Sato v. Equifax, Inc. et al

Filing 36

ORDER by Judge William H. Orrick granting 10 Motion to Dismiss. The motions to dismiss plaintiffs complaints for failure to state a claim are GRANTED with leave to amend in accordance with this Order. Any amended complaints shall be filed within 20 days of the date below. (jmdS, COURT STAFF) (Filed on 4/5/2017)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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REBECCA MENSAH,
Plaintiff,
v.

Defendants.

United States District Court
Northern District of California

REGGIE SATO,
Plaintiff,

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v.

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PAUL COLLINS,
Plaintiff,
v.

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Case No. 16-cv-05715-WHO
Re: Dkt. Nos. 19, 25

EXPERIAN INFORMATION SOLUTIONS,
INC., et al.,
Defendants.
MELVIN CRAVEN,
Plaintiff,

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25

Re: Dkt. No. 10

Defendants.

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Case No. 16-cv-05702-WHO

EQUIFAX, INC., et al.,

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Re: Dkt. Nos. 17, 23

EXPERIAN INFORMATION SOLUTIONS,
INC., et al.,

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Case No. 16-cv-05689-WHO

v.
EQUIFAX, INC., et al.,
Defendants.

Case No. 16-cv-06318-WHO
Re: Dkt. No. 21

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MARIA CHAVEZ,
Plaintiff,

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United States District Court
Northern District of California

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EXPERIAN INFORMATION SOLUTIONS,
INC., et al.,
Defendants.
CAROL CONE,

Case No. 16-cv-06359-WHO

Plaintiff,

Re: Dkt. Nos. 14, 28

v.
EXPERIAN INFORMATION SOLUTIONS,
INC., et al.,

ORDER GRANTING MOTIONS TO
DISMISS

Defendants.

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Re: Dkt. No. 20

v.

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Case No. 16-cv-06358-WHO

INTRODUCTION
Plaintiffs in the six above captioned cases bring these actions for alleged violations of the

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Fair Credit Reporting Act (“FCRA”), 15 U.S.C. §§ 1681i, 1681s-2(b), and the California

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Consumer Credit Reporting Agencies Act (“CCRAA”), California Civil Code § 1785.25(a),

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against several credit reporting agencies (“CRAs”) and data furnishers because of reporting related

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to their bankruptcies and the confirmation of their plans under Chapter 13. Defendants have

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moved to dismiss the complaints. My colleagues in this District have many similar cases pending

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before them, so I have the benefit of their thoughtful analyses of the various pleadings issues

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raised in these motions. And because of the high degree of similarity between the complaints and

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the common legal issues raised by defendants, it is appropriate to resolve all the motions to

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dismiss in a single order. For the reasons discussed below, the motions to dismiss are GRANTED

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with leave to amend.

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BACKGROUND1
I. FACTUAL BACKGROUND

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All of the plaintiffs filed for Chapter 13 bankruptcy: Rebecca Mensah on June 27, 2011;

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Reggie Sato on August 31, 2011; Paul Collins on November 25, 2015; Melvin Craven on March

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20, 2012; Maria Chavez on February 7, 2013; and Carol Cone on December 31, 2012.2 Chapter

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13 “affords individuals receiving regular income an opportunity to obtain some relief from their

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debts while retaining their property. To proceed under Chapter 13, a debtor must propose a plan

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to use future income to repay a portion (or in the rare case all) of his debts over the next three to

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five years.” Bullard v. Blue Hills Bank, 135 S. Ct. 1686, 1690, 191 L. Ed. 2d 621 (2015).
Each plaintiff’s plan was confirmed and allowed for unsecured creditors to receive a

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United States District Court
Northern District of California

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specified percentage of disbursement of their filed claims: Mensah’s plan allowed 0% and was

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confirmed on September 1, 2011; Sato’s plan allowed 100%, confirmed May 10, 2012; Collins’

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plan allowed 100%, confirmed March 8, 2016; Craven’s plan allowed 3.06%, confirmed

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November 13, 2012; Chavez’s plan allowed 100%, confirmed February 7, 2013; and Cone’s plan

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allowed 100%, confirmed December 13, 2013.3

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After plan confirmation, each plaintiff ordered a “three bureau credit report” from

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Experian.4 On these reports, plaintiffs noticed a varying number of trade lines “reporting

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The following requests for judicial notice of various documents filed in plaintiffs’ bankruptcy
proceedings are GRANTED: Mensah, No. 16-cv-5689, Dkt. No. 18 (“Mensah RJN by SLS”),
Dkt. No. 43 (“Mensah RJN by Pl.”); Sato, No. 16-cv-5702, Dkt. No. 11 (“Sato RJN by SLS”).
See Rosales–Martinez v. Palmer, 753 F.3d 890, 894 (9th Cir. 2014) (“It is well established that [a
court] may take judicial notice of judicial proceedings in other courts.”).
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Mensah, No. 16-cv-5689, Complaint (“Mensah Compl.”) (Dkt. No. 1) ¶ 93; Sato, No. 16-cv5689, Complaint (“Sato Compl.”) (Dkt. No. 1) ¶ 93, SLS Request for Judicial Notice (“Sato RJN
by SLS”) (Dkt. No. 11), Ex. 1; Collins, No. 16-cv-5715, Complaint (“Collins Compl.”) (Dkt. No.
1) ¶ 86; Craven, No. 16-cv-6318, Complaint (“Craven Compl.”) (Dkt. No. 1) ¶ 93; Chavez, No.
16-cv-6358, Complaint (“Chavez Compl.”) (Dkt. No. 1) ¶ 87; Cone, No. 16-cv-6359, Complaint
(“Cone Compl.”) (Dkt. No. 1) ¶ 87.
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Mensah Compl. ¶¶ 96-97; Sato Compl. ¶¶ 96-97, RJN by SLS, Ex. 3; Collins Compl. ¶¶ 89-90;
Craven Compl. ¶¶ 99-100; Chavez Compl. ¶¶ 93-94; Cone Compl. ¶¶ 93-94.

