Neill v. Experian Information Solutions Incorporated et al

Filing 61

ORDER: Defendant Trans Union LLC's Motion for Judgment on the Pleadings 39 is denied. Defendant Experian Information Solutions, Inc.'s Motion for Judgment on the Pleadings 41 is denied. Plaintiff's Motion for Leave to File a Second Amended Complaint 50 is granted. Plaintiff shall file the Second Amended Complaint on the docket by September 6, 2017. Signed by Judge John J Tuchi on 8/31/2017. (REK)

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1 WO NOT FOR PUBLICATION 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Patrick Neill, No. CV-16-04326-PHX-JJT Plaintiff, 10 11 v. 12 ORDER Experian Information Solutions, Inc., et al., 13 Defendants. 14 15 At issue is Defendant Trans Union, LLC’s (“Trans Union”) Motion for Judgment 16 on the Pleadings (Doc. 39, Mot. for J. on the Pleadings (“MJOP”)), to which Plaintiff 17 Patrick Neill filed a Response (Doc. 51, Resp.) and Trans Union filed a Reply (Doc. 52). 18 Defendant Experian Information Solutions, Inc. (“Experian”) joined in Trans Union’s 19 Motion (Doc. 41) and also filed a Reply (Doc. 53). On the same day as he filed the 20 Response to Trans Union’s Motion, Plaintiff also filed a Motion for Leave to File a 21 Second Amended Complaint (Doc. 50), to which Trans Union filed a Response (Doc. 54) 22 and Plaintiff filed a Reply (Doc. 55). For the reasons set forth below, the Court will deny 23 Defendants’ Motion under Federal Rule of Civil Procedure 12(c) and grant Plaintiff’s 24 Motion under Federal Rule of Civil Procedure 15. 25 I. BACKGROUND 26 In September 2014, Plaintiff signed a one-year residential lease ending on 27 September 1, 2015, with Park Kiely apartments. (Doc. 16, First Am. Compl. (“FAC”) 28 ¶ 5.) In August 2015, Plaintiff informed the Park Kiely leasing office that he would not 1 1 renew his lease. (FAC ¶ 6.) On August 30, 2015, Plaintiff signed a Resident’s Notice of 2 Intent to Vacate. (FAC ¶ 7.) The notice included the following provision: “I understand 3 that I am NOT giving the required written notice and acknowledge that necessary 4 deductions will be made from my security deposit and other fees may be due under the 5 term of my lease.” (FAC ¶ 7.) However, the original lease did not require Plaintiff to 6 submit a written notice to end the lease. (FAC ¶ 8.) 7 In October 2016, Plaintiff obtained his credit files from Defendants. Both files 8 listed a debt owed to Park Kiely of $6,509.00. (FAC ¶ 9.) On October 25, 2016, Plaintiff 9 submitted letters to both Defendants disputing the Park Kiely debt. (FAC ¶ 10.) In 10 November, Plaintiff received the investigation results from both Defendants. (FAC ¶¶ 12- 11 13.) The Trans Union file listed a debt owed to Park Kiely of $6,509.00, and the Experian 12 file listed a debt owed to Park Kiely of $6,543.00. (FAC ¶¶ 12-13.) 13 In the FAC, the operative pleading, Plaintiff asserts various violations of the Fair 14 Credit Reporting Act, 15 U.S.C. § 1681 et seq. (“FCRA”), against Defendants. 15 Defendants now move for judgment on the pleadings based on Plaintiff’s failure to 16 sufficiently plead his claims. (Docs. 39, 41.) 17 In response, although he contests Defendants’ Motion, Plaintiff filed a Motion for 18 Leave to File a Second Amended Complaint. (Doc. 50.) In relevant part, the proposed 19 Second Amended Complaint (“SAC”) adds an allegation related to Plaintiff’s claims that 20 Defendants failed to follow reasonable procedures in preparing an accurate credit report 21 in violation of 15 U.S.C. § 1681e(b) and Defendants violated § 1681i by failing to 22 conduct reasonable reinvestigations to determine the accuracy of Plaintiff’s disputed debt 23 information. 