Jenniffer Tanimura v. Experian Information Solutions, Inc. et al

Filing 65

ORDER GRANTING 48 , 49 MOTIONS TO DISMISS SECOND AMENDED COMPLAINT WITH LEAVE TO AMEND. Amended Pleading due by 5/4/2017. Signed by Judge Beth Labson Freeman on 4/13/2017. (blflc1S, COURT STAFF) (Filed on 4/13/2017)

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1 2 UNITED STATES DISTRICT COURT 3 NORTHERN DISTRICT OF CALIFORNIA 4 SAN JOSE DIVISION 5 JENNIFER TANIMURA, 6 Plaintiff, 7 v. 8 9 Case No. 16-cv-02224-BLF ORDER GRANTING MOTIONS TO DISMISS SECOND AMENDED COMPLAINT WITH LEAVE TO AMEND EXPERIAN INFORMATION SOLUTIONS, INC., et al., 10 Defendants. [RE: ECF 48, 49] United States District Court Northern District of California 11 12 13 Plaintiff Jennifer Tanimura sues Defendants Experian Information Solutions, Inc. 14 (“Experian”) and TD Bank USA, N.A. (“TD Bank”) for violations of the Fair Credit Reporting 15 Act (“FCRA”), 15 U.S.C. § 1681 et seq., and the California Consumer Credit Reporting Agencies 16 Act (“CCRAA”), California Civil Code § 1785.25(a). Both defendants move to dismiss Plaintiff’s 17 second amended complaint (“SAC”) pursuant to Federal Rule of Civil Procedure 12(b)(6). For 18 reasons discussed below, those motions are GRANTED WITH LEAVE TO AMEND. 19 I. 20 BACKGROUND1 Plaintiff filed for Chapter 13 bankruptcy protection on September 25, 2012, and her plan 21 was confirmed on November 28, 2012. SAC ¶¶ 93, 100, ECF 47. On September 25, 2015, 22 Plaintiff “ordered a three bureau report from Experian Information Solutions, Inc. to ensure proper 23 reporting by Plaintiff’s Creditors.” Id. ¶ 114. She alleges that this report (“September 2015 Credit 24 Report”) included eleven different trade lines containing inaccurate, misleading, or incomplete 25 information. Id. ¶ 115. Plaintiff neither attaches a copy of the September 2015 Credit Report nor 26 provides specifics regarding the alleged inaccuracies contained therein. Id. She asserts only that 27 1 28 Plaintiff’s well-pled factual allegations are accepted as true for purposes of the motion to dismiss. See Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681, 690 (9th Cir. 2011). 1 “multiple trade lines continued to report Plaintiff’s accounts with past due balances, inaccurate 2 balances, in collections, and/or charged off. Some accounts even failed to register that Plaintiff 3 was making payments on the account through Plaintiff’s Chapter 13 plan.” Id. Plaintiff disputed the inaccurate trade lines via certified mail sent to three different credit 4 5 reporting agencies (“CRAs”), Experian, Equifax, Inc., and TransUnion, LLC on November 20, 6 2015. SAC ¶ 116. Each CRA received Plaintiff’s dispute letter and in turn notified the entities 7 that had furnished the disputed information (“furnishers”) by means of automated credit dispute 8 verifications (“ACDVs”). Id. ¶ 118. Plaintiff ordered a second three bureau report from Experian Information Solutions, Inc. on 9 January 29, 2016 (“January 2016 Credit Report”). Id. ¶ 119. Plaintiff alleges that TD Bank 11 United States District Court Northern District of California 10 inaccurately reported the account as current and in collections during the same period. Id. ¶ 122. 12 Plaintiff also alleges that TD Bank “failed to update the CII to reflect that a bankruptcy case had 13 been filed.” Id. ¶ 123. Plaintiff does not allege whether this reporting was found in the September 14 2015 Credit Report or the January 2016 Credit Report. Since the allegations follow directly after 15 Plaintiff’s description of how she obtained the January 2016 Credit Report, the Court presumes 16 that the specifics regarding TD Bank’s reporting appeared in the January 2016 Credit Report. 17 SAC ¶¶ 119-123. Plaintiff does not allege that she disputed the January 2016 Credit Report. Plaintiff filed this action on April 25, 2016, asserting violations of the FCRA and CCRAA 18 19 against multiple CRAs and furnishers. Compl., ECF 1. All Defendants except Experian and TD 20 Bank have been dismissed. Experian and TD Bank now move to dismiss the SAC. 21 22 II. LEGAL STANDARD “A motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) for failure to state a 23 claim upon which relief can be granted ‘tests the legal sufficiency of a claim.’” Conservation 24 Force v. Salazar, 646 F.3d 1240, 1241-42 (9th Cir. 2011) (quoting Navarro v. Block, 250 F.3d 25 729, 732 (9th Cir. 2001)). When determining whether a claim has been stated, the Court accepts 26 as true all well-pled factual allegations and construes them in the light most favorable to the 27 plaintiff. Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681, 690 (9th Cir. 2011). However, the 28 Court need not “accept as true allegations that contradict matters properly subject to judicial 2 1 notice” or “allegations that are merely conclusory, unwarranted deductions of fact, or 2 unreasonable inferences.” In re Gilead Scis. Sec. Litig., 536 F.3d 1049, 1055 (9th Cir. 2008) 3 (internal quotation marks and citations omitted). While a complaint need not contain detailed 4 factual allegations, it “must contain sufficient factual matter, accepted as true, to ‘state a claim to 5 relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. 6 Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when it “allows the 7 court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. 8 9 III. EXPERIAN’S MOTION TO DISMISS The SAC contains two claims, one for violation of the FCRA (Claim 1) and the other for violation of the CCRAA (Claim 2). Although the label of the CCRAA claim indicates that it is 11 United States District Court Northern District of California 10 asserted against “Defendants,” it is clear from the body of the SAC that the CCRAA claim is not 12 asserted against Experian. Accordingly, only the FCRA claim is asserted against Experian. 13 Experian moves to dismiss for failure to state a claim upon which relief may be granted. 