Nevrik Berberyan v. Asset Acceptance LLC et al

Filing 46

MINUTES OF Motion Hearing held before Judge Christina A. Snyder: The Court GRANTS Defendant's Motion to Dismiss 39 without prejudice. Plaintiff shall have 20 days to file an amended complaint correcting the deficiencies identified herein. Failure to do so may result in dismissal with prejudice. Court Reporter: Laura Elias. (gk)

UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 12-4417-CAS (PLAx)

Title

NEVRIK BERBERYAN V. ASSET ACCEPTANCE, LLC

Present: The Honorable

Date

March 18, 2013

CHRISTINA A. SNYDER

CATHERINE JEANG
Deputy Clerk

LAURA ELIAS
Court Reporter / Recorder

N/A
Tape No.

Attorneys Present for Plaintiffs:

Attorneys Present for Defendants

Not present

Ashley Fickel

Proceedings:

I.

DEFENDANT ASSET ACCEPTANCE’S MOTION TO
DISMISS (filed February 19, 2013)

INTRODUCTION

On May 24, 2012, plaintiff Nevrik Berberyan filed suit against defendants Asset
Acceptance LLC (“Asset”), Equable Ascent Financial LLC (“Equable”), Portfolio
Recovery Associates LLC (“Portfolio”), and Second Round LP. Dkt. No. 3. On
November 19, 2012, the Court granted defendants Portfolio and Equable’s motions to
dismiss without prejudice. Dkt. No. 26. Plaintiff filed her First Amended Complaint on
December 20, 2012. Dkt. No. 30. Thereafter, the Court dismissed defendants Portfolio
and Equable from this action with prejudice pursuant to the parties’ stipulation. Dkt. No.
33.
Plaintiff’s FAC asserts claims for: (1) wilful and negligent violations of the Fair
Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681s-2(b); (2) intentional and negligent
violation of the California Consumer Credit Reporting Agencies Act (“CCRAA”), Cal.
Civ. Code § 1785.25(a); (3) violations of the Fair Debt Collection Practices Act
(“FDCPA”), 15 U.S.C. § 1692g(e)-(g); (4) violations of the California Rosenthal Fair
Debt Collection Practices Act (“RFDCPA”), Cal. Civ. Code § 1788.17; and (5) libel.
On February 19, 2012, defendant Asset filed the instant motion to dismiss.
Plaintiff opposed the motion on February 21, 2013, and defendant replied on March 4,
2013. The Court held a hearing on March 18, 2013. After considering the parties’
arguments, the Court finds and concludes as follows.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 12-4417-CAS (PLAx)

Title

NEVRIK BERBERYAN V. ASSET ACCEPTANCE, LLC

II.

Date

March 18, 2013

BACKGROUND

Plaintiff makes the following factual allegations in support of her claims. On or
about December 1, 2011, plaintiff obtained her credit reports from the three major credit
reporting agencies, Experian, Equifax, and Trans Union (collectively, “CRAs”). FAC
¶ 10. After reviewing her reports, plaintiff discovered accounts in “derogatory status”
that had been reported by defendants Asset (Account No. 11255) and Second (Account
No. 371735255111009). Id. Each of these accounts was purchased by the respective
defendant from the original creditors, as indicated on the reports; the first from non-party
HSBC, the second from non-party AMEX. Id. ¶ 11.
Plaintiff believes, however, that her accounts are still owned and controlled by
HSBC and AMEX, respectively, and therefore alleges that these accounts are being
falsely reported on her credit reports. Id. ¶¶ 12–13. Therefore, on December 1, 2011,
plaintiff submitted written disputes to the CRAs disputing the existence, ownership, and
accuracy of the above referenced accounts. Id. ¶ 14. She further requested that the CRAs
provide verification and reinvestigate these purportedly disputed accounts. Id. On
December 13, after the CRAs reported back to plaintiff that the debt accounts were valid,
plaintiff sent letters of dispute with a verification request to each defendant directly. Id. ¶
16. On or about February 24 and March 15, 2012, plaintiff sent second and third dispute
letters to Asset and the original owner of the account, HSBC, requesting that each prove
their ownership over a valid debt, as well as evidence of their legal right to collect the
disputed debt. Id. ¶ 18.
On March 21, 2012, defendant Asset responded to plaintiff, indicating that Asset
was “presently unable to determine the nature of your dispute. We will update our trade
line regarding the account is ‘disputed’ with the consumer reporting agencies.” FAC Ex.
C; id. ¶ 23. This response led plaintiff to believe that Asset lacked documentation
demonstrating that it had a right to collect upon the HSBC account, and that it had
“validated” this account with the CRAs without a legal justification for doing so. Id.
¶ 24. As of a December 18, 2012, credit report from Experian, Asset continues to report
the HSBC account on plaintiff’s credit report. FAC Ex. D. This report also states that
the “Account information [is] disputed by consumer.” Id.

