agencies (“CRAs”) that
Andrew disputed the $734 debt; by misrepresenting the character, amount, or legal
status of Andrew’s debt; and by seeking to collect a debt not permitted by law.
There is a genuine dispute of material fact as to whether NCS informed the
CRAs that Andrew disputed the $734 debt. So a jury must decide whether NCS
violated the FDCPA by failing to communicate that Andrew disputed the $734. For
the reasons stated within, all other claims will be dismissed.
STATEMENT OF THE FACTS
A.

The Moveout
Andrew lived in Maple Village from December 2011 until March 2017.

Andrew’s first lease with Maple Village required him to pay a $300 security deposit.
Doc. 1-1 at 2. But Andrew’s final lease with Maple Village, which governed the
lease term of February 1, 2016 to January 31, 2017, did not require Andrew to pay
a security deposit. Doc. 77 at 18.
On January 17, 2017, Christopher informed Maple Village that Andrew would
be moving out by March 31. That same day, Andrew’s mother, Sue Scaife, provided
Maple Village with a notice to vacate that included a forwarding address for Andrew.
The forwarding address was the address where Andrew’s parents lived.
Andrew moved out of Maple Village on March 31. When Andrew moved out,
Maple Village charged him $734.56 because of damage from smoking inside the
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apartment and a water utility bill. And because Maple Village’s final account
balance reflected that it had $0 in deposits on hand from Andrew, it did not reimburse
him for his security deposit. The Scaifes claim that they never received this final
account statement from Maple Village.
B.

Debt Collection
A little less than two months after Andrew moved out, Maple Village hired

NCS to collect from Andrew. In October 2017, NCS wrote to Andrew demanding
payment on the debt claimed by Maple Village. Christopher wrote back to NCS,
asserting that Andrew owed Maple Village no money and that Maple Village had
violated Alabama law by not notifying Andrew about what happened to his security
deposit or providing him an itemization of damages.
From October 2017 to November 2019, Christopher continued to dispute the
debt and requested that NCS not report the debt to CRAs.
C.

Credit Reports
In October 2019, Andrew obtained credit reports from Experian, Equifax, and

TransUnion that included the debt allegedly owed NCS. So, in January 2020,
Andrew wrote to Experian disputing the debt. According to Andrew’s letter, he had
paid all rent as it came due, and Maple Village had never provided him with an
itemization of damages.

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NCS received Andrew’s dispute around ten days later and launched an
investigation. As part of its investigation, NCS reached out to Maple Village, which
responded that Andrew still owed it the $734.56. So NCS continued to verify the
debt as owed but states that it told the CRAs that Andrew disputed the debt. Andrew,
however, obtained credit reports after NCS verified the debt as accurate, which
include no notation that NCS marked the debt as disputed.
Andrew then tried to refinance a mortgage currently in Christopher’s name.
According to the Scaifes, Sun Trust Bank declined to extend Andrew credit because
of derogatory information on his credit report—i.e., the NCS entry that Andrew had
an open account for $734.56.
STANDARD OF REVIEW
Christopher and NCS each move for summary judgment. See Docs. 59, 61. In
considering cross-motions for summary judgment, the court views the facts “in the
light most favorable to the non-moving party on each motion.” See Chavez v.
Mercantil Commercebank, N.A., 701 F.3d 896, 899 (11th Cir. 2012). Summary
judgment is appropriate when there is no genuine dispute of material fact and the
moving party is entitled to judgment as a matter of law. FED. R. CIV. P. 56(a). A
genuine dispute of material fact exists when “the evidence is such that a reasonable
jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 248 (1986).
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ANALYSIS
The court starts by explaining the Scaifes’ argument for why NCS wrongly
reports that Andrew owes Maple Village $734. Under Alabama law, a landlord must
either refund a tenant his entire security deposit or—within 60 days after termination
of the tenancy—provide the tenant with an itemized list of amounts withheld. See
Ala. Code § 35-9A-201. Landlords who violate this requirement must “pay the
tenant double the amount of the tenant’s original deposit.” See id. Because Maple
Village failed to either refund Andrew his original $300 security deposit or provide
him with an itemization of damages, the Scaifes say Maple Village owes him $600.
So Andrew shouldn’t be liable to Maple Village for the full $734 that it says he owes.
Before addressing whether Maple Village’s alleged violation of Alabama law
permits Andrew to recover from NCS, the court must address NCS’s argument that
Andrew lacks standing to sue NCS under the FCRA and FDCPA.
I.