14 “Congress enacted [the] FCRA in 1970 to ensure fair and accurate credit reporting, 15 promote efficiency in the banking system, and protect consumer privacy.” Safeco Ins. Co. of Am. 16 v. Burr, 551 U.S. 47, 52 (2007). To that end, the FCRA imposes specific obligations on CRAs, 17 furnishers, and other categories of persons not at issue here. See generally 15 U.S.C. § 1681 et 18 seq. Many of the obligations of CRAs are described in 15 U.S.C. § 1681i. That section provides 19 that if a consumer disputes “the completeness or accuracy of any item of information,” the CRA 20 must “conduct a reasonable reinvestigation to determine whether the disputed information is 21 inaccurate and record the current status of the disputed information, or delete the item.” 15 U.S.C. 22 § 1681i(a)(1). In addition, the CRA must provide notification of the dispute to the furnisher of the 23 information. 15 U.S.C. § 1681i(a)(2). Such notification by the CRA triggers the furnisher’s 24 obligation to conduct its own investigation. 15 U.S.C. § 1681s-2(b). The FCRA expressly creates 25 a private right of action for willful or negligent noncompliance with these requirements. 15 26 U.S.C. § 1681n & o. 27 28 Plaintiff’s FCRA claim against Experian is subheaded “Failure to Reinvestigate Disputed Information.” SAC ¶¶ 135-36. Plaintiff alleges that after she “disputed the accounts mentioned 3 1 above” – which the Court takes to mean the eleven trade lines in the September 2015 Credit 2 Report referenced earlier in the SAC – Experian was required to conduct a reasonable 3 investigation and to delete any information that was not accurate under 15 U.S.C. § 1681i-(a)(1). 4 Id. ¶ 137. Plaintiff claims that “[t]he most basic investigation required each CRA to send all 5 relevant information via an ACDV to the furnishers which they did not do.” Id. ¶ 138. Plaintiff 6 alleges that because it did not send all relevant information “to the furnishers,” Experian “failed to 7 conduct a reasonable investigation and failed to correct the misleading and or inaccurate 8 statements.” Id. ¶ 139. 9 In the alternative, Plaintiff alleges that Experian “has its own independent duty to conduct a reasonable investigation under 15 U.S.C. § 1681i(a)1.” SAC ¶ 140. Section 1681i(a)(1) does 11 United States District Court Northern District of California 10 not impose a freestanding duty to investigate; a CRA’s duties under that provision are triggered 12 only “if the completeness or accuracy of any item of information . . . is disputed by the consumer 13 and the consumer notifies the agency . . . of such dispute.” 15 U.S.C. § 1681i(a)(1) (emphasis 14 added). Thus it is unclear what Plaintiff means by “own independent duty” to investigate. 15 Plaintiff alleges that Experian “is not a passive entity” and that it “can and does suppress 16 inaccurate information from being reported when DFs provide inaccurate information.” SAC ¶¶ 17 141, 144. Plaintiff also alleges that Experian “would have known” that certain DFs were not 18 following industry standards in their reporting. Id. ¶¶ 147-50. The Court understands these 19 allegations to claim that regardless of what information was provided to Experian by furnishers, 20 Experian had an independent duty to “suppress” that information if it did not comply with industry 21 standards. 22 Experian moves to dismiss the FCRA claim on three grounds. First, Experian asserts that 23 Plaintiff has not alleged facts showing that Experian’s credit reporting was inaccurate. Second, 24 Experian argues that Plaintiff has not alleged facts showing an entitlement to damages under the 25 FCRA. And third, Experian asserts that Plaintiff has not alleged any facts showing that Experian’s 26 response to her dispute letter regarding the September 2015 Credit Report was improper. 27 A. Inaccuracy 28 The Ninth Circuit has observed that “[a]lthough the FCRA’s reinvestigation provision, 15 4 1 U.S.C. § 1681i, does not on its face require that an actual inaccuracy exist for a plaintiff to state a 2 claim, many courts, including our own, have imposed such a requirement.” Carvalho v. Equifax 3 Info. Servs., LLC, 629 F.3d 876, 890 (9th Cir. 2010).2 “Thus, even if a . . . CRA fails to conduct a 4 reasonable investigation or otherwise fails to fulfill its obligations under the FCRA, if a plaintiff 5 cannot establish that a credit report contained an actual inaccuracy, then the plaintiff’s claims fail 6 as a matter of law.” Doster v. Experian Info. Sols., Inc., No. 16-CV-04629-LHK, 2017 WL 7 264401, at *3 (N.D. Cal. Jan. 20, 2017) (internal quotation marks and citation omitted). In Carvalho, the Ninth Circuit noted that it previously had “explained that an item on a 8 9 credit report can be ‘incomplete or inaccurate’ within the meaning of the FCRA’s furnisher investigation provision, 15 U.S.C. § 1681s-2(b)(1)(D), ‘because it is patently incorrect, or because 11 United States District Court Northern District of California 10 it is misleading in such a way and to such an extent that it can be expected to adversely affect 12 credit decisions.’” Carvalho, 629 F.3d at 890 (quoting Gorman v. Wolpoff & Abramson, LLP, 584 13 F.3d 1147, 1163 (2009)). The Ninth Circuit went on to affirm “‘the maxim of statutory 14 construction that similar terms appearing in different sections of a statute should receive the same 15 interpretation,’” id. (quoting United States v. Nordbrock, 38 F.3d 440, 444 (9th Cir. 1994)), and to 16 cite with approval a First Circuit case, Chiang, which the Ninth Circuit summarized as “deeming 17 the term ‘inaccurate’ in section 1681i(a) to be ‘essentially the same’ as the term ‘incomplete or 18 inaccurate’ in section 1681s-2(b),” id. (citing Chiang v. Verizon New Eng. Inc., 595 F.3d 26, 37 19 (1st Cir. 2010)). Relying on Carvalho, district courts have “applied this ‘patently incorrect or 20 materially misleading’ standard to claims arising under various provisions of the FCRA that 21 involve the accuracy of information.” Prianto v. Experian Info. Sols., Inc., No. 13-CV-03461- 22 TEH, 2014 WL 3381578, at *3 (N.D. Cal. July 10, 2014). In particular, courts in this district have 23 applied the “patently incorrect or materially misleading” standard to the inaccuracy requirement 24 25 26 27 28 2 Carvalho involved claims asserted under the CCRAA, not the FCRA. See Carvalho, 629 F.3d at 881. However, in discussing the scope of the CCRAA, the Ninth Circuit drew heavily on cases construing the FCRA, see id. at 889-91, and numerous courts have relied on Carvalho’s explication of FCRA requirements when addressing FCRA claims, see, e.g., Artus v. Experian Info. Sols., Inc., No. 5:16-CV-03322-EJD, 2017 WL 346022, at *3 (N.D. Cal. Jan. 24, 2017); Jaras v. Experian Info. Sols., Inc., No. 16-CV-03336-LHK, 2016 WL 7337540, at *4 (N.D. Cal. Dec. 19, 2016). 