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 12-4417-CAS (PLAx)

Title

NEVRIK BERBERYAN V. ASSET ACCEPTANCE, LLC

III.

Date

March 18, 2013

LEGAL STANDARD

A Rule 12(b)(6) motion tests the legal sufficiency of the claims asserted in a
complaint. “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not
need detailed factual allegations, a plaintiff’s obligation to provide the ‘grounds’ of his
‘entitlement to relief’ requires more than labels and conclusions, and a formulaic
recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007). “[F]actual allegations must be enough to raise a
right to relief above the speculative level.” Id.
In considering a motion pursuant to Rule 12(b)(6), a court must accept as true all
material allegations in the complaint, as well as all reasonable inferences to be drawn
from them. Pareto v. F.D.I.C., 139 F.3d 696, 699 (9th Cir. 1998). The complaint must be
read in the light most favorable to the nonmoving party. Sprewell v. Golden State
Warriors, 266 F.3d 979, 988 (9th Cir. 2001); Parks Sch. of Bus., Inc. v. Symington, 51
F.3d 1480, 1484 (9th Cir. 1995). However, “[i]n keeping with these principles a court
considering a motion to dismiss can choose to begin by identifying pleadings that,
because they are no more than conclusions, are not entitled to the assumption of truth.
While legal conclusions can provide the framework of a complaint, they must be
supported by factual allegations.” Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 1950
(2009); Moss v. United States Secret Service, 572 F.3d 962, 969 (9th Cir. 2009) (“[F]or a
complaint to survive a motion to dismiss, the non-conclusory ‘factual content,’ and
reasonable inferences from that content, must be plausibly suggestive of a claim entitling
the plaintiff to relief.”) (citing Twombly and Iqbal); Sprewell, 266 F.3d at 988; W.
Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). Ultimately, “[d]etermining
whether a complaint states a plausible claim for relief will . . . be a context-specific task
that requires the reviewing court to draw on its judicial experience and common sense.”
Iqbal, 129 S.Ct. at 1950.
Furthermore, unless a court converts a Rule 12(b)(6) motion into a motion for
summary judgment, a court cannot consider material outside of the complaint (e.g., facts
presented in briefs, affidavits, or discovery materials). In re American Cont’l
Corp./Lincoln Sav. & Loan Sec. Litig., 102 F.3d 1524, 1537 (9th Cir. 1996), rev’d on
other grounds sub nom Lexecon, Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523
U.S. 26 (1998). A court may, however, consider exhibits submitted with or alleged in the
complaint and matters that may be judicially noticed pursuant to Federal Rule of
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 12-4417-CAS (PLAx)

Date

March 18, 2013

Title

NEVRIK BERBERYAN V. ASSET ACCEPTANCE, LLC

Evidence 201. In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999);
Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001).
For all of these reasons, it is only under extraordinary circumstances that dismissal
is proper under Rule 12(b)(6). United States v. City of Redwood City, 640 F.2d 963, 966
(9th Cir. 1981).
As a general rule, leave to amend a complaint which has been dismissed should be
freely granted. Fed. R. Civ. P. 15(a). However, leave to amend may be denied when “the
court determines that the allegation of other facts consistent with the challenged pleading
could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well Furniture
Co., 806 F.2d 1393, 1401 (9th Cir. 1986); see Lopez v. Smith, 203 F.3d 1122, 1127 (9th
Cir. 2000).
IV.

ANALYSIS
A.

FDCPA and RFDCPA Claims

Plaintiff brings various claims under the FDCPA and the California RFDCPA.
First, plaintiff claims that defendant violated 15 U.S.C. § 1692g(a) by disregarding the
notice and disclose requirements imposed under this section. FAC ¶ 52. This section, in
part, requires a debt collector “[w]ithin five days after the initial communication with a
consumer in connection with the collection of any debt” to send the consumer a written
notice containing certain information. 15 U.S.C. § 1692g(a). Second, plaintiff alleges
that defendant violated § 1692g(b) by disregarding plaintiff’s written request for
validation of her alleged debts. FAC ¶ 54. Under this section, a debt collector must not
engage in any collection activities until verification of any debt is mailed to the consumer
by the debt collector. 15 U.S.C. § 1692g(b). Third, plaintiff alleges that defendant
violated sections 1692e and 1692f, which prohibit false and misleading practices in the
collection of a debt and various unfair debt collection practices, respectively. See 15
U.S.C. §§ 1692e and 1982f; FAC ¶¶ 56–61. Defendant allegedly falsely represented the
character of the purported debts to plaintiff by reporting these debts to the CRAs,
communicating credit information to the CRAs which it knew to be false, and failing to
provide the required notice to plaintiff that defendant was seeking to collect a debt. FAC
¶¶ 56–62.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 12-4417-CAS (PLAx)