Standing
To determine whether a plaintiff has standing to sue, the court looks for three

things: “(1) an injury in fact that (2) is fairly traceable to the challenged action of the
defendant and (3) is likely to be redressed by a favorable decision.” See Wood v.
Raffensperger, 981 F.3d 1307, 1314 (11th Cir. 2020). NCS asserts that Andrew
cannot meet the first two requirements.

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A.

Injury in Fact

An injury in fact must be both concrete and particularized. See id. All agree
that Andrew’s alleged injury—the reporting/seeking to collect a debt that Andrew
says he doesn’t owe and the refusal to mark the debt as disputed—is particularized
because it posed a personal risk to Andrew. It is not an injury that Andrew shares
with society at large.1
To satisfy the concreteness requirement, an injury must be real and not
abstract. See Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1548 (2016). In other words,
to be concrete, an injury (or the risk of injury) must actually exist. See id. The risk
of injury from NCS’s attempts to collect the alleged debt directly from Andrew
differs from the risk of injury from NCS’s reporting of the debt to the CRAs. So the
court will address each action separately.
1. Dunning letters: Andrew argues that NCS’s insistence in dunning letters
that Andrew owed Maple Village $734 violated two provisions of the FDCPA: 15
U.S.C. § 1692e(2) and 15 U.S.C. § 1692f(1). Section 1692e(2) prohibits debt
collectors from falsely representing “the character, amount, or legal status of any
debt.” 15 U.S.C. § 1692e(2). Section 1692f(1) prohibits “[t]he collection of any
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Part of NCS’s standing argument is that Christopher lacks standing to bring this case on behalf
of Andrew. But a guardian may “sue or defend on behalf of a minor or an incompetent person.”
See Fed. R. Civ. P. 17(c)(1). And the probate court of St. Clair County has declared Andrew
incapacitated and named Christopher as Andrew’s guardian. See Doc. 60-1 at 5. So the court finds
that Christopher can bring this case on Andrew’s behalf. The court also rejects NCS’s argument
that Christopher has filed this case on behalf of himself and not Andrew.
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amount . . . unless such amount is expressly authorized by the agreement creating
the debt or permitted by law.” 15 U.S.C. § 1692f(1).
The problem for Andrew is that no evidence suggests the dunning letters
misled him or that he tried to pay NCS the $734. Instead, Christopher immediately
responded to the dunning letters by informing NCS that Andrew didn’t have to pay
the $734 because Maple Village violated Alabama law by not informing Andrew
about what happened to his security deposit. And as the Eleventh Circuit has recently
explained, misrepresentations that violate the FDCPA “are not actionable absent
reliance and ensuing damages.” Trichell v. Midland Credit Mgmt., Inc., 964 F.3d
990, 1000 (11th Cir. 2020).
The Scaifes seek to establish that Andrew suffered a concrete injury from
NCS’s dunning letters by pointing out that “he and his guardian have spent plenty
of time and postage attempting to dispute the inaccurate debt.” Doc. 67 at 10–11.
But Christopher, not Andrew, is the one who wrote to NCS in response to its dunning
letters. (Andrew only disputed the debt with Experian.) And Christopher has sued
on behalf of Andrew, not on behalf of himself. So Christopher cannot use his own
injuries to establish standing for Andrew. In short, like the plaintiffs in Trichell, the
Scaifes allege that Andrew received misleading communications that did not mislead
him. See Trichell, 964 F.3d at 1005. And the Scaifes plead the same FDCPA claims
as the plaintiffs in Trichell. See id. at 994. So this court must reach the same result
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as the Circuit Court did in Trichell: Andrew lacks standing to assert FDCPA claims
based on dunning letters that did not mislead him.
Christopher’s briefs only discuss NCS’s alleged violations of 15 U.S.C.
§§ 1692e(2), 1692f(1) in connection with the dunning letters. See Doc. 64 at 17–20,
Doc. 71 at 12–13. He does not assert that NCS’s communications with the CRAs
violated these two FDCPA provisions or allege that any other action by NCS
violated these statutes. The court will therefore dismiss the claims under 15 U.S.C.
§§ 1692e(2), 1692f(1) for lack of jurisdiction.
2. Reports to CRAs: That said, Christopher also sues NCS under 15 U.S.C.
§§ 1681s-2, 1692e(8) for reporting the $734 debt to the CRAs and for failing to
communicate to the CRAs that Andrew disputed the debt.
The reporting of inaccurate information about a plaintiff’s credit to a credit
monitoring service creates an injury that satisfies Article III’s concreteness
requirement. See Pedro v. Equifax, Inc., 868 F.3d 1275, 1280 (11th Cir. 2017). And
the failure to report that the debt is disputed creates a concrete injury because it
exposes the plaintiff “to a real risk of financial harm caused by an inaccurate credit
rating.” Sayles v. Advanced Recovery Sys., Inc., 865 F.3d 246, 250 (5th Cir. 2017).
The Scaifes have presented evidence that Andrew suffered not only a risk of
harm from the reporting of the $734 debt to the CRAs but also actual harm. For
example, Andrew suffered an injury by having to spend time trying to resolve the
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alleged credit inaccuracy with Experian. See Pedro, 868 F.3d at 1280. And,
according to Andrew, Sun Trust Bank declined to extend him credit because of the
NCS entry on his credit report. So the court finds that the claims related to NCS’s
reporting of the $734 debt to the CRAs meet Article III’s injury in fact requirement.
B.