5 1 under § 1681i. See, e.g., Banneck v. HSBC Bank USA, N.A., No. 15-cv-02250-HSG, 2016 WL 2 3383960, at *6 (N.D. Cal. June 20, 2016); Prianto, 2014 WL 3381578, at *3. 3 4 Experian argues that the SAC does not satisfy this pleading standard. The Court agrees for the reasons discussed below. 1. 5 6 Three Bureau Report Perhaps the most obvious deficiency in Plaintiff’s allegations against Experian is her failure to allege that the inaccuracies in the “three bureau” September 2015 Credit Report upon 8 which her claim is based are attributable to Experian rather than one of the other CRAs. SAC ¶ 9 115. Plaintiff alleges that she obtained the September 2015 Credit Report after confirmation of 10 her Chapter 13 plan, and that “multiple trade lines continued to report Plaintiff’s accounts with 11 United States District Court Northern District of California 7 past due balances, inaccurate balances, in collections, and/or charged off. Some accounts even 12 failed to register that Plaintiff was making payments on the account through Plaintiff’s Chapter 13 13 plan.” Id. ¶¶ 114-15. These allegations neither identify Experian as the reporting entity nor 14 identify any particular past due balances or other trade lines in the September 2015 Credit Report 15 that were inaccurate. 16 Plaintiff argues that the requisite specificity is provided in paragraphs 122-23 of the SAC 17 regarding TD Bank’s simultaneous reporting of Plaintiff’s account as current and in collections 18 and failure to note Plaintiff’s bankruptcy. See Pl.’s Opp. at 4, ECF 52. Plaintiff does not allege 19 that those allegations appeared in the September 2015 Credit Report upon which her claim is 20 based, and in fact the referenced allegations follow directly after Plaintiff’s description of how she 21 obtained the January 2016 Credit Report. SAC ¶¶ 119-123. Plaintiff does not allege that she 22 disputed the January 2016 Credit Report; she obtained the January 2016 Credit Report “to ensure 23 Plaintiff’s accounts had been updated.” Id. 119. Therefore if the alleged inaccuracies in TD 24 Bank’s reporting appeared only in the January 2016 Credit Report, they cannot form the basis of 25 her claim. 26 Other courts in this district have dismissed FCRA claims based upon alleged inaccuracies 27 in three bureau reports where no specificity is provided as to which CRA reported the inaccuracies 28 in question. See, e.g., Doster, 2017 WL 264401, at *6 (“Plaintiff’s FAC makes only general and 6 1 unspecified allegations that her credit report, which was a three-bureau credit report, contained 2 inaccuracies and that the CRAs reported misleading and inaccurate information, but the FAC does 3 not allege any conduct that is specific to Experian.”). Because Plaintiff does not specify any 4 particular inaccuracies that were reported in the September 2015 Credit Report, and does not 5 identify Experian as the reporting entity, the SAC fails to state a claim of inaccurate reporting by 6 Experian. 7 8 9 2. Reporting After Confirmation of Chapter 13 Plan More fundamentally, to the extent that Plaintiff claims that it was inaccurate for Experian to report delinquencies or past due balances after plan confirmation, that theory of liability has been rejected by courts in this district and other districts within the Ninth Circuit. See, e.g., Artus 11 United States District Court Northern District of California 10 v. Experian Info. Sols., Inc., No. 5:16-CV-03322-EJD, 2017 WL 346022, at *5 (N.D. Cal. Jan. 24, 12 2017) (collecting cases); Doster, 2017 WL 264401, at *6 (“[A]s a matter of law it is not 13 misleading or inaccurate to report a delinquent debt during the pendency of a bankruptcy.”); 14 Polvorosa v. Allied Collection Serv., Inc., No. Case No. 2:16–CV–1508 JCM (CWH), 2017 WL 15 29331, at *3 (D. Nev. Jan. 3, 2017) (“[R]eporting delinquencies during the pendency of a 16 bankruptcy or during a bankruptcy’s automatic stay is not itself a violation of the FCRA.”). 17 Plaintiff argues that these decisions fail to recognize that a bankruptcy court’s order 18 confirming a Chapter 13 plan constitutes a binding final judgment regarding the rights and 19 liabilities of the debtor and his or her creditors. According to Plaintiff, because a confirmed plan 20 modifies the original debts, any post-confirmation reporting of pre-confirmation delinquencies or 21 balances is inaccurate. Plaintiff appears to be arguing that CRAs cannot report information 22 provided to them by furnishers without first independently evaluating the legal effect of a 23 confirmed Chapter 13 plan on such information. 24 In Carvalho, the Ninth Circuit noted that “reinvestigation claims are not the proper vehicle 25 for collaterally attacking the legal validity of consumer debts.” Carvalho, 629 F.3d at 892. In that 26 case, the allegedly inaccurate reporting involved a charge for medical services that the plaintiff, 27 Carvalho, claimed should have been paid by her insurance company. Id. at 882. After Carvalho 28 disputed the charge, several CRAs requested and received verification of the debt from the 7 1 furnisher. Id. The CRAs thereafter continued reporting the debt, but they added Carvalho’s 2 statement of dispute to her credit reports. Id. at 882-83. In rejecting Carvalho’s argument that the 3 CRAs were obligated to do more, the Ninth Circuit found that “[t]he fundamental flaw in 4 Carvalho’s conception of the reinvestigation duty is that credit reporting agencies are not 5 tribunals.” Id. at 891. The Ninth Circuit reasoned that CRAs “simply collect and report 6 information furnished