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Mensah Compl. ¶ 98; Sato Compl. ¶ 98; Collins Compl. ¶ 91; Craven Compl. ¶ 111; Chavez
Compl. ¶ 105; Cone Compl. ¶ 105.
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inaccurate, misleading, or incomplete information that did not comport with credit reporting

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industry standards.”5 Plaintiffs allege that these trade lines continued to report plaintiffs’ accounts

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with past due balances, inaccurate balances, monthly payments, in collections, charged off, and/or

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open.6 Some also failed to note that the plaintiffs were making payments on the accounts through

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their Chapter 13 plans.7 Plaintiffs do not specify in their complaints which trade lines contained

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this allegedly inaccurate information.
Plaintiffs disputed these allegedly inaccurate trade lines by mail to three credit reporting

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agencies (“CRAs”): Experian, Equifax, and TransUnion, LLC.8 Their letters stated that plaintiffs

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had filed for bankruptcy and that the creditors “were not reporting the bankruptcy accurately or
worse not at all;” requested that the creditors investigate “the proper way to report” the

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United States District Court
Northern District of California

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bankruptcies; and asserted that there should not be any notations of a past due balance, charge off,

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monthly payments, transferred or sold, or in collections.9 Each CRA allegedly received the

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dispute letters and sent the disputes to each data furnisher via an automated credit dispute

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verification (“ACDV”).10 Plaintiffs also allege, however, that “[t]he most basic investigation

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required each CRA to send all relevant information via an ACDV to the furnishers which they did

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not do.”11

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Mensah Compl. ¶ 99; Sato Compl. ¶ 99; Collins Compl. ¶ 92; Craven Compl. ¶ 112; Chavez
Compl. ¶ 106; Cone Compl. ¶ 106.

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Id.
Id.

Mensah Compl. ¶¶ 100-101; Sato Compl. ¶¶ 100-101; Collins Compl. ¶¶ 93-94; Craven Compl.
¶¶ 113-114; Chavez Compl. ¶¶ 107-108; Cone Compl. ¶¶ 107-108.
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Id.

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Mensah Compl. ¶ 102; Sato Compl. ¶ 102; Collins Compl. ¶ 95; Craven Compl. ¶ 115; Chavez
Compl. ¶ 109; Cone Compl. ¶ 109.
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Mensah Compl. ¶ 121; Sato Compl. ¶ 121; Collins Compl. ¶ 115; Craven Compl. ¶ 134; Chavez
Compl. ¶ 127; Cone Compl. ¶ 126.
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Later, each plaintiff ordered a second three bureau report from either Experian or Equifax,

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or credit reports from Experian, Equifax, and TransUnion. 12 Plaintiffs identify specific data

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furnishers in these reports that allegedly reported inaccurate information, including balances, past

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due balances, charge off notations, or negative payment history, or failed to note that the account

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was disputed.13 Plaintiffs allege that such reporting does not comport with credit reporting

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industry standards under the “Metro 2 format.” They also allege that these accounts failed to list

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the correct Consumer Information Indicator (“CII”) under Metro 2, which “indicates a special

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condition that applies to a specific consumer.”14 According to plaintiffs, the furnishers should

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have listed CII Code “D,” which indicates that a Chapter 13 bankruptcy petition has been filed but
no discharge has been entered, and “alerts any potential lender that the account is no longer in a

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United States District Court
Northern District of California

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collectable status but is being handled by a Chapter 13 trustee.”15 Plaintiffs do not allege that they

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received a discharge order from the bankruptcy court.

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II. PROCEDURAL BACKGROUND

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A. Mensah (Case No. 16-cv-5689)
Mensah asserts two claims against Specialized Loan Servicing, LLC (“SLS”) for failure to

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reinvestigate and re-reporting inaccurate information in violation of 15 U.S.C. § 1681s-2(b) and

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the CCRAA. She also brings one claim against Experian and Equifax for failure to reinvestigate

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in violation of 15 U.S.C. § 1681i, and has since filed a notice of settlement with Equifax. Dkt. No.

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31. SLS now moves to dismiss both of Mensah’s claims, Dkt. No. 17, as does Experian. Dkt. No.

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23.

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Mensah Compl. ¶ 103; Sato Compl. ¶ 103; Collins Compl. ¶ 96; Craven Compl. ¶ 116; Chavez
Compl. ¶ 110; Cone Compl. ¶ 110.

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Mensah Compl. ¶ 106; Sato Compl. ¶ 106; Collins Compl. ¶¶ 98-100; Craven Compl. ¶ 119;
Chavez Compl. ¶¶ 111-112; Cone Compl. ¶ 111.

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Mensah Compl. ¶ 55; Sato Compl. ¶ 55; Collins Compl. ¶ 55; Craven Compl. ¶ 55; Chavez
Compl. ¶ 55; Cone Compl. ¶ 55.
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Mensah Compl. ¶ 59; Sato Compl. ¶ 59; Collins Compl. ¶ 59; Craven Compl. ¶ 59; Chavez
Compl. ¶ 59; Cone Compl. ¶ 59.
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B. Sato (Case No. 16-cv-5702)
Sato asserts two claims against SLS for failure to reinvestigate and re-reporting inaccurate

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information in violation of 15 U.S.C. § 1681s-2(b) and the CCRAA. He also brought one claim

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against Equifax for failure to reinvestigate in violation of 15 U.S.C. § 1681i, which by agreement

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has now been dismissed with prejudice. Dkt. No. 35. SLS moves to dismiss the complaint. Dkt.

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No. 10.

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C. Collins (Case No. 16-cv-5715)
Collins brings one claim against Experian and Equifax for failure to reinvestigate in
violation of 15 U.S.C. § 1681i. Experian and Equifax move to dismiss his FCRA claim. Dkt.

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Nos. 19, 25. He also asserted two claims against Lending Club, First Premier Bank, and First

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United States District Court
Northern District of California

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National Credit Card for failure to reinvestigate and re-reporting inaccurate information in

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violation of 15 U.S.C. § 1681s-2(b) and the CCRAA. He then voluntarily dismissed First National

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Credit Card (Dkt. No. 15) and Lending Club (Dkt. No. 47) and I granted First Premier Bank’s

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motion to compel arbitration. Dkt. No. 41.

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D. Craven (Case No. 16-cv-6318)

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Craven also brings one claim against Equifax for failure to reinvestigate in violation of 15

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U.S.C. § 1681i. Equifax moves to dismiss Craven’s FCRA claim. Dkt. No. 21. Craven also

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asserted two claims against WebBank for failure to reinvestigate and re-reporting inaccurate

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information in violation of 15 U.S.C. § 1681s-2(b) and the CCRAA that, pursuant to a stipulation,

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I dismissed with prejudice. Dkt. No. 29.