Traceability

Besides arguing that Andrew cannot meet Article III’s injury in fact
requirement, NCS argues that Andrew also cannot meet Article III’s traceability
requirement. “The causation element of Article III standing requires a causal
connection between the injury and the conduct complained of—the injury has to be
fairly traceable to the challenged action of the defendant, and not the result of the
independent action of some third party not before the court.” Lujan v. Defs. of
Wildlife, 504 U.S. 555, 560 (1992).
NCS contends that the Scaifes cannot prove causation because the injury that
Andrew complains of is that Maple Village failed to return his security deposit, so
Andrew’s injury is traceable to Maple Village, not NCS. Granted, Andrew argues
that Maple Village has injured him by not paying him the $600 that Maple Village
owes him under Alabama law. But that’s not the only injury Andrew asserts. Andrew
also says that NCS injured him by inaccurately reporting that Andrew owed Maple
Village $734, without mentioning that the Scaifes dispute $600 of that amount.

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The CRAs wouldn’t have known about the $734 debt if NCS hadn’t told them
about it. So the court finds that the reporting of the $734 debt to the CRAs is fairly
traceable to NCS and that Andrew meets the traceability requirement of Article III.
***
In summary, Andrew suffered no concrete injury from NCS’s dunning letters,
so the court will dismiss the FDCPA claims related to the dunning letters for lack of
standing. But Andrew has suffered a concrete injury from the reporting of the $734
debt to the CRAs and that injury is fairly traceable to NCS. So Christopher has
Article III standing to bring Andrew’s FCRA and FDCPA claims related to NCS’s
reporting of the debt to the CRAs.
II.

