King v. Bank of America, National Association

Filing 16

Order by Magistrate Judge Joseph C. Spero denying 8 Motion to Dismiss.(jcslc3S, COURT STAFF) (Filed on 10/1/2012)

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1 2 3 4 5 6 7 IN THE UNITED STATES DISTRICT COURT 8 FOR THE NORTHERN DISTRICT OF CALIFORNIA 9 10 Northern District of California United States District Court 11 12 KAREN KING, Plaintiff, 13 Case No.: C-12-04168 JCS ORDER DENYING DEFENDANT’S MOTION TO DISMISS v. 14 15 16 BANK OF AMERICA, N.A., et al. Defendants. 17 18 19 20 I. INTRODUCTION Plaintiff Karen King (“Plaintiff”) brings this action against Defendant Bank of America, 21 N.A. (“Defendant”), seeking redress for Defendant’s alleged inaccurate reporting of her discharged 22 debt. Presently before the Court is Defendant’s Motion to Dismiss Plaintiff’s Complaint (“Motion”). 23 The Court finds that the Motion is suitable for disposition without oral argument pursuant to Civil 24 Local Rule 7–1(b). Accordingly, the hearing on the Motion set for Friday, October 5, 2012 at 1:30 25 p.m. is VACATED. For the reasons stated below, the Court DENIES Defendant’s Motion.1 26 27 28 The parties have consented to the jurisdiction of a United States Magistrate Judge pursuant to 28 U.S.C. § 636(c). 1 1 II. BACKGROUND 2 A. 3 On July 21, 2010, the United States Bankruptcy Court for the Northern District of California 4 granted Plaintiff a discharge of all dischargeable debts pursuant to 11 U.S.C. § 727. Complaint at ¶ 5 14. This included a $50,877.00 debt owed to Defendant. Id. at ¶ 13. Defendant was noticed by 6 electronic transmission of Plaintiff’s discharge on July 23, 2010. Id. at ¶ 14. Subsequently, 7 Defendant inaccurately reported that Plaintiff was delinquent in her payments of the discharged debt. 8 Id. at ¶ 15. The Complaint alleges that 9 10 Northern District of California United States District Court 11 12 The Complaint [o]n or about May 5, 2011 Plaintiff sent Experian [Plaintiff’s credit reporting agency] written notice disputing [Defendant’s] improper reporting of delinquencies in payment . . . . Pursuant to Section 1681i(a)(2) of the Fair Credit Reporting Act, Experian provided notice to [Defendant] of Plaintiff’s dispute. After receiving notice of Plaintiff’s allegations, [Defendant] verified that it received notice of Plaintiff’s [sic] from Experian while also continuing to inaccurately report the delinquencies in payment. 13 Id. at ¶ 10. On June 6, 2011, Plaintiff received a copy of her Experian credit report, showing that 14 Defendant continued to report Plaintiff’s delinquencies in payment and that Defendant failed to 15 report Plaintiff’s account as disputed. Id. at ¶ 16. To date, Defendant refuses to correct Plaintiff’s 16 credit report. Id. at ¶ 17. 17 Plaintiff initiated this action on July 6, 2012 in San Francisco Superior Court. Id. at 1. On 18 August 8, 2012, Defendant timely removed the case to federal court based on federal question 19 jurisdiction. Defendant’s Notice of Removal, 1. Plaintiff’s Complaint alleges three causes of action: 20 1) Violation of the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681s-2(b): Plaintiff 21 claims that Defendant violated Section 1681s-2(b)(1)(A) “by failing to reasonably investigate 22 Plaintiff’s dispute after receiving notice from Experian.” Id. at ¶ 24. Plaintiff alleges that Defendant 23 also violated Section 1681s-2(b)(1)(E) “by failing to discover and remove the derogatory delinquent 24 notation on Plaintiff’s credit report,” as well as by failing to report to Experian “that Plaintiff 25 disputed the account information.” Id. at ¶ 25. Defendant’s failure to correct the inaccuracies in 26 Plaintiff’s credit report “was intentional and in reckless disregard of its duty to refrain from reporting 27 inaccurate information. Consequently, [Defendant] willfully and negligently failed to comply with 28 its duty to investigate Plaintiff’s dispute under 15 U.S.C. [§] 1681(n) & (o).” Id. at ¶ 27. 2 1 Plaintiff alleges damages arising from Defendant’s FCRA violations as follows, 2 27. As a direct and proximate result of [Defendant’s] willful and untrue communications, Plaintiff has suffered actual damages including but not limited to reviewing credit reports from all three consumer reporting agencies, traveling to and from Plaintiff’s counsel’s office, sending demand letters, continued impairment to her credit score, and such further expenses in an amount to be determined at trial. 3 4 5 6 7 8 9 28. As a further direct and proximate result of [Defendant’s] acts stated herein, Plaintiff incurred pain and suffering, was impeded in seeking necessary products and services from vendors and additional credit from other credit agencies. Id. at ¶¶ 27-28. 