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E. Chavez (Case No. 16-cv-6358)
Chavez brings one claim against Experian and Equifax for failure to reinvestigate in

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violation of 15 U.S.C. § 1681i. Equifax moves to dismiss the complaint. Dkt. No. 20. She also

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initially asserted but has now dismissed two claims against Tyco and Verizon for failure to

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reinvestigate and re-reporting inaccurate information in violation of 15 U.S.C. § 1681s-2(b) and

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the CCRAA. Dkt. Nos. 21, 34.

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F. Cone (Case No. 16-cv-6359)
Cone asserts two claims against TD Bank for failure to reinvestigate and re-reporting

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inaccurate information in violation of 15 U.S.C. § 1681s-2(b) and the CCRAA. She also brings

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one claim against Experian and Equifax for failure to reinvestigate in violation of 15 U.S.C. §

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1681i. TD Bank moves to dismiss both the FCRA and CCRAA claims. Dkt. No. 14. Equifax

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also moves to dismiss the FCRA claim. Dkt. No. 28.

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LEGAL STANDARD

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Under Federal Rule of Civil Procedure 12(b)(6), a district court must dismiss a complaint

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if it fails to state a claim upon which relief can be granted. To survive a Rule 12(b)(6) motion to
dismiss, the plaintiff must allege “enough facts to state a claim to relief that is plausible on its

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United States District Court
Northern District of California

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face.” See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is facially plausible

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when the plaintiff pleads facts that “allow the court to draw the reasonable inference that the

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defendant is liable for the misconduct alleged.” See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)

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(citation omitted). There must be “more than a sheer possibility that a defendant has acted

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unlawfully.” Id. While courts do not require “heightened fact pleading of specifics,” a plaintiff

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must allege facts sufficient to “raise a right to relief above the speculative level.” See Twombly,

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550 U.S. at 555, 570. In deciding whether the plaintiff has stated a claim upon which relief can be

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granted, the Court accepts the plaintiff’s allegations as true and draws all reasonable inferences in

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favor of the plaintiff. See Usher v. City of Los Angeles, 828 F.2d 556, 561 (9th Cir. 1987).

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However, the court is not required to accept as true “allegations that are merely conclusory,

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unwarranted deductions of fact, or unreasonable inferences.” See In re Gilead Scis. Sec. Litig.,

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536 F.3d 1049, 1055 (9th Cir. 2008).

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If the court dismisses a complaint, it “should grant leave to amend even if no request to

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amend the pleading was made, unless it determines that the pleading could not possibly be cured

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by the allegation of other facts.” See Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000). In

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making this determination, the court should consider factors such as “the presence or absence of

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undue delay, bad faith, dilatory motive, repeated failure to cure deficiencies by previous

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amendments, undue prejudice to the opposing party and futility of the proposed amendment.” See

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Moore v. Kayport Package Express, 885 F.2d 531, 538 (9th Cir. 1989).

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DISCUSSION
Experian and Equifax (the “CRA defendants”)16 move to dismiss plaintiffs’ FCRA claim.

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Data furnishers SLS and TD Bank also move to dismiss both the FCRA and the CCRAA claims

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against them.

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I. FCRA CLAIMS—MENSAH, SATO, COLLINS, CRAVEN, CHAVEZ, & CONE
Congress enacted the FCRA “to ensure fair and accurate credit reporting, promote

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efficiency in the banking system, and protect consumer privacy.” Safeco Ins. Co. of Am. v. Burr,

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551 U.S. 47, 52 (2007). “As an important means to this end, the Act sought to make ‘consumer

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United States District Court
Northern District of California

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reporting agencies exercise their grave responsibilities [in assembling and evaluating consumers’

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credit, and disseminating information about consumers’ credit] with fairness, impartiality, and a

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respect for the consumer’s right to privacy.’” Gorman v. Wolpoff & Abramson, LLP, 584 F.3d

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1147, 1153 (9th Cir. 2009) (citing 15 U.S.C. § 1681(a)(4); alterations in original).
Under the FCRA, when a consumer disputes reported credit information, a CRA must

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“conduct a reasonable reinvestigation to determine whether the disputed information is inaccurate

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and record the current status of the disputed information, or delete the item from the file.” 15

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U.S.C. § 1681i(a)(1)(A). A CRA must also “provide notification of the dispute to any person who

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provided any item of information in dispute.” 15 U.S.C. § 1681i(a)(2)(A).
Upon receiving notice of a dispute from a CRA, a data furnisher must:
(A) conduct an investigation with respect to the disputed
information;

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(B) review all relevant information provided by the consumer
reporting agency pursuant to section 1681i(a)(2) . . .;

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(C) report the results of the investigation to the consumer reporting
agency;

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Equifax asserts in a footnote that it is not a “credit reporting agency” as defined by the FCRA,
but addresses plaintiffs’ claims as if it is a CRA. Collins Equifax Mot. at 1 n.1; Craven Mot. at 1
n.1; Chavez Mot. at 1 n.1; Cone Equifax Mot. at 1 n.1. Plaintiffs’ responses to Equifax’s motions
do not respond to this argument. Because I find that the complaints should be dismissed on other
grounds, I need not decide this issue now. I assume, without finding, that Equifax is a CRA for
the purposes of this Order.
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(D) if the investigation finds that the information is incomplete or
inaccurate, report those results to all other consumer reporting
agencies to which the person furnished the information and that
compile and maintain files on consumers on a nationwide basis; and

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(E) if an item of information disputed by a consumer is found to be
inaccurate or incomplete or cannot be verified after any
reinvestigation under paragraph (1), for purposes of reporting to a
consumer reporting agency only, as appropriate, based on the results
of the reinvestigation promptly--

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(i) modify that item of information;

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(ii) delete that item of information; or

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(iii) permanently block the reporting of that item of
information.

