Mestayer v. Experian Information Solutions, Inc et al

Filing 77

ORDER by Judge Edward M. Chen Granting 65 Defendant's Motion to Dismiss. (emcsec, COURT STAFF) (Filed on 6/20/2016)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 GLORIA A. MESTAYER, Plaintiff, 8 10 11 EXPERIAN INFORMATION SOLUTIONS, INC, et al., 12 For the Northern District of California United States District Court Defendants. 13 GLORIA A. MESTAYER, 14 Case No. 15-cv-03650-EMC RELATED CASES v. 9 Case No. 15-cv-03645-EMC ORDER GRANTING DEFENDANT’S MOTION TO DISMISS Docket No. 65, C-15-3645 Docket No. 69, C-15-3650 Plaintiff, 15 v. 16 CAPITAL ONE BANK (USA), N.A., 17 Defendant. 18 The two above-referenced cases are related. In each, Plaintiff Gloria A. Mestayer has sued 19 20 Defendant Capital One Bank (USA), N.A. (“CapOne”), asserting violations of the federal Fair 21 Credit Reporting Act (“FCRA”) and the state analog, the California Consumer Credit Reporting 22 Agencies Act (“CCRAA”). Previously, the Court dismissed these claims by Ms. Mestayer, as 23 alleged in a first amended complaint (“FAC”), but gave her leave to amend based on her 24 representation (made at a hearing) that she did not include an allegation in her complaint that 25 would substantiate a FCRA and/or CCRAA claim. Ms. Mestayer has now filed her second 26 amended complaint (“SAC”) in each case, and CapOne, in turn, has filed a motion to dismiss in 27 each case. The substance of the motions are basically the same, so the Court is issuing only one 28 order. For the reasons stated below, the Court GRANTS CapOne‟s motion to dismiss but gives 1 2 Ms. Mestayer leave to amend, more specifically, with respect to her Metro 2 theory only. I. 3 As alleged in each SAC, Ms. Mestayer filed for bankruptcy on or about November 25, 4 5 FACTUAL & PROCEDURAL BACKGROUND 2013. On or about April 8, 2014, she received a bankruptcy discharge. While the bankruptcy proceedings were ongoing, Ms. Mestayer identified an obligation to 6 7 CapOne as one of her debts. See, e.g., No. C-15-3645 EMC (Docket No. 57) (SAC ¶ 25) (alleging 8 that the debt to CapOne “was included in the Bankruptcy”). CapOne received notice of Ms. 9 Mestayer‟s bankruptcy proceedings while they were ongoing but never claimed that the debt was nondischargeable. Accordingly, when Ms. Mestayer received her bankruptcy discharge on or 11 about April 8, 2014, the CapOne debt was discharged. Although not entirely clear from the SAC (this same problem infected her FAC), it appears 12 For the Northern District of California United States District Court 10 13 that Ms. Mestayer is still asserting a claim against CapOne because, while the bankruptcy 14 proceedings were still ongoing (i.e., pre-discharge) CapOne reported to a consumer reporting 15 agency that Ms. Mestayer owed it a debt. See Mestayer, No. C-15-3645 (Docket No. 54) (Order at 16 2 n.1) (stating that, “[a]t the hearing, Ms. Mestayer clarified that she was not making a claim for 17 relief based on any reporting done by CapOne after the bankruptcy discharge”) (emphasis added). II. 18 DISCUSSION 19 The Court agrees with CapOne that, for the most part, Ms. Mestayer‟s SAC simply 20 rehashes issues that the Court already addressed (and decided in CapOne‟s favor) when it ruled on 21 the viability of Ms. Mestayer‟s FAC. Ms. Mestayer admits as much in her opposition, with one 22 exception. See Opp‟n at 1 (asking the Court “to reconsider the positions it has taken”). 