2) Violation of the California Consumer Credit Reporting Agencies Act (“CCRAA”), Cal. Northern District of California Civ. Code § 1785.25(a): Plaintiff makes the same allegations in connection with her CCRAA claim 11 United States District Court 10 as she does with her FCRA claim, discussed above. Id. at ¶¶ 30-38. 12 3) Violation of the California Unfair Competition Law (“UCL”), Cal. Bus. & Prof. Code § 13 17200: Plaintiff claims that Defendant’s unfair and unlawful business practices “specifically 14 includes [Defendant’s] continued inaccurate reporting after receiving notice of Plaintiff’s dispute in 15 violation of California Civil Code § 1785.25(a).” Id. at ¶ 62.2 16 Plaintiff’s Prayer for Relief seeks, inter alia, a preliminary and permanent injunction to stop 17 Defendant from engaging in the conduct described above; $10,000 in statutory and actual damages 18 pursuant to 15 U.S.C. § 1681n and Cal. Civ. Code § 1785.31; punitive damages; and attorney’s fees 19 and costs pursuant to 15 U.S.C. § 1681n & o and Cal. Civ. Code § 1785.31. 20 B. The Motion 21 Defendant moves to dismiss Plaintiff’s Complaint on the grounds that it fails to state a claim. 22 Defendant first argues that all three claims should be dismissed because they require that Plaintiff 23 allege actual harm as a result of the purported unlawful conduct. Motion at 3-4. Since Plaintiff fails 24 to adequately allege such harm, she lacks “standing” to bring her claim. Id. Defendant asserts that 25 the UCL requires a plaintiff to allege a loss of money or property in order to maintain a claim. Id. at 26 4 (citing Peterson v. Cellco P’ship, 164 Cal. App. 4th 1583, 1590 (2008); Cal. Bus. & Prof. Code § 27 28 The Court notes that Plaintiff’s Complaint contains misnumbered paragraphs; there are paragraphs 1-38 and 58-65, but no paragraphs 39-57. 2 3 1 17204). “At best, Plaintiff’s alleged injuries (i.e. pain and suffering, traveling to and from attorney’s 2 office, sending demand letters, checking credit reports, etc.) amount to self-inflicted frustration 3 caused by her bringing this unsubstantiated lawsuit in the first place, not that [Defendant’s] actions 4 actually caused her to lose any money or property.” Id. 5 Defendant next contends that the CCRAA and the FCRA require that Plaintiff be “actually Wolpoff & Abramson, LLP, 552 F.3d 1008, 1030 n.30 (9th Cir. 2009); Sanai v. Saltz, 170 Cal. App. 8 4th 746, 777 (2009); 15 USC §§ 1681n & o). Defendant asserts that Plaintiff fails to allege any 9 injury outside of “insufficient and unsubstantiated legal conclusions.” Id. Defendant states that the 10 lack of any injury signals that Plaintiff’s action is premature and she must wait to suffer actual harm 11 Northern District of California harmed” as a result of the alleged credit reporting violations. Id. (citing, inter alia, Gorman v. 7 United States District Court 6 from Defendant’s purported conduct. Id. at 4-5. 12 Defendant also argues that Plaintiff’s claims fail because they do not sufficiently allege how 13 Defendant’s credit reporting was inaccurate. Id. at 5 (citing Bell Atl. Corp. v. Twombly, 550 U.S. 14 544, 570 (2007)). Defendant states that it cannot respond to the allegations because Plaintiff does 15 not specifically say what Defendant failed to “correct” in her credit report. Id. Defendant also 16 asserts that Plaintiff fails to provide “any circumstances regarding Experian’s purported notice of the 17 debt dispute to [Defendant], which is required for Plaintiff to be able to state an actionable FCRA 18 claim as a private individual.” Id. 19 Defendant further argues that Plaintiff’s claims are barred by the Bankruptcy Code because 20 they are premised on Defendant’s alleged violation of a bankruptcy discharge. Id. at 5-7 (citing 21 Walls v. Wells Fargo Bank, N.A., 276 F.3d 502 (9th Cir. 2002); Barrientos v. Wells Fargo Bank, 22 N.A., 633 F.3d 1186, 1188 (9th Cir. 2011)). Defendant contends that since the Bankruptcy Code 23 provides Plaintiff’s sole remedy, her claims fail and must be dismissed. Id. 24 Finally, Defendant contends that Plaintiff’s UCL claim fails to satisfy any of the UCL’s three 25 prongs—unlawful, unfair, or fraudulent. Id. at 7-10. Defendant also asserts that the claim fails 26 because Plaintiff is not entitled to any remedies under the UCL, which requires that Plaintiff must be 27 able to receive restitution in order to be awarded an injunction. Id. at 10 (citing Citizens of 28 Humanity, LLC v. Costco Wholesale Corp., 171 Cal. App. 4th 1, 22 (2009)). 