Date

March 18, 2013

Title

NEVRIK BERBERYAN V. ASSET ACCEPTANCE, LLC

None of plaintiff’s claims, however, can survive defendant’s motion to dismiss.
Plaintiff admits that Asset never communicated with her in any form, other than the
March 21, 2012 letter sent in response to plaintiff’s inquiry. See FAC Ex. D. As plaintiff
herself appears to recognize, a letter sent in response to plaintiff’s inquiry cannot serve as
the “initial communication” with a consumer in connection with the collection of a debt.
Because a defendant cannot violate the plain terms of any of the above-cited code
sections without making some sort of qualifying communication with a consumer,
plaintiff’s claim fails as a matter of law. Defendant need not provide any written notices
to plaintiff, nor refrain from making “false representations,” if defendant in fact never
made any communications at all in an attempt to collect a debt.
In opposition, plaintiff argues that defendant “communicated” with her through its
alleged reporting of a debt that appeared on her credit report, but plaintiff offers no
authority that supports such an expansive reading of the term “communicated.” Opp’n at
6. Defendant must do something more than allegedly place notice of a disputed debt on
plaintiff’s credit report to trigger its disclosure duties. And even if such disclosure duties
were triggered by plaintiff’s letter that disputed defendant’s right to collect on any debt,
see 15 U.S.C. § 1692g(b), plaintiff has not alleged that defendant was engaged in any
“collection activities” at the time of her letter. Furthermore, plaintiff fails to allege that
defendants employed any cognizable “deceptive means” in connection with the collection
of any debt; there are no allegations that defendant committed any deceptive actions,
other than reporting a debt to a CRA. Id. Because plaintiff alleges facts that demonstrate
that defendant did not violate the Act, bare recitals of the elements of a claim under the
FDCPA are not sufficient to survive defendant’s motion to dismiss.
In addition, plaintiff’s claim that defendant violated 15 U.S.C. § 1692f also fails.
This section prohibits the use of “unfair or unconscionable means to collect or attempt to
collect any debt,” including such conduct as soliciting of a postdated check, threatening
action to effect dispossession of property, or using improper language on an envelope
when communicating with the consumer. Id. As with plaintiff’s other FDCPA claims,

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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 12-4417-CAS (PLAx)

Date

March 18, 2013

Title

NEVRIK BERBERYAN V. ASSET ACCEPTANCE, LLC

her complaint is based entirely on defendant’s reporting of a debt on her credit
report—and contains no allegations of conduct that is “unfair or unconscionable.”
Accordingly, the Court grants defendant’s motion for these claims.1
B.

FCRA Claims

Plaintiff alleges that defendant violated 15 U.S.C. § 1681s-2(b), which imposes
certain duties on parties that furnish information to a CRA. FAC ¶¶ 30–33. The duties
under this section are triggered when “when a person who furnished information to a
CRA receives notice from the CRA that the consumer disputes the information.” Gorman
v. Wolpoff & Abramson, LLP, 584 F.3d 1147, 1154 (9th Cir. 2009). These duties
include conducting a reasonable investigation with respect to any disputed information,
reviewing all relevant information provided by the CRA, reporting the results of an
investigation to the CRA, and modifying any inaccurate or unverified information
contained in the consumer’s credit report. See 15 U.S.C. § 1681s-2(b)(1); Gorman, 584
F.3d at 1157 (holding that “the furnisher’s investigation pursuant to [this section] may
not be unreasonable”). The furnisher of disputed information has thirty days within
which to complete its reinvestigation. See id. § 1681s-2(b)(2). Notably, “[t]hese duties
arise only after the furnisher receives notice of dispute from a CRA; notice of a dispute
received directly from the consumer does not trigger furnishers’ duties under subsection
(b).” Gorman, 584 F.3d at 1154 (citing Nelson v. Chase Manhattan Mortgage Corp., 282
F.3d 1057, 1059–60 (9th Cir. 2002)).
In support of her claims, plaintiff alleges that defendant violated section 1681s2(b)(1) by “failing to conduct a proper investigation,” after receiving notice from a CRA
that plaintiff disputed the information in her report. FAC ¶ 31. Had defendants
conducted such an investigation, plaintiff alleges that defendant would have realized they
“could not collect upon [her] account.” Id. Indeed, without offering “proof of the right
to collect upon [a] debt” before allegedly verifying that debt for a CRA, plaintiff contends
that defendant violated the FCRA. Id. ¶ 30.