23 A. 24 Metro 2 Theory With respect to issues already addressed by this Court in its first order granting 25 Defendant‟s motion to dismiss, the only issue that warrants new analysis is Ms. Mestayer‟s Metro 26 2 theory. Ms. Mestayer has presented a recent decision from another California district court, 27 which held that a plaintiff had adequately stated a claim for relief based on a Metro 2 theory. See 28 Nissou-Rabban v. Capital One Bank (USA), N.A., No. 15cv1675 JLS (DHB) (S.D. Cal.) (Docket 2 1 No. 61) (order denying motion to dismiss). The district court recognized this Court‟s ruling in the 2 cases at hand that 3 the plaintiff “failed to point to any authority indicating that a failure to comply with an industry standard is a failure to comply with the law.” The Court does not understand that to be Plaintiff‟s burden to survive this MTD. She has not moved for judgment as a matter of law based on the undisputed fact Synchrony failed to follow the industry standard, and her claim does not depend on the premise that failure to follow these standards is an FCRA violation per se. Rather, Plaintiff’s argument is that Synchrony’s failure to adhere to the Metro 2 format may prompt those making credit decisions to draw a more negative inference from Synchrony’s reporting a charge off than if it reported “no data,” as Plaintiff alleges the industry standard required. Of course, to prove her case, Plaintiff will likely need to establish through admissible evidence that this is in fact the industry standard, that Synchrony deviated from it, and that this particular deviation might adversely affect credit decisions –in other words, that “entit[ies] would have expected Defendant to report in compliance with the CDIA guidelines.” 4 5 6 7 8 9 10 12 For the Northern District of California United States District Court 11 13 Nissou-Rabban (Docket No. 61) (Order at 9-10) (emphasis added). The district court‟s analysis in Nissou-Rabban may have merit. However, the allegations 14 15 that Ms. Mestayer made in her amended complaint did not present the theory that CapOne‟s 16 “failure to adhere to the Metro 2 format may prompt those making credit decisions to draw a more 17 negative inference from Synchrony‟s reporting a charge off than if it reported „no data.‟”1 Nissou- 18 Rabban (Docket No. 61) (Order at 10). The Court acknowledges that the Nissou-Rabban 19 complaint makes the same Metro 2 allegations as the SAC in the instant case. (Counsel for Ms. 20 Mestayer also represented the plaintiff in Nissou-Rabban.) But the Court disagrees with the 21 Nissou-Rabban court‟s implicit conclusion that this theory may be inferred from those Metro 2 22 allegations made herein. Of course, this is not a dispositive point given that Ms. Mestayer could amend her SAC 23 24 (with the Court‟s permission) to now expressly articulate the above theory, as recognized by the 25 Nissou-Rabban court. But even if Ms. Mestayer were to plead the new Metro 2 theory articulated 26 by the Court in Nissou-Rabban, her amended pleading would still be problematic. Notably, the 27 28 1 Nor was the theory articulated in Ms. Mestayer‟s opposition brief. 3 admitted that CapOne reported the fact of her bankruptcy at the time that it reported the debt. That 3 does not appear to be the case in Nissou-Rabban; at least, nothing in the opinion suggests such. 4 The reporting of the bankruptcy filing substantially diminishes the argument that failure to comply 5 with Metro 2 reporting format could be misleading. The disclosure of the bankruptcy filing 6 arguably gave fair notice of the potential consequences thereof (e.g., automatic stay, potential 7 discharge); thus, failure to follow the specific Metro 2 reporting format may well have been 8 immaterial. As a consequence, in addition to alleging that Metro 2 is an industry standard such 9 that either CapOne was required to follow that standard, see Giovanni v. Bank of Am., No. C 12- 10 02530 LB, 2013 U.S. Dist. LEXIS 55585, *15 (N.D. Cal. Apr. 17, 2013), or a reasonable entity 11 reviewing the credit report “would have expected [CapOne] to report in compliance with the 12 For the Northern District of California facts in this case are distinguishable from those in Nissou-Rabban because, here, Ms. Mestayer has 2 United States District Court 1 [Metro 2] guidelines,”2 Mortimer v. Bank of Am., N.A., C-12-01959 JCS, 2013 U.S. Dist. LEXIS 13 51877, at *32-33 (N.D. Cal. Apr. 10, 2013), Ms. Mestayer will also have to explain why the 14 failure to comply with Metro 2 format was misleading despite CapOne‟s reporting of the 15 bankruptcy (e.g., because the disclosure of the bankruptcy was so inconspicuous that it was not 16 likely to be seen). Accordingly, as to Ms. Mestayer‟s Metro 2 theory, the Court shall allow Ms. Mestayer 17 18 another opportunity to amend, as it is not clear at this juncture that the theory is not viable. 