24 II. LEGAL STANDARDS 25 Rule 12(c) permits a party to move for judgment on the pleadings “[a]fter the 26 pleadings are closed but within such time as not to delay the trial.” A Rule 12(c) motion 27 is functionally identical to a Rule 12(b) motion to dismiss for failure to state a claim, and 28 2 1 the same legal standard applies to both motions. Dworkin v. Hustler Magazine, Inc., 867 2 F.2d 1188, 1192 (9th Cir. 1989). 3 Specifically, a complaint must include “only ‘a short and plain statement of the 4 claim showing that the pleader is entitled to relief,’ in order to ‘give the defendant fair 5 notice of what the . . . claim is and the grounds upon which it rests.’” Bell Atl. Corp. v. 6 Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)); 7 see also Fed. R. Civ. P. 8(a). A dismissal for failure to state a claim can be based on either 8 (1) the lack of a cognizable legal theory or (2) insufficient facts to support a cognizable 9 legal claim. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). “While a 10 complaint attacked by a Rule 12(b)(6) motion does not need detailed factual allegations, a 11 plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more 12 than labels and conclusions, and a formulaic recitation of the elements of a cause of action 13 will not do.” Twombly, 550 U.S. at 555 (citations omitted). The complaint must thus 14 contain “sufficient factual matter, accepted as true, to ‘state a claim to relief that is 15 plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 16 U.S. at 570). 17 “Rule 15(a) declares that leave to amend shall be freely given when justice so 18 requires.” Foman v. Davis, 371 U.S. 178, 182 (1962) (citation and internal quotation 19 marks omitted). “In exercising its discretion with regard to the amendment of pleadings, a 20 court must be guided by the underlying purpose of Rule 15–to facilitate a decision on the 21 merits rather than on the pleadings or technicalities.” Eldridge v. Block, 832 F.2d 1132, 22 1135 (9th Cir. 1987) (citation and internal quotation marks omitted). 23 However, the policy in favor of allowing amendments is subject to limitations. 24 After a defendant files a responsive pleading, leave to amend is not appropriate if the 25 “amendment would cause prejudice to the opposing party, is sought in bad faith, is futile, 26 or creates undue delay.” Madeja v. Olympic Packers, 310 F.3d 628, 636 (9th Cir. 2002) 27 (citation and internal quotation marks omitted). “Futility alone can justify the denial of a 28 motion for leave to amend.” Nunes v. Ashcroft, 375 F.3d 805, 808 (9th Cir. 2003). 3 1 III. ANALYSIS 2 Congress enacted the FCRA to ensure fair and accurate credit reporting, to 3 promote efficiency in the banking system, and to protect consumer privacy. Gorman v. 4 Wolpoff & Abramson, LLP, 584 F.3d 1147, 1153 (9th Cir. 2009). 5 A prerequisite for bringing a claim against a credit reporting agency under either 6 § 1681e or § 1681i is evidence of an inaccuracy in the credit report. Guimond v. Trans 7 Union Credit Info. Co., 45 F.3d 1329, 1333 (9th Cir. 1995); see also Carvalho v. Equifax 8 Info. Servs., LLC, 629 F.3d 876, 890 (9th Cir. 2010) (“Although the FCRA’s 9 reinvestigation provision, 15 U.S.C. § 1681i, does not on its face require that an actual 10 inaccuracy exist for a plaintiff to state a claim, many courts, including our own, have 11 imposed such a requirement.”) 12 A. 13 “In order to make out a prima facie violation under § 1681e(b), a consumer must 14 present evidence tending to show that a credit reporting agency prepared a report 15 containing inaccurate information.” Guimond, 45 F.3d at 1333; see also Loomis v. U.S. 16 Bank Home Mortg., 912 F. Supp. 2d 848, 855 (D. Ariz. 2012). Because the FCRA does 17 not impose strict liability based on an inaccurate report, Defendants can escape liability 18 by showing that they followed reasonable procedures in preparing the report. Guimond, 19 45 F.3d at 1333. However, “reasonableness of the procedures and whether the agency 20 followed them will