4 1 In response, Plaintiff first rejects Defendant’s assertion that she fails to state a claim for 2 violation of the FCRA. Plaintiff contends that to establish a prima facie violation of the FCRA 3 against a furnisher, “a plaintiff need only allege that he or she submitted a dispute regarding the 4 accuracy of the information reported to a credit reporting agency, that the credit reporting agency 5 notified the furnisher of the information, and that the furnisher failed to take the remedial measures 6 outlined in the statute.” Plaintiff’s Opposition to Defendant’s Motion to Dismiss (“Opposition”), 8 7 (citing Peterson v. Wash. Mut. Bank, No. C-10-01462 JCS, 2010 U.S. Dist. LEXIS 144391 (N.D. 8 Cal. July 29, 2010) (Spero, J.); Wang v. Asset Acceptance LLC, 2010 U.S. Dist. LEXIS 91946, at 9 *15 (N.D. Cal. July 27, 2010) (Illston, J.)). Plaintiff asserts she has adequately alleged her prima Northern District of California facie case, including an adequate allegation concerning Experian’s notice of the dispute to 11 United States District Court 10 Defendant. Opposition at 10. Plaintiff maintains that she need not provide a detailed description of 12 the circumstances of such notice. Id. (citing Wang, 2010 U.S. Dist. LEXIS 91946 at *13). 13 Regarding damages, Plaintiff contends that she does not necessarily have to incur actual 14 damages in order to succeed on her FCRA claim; instead, because Plaintiff alleges that Defendant 15 “willfully” violated the FCRA, she may be awarded her requested statutory damages in the absence 16 of any actual damages. Id. at 12 (citing 15 U.S.C. § 1681n; Alkan v. CitiMortgage, 336 F. Supp.2d 17 1061, 1063-64 (N.D. Cal. 2004) (Whyte, J.)). Plaintiff further contends that even if she needs to 18 allege actual damages, her Complaint does so. Id. at 12-13. 19 Regarding her CCRAA claim, Plaintiff contends that she need only allege that “Defendant 20 furnished inaccurate information with either knowledge of the inaccuracy or at least reason to know 21 that the information was inaccurate and that Plaintiff was harmed as a result of the inaccurate 22 information.” Id. at 13 (citing Brownndorf v. TD Bank, N.A., 2012 U.S. Dist. LEXIS 99237, at *16 23 (C.D. Cal. July 16, 2012)). Plaintiff insists her Complaint contains such allegations. Id. (citing 24 Complaint at ¶¶ 13-14). 25 Plaintiff also argues that the Complaint adequately claims a violation of the UCL based on 26 Defendant’s violation of the CCRAA. Id. at 14. Plaintiff further contends that she has standing 27 under the UCL because she has alleged an “actual injury.” Id. (citing White v. Transunion LLC, 462 28 F. Supp. 2d 1079, 1083 (C.D. Cal. 2006)). 5 1 Finally, Plaintiff rejects Defendant’s argument that her claims are barred by the Bankruptcy 2 Code. Id. at 15-16. Plaintiff contends that since she does not assert a claim pursuant to the 3 bankruptcy discharge injunction, her claims do not impermissibly circumvent the remedial scheme 4 of the Bankruptcy Code. Id. (citing Brownndorf, 2012 U.S. Dist. LEXIS 99237 at *9; Hanks v. 5 Talbots Classics Nat’l Bank, 2012 U.S. Dist. LEXIS 109934, at *12 (N.D. Cal. Aug. 6, 2012)). 6 In reply, Defendant recognizes that Plaintiff’s FCRA claim may survive without a claim of 7 actual damages if Defendant’s conduct was willful, but disputes that Plaintiff has adequately alleged 8 Defendant acted willfully. Defendant’s Reply in Support of Motion, 3. 9 III. 10 Northern District of California United States District Court 11 ANALYSIS A. Legal Standard A complaint may be dismissed for failure to state a claim for which relief can be granted 12 under Rule 12(b)(6) of the Federal Rules of Civil Procedure. Fed. R. Civ. P. 12(b)(6). “The purpose 13 of a motion to dismiss under Rule 12(b)(6) is to test the legal sufficiency of the complaint.” N. Star 14 Int’l v. Ariz. Corp. Comm’n, 720 F.2d 578, 581 (9th Cir. 1983). Generally, a plaintiff’s burden at the 15 pleading stage is relatively light. Rule 8(a) of the Federal Rules of Civil Procedure states that “[a] 16 pleading which sets forth a claim for relief . . . shall contain . . . a short and plain statement of the 17 claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a). 18 In ruling on a motion to dismiss under Rule 12, the court analyzes the complaint and takes 19 “all allegations of material fact as true and construe(s) them in the lights most favorable to the non- 20 moving party.” Parks Sch. of Bus. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). Dismissal may 21 be based on a lack of a cognizable legal theory or on the absence of facts that would support a valid 22 theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). A complaint must 23 “contain either direct or inferential allegations respecting all the material elements necessary to 24 sustain recovery under some viable legal theory.” Bell Atl. Corp. v. Twombley, 550 U.S. 544, 562 25 (2007) (citing Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1106 (7th Cir. 1984)). “A 26 pleading that offers ‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of 27 action will not do.