19 However, the Court forewarns Ms. Mestayer that she will have to substantiate her Metro-2 based 20 claims with much more specific allegations, particularly because of her concession that CapOne 21 did report as a furnisher of information the fact of her bankruptcy at the time it reported the debt. 22 B. Although most of Ms. Mestayer‟s opposition simply rehashes old issues, Ms. Mestayer 23 24 Theory Based on CapOne‟s Failure to Report Debt Was Disputed correctly points out that her SAC does contain some new allegations in support of her claims for 25 26 27 28 2 Although, at the hearing, Ms. Mestayer indicated that TransUnion consistently follows the Metro 2 standard in its credit reports, she did not make that same comment with respect to either Experian or Equifax. In fact, at the hearing, her counsel indicated that Experian and Equifax do not follow the Metro 2 format. If true, this could undercut her argument that Metro 2 reflects the industry standard. 4 1 relief. Those allegations are contained in paragraphs 78-82 of the SAC, which read as follows: 2 78. Experian [or Equifax, i.e., the consumer reporting agency] did not provide notice to Plaintiff that [her] dispute was “frivolous or irrelevant,” pursuant to 15 U.S.C. § 1681i(a)(3). 79. As discussed above, included in the Experian [or Equifax] Dispute Letter was Plaintiff‟s statement of dispute, pursuant to 15 U.S.C. § 1681i(b). 80. However, despite Experian [or Equifax] never notifying Plaintiff that her dispute was “frivolous or irrelevant,” they [sic] failed to notate that Plaintiff disputed the above reporting in their subsequent reporting, as required by 15 U.S.C. § 1681i(c). 81. Capital failed to provide notice of dispute to Experian [or Equifax] as required by 15 U.S.C. § 1681s-2(a)(3). 82. 3 Accordingly, Capital failed to conduct a reasonable investigation with respect to the disputed information as required by 15 U.S.C. § 1681s-2(b)(1)(A) by: 4 5 6 7 8 9 10 12 For the Northern District of California United States District Court 11 13 a. 15 Failing to remove all of the disputed and incorrect information, and b. 14 Failing to notate, as required, Plaintiff‟s dispute. 16 Mestayer, No. C-15-3645 EMC (Docket No. 57) (SAC ¶¶ 78-82). The gist of the new allegations 17 against CapOne specifically (as opposed to Experian or Equifax) is that CapOne failed to provide 18 notice to the consumer reporting agency that she disputed the CapOne debt.3 Title 15 U.S.C. § 1681s-2(a)(3) provides that “[i]f the completeness or accuracy of any 19 20 information furnished by any person to any consumer reporting agency [e.g., Experian or Equifax] 21 is disputed to such person by a consumer, the person may not furnish the information to any 22 consumer reporting agency without notice that such information is disputed by the consumer.” 15 23 U.S.C. § 1681s-2(a)(3). However, the FCRA “expressly provides that a claim for violation of this 24 requirement can be pursued only by federal or state officials, and not by a private party.” Gorman 25 3 26 27 28 In its reply brief, CapOne notes that it disputes Ms. Mestayer‟s factual allegations that Experian and Equifax informed CapOne of Ms. Mestayer‟s dispute. See, e.g., Mestayer, No. C-15-3645 EMC (Docket No. 57) (SAC ¶ 74) (“Upon information and belief, Experian timely notified Capital of Plaintiff‟s dispute . . . .”). However, CapOne recognizes that, at the 12(b)(6) phase, it cannot challenge Ms. Mestayer‟s factual allegations. In light of this recognition, Ms. Mestayer‟s limited objection to CapOne‟s reply brief is moot. 5 1 v. Wolpoff & Abramson, LLP, 584 F.3d 1147, 1162 (9th Cir. 2009) (citing 15 U.S.C. § 1681s- 2 2(c)(1)). Thus, Ms. Mestayer “has no private right of action under § 1681s-2(a)(3) to proceed 3 against [CapOne] for its initial failure to notify the CRAs that [she] disputed the [CapOne debt].” 