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15 U.S.C. § 1681s-2(b)(1). A “furnisher’s investigation pursuant to § 1681s-2(b)(1)(A) may not

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United States District Court
Northern District of California

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be unreasonable.” Gorman, 584 F.3d at 1157.
Plaintiffs allege that the CRA defendants failed to conduct a reasonable reinvestigation

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into the disputed information by not sending all relevant information to the furnishers via an

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ACDV.17 Alternatively, plaintiffs contend that the CRA defendants failed to conduct a reasonable

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reinvestigation because they would have known that plaintiffs had Chapter 13 plans confirmed

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based on other accounts’ reporting.18 Also, plaintiffs assert that certain furnishers failed to

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conduct a reasonable reinvestigation by not reviewing industry standards or investigating the

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terms of plaintiffs’ Chapter 13 plans.19

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A. Inaccuracy

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Experian, Equifax, SLS, and TD Bank move to dismiss plaintiffs’ FCRA claims for failure

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to plead an actionable inaccuracy. 20 To state a claim for violation of 15 U.S.C. § 1681i or §

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Mensah Compl. ¶¶ 120-122; Collins Compl. ¶¶ 114- 116; Craven Compl. ¶¶ 133-135; Chavez
Compl. ¶¶ 126-128; Cone Compl. ¶¶ 125-127. There are no remaining CRA defendants in Sato.

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Mensah Compl. ¶¶ 123-133; Collins Compl. ¶¶ 117-127; Craven Compl. ¶¶ 136-147; Chavez
Compl. ¶¶ 129-140; Cone Compl. ¶¶ 128-139. There are no remaining CRA defendants in Sato.
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Mensah Compl. ¶¶ 110-118; Sato Compl. ¶¶ 110-118; Cone Compl. ¶¶ 115-123. Furnisher
defendants in the other three above-captioned cases have either been voluntarily dismissed or they
have not moved for dismissal of plaintiffs’ claims.
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Mensah SLS Mot. at 5; Mensah Experian Mot. at 8; Sato Mot. at 4; Collins Experian Mot. at 8;
Collins Equifax Mot. at 5; Craven Mot. at 4; Chavez Mot. at 5; Cone TD Bank Mot. at 9; Cone
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1681s-2(b), a plaintiff must demonstrate “that an actual inaccuracy exist[s].” Carvalho v. Equifax

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Info. Servs., LLC, 629 F.3d 876, 890 (9th Cir. 2010). “[A]n item on a credit report can be

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‘incomplete or inaccurate’ within the meaning of the FCRA’s furnisher investigation provision, 15

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U.S.C. § 1681s–2(b)(1)(D), ‘because it is patently incorrect, or because it is misleading in such a

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way and to such an extent that it can be expected to adversely affect credit decisions.’” Id. (citing

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Gorman, 584 F.3d at 1163). This standard is equally applicable to claims arising under 15 U.S.C.

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§ 1681i. See Smith v.Experian Info. Solutions, No. 16-cv-04653-BLF, 2017 WL 1092377, at *3

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(N.D. Cal. Mar. 23, 2017). However, “even if a CRA fails to conduct a reasonable investigation

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or otherwise fails to fulfill its obligations under the FCRA, if a plaintiff cannot establish that a
credit report contained an actual inaccuracy, then the plaintiff’s ‘claims fail as a matter of law.’”

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United States District Court
Northern District of California

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Connors v. Experian Info. Sols., Inc., No. 16-cv-4663-LHK, 2017 WL 168493, at *3 (N.D. Cal.

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Jan. 17, 2017) (citing Carvalho, 629 F.3d at 890). In addition, “a complaint’s allegations must

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dispute facts underlying a purported inaccuracy, as the presentation of legal defenses to payment

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will not suffice.” Masimay v. Experian Info. Solutions, Inc., No. 16-cv-05684-YGR, 2017 WL

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1065170, at *3 (N.D. Cal. Mar. 21, 2017) (original emphasis).

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1. Post-Confirmation, Pre-Discharge Reporting of Past Due Balances or
Delinquencies
Plaintiffs argue that reporting a delinquency or past due balance that does not reflect a
Chapter 13 plan’s terms after confirmation, but before discharge, is inaccurate. Courts in this
District, however, have consistently held that such reporting is not inaccurate or misleading. See,
e.g., Fair v. Experian Info. Solutions, Inc., No. 16-cv-5712, 2017 WL 1164225 (N.D. Cal. Mar.
29, 2017) (Wilken, J.); In re Experian Info. Solutions Credit Reporting Litig., No. 16-cv-5674,
Order Granting Defendants’ Motions to Dismiss, Dkt. No. 74 (N.D. Cal. Mar. 28, 2017) (Alsup,
J.); Masimay, 2017 WL 1065170 (Gonzalez Rogers, J.); Ramos v. Experian Info. Sols., Inc., No.
16-cv-06375, 2017 WL 1047019 (N.D. Cal. Mar. 20, 2017) (Hamilton, J.); Penney v. Experian
Info. Solutions, Inc., No. 16-cv-5695, 2017 WL 1078649, (N.D. Cal. Mar. 15, 2017) (Armstrong,

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Equifax Mot. at 5.
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J.); Anderson v. Experian Info. Sols., Inc., No. 16-cv-03328, 2017 WL 914394 (N.D. Cal. Mar. 8,

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2017) (Freeman, J.); Artus v. Experian Info. Sols., Inc., No. 16-cv-03322, 2017 WL 346022 (N.D.

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Cal. Jan. 24, 2017) (Davila, J.); Doster v. Experian Info. Sols., Inc., No. 16-cv-04629-LHK, 2017

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WL 264401 (N.D. Cal. Jan. 20, 2017) (Koh, J.).21
Plaintiffs contend that these decisions ignore the Bankruptcy Code. Under 11 U.S.C.

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§ 1322(b)(2), a Chapter 13 plan may “modify the rights of holders of secured claims, other than a

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claim secured only by a security interest in real property that is the debtor’s principal residence, or

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of holders of unsecured claims, or leave unaffected the rights of holders of any class of claims.”

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Plaintiffs also point to 11 U.S.C. § 1327(a), under which “[t]he provisions of a confirmed plan
bind the debtor and each creditor, whether or not the claim of such creditor is provided for by the

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United States District Court
Northern District of California

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plan, and whether or not such creditor has objected to, has accepted, or has rejected the plan.”