by others” and thus are “ill equipped to adjudicate contract disputes.” Id. 7 For that reason, “courts have been loath to allow consumers to mount collateral attacks on the 8 legal validity of their debts in the guise of FCRA reinvestigation claims.” Id. 9 Plaintiff argues that Carvalho is distinguishable from the present case, because in Carvalho there had been no adjudication of the rights and obligations of the debtor and the 11 United States District Court Northern District of California 10 creditor, whereas in the present case there has been such an adjudication in the form of an order 12 confirming Plaintiff’s Chapter 13 plan. Plaintiff’s argument is unpersuasive. Carvalho did not 13 turn on the lack of finality of the debt at issue, but rather on the Ninth Circuit’s conclusion that 14 CRAs are neither equipped nor obligated to determine the legal status of debts that have been 15 reported and verified by furnishers. 16 Plaintiff’s assertion of the legal effect of a Chapter 13 confirmation plan is unavailing for 17 other reasons as well. It is true that “[t]he provisions of a confirmed plan bind the debtor and each 18 creditor.” 11 U.S.C. § 1327(a). Thus a creditor seeking payment on a debt is entitled only to 19 those payments provided for under the plan, and “any issue decided under a plan is entitled to res 20 judicata effect.” In re Blendheim, 803 F.3d 477, 486 (9th Cir. 2015). However, the Court 21 declines to make the logical leap urged by Plaintiff that these authorities, governing the 22 relationships between parties to a bankruptcy action, make it a violation of the FCRA for a CRA 23 to report a historically accurate pre-confirmation debt or delinquency. Regardless of how the 24 rights and obligations of the parties to a bankruptcy are modified by a Chapter 13 plan, the 25 original debt did exist prior to confirmation and Plaintiff has cited no authority suggesting that 26 bankruptcy proceedings “erase” that historical fact for purposes of the FCRA. 27 28 Plaintiff’s reliance on In re Luedtke, No. 02-35082-svk, 2008 WL 2952530 (Bankr. E.D. Wis. July 31, 2008), is misplaced. In Luedtke, the bankruptcy court concluded that a creditor 8 whose claim was modified by a Chapter 13 confirmation order had violated that order by 2 continuing to report the original debt to CRAs. Id. at *6. The court suggested that in addition to 3 seeking sanctions for violation of the confirmed plan, the debtor also could have sought relief 4 under the FCRA. Id. In making that suggestion, the bankruptcy court appeared to assume that the 5 creditor’s reporting of the original debt would have constituted an inaccuracy under the FCRA. 6 Id. at *5. That view, expressed in dicta by a bankruptcy court outside the Ninth Circuit almost a 7 decade ago, has not been adopted by the courts in this district. In fact, it appears that Luedtke has 8 been cited by only one other court, which found the decision to be irrelevant to its determination 9 whether the plaintiff had pleaded a viable FCRA claim. See Wylie v. TransUnion, LLC, No. 3:16- 10 CV-102, 2017 WL 835205, at *5 n.6 (W.D. Pa. Mar. 2, 2017) (“[T]he question before the Court is 11 United States District Court Northern District of California 1 whether Defendants reported accurate information, not whether Defendant violated the bankruptcy 12 code.”) (internal quotation marks and citation omitted). 13 Moreover, with respect to the many debtors who fail to make all required plan payments, 14 the original debt terms ultimately are reinstated. See Blendheim, 803 F.3d at 487. Indeed, 15 historically accurate debts may be reported even after discharge, so long as the credit report 16 indicates that the debts were discharged in bankruptcy. See Mortimer v. Bank of Am., N.A., No. C- 17 12-01959 JCS, 2013 WL 1501452, *9-11 (N.D. Cal. Apr. 10, 2013) (furnisher’s reporting that the 18 debt had been delinquent during the pendency of the bankruptcy was historically accurate and thus 19 not actionable under the FCRA where report also indicated that the debt had been discharged in 20 bankruptcy). 21 Plaintiff’s counsel argued at the hearing that allowing reporting of pre-confirmation 22 delinquencies or balances after a Chapter 13 plan has been confirmed will deprive debtors of 23 significant benefits that they expect to obtain through Chapter 13 bankruptcy. That issue is one 24 for Congress to resolve, not this Court. The Court’s task in evaluating Plaintiff’s SAC is to 25 determine whether the facts alleged therein make out a plausible claim that Experian’ credit 26 reporting was inaccurate. The Court simply is not persuaded that the reporting of a delinquency or 27 past due balance after plan confirmation is per se inaccurate under the FCRA. 28 However, it appears to be an open question whether such reporting could satisfy the 9 1 inaccuracy requirement if the report is unaccompanied by any indication that the consumer is in 2 bankruptcy. See Devincenzi v. Experian Info. Sols., Inc., No. 16-CV-04628-LHK, 2017 WL 3 86131, at *7 (N.D. Cal. Jan. 10, 2017) (declining to decide whether allegations that the “credit 4 report contained no indication at all that the debts were the subject of a pending bankruptcy . . . 5 would be sufficient to state a claim” but granting plaintiff leave to attempt to assert FCRA claim 6 based on that theory). It is this Court’s view that it may well be possible for a plaintiff to allege 7 facts showing that the reporting of a pre-confirmation debt or delinquency is materially misleading 8 absent any reference to a pending Chapter 13 bankruptcy in the report, at least where a confirmed 9 plan governs the timing and amounts of post-confirmation payments on the debt. Plaintiff has not alleged such facts here, as she has not identified any particular inaccuracy 11 United States District Court Northern District of California 10 contained in the September 2015 Credit Report upon which her claim is based, and has not stated 12 whether the September 2015 Credit Report mentioned her bankruptcy. 