Ali v. Capital One

Filing 9

ORDER on Defendant's 6 Motion to Dismiss signed by District Judge Lawrence J. O'Neill on 01/27/2012. Amended Complaint due by 2/29/2012.(Flores, E)

1
2
3
4
5
6
7
8
9

IN THE UNITED STATES DISTRICT COURT

10

FOR THE EASTERN DISTRICT OF CALIFORNIA

11
12
KARIMA ALI,

CASE NO. 1:11-cv-02115-LJO-SKO

13
Plaintiff,
14

ORDER ON DEFENDANT’S MOTION TO
DISMISS (Doc. 6)

vs.

15
CAPITAL ONE,
16
Defendant.
17
/
18
19

INTRODUCTION

20

This action arises from the alleged inaccurate reporting of a delinquent credit card account issued

21

by defendant, Capital One Bank (USA), N.A. (“defendant”) to plaintiff, Karima Ali (“plaintiff”).

22

Plaintiff, appearing in propria persona, alleges that defendant wrongfully reported that she was

23

delinquent on her account and owed in excess of $11,000. She alleges violations of the Fair Credit

24

Reporting Act (“FCRA”) and a defamation claim. Defendant seeks to dismiss all counts of the

25

complaint for failure to state a claim, pursuant to Fed. R. Civ. P. 12(b)(6). For the reasons discussed

26

below this Court GRANTS defendant’s motion to dismiss all counts of the complaint.

27

///

28

///
1

1

BACKGROUND

2

Facts1

3

Plaintiff alleges that on or about October of 2011, she applied for a credit card and was rejected

4

because of negative information on her credit report. (Docket #1, p. 12). Upon examining her credit

5

report, plaintiff learned that defendant reported that she was delinquent on a credit card issued by

6

defendant and that she owed in excess of $11,000. (Docket #1, p. 12). Plaintiff previously had a credit

7

card issued by defendant but had closed the account and was never late with her payments. (Docket #1,

8

p. 12). Plaintiff disputed the allegedly inaccurate report with the consumer reporting agencies and

9

defendant. (Docket #1, p. 12). Plaintiff also requested defendant to investigate the matter which

10

defendant failed to do and continued to report the negative information. (Docket #1, p. 12). Plaintiff

11

alleges that defendant knew the reported information was false and that defendant’s acts were willful

12

and malicious. (Docket #1, p. 15). Plaintiff further alleges that defendant’s false reporting has had a

13

negative impact on her ability to obtain credit. (Docket #1, p. 12).

14

Procedural History

15

On November 22, 2011, plaintiff, proceeding in propria persona, commenced the instant action

16

in Fresno County Superior Court. (Docket #1, p.11). Plaintiff alleged five claims for relief: (1) failure

17

to investigate the disputed information, in violation of the FCRA; (2) failure to follow reasonable

18

procedures to ensure the accuracy of the reported information, in violation of the FCRA; (3) failure to

19

follow reasonable procedures to ensure the accuracy of the reported information which resulted in a loss

20

of opportunity, in violation of the FCRA; (4) defamation; and (5) the negligent and willful failure to

21

reinvestigate the disputed entries, in violation of the FCRA.

22

On December 22, 2011, defendant removed the action to this Court. (Docket #1). On December

23

29, 2011, defendant filed a motion to dismiss, pursuant to Fed. R. Civ. P. 12(b)(6). (Docket #6).

24

Plaintiff opposed the motion (Docket #7) and defendant filed a reply (Docket #8). This Court

25

VACATES the February 2, 2012, hearing or oral argument, pursuant to Local Rule 230(g). Having

26

considered the parties’ arguments and the relevant law, this Court issues this order.

27
1

28

The background facts are derived from the complaint. This Court accepts the factual allegations in the complaint
as true for purposes of this motion. See Lazy Y. Ranch LTD v. Behrens, 546 F.3d 580, 588 (9th Cir. 2008).