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Under these sections, plaintiffs assert that the modification to the rights of creditors “occurs at

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confirmation and given the res judicata effect of confirmation this modification should be reflected

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on a consumer’s credit report with respect to balances and past due balances.”22
Courts have found that, pursuant to 11 U.S.C. § 1327, “any issue decided under a plan is

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entitled to res judicata effect.” In re Blendheim, 803 F.3d 477, 486–87 (9th Cir. 2015) (citing

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Bullard, 135 S.Ct. 1686, 1692 (2015) (“Confirmation has preclusive effect, foreclosing relitigation

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of any issue actually litigated by the parties and any issue necessarily determined by the

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confirmation order.” (internal quotation marks omitted)). But “although § 1327(a) makes the

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confirmation plan binding on both the debtor and creditor and limits a creditor’s ability to collect

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on a debt outside of the plan, the confirmation of a plan, standing alone, does not legally alter the

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Other district courts in the Ninth Circuit have come to similar conclusions. See, e.g., Abeyta v.
Bank of Am., No. 15-cv-02320, 2016 WL 1298109, at *2 (D. Nev. Mar. 31, 2016) (notice of
appeal filed) (“[T]he Bankruptcy Code prevents certain collection activities, but it does not alter
the fact of delinquency.”); Polvorosa v. Allied Collection Serv., Inc., No. 16-cv-1508, 2017 WL
29331, at *3 (D. Nev. Jan. 3, 2017) (“[R]eporting delinquencies during the pendency of a
bankruptcy or during a bankruptcy’s automatic stay is not itself a violation of the FCRA.”).
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Craven Oppo. at 14; Chavez Oppo. at 14; Cone Oppo. to Equifax Mot. at 14; see also Mensah
Oppo. to Experian Mot. at 6-8.; Mensah Oppo. to SLS Mot. at 6-9; Collins Oppo. to Experian
Mot. at 6-8; Collins Oppo. to Equifax Mot. at 12.
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debt or the fact that payments are in arrears.” Newkirk v. Experian Info. Solutions, Inc., No. 16-

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cv-5691-SBA, 2017 WL 1078653, at *4 (N.D. Cal. Mar. 16, 2017); see also Anderson, 2017 WL

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914394, at *5 ( “[T]he original debt did exist prior to confirmation and [plaintiff] has cited no

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authority suggesting that bankruptcy proceedings ‘erase’ that historical fact for purposes of the

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FCRA.”); Artus, 2017 WL 346022, at *5 (“[T]he language that governs such plans, § 1327,

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describes no effect to the existence or status of a debt upon plan confirmation”). Instead, the full

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debt amount remains until a debtor successfully completes the plan and obtains an order of

8

discharge in the bankruptcy court. See Newkirk, 2017 WL 1078653, at *4 (citing In re Blendheim,

9

803 F.3d at 487; Menk v. Lapaglia (In re Menk), 241 B.R. 896, 908 (9th Cir. BAP 1999)).
Plaintiffs have not alleged that they received discharge orders or that defendants’ reporting was

11
United States District Court
Northern District of California

10

inaccurate in light of a discharge.

12

Also, “[m]any debtors fail to complete a Chapter 13 plan successfully, often because they

13

cannot make payments on time.” In re Blendheim, 803 F.3d at 487. If this occurs, the Chapter 13

14

case may either be converted to a case under a different chapter of the Bankruptcy Code or

15

dismissed. Id. A “conversion or dismissal returns to the creditor all the property rights he held at

16

the commencement of the Chapter 13 proceeding and renders him free to exercise any

17

nonbankruptcy collection remedies available to him.” Id. This further supports the conclusion

18

that plan confirmation does not alter the legal status of a debt.

19

Plaintiffs’ citation to In re Luedtke, No. 02-35082-SVK, 2008 WL 2952530 (Bankr. E.D.

20

Wis. July 31, 2008), does not persuade me otherwise. There, the bankruptcy court found that the

21

creditor violated a confirmation order—not the FCRA—by reporting to a CRA the original loan

22

amount, rather than the confirmed plan’s terms. Id. at *6. Although the court suggested that the

23

plaintiff could have proceeded under the FCRA, this was dicta. Id. at *5. Additionally, other

24

courts in this District have similarly rejected In re Luedtke. See, e.g., Masimay, 2017 WL

25

1092377, at *5 n.5; Smith, 2017 WL 1092377, at *4; In re Experian Info. Solutions Credit

26

Reporting Litigation, No. 16-cv-5674-WHA, Order Granting Defendants’ Motion to Dismiss (Dkt.

27

No. 74) (N.D. Cal. Mar. 28, 2017) at 2.

28
12

I join my colleagues in finding that it is not inaccurate to report an account’s full unpaid

1
2

balance after plan confirmation, but before discharge.23 However, it is “an open question whether

3

such reporting could satisfy the inaccuracy requirement if unaccompanied by any indication that

4

the consumer is in bankruptcy.” Anderson, 2017 WL 914394, at *5. As the Hon. Beth Freeman

5

noted in Anderson, “it may well be possible for a plaintiff to allege facts showing that the

6

reporting of a pre-confirmation delinquency is materially misleading absent any reference to a

7

pending Chapter 13 bankruptcy, at least where a confirmed plan governs the timing and amounts

8

of post-confirmation payments on the debt.” Id. Plaintiffs are given leave to amend in order to

9

allege whether specific defendants failed to report their bankruptcy filings and why such reporting

10

is misleading.

United States District Court
Northern District of California

11

2. Reporting in Violation of Industry Standards

12

Plaintiffs also assert that defendants reported inaccurate information by failing to follow

13

credit reporting industry standards, particularly the Metro 2 format. Post-confirmation, plaintiffs

14

allege, the industry standard for reporting balances and monthly payments is to report in

15

accordance with the terms of the Chapter 13 plan and list CII Code “D.”24 They argue that

16

defendants’ reporting is inaccurate because they reported the pre-petition debts, rather than the

17

plan terms, and did not list CII Code “D.” Plaintiffs allege that a failure to list CII Code “D”