13 3. Metro 2 Format 14 In addition to her theory of FCRA liability based on the effect of plan confirmation, 15 Plaintiff asserts a related theory based on industry standards regarding credit reporting. She 16 devotes more than thirty paragraphs of the SAC to a tutorial on industry standards and in 17 particular the “Metro 2 format” adopted by the Consumer Data Industry Association (“CDIA”). 18 See SAC ¶¶ 37-71. According to Plaintiff, “Metro 2 provides instruction on what updates must be 19 made when a bankruptcy is filed,” and deviation from the Metro 2 format is inaccurate or 20 misleading. See Pl.’s Opp. at 3, ECF 60. The Ninth Circuit has not spoken on the effect of the 21 Metro 2 format, if any, on the obligations of CRAs and furnishers under the FCRA. However, 22 district courts within the Ninth Circuit overwhelmingly have held that a violation of industry 23 standards is insufficient, without more, to state a claim for violation of the FCRA. See, e.g., 24 Doster, 2017 WL 264401, at *5 (collecting cases); Mestayer v. Experian Info. Sols., Inc., No. 15- 25 CV-03645-EMC, 2016 WL 7188015, at *3 (N.D. Cal. Dec. 12, 2016). 26 The out-of-district cases cited by Plaintiff do not persuade this Court to take a contrary 27 view. In Dreher v. Experian Info. Sols., Inc., No. 3:11-CV-00624-JAG, 2013 WL 2389878, at *7 28 (E.D. Va. May 30, 2013), the district court held that industry standards could be considered at the 10 summary judgment stage as part of the totality of evidence regarding the reasonableness of 2 Experian’s failure to identify the main source of disputed information. That ruling does not 3 advance Plaintiff’s argument that deviation from Metro 2 constitutes a per se inaccuracy under the 4 FCRA. In Nissou-Rabban v. Capital One Bank (USA), N.A., No. 15CV1675 JLS (DHB), 2016 5 WL 4508241, at *5 (S.D. Cal. June 6, 2016), the district court held that the plaintiff had alleged a 6 claim under the FCRA where she alleged that Metro 2 was Synchrony’s chosen method of 7 reporting and that Synchrony’s deviation from Metro 2 might be misleading to such an extent as to 8 affect credit decisions. Courts in this district have found such allegations to be insufficient. See, 9 e.g., Mestayer, 2016 WL 7188015, at *3 (credit report that deviated from Metro 2 was not 10 misleading where report disclosed bankruptcy); see also Doster, 2017 WL 264401, at *5 11 United States District Court Northern District of California 1 (collecting cases). This Court finds the latter decisions to be better reasoned and therefore 12 concludes that allegations that a credit report deviated from the Metro 2 format is insufficient, 13 without more, to state a claim under the FCRA. 14 The Court does not mean to suggest that Metro 2 is wholly irrelevant to the evaluation of a 15 claim asserted under the FCRA. It may be that allegations of deviations from the Metro 2 format 16 could bolster other allegations of inaccuracy or be relevant to allegations of negligence on the part 17 of the reporting entity. However, Plaintiff’s reliance on Metro 2 as an independent source of 18 liability under the FCRA is unavailing. 19 B. Damages 20 Experian also asserts that Plaintiff has failed to allege facts sufficient to entitle her to 21 recovery of damages. The FCRA creates a private right of action for willful or negligent 22 noncompliance with § 1681i. 15 U.S.C. §§ 1681n & o; Gorman v. Wolpoff & Abramson, LLP, 23 584 F.3d 1147, 1154 (2009). If a failure to comply with § 1681i is willful, the plaintiff may 24 recover either actual damages or statutory damages between $100 and $1,000, as well as any 25 appropriate punitive damages. 15 U.S.C. § 1681n(a). If a failure to comply with § 1681i is 26 negligent, the plaintiff is limited to recovery of “any actual damages sustained by the consumer as 27 a result of the failure.” 15 U.S.C. § 1681o(a)(1). Experian contends that Plaintiff has not alleged 28 facts showing entitlement to recovery under either theory. 11 1 1. Willfulness 2 A defendant acts “willfully” for purposes of the FCRA if the defendant knowingly or 3 recklessly disregards its statutory duties. Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 57-58 4 (2007). “[A] company subject to FCRA does not act in reckless disregard of it unless the action is 5 not only a violation under a reasonable reading of the statute’s terms, but shows that the company 6 ran a risk of violating the law substantially greater than the risk associated with a reading that was 7 merely careless.” Id. at 69. Thus a plaintiff seeking to recover damages under a willfulness theory 8 “must allege, at a minimum, that the defendant’s reading of the FCRA is ‘objectively 9 unreasonable.’” Kirchner v. Shred-it USA Inc., No. 2:14-1437 WBS, 2014 WL 6685210, at *1 10 (E.D. Cal. Nov. 25, 2014) (quoting Safeco, 551 U.S. at 69). United States District Court Northern District of California 11 As discussed above, Plaintiff has not sufficiently alleged that Experian’s reporting 12 contained an actual inaccuracy. Even had she done so, she has not alleged any facts showing that 13 such inaccuracy was the result of Experian’s knowing or reckless disregard of its statutory duties. 14 Plaintiff argues in her opposition that Experian recklessly disregarded its statutory duties by 15 failing to reinvestigate Plaintiff’s dispute or correct the alleged inaccuracies as prescribed by 16 industry standards, when it knew that the disputed report deviated from Metro 2. Pl.’s Opp. at 10- 17 11, ECF 52. As discussed, deviation from the Metro 2 format alone is insufficient to state a 18 violation of the FCRA. 19 20 2. Negligence In order to recover under a negligence theory, Plaintiff must plead and prove actual 21 damages resulting from Experian’s violation of the FCRA. 15 U.S.C. § 1681o(a)(1). Plaintiff’s 22 FCRA claim against Experian is based on her allegations that after Plaintiff disputed information 23 in the September 2015 Credit Report, Experian failed to reinvestigate. See SAC ¶¶ 137-51. 24 However, she does not allege facts showing that she suffered any damages flowing from 25 Experian’s alleged failure. See id. 26 27 Accordingly, the SAC is subject to dismissal on the ground that Plaintiff has failed to allege facts showing an entitlement to damages. 