Moses v. Experian Information Solutions, Inc. et al

Filing 53

ORDER DENYING 44 DEFENDANT AFNI, INC.'S MOTION TO DISMISS PLAINTIFF'S FIRST AMENDED COMPLAINT. Signed by Judge Beth Labson Freeman on 7/11/2016. (blflc1S, COURT STAFF) (Filed on 7/11/2016)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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SAN JOSE DIVISION

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MICHAEL MOSES,

Case No. 15-cv-05548-BLF

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

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ORDER DENYING DEFENDANT
AFNI, INC.’S MOTION TO DISMISS
PLAINTIFF’S FIRST AMENDED
COMPLAINT
[Re: ECF 44]

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Defendant AFNI, Inc. moves to dismiss Plaintiff’s first amended complaint (“FAC”) for

United States District Court
Northern District of California

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failure to state a claim under Federal Rule of Civil Procedure 12(b)(6). For the reasons stated on

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the record at the hearing on July 7, 2016, and discussed below, the motion is DENIED.

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I.

BACKGROUND
Plaintiff asserts claims under the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. §

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1681s-2(b), and the California Consumer Credit Reporting Agencies Act (“CCRA”), Cal. Civ.

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Code § 1785.25(a), based upon alleged inaccuracies in his credit reports. He alleges that he filed a

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Chapter 13 bankruptcy petition in January 2015; his Chapter 13 plan was confirmed in May 2015;

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credit reports obtained in July 2015 showed that AFNI was reporting a balance and past-due

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balance of $1,482 on Plaintiff’s account; and those reports were inaccurate because the

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Bankruptcy Court ordered that $0 was owed on the account under the terms of Plaintiff’s

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confirmed Chapter 13 plan. FAC ¶¶ 5-8. Plaintiff further alleges that he disputed the inaccurate

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tradelines via certified mail to consumer reporting agencies Experian Information Solutions, Inc.,

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Equifax, Inc., and TransUnion, LLC, and that each of those agencies notified AFNI of the dispute.

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FAC ¶ 9. Plaintiff alleges that AFNI failed to conduct a reasonable investigation and reported

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misleading and inaccurate information to Experian and Equifiax; Experian failed to perform its

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own reasonable investigation; the inaccurate tradelines were not corrected; and credit reports

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obtained in November 2015 continued to show the inaccurate information. FAC ¶¶ 11-13. Based

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upon those allegations, Plaintiff sues AFNI and Experian for violations of the FCRA and CCRA.

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The present motion to dismiss is brought only by AFNI.

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II.

LEGAL STANDARD
“A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a

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claim upon which relief can be granted ‘tests the legal sufficiency of a claim.’” Conservation

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Force v. Salazar, 646 F.3d 1240, 1241-42 (9th Cir. 2011) (quoting Navarro v. Block, 250 F.3d

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729, 732 (9th Cir. 2001)). When determining whether a claim has been stated, the Court accepts

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as true all well-pled factual allegations and construes them in the light most favorable to the

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plaintiff. Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681, 690 (9th Cir. 2011). However, the
Court need not “accept as true allegations that contradict matters properly subject to judicial

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United States District Court
Northern District of California

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notice” or “allegations that are merely conclusory, unwarranted deductions of fact, or

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unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008)

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(internal quotation marks and citations omitted). While a complaint need not contain detailed

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factual allegations, it “must contain sufficient factual matter, accepted as true, to ‘state a claim to

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relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl.

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Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when it “allows the

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court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

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III.

DISCUSSION
As noted above, Plaintiff asserts claims under the FCRA and the CCRA. The Court

addresses those claims in turn.
Claim 1 – FCRA

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A.

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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.’” Gorman v. Wolpoff &

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Abramson, LLP, 584 F.3d 1147, 1153 (9th Cir. 2009) (quoting Safeco Ins. Co. of Am. v. Burr, 127

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S. Ct. 2201, 2205 (2007)). To ensure that credit reports are accurate, the FCRA imposes two

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categories of duties upon “furnishers” of credit information to consumer reporting agencies, often

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referred to as “CRAs” in the case law. Id. Section 1681s-2(a) “details the duty ‘to provide

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accurate information,’” while Section 1681s-2(b) sets forth other obligations that “are triggered
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‘upon notice of dispute.’” Id. at 1154 (quoting 15 U.S.C. § 1681s-2). The “notice of dispute”

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referenced by the statute occurs when a person who furnished information to a consumer reporting

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agency receives notice from the consumer reporting agency that the consumer disputes the

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information. Id. Upon receiving a notice of dispute, the furnisher “‘has four duties: to conduct an

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investigation with respect to the disputed information; to review all relevant information provided

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by the CRA; to report the results of its investigation to the CRA; and if the investigation finds the

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information is incomplete or inaccurate to report those results to all [nationwide] consumer

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reporting agencies to which the person furnished the information.” Nelson v. Chase Manhattan

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Mortg. Corp., 282 F.3d 1057, 1059 (9th Cir. 2002) (internal quotation marks and citation omitted)

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(alteration in original).
“The FCRA expressly creates a private right of action for willful or negligent

United States District Court
Northern District of California

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noncompliance with its requirements.” Gorman, 584 F.3d at 1154. “However, § 1681s-2 limits

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this private right of action to claims arising under subsection (b), the duties triggered upon notice

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of a dispute” from a consumer reporting agency. Id. “Duties imposed on furnishers under

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subsection (a) are enforceable only by federal or state agencies.” Id.
A plaintiff suing under § 1681s-2(b) “is required to plead the following four elements to

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state a claim against a credit furnisher: (1) a credit reporting inaccuracy existed on plaintiff’s

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credit report; (2) plaintiff notified the consumer reporting agency that plaintiff disputed the

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reporting as inaccurate; (3) the consumer reporting agency notified the furnisher of the alleged

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inaccurate information of the dispute; and (4) the furnisher failed to investigate the inaccuracies or

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further failed to comply with the requirements in 15 U.S.C. 1681s-2(b)(1)(A)-(E).” Denison v.