2

1
2

DISCUSSION
I. Motion to Dismiss for Failure to State a Claim Standard

3

A motion to dismiss pursuant to Fed R. Civ. P. 12(b)(6) is a challenge to the sufficiency of the

4

allegations set forth in the complaint. A Fed. R. Civ. P. 12(b)(6) dismissal is proper where there is

5

either a “lack of a cognizable legal theory” or “the absence of sufficient facts alleged under a cognizable

6

legal theory.” Balisteri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990). In considering a

7

motion to dismiss for failure to state a claim, the court generally accepts as true the allegations in the

8

complaint, construes the pleading in the light most favorable to the party opposing the motion, and

9

resolves all doubts in the pleader's favor. Lazy Y. Ranch LTD v. Behrens, 546 F.3d 580, 588 (9th Cir.

10

2008).

11

To survive a Rule 12(b)(6) motion to dismiss, the plaintiff must allege “enough facts to state a

12

claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A

13

claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the

14

reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 129 S.

15

Ct. 1937, 1949 (2009). “The plausibility standard is not akin to a ‘probability requirement,’ but it asks

16

for more than a sheer possibility that a defendant has acted unlawfully.” Id. (quoting Twombly, 550 U.S.

17

at 556). “Where a complaint pleads facts that are ‘merely consistent with’ a defendant’s liability, it

18

‘stops short of the line between possibility and plausibility for entitlement to relief.’” Id. (quoting

19

Twombly, 550 U.S. at 557).

20

“While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual

21

allegations, a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitlement to relief’ requires more

22

than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.”

23

Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted). Thus, “bare assertions...amount[ing]

24

to nothing more than a ‘formulaic recitation of the elements’...are not entitled to be assumed true.”

25

Iqbal, 129 S. Ct. at 1951. A court is “free to ignore legal conclusions, unsupported conclusions,

26

unwarranted inferences and sweeping legal conclusions cast in the form of factual allegations.” Farm

27

Credit Services v. American State Bank, 339 F.3d 764, 767 (8th Cir. 2003) (citation omitted).

28

Moreover, a court “will dismiss any claim that, even when construed in the light most favorable to
3

1

plaintiff, fails to plead sufficiently all required elements of a cause of action.” Student Loan Marketing

2

Ass'n v. Hanes, 181 F.R.D. 629, 634 (S.D. Cal. 1998). In practice, “a complaint . . . must contain either

3

direct or inferential allegations respecting all the material elements necessary to sustain recovery under

4

some viable legal theory.” Twombly, 550 U.S. at 562 (quoting Car Carriers, Inc. v. Ford Motor Co.,

5

745 F.2d 1101, 1106 (7th Cir. 1984)). To the extent that the pleadings can be cured by the allegation

6

of additional facts, the plaintiff should be afforded leave to amend. Cook, Perkiss and Liehe, Inc. v.

7

Northern California Collection Serv. Inc., 911 F.2d 242, 247 (9th Cir. 1990) (citations omitted).

8
9
10

With these standards in mind, this Court turns to defendant’s challenges to the allegations in
plaintiff’s complaint.
II. Defendant’s Challenges to the Allegations in the Complaint

11

A. First Cause of Action

12

Defendant contends that this Court should dismiss plaintiff’s claim that defendant failed to

13

investigate the disputed information, in violation of 15 U.S.C. § 1691o(a) of the FCRA because the

14

statute does not exist.

15

The FCRA is codified in 15 U.S.C. § 1681, et seq. (“section 1681”). 15 U.S.C. § 1691, et seq.

16

is the Equal Credit Opportunity Act and does not contain a subsection “o(a).” Accordingly, plaintiff has

17

failed to state a claim under the FCRA. Plaintiff’s clarification in her opposition that her “failure to

18

investigate” argument is brought pursuant to 15 U.S.C. § 1681o(a), which is part of the FCRA, is

19

unavailing, as it is the complaint that must contain a “cognizable legal theory.” Balisteri, 901 F.2d at

20

699 (a Rule 12(b)(6) dismissal is proper where there is a “lack of a cognizable legal theory”).

21

Additionally, Plaintiff’s attempt in her opposition to enlarge her first cause of action to include the

22

allegations that defendant failed to follow reasonable procedures to ensure the accuracy of her credit

23

information and published false and incorrect statements, is unavailing, as these allegations are

24

repetitious of plaintiff’s second and fourth causes of action and are analyzed below.