28 12 1 C. 2 Experian’s final argument is that Plaintiff has not provided any factual basis for her 3 allegation that Experian’s response to her dispute letter was inadequate. The Court agrees. 4 Lack of Factual Specificity Plaintiff alleges that after she disputed the September 2015 Credit Report, Experian was 5 required to conduct a reasonable investigation and to delete any information that was not accurate. 6 SAC ¶ 137. Plaintiff then claims that each CRA was required “to send all relevant information via 7 an ACDV to the furnishers which they did not do.” Id. ¶ 138. When a consumer disputes 8 information on a credit report, the CRA must provide notification of the dispute to the furnisher of 9 the information. 15 U.S.C. § 1681i(a)(2). Thus an allegation that Plaintiff disputed a particular account reported in the September 2015 Credit Report, and that Experian failed to notify the 11 United States District Court Northern District of California 10 furnisher of the disputed information, would state a claim under the FCRA, assuming that all other 12 pleading requirements regarding inaccuracy and damages were satisfied. However, as discussed 13 above, Plaintiff’s allegations regarding the asserted inaccuracies in the September 2015 Credit 14 Report do not identify any particular account or item of information reported by Experian. 15 Moreover, elsewhere in the SAC Plaintiff alleges that “each CRA received Plaintiff’s dispute letter 16 and in response sent Plaintiff’s dispute to each DF via an ACDV.” SAC ¶ 118. Based on that 17 allegation, it would appear that Experian did satisfy its notification obligations under the FCRA. 18 Plaintiff also alleges that Experian would have known that the furnishers’ reporting of 19 certain accounts deviated from the industry standard, but Experian did not suppress that inaccurate 20 information. SAC ¶¶ 147-51. Plaintiff does not identify any specific errors or inaccuracies that 21 Experian should have suppressed. Plaintiff alleges only that Experian “would have known” that 22 “failure to report a CII given that a Chapter 13 was filed” and “reporting a past due balance post 23 confirmation” do not comport with industry standards. Id. These allegations are not sufficient to 24 state a claim under 15 U.S.C. § 1681i(a)(1). 25 Plaintiff’s conclusory allegation that Experian “failed to conduct a reasonable 26 investigation,” id. ¶ 146, likewise is inadequate to state a claim under the FCRA. See O’Connor v. 27 Capital One, N.A., No. CV 14-00177-KAW, 2014 WL 2215965, at *7 (N.D. Cal. May 29, 2014) 28 (No FCRA claim stated where plaintiff “fails to offer any factual allegations supporting his 13 1 contention that Defendant’s investigation of his disputed account was unreasonable”). Accordingly, Experian’s motion to dismiss Plaintiff’s FCRA claim is GRANTED. 2 3 4 5 IV. TD BANK’S MOTION TO DISMISS Both Claim 1 for violation of the FCRA and Claim 2 for violation of the CCRAA are asserted against TD Bank. TD Bank seeks dismissal of both claims under Rule 12(b)(6). 6 A. FCRA (Claim 1) 7 The FCRA creates a private right of action against furnishers for noncompliance with 8 duties imposed under 15 U.S.C. § 1681s-2(b). Gorman, 584 F.3d at 1154. Section 1681s-2(b) 9 imposes certain obligations on a furnisher, such as a duty to conduct an investigation, when the furnisher receives notice from a CRA that a consumer disputes information reported by the 11 United States District Court Northern District of California 10 furnisher. Id. A plaintiff is required to plead and prove four elements to prevail on an FCRA 12 claim against a credit furnisher: “(1) a credit reporting inaccuracy existed on plaintiff’s credit 13 report; (2) plaintiff notified the consumer reporting agency that plaintiff disputed the reporting as 14 inaccurate; (3) the consumer reporting agency notified the furnisher of the alleged inaccurate 15 information of the dispute; and (4) the furnisher failed to investigate the inaccuracies or further 16 failed to comply with the requirements in 15 U.S.C. 1681s-2(b) (1)(A)-(E).” Denison v. 17 Citifinancial Servicing LLC, No. C 16-00432 WHA, 2016 WL 1718220, at *2 (N.D. Cal. Apr. 29, 18 2016). A furnisher’s duties under § 1681s-2(b) of the FCRA arise “only after the furnisher 19 receives notice of dispute from a CRA.” Gorman, 584 F.3d at 1154. 20 Plaintiff’s FCRA claim against TD Bank is subheaded “Failure to Reinvestigate.” SAC ¶ 21 125-26. Plaintiff alleges that TD Bank “violated section 1681s-2(b) by failing to conduct a 22 reasonable investigation and re-reporting misleading and inaccurate account information.” Id. ¶ 23 128. Presumably, this claim is based upon TD Bank’s conduct upon receiving notice of Plaintiff’s 24 dispute regarding the September 2015 Credit Report. Plaintiff alleges that she sent dispute letters 25 to Experian and other CRAs regarding unidentified inaccuracies contained in the September 2015 26 Credit Report, and that the CRAs in turn sent Plaintiff’s dispute to each furnisher by means of an 27 ACDV. Id. ¶¶ 116-18. 28 TD Bank moves to dismiss the FCRA claim on three grounds. First, TD Bank asserts that 14 1 Plaintiff is judicially estopped from bringing this action because she did not list her FCRA claim 2 as an asset in her bankruptcy. Second, TD Bank argues that Plaintiff has not alleged facts showing 3 that TD Bank’s reporting was inaccurate. And third, TD Bank asserts that Plaintiff has not alleged 4 facts showing that she has suffered injury sufficient to confer Article III standing. Because the 5 argument regarding lack of Article III standing goes to this Court’s subject matter jurisdiction, the 6 Court takes up that argument first. 7 Before turning to TD Bank’s arguments, however, the Court addresses TD Bank’s request 8 for judicial notice of documents filed by Plaintiff in her bankruptcy case. See RJN, ECF 48-1. 9 The request is GRANTED, as the documents are proper subject for judicial notice. See Reyn’s 10 United States District Court Northern District of California 11 12 Pasta Bella, LLC v. Visa USA, Inc., 442 F.3d 741, 746 n.6 (9th Cir. 2006). 