Fair Debt Collection Practice Act Claims (Count 5)
The court’s jurisdictional ruling leaves only one FDCPA claim: an alleged

violation of 15 U.S.C. § 1692e(8). Section 1692e(8) prohibits debt collectors from
“[c]ommunicating or threatening to communicate to any person credit information
which is known or which should be known to be false, including the failure to
communicate that a debt is disputed.” 15 U.S.C. § 1692e(8). The Eleventh Circuit
has yet to address when a debt collector’s communication with CRAs violates this
provision. But at least three other Courts of Appeal have held that debt collectors
violate § 1692e(8) when they elect to communicate with CRAs about an alleged debt
but omit that the debtor disputes the debt. See Evans Portfolio Recovery Assocs.,
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LLC, 889 F.3d 337, 349 (7th Cir. 2018); Sayles, 865 F.3d at 249–50; Wilhelm v.
Credico, Inc., 519 F.3d 416, 418 (8th Cir. 2008). These courts note two reasons why
a debt collector who knows that a debtor disputes a debt but fails to mention that in
debt related communications with CRAs violates the FDCPA. First, nothing within
the text of § 1692e(8) requires the debtor’s dispute to be valid or reasonable before
triggering § 1692e(8)’s protections. See Evans, 889 F.3d at 346–47. And second,
“the failure to inform a credit reporting agency that the debtor disputed his or her
debt will always have influence on the debtor, as this information will be used to
determine the debtor’s credit score.” See id. at 349.
The Scaifes argue that NCS violated § 1692e(8) when it updated its entry with
the CRAs after Andrew disputed the debt with Experian in January 2020. 2 NCS’s
records show that it received Andrew’s dispute on January 20, 2020 and responded
to it on February 3, 2020. Five days later, NCS updated its entry on Andrew’s
TransUnion credit report, but the entry does not include a notation that Andrew
disputed the debt the month before. See Doc. 1-1 at 43. The Scaifes point to this lack
of a dispute notation as evidence that NCS did not tell TransUnion that Andrew
disputed the debt.

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The FDCPA has a one-year statute of limitations. See Rotiske v. Klemm, 140 S. Ct. 355, 360–61
(2019). And NCS’s communication with the CRAs after Andrew disputed the debt in January 2020
is the only NCS communication with the CRAs that Andrew shows falls within the applicable
statute of limitations. So the court limits its discussion of the alleged violation of § 1692e(8) to
this communication.
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NCS responds with a declaration from its Vice President of Operations that
when Andrew disputed the debt it marked his account as disputed with the credit
bureaus and launched an investigation. And notes from an NCS employee who
responded to Andrew’s January 2020 dispute state that the employee would report
the dispute. According to NCS, these statements from its employees establish that
NCS reported the dispute because the TransUnion credit report is irrelevant,
unauthenticated evidence that the Scaifes cannot use to defeat summary judgment.
When presented with a nearly identical set of facts, the Southern District of
Florida held that there was a genuine dispute of material fact as to whether the
defendant violated § 1692e(8). See Sanchez v. Healthcare Revenue Recovery Grp.,
LLC, 2018 WL 2021359, at *2–4 (S.D. Fla. Mar. 8, 2018). There, the court found
that a declaration from the defendant’s President that his company reported the
disputed status of the plaintiff’s debt to the CRAs conflicted with credit reports that
included no notation that the plaintiff disputed the debt. Id. at *3. And the court
reasoned that the plaintiff did not have to authenticate the credit reports at the
summary judgment stage. Id. at *4.
This court agrees. “[O]therwise admissible evidence” may “be submitted in
inadmissible form at the summary judgment stage, though at trial it must be
submitted in admissible form.” McMillian v. Johnson, 88 F.3d 1573, 1584 (11th Cir.
1996). A reasonable juror could find that NCS’s failure to note Andrew’s dispute on
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the TransUnion report means that NCS did not report the dispute. Or a reasonable
juror could believe NCS’s witness testimony. That means there is a genuine dispute
of material fact about whether NCS reported the dispute. So the court will deny both
parties’ motions for summary judgment on the § 1692e(8) claims. 3
III.