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Citifinancial Servicing LLC, No. C 16-00432 WHA, 2016 WL 1718220, at *2 (N.D. Cal. April 29,

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2016).

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AFNI contends that Plaintiff has not alleged these elements sufficiently to make out a

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claim. However, as discussed above, Plaintiff alleges that he disputed the tradelines showing a

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balance and past-due balance of $1,482 on his AFNI account by means of certified mail to

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Experian, Equifax, and TransUnion; those consumer reporting agencies notified AFNI of the

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dispute; AFNI failed to conduct a reasonable investigation; AFNI reported misleading and
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inaccurate information to Experian and Equifiax; and the inaccurate information remained on

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Plaintiff’s credit reports. See FAC ¶¶ 5-13. These allegations satisfy the pleading requirements

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set forth above.

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AFNI also asserts a separate legal argument that Plaintiff’s theory of liability against it

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simply is not viable. According to AFNI, it accurately reported Plaintiff’s debt prior to Plaintiff’s

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bankruptcy. AFNI contends that, as a matter of law, a company that furnishes a CRA with

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accurate information regarding a debt has no “affirmative duty to go back and update pre-petition,

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historically-accurate reporting after the debtor obtains discharge.” Def.’s Mot. at 4, ECF 44. In

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support of that argument, AFNI relies primarily upon Mortimer v. Bank of America and similar
cases holding that a furnisher does not violate the FCRA when it accurately reports, post-

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United States District Court
Northern District of California

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discharge, that a debt was delinquent during the pendency of the bankruptcy action. See Mortimer

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v. Bank of Am., N.A., No. C-12-01959 JCS, 2013 WL 1501452 (N.D. Cal. Apr. 10, 2013). In

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Mortimer, however, the furnisher updated its reporting post-discharge to reflect that the debt in

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question had been discharged and had a balance of $0. Id. at *4. It was in that context that the

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district court held that the furnisher’s reporting that the debt had been delinquent during the

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pendency of the bankruptcy was historically accurate and thus not actionable under the FCRA. Id.

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at *9. The Mortimer court did not squarely address the question presented by AFNI’s motion,

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whether a furnisher that accurately reports a debt prior to the consumer’s bankruptcy has a duty to

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update its reporting once the debt has been discharged.

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While AFNI’s motion presents an interesting legal question regarding the precise scope of

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a furnisher’s duty to update its pre-bankruptcy reporting, consideration of that question would be

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premature at this time. It is not clear from the face of the FAC whether AFNI’s only reporting

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regarding the debt was prior to Plaintiff’s bankruptcy. Plaintiff alleges that at the time he obtained

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credit reports in July 2015, AFNI “was reporting” a balance and past due balance of $1,482 on

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Plaintiff’s account. FAC ¶ 8.

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AFNI requests the Court to consider under the incorporation by reference doctrine portions

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of Plaintiff’s credit reports obtained from Equifax, Experian, and TransUnion in February 2016.

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See Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005) (incorporation by reference doctrine
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permits a court to consider documents referenced in but not physically attached to the complaint).

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According to AFNI, those reports demonstrate that AFNI furnished the information regarding

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Plaintiff’s debt prior to his bankruptcy and that in in any event the tradelines in question were

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updated after confirmation of Plaintiff’s Chapter 13 plan to reflect “BK 13 Pet.” on one report and

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“CHAPTER 13 BANKRUPTCY” on another. See Richard Decl. Exh. 1, ECF 25-1. The

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February 2016 reports submitted by AFNI were obtained months after the credit reports referenced

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in the FAC and do not speak to the contents of the credit reports that form the basis of Plaintiff’s

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FCRA claim. AFNI’s request for incorporation by reference is DENIED.
AFNI’s motion to dismiss Plaintiff’s FCRA claim likewise is DENIED. The Court simply

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does not have a sufficient factual record to address AFNI’s argument that it cannot be liable under

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United States District Court
Northern District of California

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the FCRA as a matter of law because it provided only pre-discharge, historically accurate

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reporting. AFNI may reassert its legal argument in an appropriate future motion once the record

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has been more fully developed.
Claim 2 – CCRA

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B.

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As relevant here, the CCRA provides that “[a] person shall not furnish information on a

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specific transaction or experience to any consumer credit reporting agency if the person knows or

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should know the information is incomplete or inaccurate.” Cal. Civ. Code § 1785.25(a).
AFNI contends that Plaintiff’s allegations are too conclusory to state a claim under this

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statute, because Plaintiff has not adequately identified what information AFNI provided that was

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incomplete or inaccurate. However, as discussed above, Plaintiff alleges that AFNI reported the

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existence of a balance and past-due balance of $1,482 when in fact that true balance was $0. See

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FAC ¶ 8. Accordingly, AFNI’s motion to dismiss is Plaintiff’s CCRA claim is DENIED.

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IV.

ORDER
Defendant AFNI’s motion to dismiss is DENIED.

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Dated: July 11, 2016
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BETH LABSON FREEMAN
United States District Judge
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