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 28 6 1 555). “Nor does a complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual 2 enhancement.’” Id. (quoting Twombly, 550 U.S. at 557). 3 The factual allegations must be definite enough to “raise a right to relief above the 4 speculative level.” Twombly, 550 U.S. at 555. However, a complaint does not need detailed factual 5 allegations to survive dismissal. Id. Rather, a complaint need only include enough facts to state a 6 claim that is “plausible on its face.” Id. at 570. That is, the pleadings must contain factual 7 allegations “plausibly suggesting (not merely consistent with)” a right to relief. Id. at 557 (noting 8 that this requirement is consistent with Fed. R. Civ. P. 8(a)(2), which requires that the pleadings 9 demonstrate that “the pleader is entitled to relief”). 10 Northern District of California United States District Court 11 12 B. Whether Plaintiff’s FCRA Claim is Adequately Alleged 1. Background Law The FCRA was enacted to promote the equitable use of consumer credit information and to 13 ensure fairness and accuracy within the credit reporting system. 15 U.S.C. § 1681. The FCRA 14 confers a private right of action upon consumers and allows them to sue a furnisher of credit 15 information if such furnisher breaches any of the duties enumerated in § 1681s-2(b). See Gorman v. 16 Wolpoff & Abramson, LLP, 584 F.3d 1147, 1162 (9th Cir. 2009). A furnisher’s duties “arise only 17 after the furnisher receives notice of dispute from a CRA; notice of a dispute received directly from 18 the consumer does not trigger furnishers’ duties under subsection (b).” Id. “To state a claim under 19 the FCRA against the Defendants as a furnisher of credit information, the Plaintiff must allege that: 20 (1) he contacted the CRA; (2) the CRA pursued the claim; and (3) the CRA contacted the 21 Defendants regarding the dispute, triggering the Defendants’ duty to investigate.” Peterson v. Wash. 22 Mut. Bank, No. C-10-01462 JCS, 2010 U.S. Dist. LEXIS 144391, at *26 (N.D. Cal. July 29, 2010) 23 (Spero, J.) (citing Roybal v. Equifax, 405 F. Supp. 2d 1177, 1180 (E.D. Cal. 2005); Nelson v. Chase 24 Manhattan Mortg. Corp., 282 F.3d 1057, 1060 (9th Cir. 2002)). 25 When a violation of 1681s-2(b) occurs, a plaintiff may base his allegations on negligent 26 noncompliance (§ 1681o) and/or willful noncompliance (§ 1681n) of § 1681s-2(b). Under § 1681o, 27 a person who negligently violates the FCRA is liable in an amount equal to the sum of “any actual 28 damages sustained by the consumer as a result of that violation” plus costs and attorney’s fees. 7 1 Some courts have thus required a plaintiff to plead actual damages in order to allege an FCRA claim 2 based on a negligent violation. See Johnson v. CGR Servs., Inc., 2005 WL 991770, at *2 (N.D. Ill. 3 Apr. 7, 2005) (“The FCRA does not explicitly limit the ‘actual damages’ recoverable under the 4 statute and Plaintiff does not need to plead her damages with heightened particularity. However, the 5 Complaint needs at least to give the other party some notice as to what her actual damages could 6 possibly be.”); Martin v. Asset Acceptance, LLC, 2012 WL 3042524, at *2-3 (N.D. Ill. July 25, 7 2012); Engel v. Scully & Scully, Inc., 279 F.R.D. 117, 125-126 (S.D.N.Y. 2011). Under § 1681n, a 8 person who “willfully” violates the FCRA may seek either actual damages or “damages of not less 9 than $100 and not more than $1,000,” as well as punitive damages and reasonable attorney’s fees. § Northern District of California 1681n(a)(1)(A). Because a plaintiff may recover actual or statutory damages under § 1681n, that 11 United States District Court 10 section does not require a plaintiff to allege actual damages. See Martin, 2012 WL 3042524, at *4. 12 13 2. Application of Law to Facts Defendant argues that Plaintiff fails to adequately allege that Experian, the CRA, contacted 14 Defendant regarding the dispute, and thus Defendant had no duty to investigate the dispute or to 15 report the nature of the dispute to Experian. The Court disagrees. Plaintiff’s Complaint alleges that 16 17 18 19 [o]n or about May 5, 2011 Plaintiff sent Experian [Plaintiff’s credit reporting agency] written notice disputing [Defendant’s] improper reporting of delinquencies in payment . . . . Pursuant to Section 1681i(a)(2) of the Fair Credit Reporting Act, Experian provided notice to [Defendant] of Plaintiff’s dispute. After receiving notice of Plaintiff’s allegations, [Defendant] verified that it received notice of Plaintiff’s [sic] from Experian while also continuing to inaccurately report the delinquencies in payment. 