be jury questions in the overwhelming majority of cases.” Id. Accuracy of Report 21 Defendants first move for judgment on the pleadings because the credit file 22 Plaintiff obtained from Defendants was not a “consumer report” within the meaning of 23 the statute. (MJOP at 5–6.) Relying on the definition in §1681a(d), Defendants claim that 24 in order to qualify as a “consumer report” for purposes of § 1681e liability, the report 25 must be delivered to a third party. Defendants cite to cases from the Eleventh and 26 Seventh Circuits to argue that “a ‘consumer report’ is different from a consumer 27 disclosure that is provided to a consumer as record of his own credit file,” and “there 28 cannot be a consumer report without delivery to a third party.” (MJOP at 5–6.) 4 1 However, the statute does not explicitly require delivery to a third party in order to 2 be a “consumer report.” See § 1681a(d). Rather, a consumer report is “any written, oral, 3 or other communication . . . bearing on a consumer’s credit worthiness . . . which is used 4 or expected to be used . . . for credit or insurance . . . purposes [or] employment 5 purposes.” Id. Cases in this District have declined to follow the interpretation that a 6 consumer report differs from a file pulled for the consumer’s own records. See, e.g., 7 Cairns v. GMAC Mortg. Corp., No. CV-04–1840–PHX–SMM, 2007 WL 735564, at *3 8 (D. Ariz. Mar. 5, 2007). Indeed, the Ninth Circuit has indicated its disapproval of the idea 9 that a consumer report necessitates delivery to a third party. See Guimond, 45 F.3d at 10 1333 (“[W]e find that a failure to comply with §1681e(b) is actionable even absent a 11 denial of credit. Accordingly, the district court erred in finding that any liability under 12 § 1681e(b) was predicated, as a matter of law, on the occurrence of some event—denial 13 of credit or transmission of the report to third parties.”) (emphasis added). Further, the 14 statutory definition states that a consumer report is one that is expected to be used for 15 credit or employment purposes. Plaintiff could pull his file for any number of reasons to 16 establish credit, without requiring Defendants to deliver the report directly to a third 17 party. 18 Because Plaintiff sufficiently alleged that Defendants prepared an inaccurate 19 report, Plaintiff has presented a prima facie violation under § 1681e. Under Guimond, the 20 fact-finder generally determines whether Defendants followed reasonable procedures in 21 preparing the credit files. Accordingly, the Court denies Defendants’ Motion with respect 22 to § 1681e. 23 B. Reasonable Reinvestigation 24 Defendants also contend that Plaintiff did not sufficiently allege that they failed to 25 conduct reasonable reinvestigations under § 1681i. (MJOP at 6.) Under the Federal 26 Rules’ standard for pleading, a court may dismiss a complaint only if the allegations are 27 insufficient to plausibly state a claim. Iqbal, 556 U.S. at 678. To state an FCRA claim, a 28 consumer first needs to allege facts supporting an inference that the consumer reporting 5 1 agency prepared an inaccurate report, Baker v. Trans Union LLC, No. CV-10-8038-PHX- 2 NVW, 2010 WL 2104622, at *4 (D. Ariz. May 25, 2010), which Plaintiff has done. 3 Though the Court notes that Plaintiff’s allegations are not extensively detailed, the 4 Court is satisfied that the allegations are sufficient to plausibly state a §1681i claim. 5 Defendants contend the alleged facts do not provide enough information to show that 6 they did not conduct reasonable reinvestigations; however, Plaintiff is not required to 7 prove his case in the Complaint. See Iqbal, 556 U.S. at 677–78. While Plaintiff may not 8 have all the evidence necessary at this point to prove his case—and indeed Plaintiff is 9 faced with the problem of alleging what did not happen—Plaintiff has alleged sufficient 10 facts to support an inference that Defendants did not conduct reasonable reinvestigations 11 under § 1681i. For example, from the allegation that Plaintiff contacted Defendants but 12 their reinvestigation results continued to state that Plaintiff owed the Park Kiely debt, the 13 Court can infer Defendants may not have reasonably conducted the reinvestigations. 