1

Plaintiff’s claims under California’s RFDCPA are derivative of her federal
claims; accordingly, dismissal is also appropriate on these claims. See Cal. Civil Code §
1788.17.
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 12-4417-CAS (PLAx)

Date

March 18, 2013

Title

NEVRIK BERBERYAN V. ASSET ACCEPTANCE, LLC

The Court concludes that plaintiff fails to state a claim under the FCRA. Plaintiff
fails to offer any factual allegations supporting her contention that defendant’s
investigation of her disputed account was unreasonable. First, there is no duty on the part
of the furnisher to provide proof of its right to collect upon a debt under the plain
language section 1681s-2(b). As plaintiff herself alleges, she received confirmation from
the CRAs that Asset had verified the account appearing on her credit report as valid.
FAC ¶ 16. Plaintiff cannot attempt to impose a further requirement of “validation” in
section 1681s-2(b), above and beyond that of “reasonable investigation,” where none
exists. Second, plaintiff offers no facts in support of her conclusory allegation that
defendant failed to conduct a proper investigation into the validity of the debt it had
reported. See FAC ¶¶ 30–31. This is insufficient to state a claim based on a furnisher’s
failure to reasonably investigate disputed information in her credit report. Plaintiff must
allege at least some facts that could support a plausible claim that defendant acted
unreasonably in carrying out its investigation. This is particularly true where plaintiff
admits that Asset purchased the account reported on her credit report from HSBC, a
company from which plaintiff alleges she had an account. FAC ¶ 13. Although plaintiff
is not required to plead facts she cannot know prior to engaging in discovery, she must at
least allege facts regarding the disputed debt to put defendant on notice as to why the
investigation was allegedly defective. See Iyigun v. Cavalry Portfolio Services, LLC,
CV-12-8682, 2013 WL 93114, at * 1 (C.D. Cal. Jan. 8, 2013). Accordingly, the Court
grants defendant’s motion to dismiss this claim.
C.

CCRAA Claims

Plaintiff also claims that defendant disregarded its obligation to accurately report
credit information pursuant to California Civil Code § 1785.25(a). FAC ¶¶ 41–50. In
particular, plaintiff alleges that defendant reported information that it knew or should
have known to be inaccurate or that it failed to verify was accurate at the time this
information was furnished. FAC ¶¶ 42–43. This section of the CCRAA prohibits an
entity from “furnish[ing] information on a specific transaction or experience to any
consumer credit reporting agency if the person knows or should know the information is
complete or inaccurate.” Cal. Civ. Code § 1785.25(a).
First, the Court rejects defendant’s preemption-based argument to dismiss this
claim, because plaintiff has not, as defendant contends, pled a claim under section
1785.25(c) rather than section 1785.25(a). Whereas section 1785.25(c) is expressly
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UNITED STATES DISTRICT COURT
CENTRAL DISTRICT OF CALIFORNIA
CIVIL MINUTES - GENERAL
Case No.

CV 12-4417-CAS (PLAx)

Date

March 18, 2013

Title

NEVRIK BERBERYAN V. ASSET ACCEPTANCE, LLC

preempted by the FCRA, section 1785.25(a) is expressly carved-out from the FRCA’s
preemptive force. See 15 U.S.C. § 1681t(b)(1)(F)(ii). As plaintiff is ultimately the
master of her complaint, the Court will not construe her claim as arising under section
1785.25(c), rather than section 1785.25(a).
However, plaintiff’s CCRAA claims suffer from the same factual inadequacies as
her claims under the FCRA. Just as with plaintiff’s claims for failure to reasonably
investigate, plaintiff must offer more than a conclusory allegation that defendant reported
false information, without any factual support whatsoever, to withstand defendant’s
motion to dismiss her CCRAA claims. Accordingly, the Court grants defendant’s motion
to dismiss these claims.
D.

Defamation Claim

Plaintiff’s defamation claim is premised on her allegation that defendant published
“inaccurate credit information about plaintiff to CRAs.” FAC ¶ 69. Following the
majority of courts to have considered the issue, however, the Court concludes that
plaintiff’s defamation claim is preempted by the FCRA. See, e.g., Iyigun, 2013 WL
93114, at *2 (C.D. Cal. Jan. 8, 2013); Buraye v. Equifax, 625 F. Supp. 2d 894, 897–898
(C.D. Cal. 2008).2 And even if the alleged tort is not preempted, plaintiff fails to allege
facts that would support the requisite element of malice. Accordingly, the Court grants
defendant’s motion to dismiss this claim.
V.

CONCLUSION

In accordance with the foregoing, the Court GRANTS defendant’s motion to
dismiss without prejudice. Plaintiff shall have twenty (20) days to file an amended
complaint correcting the deficiencies identified herein. Failure to do so may result in
dismissal with prejudice.
IT IS SO ORDERED.
00
Initials of Preparer

2

:

02

CMJ

The Ninth Circuit in Gorman declined to reach this issue. See 584 F.3d at 1154.

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