20 Complaint at ¶ 10. Because Plaintiff contacted the CRA, the CRA pursued the claim, and the CRA 21 contacted Defendant regarding the dispute, these actions trigger the Defendant’s duty to investigate 22 the claim and report back to the CRA.3 15 U.S.C. § 1681s-2(b); Peterson, 2010 U.S. Dist. LEXIS 23 144391, at *26; Wang v. Asset Acceptance LLC, 2010 U.S. Dist. LEXIS 91946, at *15 (N.D. Cal. 24 25 26 27 28 Section 1681s–2(b)(2) provides that Defendant, a furnisher, must complete its investigation or review and report back to the CRA its position about the disputed information within the 30–day deadline provided for the CRA’s “reinvestigation” under § 1681i(a)(1). The furnisher could, for example, report back to the CRA that the information provided was accurate and need not be modified, deleted or blocked. See, e.g, Gorman, 584 F.3d at 1152 (furnisher reported back to CRA that the credit information was accurate). Or the furnisher could report back that the information provided must be modified in the consumer’s credit report to show that a particular debt has been disputed by a consumer. Id. at 1164. 3 8 1 July 27, 2010) (Illston, J.) (rejecting argument that plaintiff must allege additional facts about notice, 2 including when CRA notified furnisher of the dispute because defendant “[did] not explain how 3 Wang or similarly situated consumers would have access to those ‘facts’ without formal discovery”). 4 The Court further disagrees with Defendant’s contention that Plaintiff fails to adequately that the defendant violated the FCRA either knowingly or recklessly. Safeco Ins. Co. of Am. v. Burr, 7 551 U.S. 47, 57, 69 (2007) (regarding recklessness, “a company subject to FCRA does not act in 8 reckless disregard of it unless the action is not only a violation under a reasonable reading of the 9 statute’s terms, but shows that the company ran a risk of violating the law substantially greater than 10 the risk associated with a reading that was merely careless”). Here, Plaintiff’s allegations, discussed 11 Northern District of California allege that Defendant’s conduct was willful. To prove a willful violation, a consumer must show 6 United States District Court 5 above, provide sufficient facts to support Plaintiff’s claim of willfulness. Experian notified 12 Defendant of the dispute yet Defendant did not undertake the required investigation nor properly 13 report the outcome of the investigation. See Complaint at ¶¶ 10, 24-25. Such allegations, when 14 taken as true, support a claim that Defendant willfully violated its duties under § 1681s-2(b). 15 Additionally, Plaintiff has adequately claimed that Defendant’s conduct, if not willful, was 16 negligent and Plaintiff suffered actual harm as a result. Plaintiff’s alleged damages are as follows: 17 reviewing credit reports from all three consumer reporting agencies; traveling to and from Plaintiff’s 18 counsel’s office; sending demand letters; continued impairment to her credit score; impeded in 19 seeking necessary products and services from vendors and additional credit from other credit 20 agencies; and pain and suffering. Id. at ¶¶ 27-28. At a minimum, Plaintiff’s allegation of pain and 21 suffering satisfies any requirement to plead actual damages. “The FCRA permits ‘recovery for 22 emotional distress and humiliation.’” Drew v. Equifax Info. Servs., LLC, --- F.3d ----, 2012 WL 23 3186110, at *6 (9th Cir. Aug. 7, 2012) (quoting Guimond v. Trans Union Credit Info. Co., 45 F.3d 24 1329, 1333 (9th Cir. 1995) (rejecting the argument that a denial of credit is a prerequisite to recovery 25 under the FCRA and finding that emotional distress and humiliation constitute actual damages)). 26 Furthermore, allegations similar to Plaintiff’s regarding her access to credit have been found by this 27 Court to satisfy the FCRA’s pleading requirements. In Alkan v. CitiMortgage, the Court denied 28 defendant’s motion to dismiss on the grounds that plaintiff failed to adequately plead actual damages 9 1 where plaintiff alleged that defendant had “compromised [plaintiff’s] access to credit by providing 2 erroneous information to Experian.” 