25

This Court GRANTS defendant’s motion to dismiss the first cause of action with leave to amend.

26

B. Second Cause of Action

27

Defendant asserts that plaintiff’s second cause of action, that defendant violated the FCRA by

28

failing to follow reasonable procedures to ensure the accuracy of the information it furnished to
4

1

consumer reporting agencies, should be dismissed because the alleged wrongful acts do not constitute

2

a violation of the FCRA.

3

Furnishers of information are subject to two distinct duties under the FCRA.2 Rieger v. American

4

Exp. Co., 2011 WL 5080188, *2 (N.D. Cal. Oct. 25, 2011). First, under 15 U.S.C. § 1681s-2(a),

5

furnishers have a duty to provide accurate information. Gorman v. Wolpoff & Abramson, LLP, 584 F.3d

6

1147, 1153-54 (9th Cir. 2009). It is well-settled however, that there is no private right of action for

7

violations of section 1681s-2(a). See 15 U.S.C. § 1681s-2(c) (stating that section 1681o, which confers

8

a private right of action for the willful or negligent noncompliance with the FCRA, does “not apply to

9

any violation of . . . subsection (a) of . . . section [1681s-2]”); see also Gorman, 584 F.3d at 1154

10

(“Duties imposed on furnishers under [15 U.S.C. § 1681s-2(a)] are enforceable only by federal or state

11

agencies.”). Second, under 15 U.S.C. § 1681s-2(b), furnishers have a duty to undertake an investigation

12

upon receipt of notice of dispute from a consumer reporting agency. Gorman, 584 F.3d at 1154.

13

However, the duty to investigate is triggered “only after the furnisher receives notice of dispute from a

14

[consumer reporting agency].” Id.; Matracia v. JP Morgan Chase Bank, NA, 2011 WL 5374776, *3

15

(E.D. Cal. Nov. 4, 2011).

16

Plaintiff alleges that defendant violated the FCRA by, “fail[ing] to follow reasonable procedures

17

to assure the maximum possible accuracy of information in the plaintiff [sic] consumer report.” (Docket

18

#1, p. 14). Plaintiff fails to allege the subsection of the FCRA that defendant allegedly violated, let alone

19

facts to show that defendant failed to follow reasonable procedures. To the extent that plaintiff alleges

20

a violation of 15 U.S.C. § 1681s-2(a) for failing to provide accurate information, there is no private right

21

of action for violations of this section. See Gorman, 584 F.3d at 1154. To the extent that plaintiff

22

alleges a violation of 15 U.S.C. § 1681s-2(b) for failing to investigate disputed information upon receipt

23

of notice of dispute from a consumer reporting agency, plaintiff has failed to allege that defendant

24

received notice from a consumer reporting agency or what procedures defendant failed to follow.

25

Accordingly, the second cause of action fails to state a claim under the FCRA.

26
2

27
28

The FCRA does not define the term “furnisher of information.” However, a plain reading of the statute suggests
that the term refers to a person who provides information about a consumer to any consumer reporting agency. See 15 U.S.C.
§ 1681s-2; Gonzalez v. Ocwen Financial Services, Inc., No. C03-04592, 2003 W L 23939563, at *2 n.5 (N.D. Cal. Dec. 2,
2003). Defendant concedes that in this instance “Capital One is a furnisher of information.” (Docket #6, p. 4).

5

1
2

This Court GRANTS defendant’s motion to dismiss the second cause of action with leave to
amend.

3

C. Third Cause of Action

4

In plaintiff’s third cause of action, which she labels “Loss of Opportunity,” plaintiff alleges that

5

defendant wilfully failed to follow reasonable procedures to ensure the accuracy of the information in

6

her consumer report and as a result, plaintiff was unable to obtain a credit card. (Docket #1, p. 14).

7

Plaintiff also alleges that she is entitled to punitive damages pursuant to 15 U.S.C. § 1681n. (Docket

8

#1, p. 14). Defendant contends that plaintiff’s third cause of action should be dismissed because it is

9

not a valid claim but rather a theory used to determine damages.