14 Because the Court finds that Plaintiff has pled sufficient facts to support his claim 15 that Defendants did not conduct reasonable reinvestigations, the Court denies 16 Defendants’ Motion with respect to § 1681i. 17 C. Collateral Attack on the Underlying Debt 18 Lastly, Defendants rely on Carvalho to argue that Plaintiff’s claims constitute a 19 collateral attack on the underlying debt, and that the FCRA “is not the proper vehicle for 20 collaterally attacking the legal validity of debt appearing on the consumer report.” (MJOP 21 at 4.) 22 As Plaintiff notes in his Response, the facts of Carvalho materially differ from the 23 allegations in the case at bar. (Resp. at 5.) In Carvalho, the plaintiff obtained medical 24 services from Bayside Medical Group. 629 F.3d at 882. The plaintiff had signed an 25 agreement that stated she be would be responsible for payment in the event that her 26 insurance company did not pay. Id. Neither she nor her insurance company ever remitted 27 payment for the services. Id. The debt later appeared on the plaintiff’s credit report. Id. 28 6 1 In her dispute letters to the credit reporting agencies, the plaintiff alleged that it 2 was her insurance company who “wrongfully refused to pay” the medical bill. Id. Later, 3 she argued Bayside “failed to timely and properly” bill her insurer. Id. at 883. The crux of 4 the plaintiff’s argument, therefore, was not that the information reported was 5 inaccurate—the plaintiff herself admitted that it was technically accurate—but rather that 6 it was “misleading because she was not legally obligated to pay Bayside until Bayside 7 had properly billed her insurer.” Id. at 891. 8 The court in Carvalho granted summary judgment because the plaintiff failed to 9 establish a requisite element of a prima facie reinvestigation claim: inaccuracy. Id. at 892. 10 Here, Plaintiff has sufficiently alleged that Defendants reported inaccurate information on 11 his credit files. The question remaining is whether Defendants were reasonable in their 12 preparation of those files and their reinvestigations of the disputed information. 13 Further, under Defendants’ reading of the statute, any alleged violation of § 1681i 14 would constitute a collateral attack on the underlying debt. The purpose of the statute and 15 the consumer protections FCRA seeks to ensure would be eviscerated if the Court were to 16 adopt Defendants’ interpretation. Accordingly, the Court rejects Defendants’ argument 17 that Plaintiff’s claim serves only as a collateral attack on the underlying debt. 18 D. 19 In his Motion to Amend, Plaintiff seeks only to add one allegation to the FAC. As 20 indicated above, the addition of this allegation is not futile. The Court therefore grants 21 Plaintiff’s Motion to Amend under Rule 15(a). 22 23 Motion to Amend IT IS THEREFORE ORDERED denying Defendant Trans Union LLC’s Motion for Judgment on the Pleadings (Doc. 39). 24 IT IS FURTHER ORDERED denying Defendant Experian Information 25 Solutions, Inc.’s Motion for Judgment on the Pleadings (Doc. 41). 26 .... 27 .... 28 .... 7 1 IT IS FURTHER ORDERED granting Plaintiff’s Motion for Leave to File a 2 Second Amended Complaint (Doc. 50). Plaintiff shall file the Second Amended 3 Complaint on the docket by September 6, 2017. 4 Dated this 31st day of August, 2017. 5 6 7 Honorable John J. Tuchi United States District Judge 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 8

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