336 F. Supp. 2d 1061, 1063 (N.D. Cal. 2004) (Whyte, J.) 3 (internal quotation marks omitted). While a mere drop in Plaintiff’s credit score without any 4 damages actually incurred would likely not satisfy the actual damages requirement, see, e.g., Young 5 v. Harbor Mortor Works, Inc., 2009 WL 187793, at *5 (N.D. Ind. Jan. 27, 2009) (dismissing FCRA 6 claim in which plaintiff alleged that he suffered a decrease in his credit score but no pecuniary or 7 non-pecuniary damage arising from such a decrease), Plaintiff’s claim that she is “impeded in 8 seeking necessary products and services from vendors and additional credit from other credit 9 agencies,” when construed in the light most favorable to the nonmoving party, adequately alleges 10 actual damage beyond simply a diminished credit score.4 Northern District of California United States District Court 11 Accordingly, the Court finds that Plaintiff states a claim under the FCRA. 12 C. 13 14 15 16 17 Whether Plaintiff’s CCRAA Claim is Adequately Alleged 1. Background Law “The CCRAA mirrors the provisions of the FCRA.” Guimond, 45 F.3d at 1335. California Civil Code section 1785.25(a) provides: A person shall not furnish information on a specific transaction or experience to any consumer credit reporting agency if the person knows or should know the information is incomplete or inaccurate. 18 19 Section 1785.31 provides: 20 (a) Any consumer who suffers damages as a result of a violation of this title by any person may bring an action in a court of appropriate jurisdiction against that person to recover the following: 21 22 (1) In the case of a negligent violation, actual damages, including court costs, loss of wages, attorney’s fees and, when applicable, pain and suffering. 23 24 (2) In the case of a willful violation: 25 The Court also rejects Defendant’s contention that the entire Complaint should be dismissed because Plaintiff fails to clearly identify what Defendant reported was “inaccurate” and thus Defendant cannot respond to the allegations set forth in the Complaint. Upon a fair reading of the Complaint, Defendant’s alleged reporting violations—failure to investigate, failure to report debt as disputed, and failure to remove delinquent notation on Plaintiff’s credit report—are easily identified and the Court is confident that Defendant can properly respond to them. 4 26 27 28 10 1 (A) Actual damages as set forth in paragraph (1) above: 2 4 (B) Punitive damages of not less than one hundred dollars ($100) nor more than five thousand dollars ($5,000) for each violation as the court deems proper; 5 (C) Any other relief that the court deems proper. 3 6 Cal. Civ. Code § 1785.31. 7 8 9 2. Application of Law to Facts Defendant’s sole argument particular to the CCRAA claim—that Plaintiff fails to allege that she was actually injured—is coextensive with its argument that Plaintiff fails to plead any actual Northern District of California damages in connection with her FCRA claim. Even assuming that Plaintiff must plead actual 11 United States District Court 10 damages to state a claim under Section 1785.25(a), as discussed above, Plaintiff adequately does so. 12 The Court accordingly denies Defendant’s motion to dismiss Plaintiff’s CCRAA claim. 13 14 D. Whether Plaintiff’s UCL Claim is Adequately Alleged 1. Background Law 15 A claim for unfair competition under the UCL may be brought “by a person who has suffered 16 injury in fact and has lost money or property as a result of the unfair competition.” Cal. Bus. & Prof. 17 Code § 17204. Therefore, to establish standing under the UCL a plaintiff must “(1) establish a loss 18 or deprivation of money or property sufficient to qualify as injury in fact, i.e., economic injury, and 19 (2) show that that economic injury was the result of, i.e., caused by, the unfair business practice . . . 20 that is the gravamen of the claim.” Kwikset Corp. v. Superior Court, 51 Cal. 4th 310, 322 (2011) 21 (emphasis original). 22 The UCL prohibits “unfair competition,” which is defined as any “unlawful, unfair or 23 fraudulent business act or practice.” Cal. Bus. & Prof. Code § 17200. To establish a violation of the 24 UCL, a plaintiff may establish a violation under any one of these prongs. To state a cause of action 25 based on an unlawful business act or practice under the UCL, a plaintiff must allege facts sufficient 26 to show a violation of some underlying law. People v. McKale, 25 Cal. 3d 626, 635 (1979). “The 27 test of whether a business practice is unfair ‘involves an examination of [that practice’s] impact on 28 its alleged victim, balanced against the reasons, justifications and motives of the alleged wrongdoer.” 11 1 Smith v. State Farm Mut. Auto. Ins. Co., 93 Cal. App. 4th 700, 718 (2001). “An ‘unfair’ business 2 practice occurs when that practice offends an established public policy or when the practice is 3 immoral, unethical, oppressive, unscrupulous or substantially injurious to consumers.” Id. (citations 4 omitted). 