10

15 U.S.C. § 1681n imposes civil liability on any person who wilfully fails to comply with the

11

requirements of the FCRA with respect to any consumer and allows that consumer to recover punitive

12

damages as the Court may allow. See 15 U.S.C. § 1681n(a)(2). Plaintiff requests punitive damages

13

pursuant to 15 U.S.C. § 1681n, but fails to allege what section of the FCRA defendant wilfully violated.

14

To the extent that plaintiff bases her request for punitive damages on 15 U.S.C. § 1681s-2, which

15

outlines the responsibilities of furnishers of information to consumer reporting agencies, this appears

16

to be a repeat of plaintiff’s second cause of action which this Court dismissed for the reasons discussed

17

above. Accordingly, plaintiff has failed to state a claim under the FCRA in count three of her complaint.

18

This Court GRANTS defendant’s motion to dismiss plaintiff’s third cause of action with leave

19

to amend.

20

D. Fourth Cause of Action

21

In plaintiff’s fourth cause of action she alleges a defamation claim based on the allegation that

22

defendant reported to consumer reporting agencies that she was delinquent on her account and had an

23

outstanding balance, knowing that the information was false. She further alleges that defendant’s acts

24

were done with malice. Defendant maintains that this claim should be dismissed because it is preempted

25

by the FCRA. This Court agrees.

26

As a general rule, the FCRA does not preempt any state law. 15 U.S.C. § 1681t(a); Gorman, 584

27

F.3d at 1166. However, there are several exceptions to the general rule, including the regulation of the

28

responsibilities of those who furnish information to consumer reporting agencies. 15 U.S.C. §
6

1

1681t(b)(1)(F) provides:

2

4

No requirement or prohibition may be imposed under the laws of any State . .
. with respect to any subject matter regulated under . . . section 1681s-2 of this
title, relating to the responsibilities of persons who furnish information to
consumer reporting agencies, except that this paragraph shall not apply . . . with
respect to section 1785.25(a) of the California Civil Code . . .3

5

Plaintiff’s defamation claim is based on the allegation that defendant furnished inaccurate information

6

to consumer reporting agencies knowing that the information was false. Because her claim is based on

7

the furnishment of information to a consumer reporting agency, her claim is completely preempted by

8

the FCRA. See Buraye v. Equifax, 625 F. Supp. 2d 894, 900 (C.D. Cal. 2008) (holding that the plain

9

language of “section 1681t(b)(1)(F) clearly eliminated all state cause of action against furnishers of

10

information”) (internal quotation marks and citations omitted); Roybal v. Equifax, 405 F. Supp. 2d 1177,

11

1181 (E.D. Cal. 2005) (“On its face, the FCRA precludes all state statutory or common law causes of

12

action that would impose any requirement or prohibition on the furnishers of credit information”); see

13

also Johnson v. JP Morgan Chase Bank DBA Chase Manhattan, 536 F. Supp. 2d 1207, 1215 (E.D. Cal.

14

2008) (holding that FCRA preempted plaintiff’s cause of action for defamation).

3

15

This Court acknowledges that there is an apparent tension between two preemption provisions

16

in the FCRA that relate to defamation claims. In Gorman, the Ninth Circuit recognized that “[a]lthough

17

§ 1681t(b)(1)(F) appears to preempt all state law claims based on a creditor’s responsibilities under §

18

1681s-2, § 1681h(e) suggests that defamation claims can proceed against creditors as long as the plaintiff

19

alleges falsity and malice.” Gorman, 584 F.3d at 1166. The Ninth Circuit further acknowledged that

20

“[a]ttempting to reconcile the two sections has left district courts in disarray,” id., but concluded that it

21

need not decide the issue, id. at 1167. This Court acknowledges the apparent tension, but follows its

22

previous reasoning in holding that 15 U.S.C. § 1681t(b)(1)(F) preempts defamation claims based on

23

allegations that a furnisher of information provided false or inaccurate information to a consumer

24

reporting agency. Johnson, 536 F. Supp. 2d at 1214-15 (holding that the FCRA preempted plaintiff’s

25

defamation claim based on allegations that a furnisher of information reported inaccurate information

26
3

27
28

W hile there is an exception to this rule for enforcement of Cal. Civ. Code § 1785.25(a), Carvalho v. Equifax
Information Services, LLC, 629 F.3d 876, 888 (9th Cir. 2010) (recognizing “that the private right of action to enforce
California Civil Code section 1785.25(a) is not preempted by the FCRA”) (internal quotation marks and citations omitted),
plaintiff has not alleged a violation of that statute.