18
19
20
21
22
23
24
25
26
27
28

23

Plaintiffs Craven, Chavez, and Cone submitted identical requests for judicial notice to illustrate
the practical implications of such a decision. Craven, No. 16-cv-6318, Request for Judicial Notice
(Dkt. No. 31); Chavez, No. 16-cv-6358, Request for Judicial Notice (Dkt. No. 33); Cone, 16-cv6359, Request for Judicial Notice (Dkt. No. 42). These requests are GRANTED. See Rosales–
Martinez, 753 F.3d at 894. After another court in this District held that it is not inaccurate to
report past due balances after plan confirmation, the plaintiff moved in the bankruptcy court for an
order allowing her to make direct payments to a creditor to avoid having a “past due” mark on her
credit report. Craven RJN, Ex. A. In response, the Chapter 13 trustee objected that: (1) creditors
are barred from collecting on pre-petition debt under the automatic stay provision; (2) creditors are
bound by the confirmation plan under 11 U.S.C. § 1327; and (3) allowing a debtor to directly pay
one creditor would unfairly discriminate against the other unsecured creditors. Id., Ex. B. Based
on decisions in this District and the trustee’s response, plaintiffs’ counsel asserted that plaintiffs
are left with a negative mark on their credit reports but are unable to make any payments to
remedy that mark. While I appreciate the difficult situation that plaintiffs are facing, this is an
issue best left to Congress. See Smith, 2017 WL 1092377, at *5 (explaining that any deprivation
of benefits associated with filing for Chapter 13 bankruptcy because of reporting of preconfirmation debts is an issue for Congress, not the courts).
24

See, e.g., Chavez Compl. ¶¶ 80-86.
13

1

makes it appear as if “a consumer has not addressed outstanding debt obligations through the

2

bankruptcy process” and that creditors are free to collect despite the automatic stay, causing “a

3

more negative inference regarding a consumer’s credit worthiness.”25 In support of this argument,

4

plaintiffs’ cite Nissou-Rabban v. Capitol One Bank (USA), N.A., No. 15-cv-1675, 2016 WL

5

4508241 (S.D. Cal. June 6, 2016), where the court held that the plaintiff plausibly stated a claim

6

under the FCRA where she alleged that a data furnisher failed to comply with Metro 2 format by

7

reporting an account as “charged off” rather than CII code “D” or “no data,” and that such

8

reporting may be misleading to those making credit decisions. Id. at *4-5.
Courts in this District have generally distinguished or disagreed with this portion of

9

Nissou-Raban. See, e.g., Devincenzi v. Experian Info. Sols., Inc., No. 16-cv-04628-LHK, 2017

11
United States District Court
Northern District of California

10

WL 86131, at *6 (N.D. Cal. Jan. 10, 2017) (“[A]t most Nissou-Raban stands for the proposition

12

that a furnisher that reports delinquent debts during the pendency of a bankruptcy should also

13

report the fact that a bankruptcy is pending so that creditors know that those delinquent debts may

14

be discharged in the future.”); Anderson, 2017 WL 914394, at *6. The courts in this District have

15

“repeatedly held that accurately reporting a delinquent debt during the pendency of a bankruptcy is

16

not rendered unlawful simply because a plaintiff alleges that the reporting, though accurate, was

17

inconsistent with industry standards.” Doster, 2017 WL 264401, at *5 (collecting cases); see also

18

Anderson, 2017 WL 914394, at *6 (“[D]istrict courts within the Ninth Circuit overwhelmingly

19

have held that a violation of industry standards is insufficient, without more, to state a claim for

20

violation of the FCRA.”); Mestayer v. Experian Info. Sols., Inc., No. 15-cv-03645-EMC, 2016 WL

21

7188015, at *3 (N.D. Cal. Dec. 12, 2016) (holding that reporting accurate information but

22

deviating from Metro 2 format was not misleading where bankruptcy also reported). I find these

23

cases more persuasive than Nissou-Raban. Therefore, deviation from industry standards by itself

24

is insufficient to allege inaccurate or misleading reporting. To the extent that plaintiffs’ FCRA

25

claims are based solely on the theory that defendants did not comply with industry standards, these

26

claims are dismissed.

27
28

25

See, e.g., Chavez Compl. ¶¶ 64-66.
14

1

3. Allegations Regarding the Three Bureau Credit Reports and Dispute Letters

2

In order to state a claim against the CRA defendants, plaintiffs must identify which CRA

3

reported the allegedly “incomplete or inaccurate” information in the three bureau reports. See

4

Anderson, 2017 WL 914394, at *4; Doster, 2017 WL 264401. Plaintiffs allege that they each

5

ordered a “three bureau report,” on which they noticed several different trade lines with inaccurate

6

information. After disputing these reports, plaintiffs ordered either a second “three bureau report”

7

or a second credit report from Experian, Equifax, and TransUnion. The complaints do not specify

8

whether Experian or Equifax reported the allegedly inaccurate information, as opposed to the other

9

bureaus. The FCRA claims against the CRA defendants are dismissed on this ground.
Similarly, plaintiffs do not identify which trade lines in their first three-bureau reports

10

United States District Court
Northern District of California

11

contained the allegedly inaccurate information. Nor do plaintiffs allege that they identified in their

12

dispute letters the specific defendant furnishers or the individual basis for their belief that each of

13

those accounts was inaccurately reported. Therefore, plaintiffs failed to allege that their dispute

14

letters raised any actual inaccuracy on the part of specific defendant furnishers.26 The FCRA

15

claims against SLS and TD Bank are dismissed on this basis.

16

4. Failure to Report Account as Disputed—Cone

17

Plaintiff Cone alleges that TD Bank failed to report that her account was being disputed.

18

Cone Compl. ¶ 111. “A disputed credit file that lacks a notation of dispute may well be

19

‘incomplete or inaccurate’ within the meaning of the FCRA, and the furnisher has a privately

20

enforceable obligation to correct the information after notice.” Gorman, 584 F.3d at 1164 (citing

21

15 U.S.C. § 1681s-2(b)(1)(D)); see also Wang v. Asset Acceptance LLC, No. C 09-4797-SI, 2010

22

WL 2985503 (N.D. Cal. July 27, 2010). However, a furnisher is not always liable for failure to

23

report a debt as disputed. For instance, “a furnisher does not report ‘incomplete or inaccurate’

24
25
26
27
28

26

Some plaintiffs alleged that defendants reported balances that differed from either the proof of
claim filed in the bankruptcy court or the bankruptcy trustee’s accounting in light of payments
made under the plan. These alleged inaccuracies appear to be independent from plaintiffs’ theory
regarding the effect of the confirmation order, and may potentially state a claim. However,
plaintiffs should include much more detailed allegations, such as whether the dispute letter stated
that the accounts were inaccurate on these bases, and whether the payments made to the furnishers
occurred before or after plaintiffs ordered their credit reports.
15

1

information within the meaning of § 1681s-2(b) simply by failing to report a meritless dispute,

2

because reporting an actual debt without noting that it is disputed is unlikely to be materially

3

misleading.” Gorman, 584 F.3d at 1163. Instead, there must be a “bona fide dispute,” meaning “a

4

dispute that could materially alter how the reported debt is understood.” Id.; see also Blakeney v.