5 6 2. Application of Law to Facts Defendant contends that Plaintiff fails to adequately allege an economic injury sufficient to credit score,” as well as being “impeded in seeking necessary products and services from vendors 9 and additional credit from other credit agencies.” Complaint ¶¶ 27-28. Allegations of a diminished 10 credit score have been found to satisfy the UCL’s standing requirement. See White v. Trans Union 11 Northern District of California grant her standing under the UCL. Plaintiff, however, has alleged “continued impairment to her 8 United States District Court 7 LLC, 462 F. Supp. 2d 1079, 1080, 1084 (C.D. Cal. 2006) (finding UCL standing where plaintiffs 12 alleged on behalf of a class that TransUnion had “employ[ed] credit reporting practices that they 13 allege falsely declare their discharged debts to be ‘due and owing’ and thereby inappropriately taint 14 Plaintiffs’ credit reports”) (cited with approval in Rubio v. Cap. One Bank, 613 F.3d 1195, 1204 (9th 15 Cir. 2010)); Aho v. AmeriCredit Fin. Servs., Inc., 2011 WL 2292810, at *2 (S.D. Cal. June 8, 2011) 16 (finding economic injury where plaintiff alleged that “his credit report has been negatively affected 17 by Defendant’s reporting of the deficiency to credit reporting agencies”).5 Additionally, Plaintiff’s 18 Complaint can be read as alleging that her diminished credit score actually prevented her from 19 obtaining “products and services from vendors and additional credit from other credit agencies.” 20 Similar allegations have also been found to satisfy the UCL’s standing requirement. See Rubio, 613 21 F.3d at 1204 (holding that a loss of credit that would be available to plaintiff absent defendant’s 22 conduct constituted an “actual economic injury”).6 23 Defendant argues that White is distinguishable because that case is limited to perpetrators of credit reports, like Experian, and does not extend to entities such as Defendant, which simply furnish the information contained in the credit report. The Court sees no legitimate reason why White would be so limited. The issue is economic injury; whether Defendant provided the credit report or furnished the information, if Defendant’s actions caused Plaintiff’s credit report to reflect a debt that had in fact been discharged, Plaintiff’s injury is the same and a claim against Defendant may lie. 6 The Court also rejects Defendant’s argument that Plaintiff must show she is entitled to restitution in order to having standing under the UCL. See Motion at 10 (citing Citizens of Humanity, 5 24 25 26 27 28 12 1 Having found that Plaintiff adequately alleges standing, the Court also concludes that 2 Plaintiff’s UCL claim may be maintained based on the unlawful and unfair prongs.7 Because 3 Plaintiff has stated a claim under the CCRAA, she has stated a claim under the UCL.8 Additionally, 4 Defendant’s actions as alleged in the Complaint could constitute an unfair business practice. 5 E. Whether Plaintiff’s Complaint is Precluded by the Bankruptcy Code 6 Defendant argues that Plaintiff’s Complaint should be dismissed because all of Plaintiff’s 7 claims are barred by the Bankruptcy Code. Defendant contends that the claims are premised on its 8 alleged violation of the bankruptcy discharge and therefore precluded under the Ninth Circuit’s 9 decision in Walls v. Wells Fargo Bank, 276 F.3d 502, 510 (9th Cir. 2002). The Court disagrees. 10 The Ninth Circuit in Walls held that a plaintiff’s claim under § 1692(f) of the Fair Debt Northern District of California United States District Court 11 Collections Practices Act (“FDCPA”) could not be sustained because it turned on whether the 12 discharge injunction of 15 U.S.C. § 524 was violated.9 Walls, 276 F.3d at 510; see also Hanks v. 13 Talbots Classics Nat’l Bank, 2012 WL 3236323, at *4 (N.D. Cal. Aug. 6, 2012) (Illston, J.). 14 Because plaintiff’s FDCPA claim was effectively challenging a violation of § 524, the court 15 concluded that plaintiff’s remedy lied solely in contempt proceedings before the Bankruptcy Court 16 for violation of the discharge injunction. Walls, 276 F.3d at 509. The Ninth Circuit concluded that 17 “because Wall’s remedy for violation of § 524 no matter how cast lies in the Bankruptcy Code, her 18 simultaneous FDCPA claim is precluded.” Id. at 511. 19 20 21 22 23 24 25 26 27 28 LLC v. Costco Wholesale Corp., 171 Cal. App. 4th 1, 22 (2009)). The California Supreme Court has expressly held that such a showing is not required. See Kwikset, 51 Cal. 4th at 337 (overruling Citizens of Humanity). 7 Plaintiff’s Complaint does not allege a violation of the UCL pursuant to the fraudulent prong. 