Fair Credit Reporting Act Claims (Count 4)
The Scaifes assert that NCS’s communications with the CRAs also violated

FCRA Section 1681s-2(b). Doc. 1 ¶¶ 69–73. Section 1681s-2(b) prohibits furnishers
from furnishing information relating to a consumer to CRAs if: (a) the consumer has
notified the furnisher that the information is inaccurate; and, (b) the information is,
in fact, inaccurate. 15 U.S.C. § 1681s-2(b).
The Scaifes contend that NCS provided the CRAs with inaccurate information
when it: (1) verified that Andrew owed the full $734 debt when Maple Village had
not returned his security deposit, and (2) failed to report that Andrew disputed the
debt. The court will address each alleged inaccuracy in turn.
A.

The Scaifes’ claim that Andrew does not owe the full $734 is a legal
dispute, not a factual inaccuracy.

The FCRA requires a plaintiff to “present evidence tending to show that a
credit reporting agency prepared a report containing ‘inaccurate’ information.”
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In its response to Christopher’s motion for summary judgment, NCS contends that it can prevail
on a bona fide error defense to the FDCPA claims. Because the court finds that there is a genuine
dispute of material fact about whether NCS violated § 1692e(8) and NCS did not move for
summary judgment on the bona fide error defense, the court will not address the bona fide error
defense in this opinion. NCS will be free to assert the bona fide error defense at trial.
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Batterman v. BR Carroll Glenridge, LLC, 829 F. App’x 478, 481 (11th Cir. 2020).
And when suing a furnisher under § 1681s-2(b), “[a] plaintiff must show a factual
inaccuracy rather than the existence of disputed legal questions.” Hunt v. JPMorgan
Chase Bank, Nat’l Ass’n, 770 F. App’x 452, 458 (11th Cir. 2019). Here, the Scaifes
don’t dispute that the reported debt is accurate as to the amount Andrew owed Maple
Village for smoking damage and the remaining water utility bill. The Scaifes instead
contend that Andrew doesn’t owe Maple Village the full $734 because Maple
Village must pay him $600 for failing to return the $300 security deposit he paid in
2011. As shown by the Eleventh Circuit’s opinion in Batterman, the Scaifes’ failure
to dispute the amount Andrew owed in damages is fatal to his claim that NCS
inaccurately verified the $734 debt.
1. Batterman: This court has recently recounted in detail the facts and holding
in Batterman. See Edwards v. Med-Trans Corp., 2021 WL 1087228, at *3–4 (N.D.
Ala. Mar. 22, 2021). In short, Jared Batterman rented an apartment from BR Carroll
and moved out early because of damage from flooding in his apartment. BR Carroll
then claimed that Batterman owed it $2,816 for early termination damages and later
hired a third-party debt collector who reported the debt to CRAs. Batterman then
sued BR Carroll, the third-party debt collector, and the CRAs under the FCRA,
asserting that he did not owe the early termination damages because his apartment’s
uninhabitability meant he lawfully terminated the lease. See id. at *3.
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The Eleventh Circuit held that Batterman failed to state a claim under the
FCRA because “[t]he report of the liquidated damages is not a factual inaccuracy;
rather, it is a contractual dispute.” Batterman, 829 F. App’x at 481. And “[s]uch
contractual disputes require resolution by a court of law, not a credit reporting
agency.” See id. In other words, “because Batterman challenged BR Carroll’s
reading of the contract, rather than the amount he reportedly owed under the contract,
he had not pleaded a viable FCRA claim.” Edwards, 2021 WL 1087228, at *4.
2. Application to this case: Applying Batterman, the Scaifes’ main contention
that Andrew does not owe the full $734 because Maple Village violated the Alabama
Landlord and Tenant Law presents a legal defense to payment, not a factual
inaccuracy. To determine whether Andrew had this defense to payment, NCS would
have had to make the following legal determinations: (1) the failure to refund the
security deposit or provide Andrew with an itemization of damages violated
Alabama law; (2) the remedy for Maple Village’s violation of Alabama law is that
it owed Andrew $600; and (3) that Maple Village owed Andrew $600 relieved him
of his obligation to pay Maple Village the full $734 balance that he owed it. The
FCRA does not require NCS to resolve these legal questions; that’s left up to the
courts. See Batterman, 829 F. App’x at 481. So NCS did not violate the FCRA by
failing to consider Maple Village’s potential liability to Andrew under Alabama law
when providing the CRAs with information about Andrew’s alleged debt.
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The Scaifes’ argument that Maple Village’s final account statement was
inaccurate because it failed to address the $300 security deposit Andrew paid in 2011
comes closer to pointing to a potential factual inaccuracy in the debt that Andrew
reportedly owed. But the obligations listed in the final account statement relate to
Andrew’s obligations under the lease contract he signed in February 2016, not the
original lease contract he signed in 2011. Unfortunately, the 2016 lease contract is
silent on whether Andrew’s original security deposit would carry over to the new
lease term. See Doc. 77 at 18–23. And the Scaifes have provided no evidence that
Andrew paid a security deposit when he signed the 2016 lease contract. So the court
finds that the final account statement’s notation that the total deposit was $0 is not a
factual inaccuracy. Instead, whether Andrew’s original security deposit applied to
the 2016 lease, is a contractual dispute, like the one in Batterman, that requires
resolution by a court of law. NCS therefore did not violate the FCRA when it verified
with the CRAs that Andrew owed Maple Village $734.
B.