4 Id. 5 Ms. Mestayer protests that she does “have a private right of action . . . to challenge 6 [CapOne‟s] subsequent failure to so notify the CRAs after receiving notice of [her] dispute under 7 § 1681s-2(b).” Id. In Gorman, the Ninth Circuit acknowledged that such a claim may be brought 8 under § 1681s-2(b) but clarified that 9 10 12 For the Northern District of California United States District Court 11 13 14 15 16 17 18 19 [h]olding that there is a private cause of action under § 1681s-2(b) does not mean that a furnisher could be held liable on the merits simply for a failure to report that a debt is disputed. The consumer must still convince the finder of fact that the omission of the dispute was “misleading in such a way and to such an extent that [it] can be expected to have an adverse effect.” Saunders, 526 F.3d at 150 (quotation omitted). In other words, a furnisher does not report “incomplete or inaccurate” information within the meaning of § 1681s-2(b) simply by failing to report a meritless dispute, because reporting an actual debt without noting that it is disputed is unlikely to be materially misleading. It is the failure to report a bona fide dispute, a dispute that could materially alter how the reported debt is understood, that gives rise to a furnisher’s liability under § 1681s-2(b). Cf. id. at 151 (“[W]e assume, without deciding that a furnisher incurs liability under § 1681s-2(b) only if it fails to report a meritorious dispute.”). Id. at 1163 (emphasis added). Based on Gorman, a plaintiff may bring a FCRA claim based on the defendant creditor‟s 20 failure to report to the consumer reporting agency that a debt is disputed – but only if the failure to 21 so report is misleading. The problem for Ms. Mestayer is that she does not dispute the CapOne 22 debt per se – i.e., that she owed the money to CapOne. Rather, her point is that the debt was not 23 collectible because she was in bankruptcy. But she previously conceded at the hearing on the 24 motion to dismiss her FAC that “CapOne reported not only her account balance/delinquency but 25 also the fact that she was in bankruptcy proceedings.” Mestayer, No. C-15-3645 EMC (Docket 26 No. 54) (Order at 4). Because CapOne reported the fact that she was in bankruptcy proceedings, 27 the Court held that “CapOne‟s reporting was not misleading so as to violate the FCRA.” 28 Mestayer, No. C-15-3645 EMC (Docket No. 54) (Order at 4). Ms. Mestayer has failed to explain 6 1 how her new allegations establish misleading reporting in light of her prior concession. That is, 2 how could it have been misleading for CapOne to fail to report that the debt was disputed based on 3 her bankruptcy when CapOne reported that she was in bankruptcy? The only way Ms. Mestayer 4 could potentially avoid this dilemma is if her Metro 2 theory above is viable. Accordingly, at the 5 end of the day, whether Ms. Mestayer has claims that may proceed will ultimately turn on the 6 Metro 2 theory. III. 7 For the foregoing reasons, the Court grants CapOne‟s motion to dismiss but gives Ms. 8 9 10 Mestayer leave to amend consistent with this opinion. Ms. Mestayer‟s amended complaint shall be filed within thirty (30) days of the date of this order. This order disposes of Docket No. 65 in No. C-15-3645 and Docket No. 69 in No. C-15- For the Northern District of California United States District Court 11 12 CONCLUSION 3650. 13 14 IT IS SO ORDERED. 15 16 17 18 Dated: June 20, 2016 ______________________________________ EDWARD M. CHEN United States District Judge 19 20 21 22 23 24 25 26 27 28 7

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