5

Experian Info. Sols., Inc., No. 15-cv-05544-LHK, 2016 WL 4270244, at *5 (N.D. Cal. Aug. 15,

6

2016) (“[O]mitting the disputed nature of a debt, if the dispute could materially alter how the

7

reported debt is understood, may be ‘incomplete or inaccurate’ reporting.”).

8
9

Cone’s underlying dispute with TD Bank is that it reported her account as “charged off”
despite her confirmed Chapter 13 plan. Cone Compl. ¶ 111. Cone’s allegations that such
reporting is inaccurate are less than clear. She asserts that: (1) TD Bank transferred the account to

11
United States District Court
Northern District of California

10

a third party after Cone filed for bankruptcy; (2) the third party filed a proof of claim for $3,358;

12

(3) TD Bank is owed nothing because the account was transferred to another creditor; and (4) even

13

assuming that money was owed to TD Bank, it should have reported the account with CII Code

14

“D,” rather than as “charged off.” Id. Cone argues that TD Bank’s reporting of the account as

15

“charged off” is misleading because it “implies that the account is still subject to some type of

16

collection rather than not owing any outstanding balance.” Cone Oppo. to TD Bank Mot. at 5.

17

As pleaded, Cone’s allegations regarding the inaccuracy of TD Bank’s reporting are

18

insufficient. If she chooses to amend, Cone should make clear whether she is alleging that the

19

“charged off” notation is inaccurate because that account had been transferred to a third party or

20

because the notation does not comply with industry standards and the confirmation order. If the

21

latter, Cone should specify whether TD Bank reported her pending bankruptcy and, if so, allege

22

facts showing how the “charged off” notation could nevertheless be misleading. She should also

23

include allegations why the failure to note this dispute is inaccurate or misleading. Because

24

plaintiffs have not adequately alleged an actionable inaccuracy, the FCRA claims are dismissed.

25
26

B. Allegations Regarding Notice
When a CRA receives a dispute from a consumer, it is required to provide to the data

27

furnisher a notification of the dispute that includes “all relevant information.” 15 U.S.C.

28

§ 1681i(a)(2). Therefore, plaintiffs may state a claim against a CRA defendant if they allege that
16

1

they disputed particular accounts reported in their first three-bureau reports and that the CRA

2

failed to notify the relevant furnishers of the dispute, so long as all other pleading requires

3

regarding inaccuracy and damages are met. Anderson, 2017 WL 914394, at *7. However, to state

4

a claim against a furnisher, a plaintiff must allege that the furnisher received notice of the dispute

5

from a CRA, which triggered the furnisher’s duties under 15 U.S.C. § 1681s-2(b). Drew v.

6

Equifax Info. Servs., LLC, 690 F.3d 1100, 1106 (9th Cir. 2012); Adkins v. Experian Info. Sols.,

7

Inc., No. 16-cv-02150-EJD, 2016 WL 6841700, at *1 (N.D. Cal. Oct. 7, 2016).
Plaintiffs allege that the CRA defendants received plaintiffs’ dispute letters and sent the

8
9

dispute to each data furnisher via an ACDV. Plaintiffs also assert that “[t]he most basic
investigation required each CRA to send all relevant information via an ACDV to the furnishers

11
United States District Court
Northern District of California

10

which they did not do.”27 These allegations are inconsistent and cannot state a claim under the

12

FCRA against either the CRA defendants or the furnisher defendants. See Manley v. Experian

13

Info. Sols., Inc., No. 16-cv-03355-LHK, 2017 WL 151540, at *5 (N.D. Cal. Jan. 16, 2017); cf.

14

Anderson, 2017 WL 914394, at *7. To the extent that plaintiffs base their claims against the CRA

15

defendants on failure to notify the data furnishers of the dispute, these claims are dismissed. The

16

FCRA claims against the data furnishers in Mensah, Sato, and Cone are also dismissed for failure

17

to plausibly allege that the furnishers received notice of the dispute. Plaintiffs are given leave to

18

amend in order to plausibly allege facts supporting whether or not the CRA defendants notified the

19

relevant furnishers of plaintiffs’ disputes.

20

C. Willfulness or Negligence Allegations

21

The CRA defendants also move to dismiss plaintiffs’ claims for failure to plead willfulness

22

or actual damages. I need not decide this issue now because plaintiffs’ FCRA claims are

23

dismissed on other grounds, as discussed above.

24

II. CCRAA CLAIMS—MENSAH, SATO, & CONE

25
26

Defendants SLS and TD Bank also move to dismiss the CCRAA claims in Mensah, Sato,
and Cone. Similar to the FCRA, the CCRAA provides that “[a] person shall not furnish

27
28

27

Mensah Compl. ¶¶ 102, 121; Sato Compl. ¶¶ 102, 121; Collins Compl. ¶¶ 95, 115; Craven
Compl. ¶¶ 115, 134; Chavez Compl. ¶¶ 109, 127; Cone Compl. ¶¶ 109, 126.
17

1

information on a specific transaction or experience to any consumer credit reporting agency if the

2

person knows or should know that the information is incomplete or inaccurate.” Cal. Civ. Code §

3

1785.25(a). “[B]ecause the CCRAA ‘is substantially based on the Federal Fair Credit Reporting

4

Act, judicial interpretation of the federal provisions is persuasive authority and entitled to

5

substantial weight when interpreting the California provisions.’” Carvalho, 629 F.3d at 889

6

(quoting Olson v. Six Rivers Nat’l Bank, 111 Cal. App. 4th 1, 12 (2003)). The failure to plead an

7

actionable inaccuracy, as discussed above, is also grounds for dismissal of plaintiffs’ CCRAA

8

claims.