NCS did not violate the FCRA by failing to report that Andrew
disputed the debt.

The Scaifes finally assert that NCS violated the FCRA by failing to report to
the CRAs that Andrew disputed the debt it alleged he owed Maple Village. The
Third, Fourth, and Ninth Circuits have all held that a furnisher can be liable under
§ 1681s-2(b) when it receives notice that a consumer disputes a debt but fails to
report to CRAs the disputed status of the debt. See Seamans v. Temple Univ., 744
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F.3d 853, 866–67 (3d Cir. 2014); Gorman v. Wolpoff & Abramson, LLP, 584 F.3d
1147, 1163–65 (9th Cir. 2009); Saunders v. Branch Banking & Trust Co. of Va., 526
F.3d 142, 150 (4th Cir. 2008). This court agrees that information provided a CRA
can be inaccurate or incomplete under § 1681s-2(b) when a furnisher fails to report
that a consumer disputes a reported debt.
As explained above, there is a genuine dispute of material fact about whether
NCS reported to the CRAs that Andrew disputed the $734 debt. But unlike the
FDCPA, the FCRA makes a furnisher liable for failing to report a dispute only if the
dispute is meritorious. See Gorman, 584 F.3d at 1163. That is because while the
FDCPA is concerned with how the failure to report the dispute influences the debtor,
the FCRA is concerned only with the failure to report disputes “that could materially
alter how the reported debt is understood” by CRAs. See id. Here, the Scaifes have
not pointed to any factual inaccuracies in the information NCS provided the CRAs.
Instead, they have merely shown that Andrew may not be legally obligated to pay
the $734 under Alabama law or his final lease contract. So the court finds that NCS’s
alleged failure to report that Andrew disputed the debt did not materially alter how
the CRAs understood his reported debt. The court will thus grant NCS’s motion for
summary judgment on the FCRA claims and deny Christopher’s motion for
summary judgment on those claims.

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CONCLUSION
In summary, the court will dismiss without prejudice the FDCPA claims
related to the dunning letters for lack of jurisdiction. The court will dismiss with
prejudice the FCRA claims. The claims under the FDCPA that NCS failed to report
to the CRAs that Andrew disputed the debt will go to trial.
The court will therefore enter a separate order that DENIES Christopher’s
motion for summary judgment (doc. 59) and GRANTS in PART and DENIES in
PART NCS’s motion for summary judgment (doc. 61).
DONE this April 26, 2021.

_________________________________
COREY L. MAZE
UNITED STATES DISTRICT JUDGE

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