1. Article III Standing “[T]he ‘irreducible constitutional minimum’ of standing consists of three elements.” 13 Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016) (quoting Lujan v. Defs. of Wildlife, 504 U.S. 14 555, 560 (1992)). “The plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable 15 to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable 16 judicial decision.” Id. (citing Lujan, 504 U.S. at 560-61). “The plaintiff, as the party invoking 17 federal jurisdiction, bears the burden of establishing these elements.” Id. 18 TD Bank challenges the first element, injury in fact. A plaintiff does not automatically 19 satisfy the injury in fact requirement “whenever a statute grants a person a statutory right and 20 purports to authorize that person to sue to vindicate that right.” Spokeo, 136 S. Ct. at 1549. 21 “Article III standing requires a concrete injury even in the context of a statutory violation.” Id. 22 “‘Concrete’ is not, however, necessarily synonymous with ‘tangible.’” Id. “[T]he risk of real 23 harm” may satisfy the concreteness requirement. Id. Moreover, “the violation of a procedural 24 right granted by statute can be sufficient in some circumstances to constitute injury in fact.” Id. 25 “In other words, a plaintiff in such a case need not allege any additional harm beyond the one 26 Congress has identified.” Id. However, a plaintiff “cannot satisfy the demands of Article III by 27 alleging a bare procedural violation” of a statute. Id. at 1550. 28 Several courts in this district have concluded that claims of inaccurate credit reporting 15 1 regarding debts and debt delinquency are sufficient to satisfy the injury in fact requirement. See, 2 e.g., Mamisay v. Experian Info. Sols., Inc., No. 16-CV-05684-YGR, 2017 WL 1065170 (N.D. Cal. 3 Mar. 21, 2017); Artus , 2017 WL 346022; Keller v. Experian Info. Sols., Inc., No. 16-CV-04643- 4 LHK, 2017 WL 130285 (N.D. Cal. Jan. 13, 2017). Those courts distinguished a “bare procedural 5 violation” of the FCRA which the Supreme Court held could not establish concrete harm – for 6 example, the dissemination of an incorrect zip code – from the inaccurate reporting of a 7 consumer’s debs and debt delinquencies. Mamisay, 2017 WL 1065170, at *2 (“This inaccurate 8 reporting of debt constitutes the precise harm Congress sought to protect against in enacting the 9 FCRA, and thus, cannot be classified as a ‘mere procedural violation.’”); Artus, 2017 WL 346022, at *3 (“Since Plaintiff alleges that TD Bank was notified that its credit reporting was inaccurate 11 United States District Court Northern District of California 10 and failed to undertake one of its duties under § 1681s-2(b), she has not merely alleged a ‘bare 12 procedural violation’ but rather a harm the court finds sufficiently concrete based on Congress’ 13 intent in enacting the FCRA”); Keller, 2017 WL 130285, at *4 (“Inaccurate reporting about 14 whether Plaintiff has a debt and whether that debt is delinquent could harm a Plaintiff's credit and 15 employment prospects.”). This Court finds that reasoning to be persuasive and likewise concludes 16 that Plaintiff’s claim of inaccuracies in the reporting of her debts and delinquencies is sufficient to 17 satisfy the injury in fact requirement of Article III. 18 19 2. Inaccuracy Although Plaintiff has asserted a claim which satisfies Article III’s requirements, she has 20 not pled the claim adequately. TD Bank argues that numerous courts have rejected Plaintiff’s 21 theories of liability based on the reporting of debt delinquency during the pendency of a Chapter 22 13 bankruptcy and the failure to conform to Metro 2. TD Bank’s argument is well-taken for the 23 reasons discussed in section III.A., above. Consistent with the Court’s discussion above, Plaintiff 24 might be able to allege the existence of an inaccuracy based on TD Bank’s reporting of specific 25 debt amounts or delinquencies after confirmation of Plaintiff’s Chapter 13 plan if the reporting 26 contained no mention of Plaintiff’s bankruptcy. See Devincenzi, 2017 WL 86131, at *7 (declining 27 to decide whether allegations that the “credit report contained no indication at all that the debts 28 were the subject of a pending bankruptcy . . . would be sufficient to state a claim” but granting 16 1 plaintiff leave to attempt to assert FCRA claim based on that theory). Plaintiff has not alleged 2 such reporting with respect to the September 2015 Credit Report, which is the only report she 3 alleges that she disputed. 4 5 3. Judicial Estoppel Finally, TD Bank contends that Plaintiff is judicially estopped from asserting her FCRA 6 claim because she did not list her FCRA claim as an asset in her bankruptcy. “Judicial estoppel is 7 an equitable doctrine that precludes a party from gaining an advantage by asserting one position, 8 and then later seeking an advantage by taking a clearly inconsistent position.” Hamilton v. State 9 Farm Fire & Cas. Co., 270 F.3d 778, 782 (9th Cir. 2001). The Supreme Court has articulated three factors that a court must consider when deciding whether to apply the doctrine: (1) whether 11 United States District Court Northern District of California 10 a party’s later position is clearly inconsistent with its earlier position; (2) whether that party has 12 succeeded in persuading a court to accept its earlier position; and (3) whether the party seeking to 13 assert an inconsistent position would derive an unfair advantage or impose an unfair detriment on 14 the opposing party if not estopped. New Hampshire v. Maine, 532 U.S. 742, 750-51 (2001). 15 In the bankruptcy context, the Ninth Circuit has adopted “a basic default rule: If a 16 plaintiff-debtor omits a pending (or soon-to-be-filed) lawsuit from the bankruptcy schedules and 17 obtains a discharge (or plan confirmation), judicial estoppel bars the action.” Ah Quin v. Cnty. of 18 Kauai Dep’t of Transp., 733 F.3d 267, 271 (9th Cir. 2013). “The logic is straightforward: by not 19 listing the lawsuit in the bankruptcy schedules, the debtor represented that the asset did not exist. 