7

1

to a consumer reporting agency because 15 U.S.C. § 1681h(e) was inapplicable under the facts

2

presented). Because plaintiff’s defamation claim is completely preempted by the FCRA, “the allegation

3

of other facts consistent with the challenged pleading could not possibly cure the deficiency.” Schreiber

4

Distributing Co. v. Serv-Well Furniture Co., Inc., 806 F.2d 1393, 1401 (9th Cir. 1986) (holding that the

5

district court abused its discretion when it dismissed claims with prejudice without first determining

6

whether the allegation of other facts could possibly cure the deficiencies).

7
8

This Court GRANTS defendant’s motion to dismiss plaintiff’s fourth cause of action without
leave to amend.

9

E. Fifth Cause of Action

10

In plaintiff’s fifth cause of action she alleges, “[c]ivil liability for negligent noncompliance[,]

11

negligent and willful failure to reinvestigate the disputed entries in violation of . . . 15 U.S.C. §§

12

1681i(a), 1681n, 1681o.” (Docket #1, p. 15). Defendant argues that this claim should be dismissed

13

because plaintiff has failed to allege the basis of defendant’s duty and no duty exists as a matter of law.

14

“15 U.S.C. § 1681n and 15 U.S.C. § 1681o impose civil liability on any person who wilfully or

15

negligently fails to comply with the requirements of the FCRA.” White v. E-Loan, Inc., 409 F. Supp.

16

2d 1183, 1184 (N.D. Cal. 2006). 15 U.S.C. § 1681i(a) “describes the procedure that a [consumer

17

reporting agency] must follow during a reinvestigation of disputed information.” Lazar v. Trans Union

18

LLC, 195 F.R.D. 665, 669 n.1 (C.D. Cal. 2000). Defendant is a furnisher of information and not a

19

consumer reporting agency. Accordingly, defendant was not required to follow the procedures outlined

20

in 15 U.S.C. § 1681i(a). Thus, plaintiff cannot impose civil liability, pursuant to 15 U.S.C. §§ 1681n

21

and 1681o, on defendant for the failure to comply with 15 U.S.C. § 1681i(a). Because defendant was

22

not required to follow the procedures outlined in 15 U.S.C. § 1681i(a), “the allegation of other facts

23

consistent with the challenged pleading could not possibly cure the deficiency.” Schreiber Distributing

24

Co., 806 F.2d at 1401 (holding that the district court abused its discretion when it dismissed claims with

25

prejudice without first determining whether the allegation of other facts could possibly cure the

26

deficiencies).

27
28

This Court GRANTS defendant’s motion to dismiss the fifth cause of action without leave to
amend.
8

1

CONCLUSION AND ORDER

2

For the reasons discussed above, this Court:

3

1.

4
5

230(g);
2.

6
7
8

VACATES the February 2, 2012, hearing or oral argument, pursuant to Local Rule

GRANTS defendant’s motion to dismiss plaintiff’s first, second, and third causes of
action with leave to amend; and

3.

GRANTS defendant’s motion to dismiss plaintiff’s fourth and fifth causes of action
without leave to amend.

9

Plaintiff shall have one opportunity to amend her complaint. Any such amended complaint is

10

due within thirty (30) days of electronic service of this order. This Court is beyond busy.

11

Amend only if the facts as alleged exist, and the law cited herein is followed.

12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28

IT IS SO ORDERED.
9

1

Dated:
b9ed48

January 27, 2012

/s/ Lawrence J. O'Neill
UNITED STATES DISTRICT JUDGE

2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
10