8 Although Plaintiff does not base her UCL claim on Defendant’s alleged violation of the FCRA, the Court notes that such a claim would be preempted. See Subhani v. JPMorgan Chase Bank, Nat’l Ass’n, 2012 WL 1980416, at *4-7 (N.D. Cal. June 1, 2012) (Alsup, J.) (dismissing UCL claim based on FCRA violation as preempted but declining to dismiss UCL claim based on Section 1785.25(a) of the CCRAA as preempted). 9 Section 524 states that a discharge “operates as an injunction against the commencement or continuation of an action, the employment of process, or an act, to collect, recover or offset any such debt as a personal liability of the debtor, whether or not such debt is waived . . . .” § 524(a)(2). 13 1 Defendant asserts that although Walls dealt with an FDCPA claim, the same reasoning can be 2 extended to Plaintiff’s FCRA, CCRAA, and UCL claims. This Court in Hanks recently rejected this 3 argument: 4 5 6 7 8 9 10 Northern District of California United States District Court 11 12 13 14 15 16 [Whether Walls applied to FCRA claims] was addressed in Henry v. Saxon Mortg., Inc., 2011 WL 5331679, *3–4 (D. Ariz. Nov. 7, 2011). There, the plaintiffs claimed that the defendant failed to conduct a reasonable investigation pursuant to the plaintiffs’ disputes with the major credit reporting agencies. Applying Walls, the court dismissed plaintiffs’ claims under the FDCPA as “bankruptcy-laden determinations” precluded by the Bankruptcy Code. The court then turned to the plaintiffs’ claims under the FCRA: Although the Ninth Circuit has not addressed whether Walls applies to FCRA claims, this issue has been addressed in the District of Oregon. See Wakefield v. Calvary Portfolio Servs., No. 06–CV–1066–BR, 2006 WL 3169517, at *2 (D.Or. Nov. 1, 2006). In Wakefield, the court held that the Bankruptcy Code does not preclude an FCRA claim. Id. The court cited two bankruptcy court decisions in support of its conclusion. See In re Miller, No. 01–02004, 2003 WL 25273851, at *2 (Bankr.D.Idaho Aug.15, 2003) (holding that “there appears to be no conflict in remedies between the FCRA and the [Bankruptcy] Code”); In re Pots, 336 B.R. 731, 733 (Bankr.E.D.Va.2005) (holding that the FCRA and the Bankruptcy Code “coexist”). Therefore, although the Defendant correctly asserts that the above cases are not binding authority, they are persuasive nonetheless and present conclusions that logically follow the purpose of the FCRA. For example, the court in In re Pots held that there are two reasons why the Bankruptcy Code and the FCRA can co-exist. 17 18 19 20 21 22 First, while the FCRA and the discharge stay are similar, they are not identical. They differ in their objectives. The FCRA seeks to minimize credit reporting errors and to cure those that are made in a prompt and efficient manner. Actions under it generally involve mistakes. The discharge stay is directed to enforcing the bankruptcy discharge. Actions under it generally involve intentional acts. The elements that must be proved under each statute may overlap, but they are not identical. The remedies available, while similar, may differ. Second, there is no express provision in either the Fair Credit Reporting Act or the Bankruptcy Code that either supercedes the other. 23 24 25 Id. These reasons are sufficient to support a finding that the Bankruptcy Code does not preclude an FCRA claim. 2011 WL 5331679, at *3–4. 26 27 28 The Court agrees with that reasoning and adopts it here. 2012 WL 3236323, at *4-5. 14 1 Defenda fails to ad ant ddress Hanks and the Co finds no reason to di ks ourt o istinguish th action his 2 from that case. As discussed above, Pla m aintiff’s FCR claim res on Defendant’s allege failure to RA sts ed 3 reas sonably investigate Plain ntiff’s dispute and its con ntinued repo orting of Plai intiff’s debt t Experian to 4 with hout at least noting that the debt was disputed. “ t s “Complaints about inacc curacy in cre reporting edit g 5 fall within the aegis of the FCRA, and in F nvolve distin inquiries from complaints about violations of nct s o 6 the discharge inj d njunction.” Id. at *5 (citi In re: Po 336 B.R. 731, 733 (B I ing ots, Bankr.E.D.V 2005)). Va. 7 Plaintiff’s CCRA and UCL claims are also limited to Defenda AA L e d ant’s alleged failure to co d orrectly 8 repo Plaintiff’s credit infor ort s rmation. 9 Accordin ngly, the Co finds tha Plaintiff’s Complaint i not preclu ourt at is uded by the B Bankruptcy Northern District of California Cod de. 11 United States District Court 10 IV. LUSION CONCL 12 For the reasons state above, De r ed efendant’s M Motion to Dis smiss is DEN NIED. 13 IT IS SO ORDERED O D. 14 15 16 17 Date October 1, 2012 ed: _________ ___________ __________ ______ JOSEPH C SPERO C. United Stat Magistra Judge tes ate 18 19 20 21 22 23 24 25 26 27 28 15 5

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