9

III. ARGUMENTS UNIQUE TO DEFENDANT SLS—MENSAH AND SATO

10

United States District Court
Northern District of California

11

In Mensah and Sato, defendant SLS also argues that plaintiffs’ FCRA and CCRAA claims
are barred by judicial estoppel and the statute of limitations.

12

A. Judicial Estoppel

13

In deciding whether judicial estoppel bars a plaintiff’s claims, a court considers: (1)

14

whether a party’s later position is “clearly inconsistent” with its earlier position; (2) “whether the

15

party has succeeded in persuading a court to accept that party’s earlier position”; and (3) “whether

16

the party seeking to assert an inconsistent position would derive an unfair advantage or impose an

17

unfair detriment on the opposing party if not estopped.” New Hampshire v. Maine, 532 U.S. 742,

18

750–51 (2001). “In the bankruptcy context, the federal courts have developed a basic default rule:

19

If a plaintiff-debtor omits a pending (or soon-to-be-filed) lawsuit from the bankruptcy schedules

20

and obtains a discharge (or plan confirmation), judicial estoppel bars the action.” Ah Quin v. Cty.

21

of Kauai Dep’t of Transp., 733 F.3d 267, 271 (9th Cir. 2013). “The reason is that the plaintiff-

22

debtor represented in the bankruptcy case that no claim existed, so he or she is estopped from

23

representing in the lawsuit that a claim does exist.” Id. (original emphasis).

24

A court will find judicial estoppel “when the debtor has knowledge of enough facts to

25

know that a potential cause of action exists during the pendency of the bankruptcy, but fails to

26

amend his schedules or disclosure statements to identify the cause of action as a contingent asset.”

27

Hamilton v. State Farm Fire & Cas. Co., 270 F.3d 778, 784 (9th Cir. 2001); see also Hay v. First

28

Interstate Bank of Kalispell, N.A., 978 F.2d 555, 557 (9th Cir. 1992) (finding estoppel where “all
18

1

facts were not known to” the plaintiff during pendency of bankruptcy case, “but enough was

2

known to require notification of the existence of the asset to the bankruptcy court”). “The debtor’s

3

duty to disclose potential claims as assets does not end when the debtor files schedules, but instead

4

continues for the duration of the bankruptcy proceeding.” Hamilton, 270 F.3d at 785.

5

Mensah’s Chapter 13 plan was confirmed on September 1, 2011, and she obtained a

6

discharge order on September 14, 2016. Mensah RJN by SLS, Exs. 2, 3. Her claims are based on

7

her two credit reports, ordered on March 8, 2016, and August 15, 2016. Mensah Compl. ¶¶ 99,

8

103. Sato’s Chapter 13 plan was confirmed on May 10, 2012, and he received a discharge order

9

on June 15, 2016. Sato RJN by SLS, Exs. 2, 3. His claims are based on his two credit reports,
ordered on March 25, 2016, and September 2, 2016. Sato Compl. ¶¶ 98, 103. Based on the

11
United States District Court
Northern District of California

10

judicially noticeable documents, it appears that neither Mensah nor Sato listed this cause of action

12

on their schedules before obtaining a confirmation order. However, both confirmation orders were

13

entered before Mensah or Sato ordered any of the relevant credit reports.

14

While judicial estoppel may apply to Mensah’s and Sato’s claims, I decline to make such a

15

finding on this record. Judicial estoppel would not apply based on the entry of the confirmation

16

orders alone because Mensah and Sato could not have known about these claims at that time.

17

Although plaintiffs received discharge orders, there is no information regarding whether they ever

18

amended their schedules after plan confirmation, but before discharge. Nor is it “clear that

19

[plaintiffs’] failure to amend the schedules disadvantaged the creditors in a significant way, given

20

that the potential damages here are likely nominal.” Basconcello v. Experian Info. Solutions, Inc.,

21

No. 16-cv-6307-PJH, 2017 WL 1046969, at *4 (N.D. Cal. Mar. 20, 2017). And for Sato, it is not

22

clear whether he could have known about these claims before discharge because he did not order

23

his second credit report until after discharge. Should Mensah and Sato amend their claims, SLS

24

may raise this issue again on a fuller record.

25
26

B. Statute of Limitations
SLS argues that Mensah’s FCRA and CCRAA claims and Sato’s CCRAA claim are barred

27

by the applicable statute of limitations. An action for a violation of the FCRA must be filed “not

28

later than the earlier of--(1) 2 years after the date of discovery by the plaintiff of the violation that
19

1

is the basis for such liability; or (2) 5 years after the date on which the violation that is the basis

2

for such liability occurs.” 15 U.S.C. § 1681p. An action for a violation of the CCRAA “may be

3

brought . . . within two years from the date the plaintiff knew of, or should have known of, the

4

violation of this title, but not more than seven years from the earliest date on which liability could

5

have arisen.” Cal. Civ. Code § 1785.33. The seven year limitation does not apply, however, when

6

the defendant “materially and willfully misrepresented any information” that is material to

7

establishing the defendant’s liability. Id.

8

Mensah filed her lawsuit on October 5, 2016, and her plan was confirmed on September 1,
2011. Sato also filed his lawsuit on October 5, 2016, and his plan was confirmed May 10, 2012.

10

SLS argues that the statute of limitations began to run on the date of plan confirmation. Mensah

11
United States District Court
Northern District of California

9

SLS Mot. at 4; Sato Mot. at 4. SLS argues that Mensah and Sato should have known of the

12

alleged FCRA and CCRAA violations any time after their plans were confirmed because their

13

credit scores were readily available. This argument is unpersuasive. SLS has not argued why

14

Mensah and Sato should have ordered their credit reports any earlier than they did. Given that

15

SLS’s alleged liability arises from credit reports that were ordered in the same year that the

16

lawsuits were filed, I decline to find that the actions are barred by the statute of limitations.

17
18

CONCLUSION
The motions to dismiss plaintiffs’ complaints for failure to state a claim are GRANTED

19

with leave to amend in accordance with this Order. Any amended complaints shall be filed within

20

20 days of the date below.

21
22
23
24

IT IS SO ORDERED.
Dated: April 5, 2017
______________________________________
WILLIAM H. ORRICK
United States District Judge

25
26
27
28
20