20 The bankruptcy court accepted that position in its confirmation or discharge order, and the claim 21 was hidden from the bankruptcy estate to the detriment of the creditors and advantage of the 22 debtor.” Basconcello v. Experian Info. Sols., Inc., No. 16-CV-06307-PJH, 2017 WL 1046969, at 23 *3 (N.D. Cal. Mar. 20, 2017). 24 Courts in this district have declined to apply the judicial estoppel doctrine to FCRA claims 25 like Plaintiff’s at the pleading stage. See Mensah v. Experian Info. Sols., Inc., No. 16-CV-05689- 26 WHO, 2017 WL 1246892, at *10-11 (N.D. Cal. Apr. 5, 2017); Basconcello, 2017 WL 1046969, at 27 *4-5; Keller, 2017 WL 130285, at *9 n.6. Each of those courts noted that the plaintiff could not 28 have listed the FCRA claim when filing for Chapter 13 protection because the claim was based 17 1 upon alleged inaccuracies in reporting after Chapter 13 plan confirmation. While acknowledging 2 that the plaintiffs may have had an obligation to supplement the bankruptcy record after filing suit 3 under the FCRA, the courts concluded that the records before them did not contain sufficient 4 information to apply the New Hampshire factors in the context of a motion to dismiss. This Court follows suit and declines find Plaintiff’s claim barred under the doctrine of 5 6 judicial estoppel at this time. The Court’s ruling is without prejudice to assertion of the doctrine at 7 a later stage in the proceedings and on a more developed record. Accordingly, TD Bank’s motion to dismiss Plaintiff’s FCRA claim is GRANTED only on 8 9 the ground that Plaintiff has failed to allege an actionable inaccuracy. B. 11 United States District Court Northern District of California 10 CCRAA (Claim 2) Subject matter jurisdiction in this case is based on federal question with respect to 12 Plaintiff’s FCRA claim and supplemental jurisdiction with respect to her CCRAA claim. See SAC 13 ¶ 13. Plaintiff has yet to allege a viable federal claim, and if she fails to do so this Court will 14 decline to exercise supplemental jurisdiction over her state law claim. See Sanford v. 15 MemberWorks, Inc., 625 F.3d 550, 561 (9th Cir. 2010) (“[I]n the usual case in which all federal- 16 law claims are eliminated before trial, the balance of factors to be considered under the pendent 17 jurisdiction doctrine – judicial economy, convenience, fairness, and comity – will point toward 18 declining to exercise jurisdiction over the remaining state-law claims.”) (internal quotation marks 19 and citation omitted). Accordingly, the Court DECLINES TO ADDRESS the merits of Plaintiff’s CCRAA claim 20 21 22 23 against TD Bank at this time. V. LEAVE TO AMEND Having concluded that Experian and TD Bank are entitled to dismissal of Plaintiff’s FCRA 24 claims against them, the Court must determine whether leave to amend is warranted. In deciding 25 whether to grant Plaintiff leave to amend her pleading, the Court must consider the factors set 26 forth by the Supreme Court in Foman v. Davis, 371 U.S. 178 (1962), and discussed at length by 27 the Ninth Circuit in Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048 (9th Cir. 2003). A 28 district court ordinarily must grant leave to amend unless one or more of the Foman factors is 18 1 present: (1) undue delay, (2) bad faith or dilatory motive, (3) repeated failure to cure deficiencies 2 by amendment, (4) undue prejudice to the opposing party, and (5) futility of amendment. 3 Eminence Capital, 316 F.3d at 1052. “[I]t is the consideration of prejudice to the opposing party 4 that carries the greatest weight.” Id. However a strong showing with respect to one of the other 5 factors may warrant denial of leave to amend. Id. The first factor (undue delay), second factor (bad faith), and fourth factor (undue 6 7 prejudice) do not weigh against granting leave to amend at this time, although the Court may well 8 have a different view in the event that Plaintiff’s counsel fails to address the deficiencies 9 addressed herein and persists in submitting pleadings consisting primarily of copy-and-paste boilerplate allegations. The third factor (failure to cure deficiencies) weighs against granting leave 11 United States District Court Northern District of California 10 to amend, as Plaintiff previously amended her pleading. Finally, with respect to the fifth factor 12 (futility of amendment), the Court has grave reservations whether Plaintiff will be able to state a 13 viable FCRA claim against Experian or TD Bank. However, because it is not clear that Plaintiff 14 cannot do so, the Court will grant her leave to amend. If Plaintiff chooses to amend her FCRA claim, she shall allege with specificity what 15 16 reporting is attributable to each defendant and shall attach a copy of each report or allege the 17 contents of the offending trade lines verbatim. Failure to do so will be deemed an admission that 18 Plaintiff is incapable of pleading specific facts giving rise to liability under the FCRA. 19 20 VI. ORDER (1) TO AMEND; 21 22 Defendant Experian’s motion to dismiss the SAC is GRANTED WITH LEAVE (2) Defendant TD Bank’s motion to dismiss the SAC is GRANTED WITH LEAVE 23 TO AMEND as to Plaintiff’s FCRA claim; the Court declines to address Plaintiff’s 24 CCRAA claim unless and until Plaintiff states a viable federal claim; 25 (3) Leave to amend is limited to the FCRA claim discussed in this order and the related 26 CCRAA claim; Plaintiff may not add new claims or parties without express leave 27 of the Court; 28 (4) Any amended pleading shall be filed on or before May 4, 2017; and 19 1 (5) Failure to meet the May 4 deadline to file an amended complaint or failure to cure 2 the deficiencies identified in this Order will result in a dismissal of Plaintiff’s 3 claims with prejudice. 4 5 6 Dated: April 13, 2017 ______________________________________ BETH LABSON FREEMAN United States District Judge 7 8 9 10 United States District Court Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 20

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