Cunningham v. Ocwen Financial et al

Filing 142

REPORT AND RECOMMENDATION: The undersigned recommends that the defendants' Motion to Dismiss be GRANTED in regard to Plaintiffs claims that Defendants': 1) reported on loans they did not own; 2) failed to report the results of their inve stigation to him; 3) initially reported inaccurate information to CRAs; and 4) failed to provide an adverse action notice; and that those claims be DISMISSED. The Magistrate Judge also recommends that the defendants' Motion to Dismiss be DENI ED in regard to Plaintiff's claims that Defendants failed to conduct reasonable investigations or that they failed to "modify, delete, or permanently block" inaccurate information subsequent to an investigation; and that those claims be allowed to PROCEED. Signed by Magistrate Judge Joe Brown on 12/10/2013. (xc:Pro se party by regular and certified mail.)(DOCKET TEXT SUMMARY ONLY-ATTORNEYS MUST OPEN THE PDF AND READ THE ORDER.)(eh)

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF TENNESSEE
Craig Cunningham,
Plaintiff,
vs.
Ocwen Financial, et al.
Defendants.

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Cv. No.
3:12-cv-0440
District Judge Trauger/Magistrate Judge
Brown.

To the Honorable District Judge Aleta A. Trauger
REPORT AND RECOMMENDATION
Presently pending before the Magistrate Judge is Defendants’, Ocwen Financial
(“Ocwen”) and Litton Loan Servicing (“Litton”), Motion for Partial Dismissal for Failure
to State a Claim under Fed. R. Civ. P. 12(b)(6). (Docket Entry (“DE”) 131) As explained in
detail below, the Magistrate Judge recommends that the defendants’ Motion to Dismiss be
GRANTED in PART.
I.

INTRODUCTION AND BACKGROUND

According to the Verified Third Amended Complaint (“Complaint”) (DE 128), Mr. Craig
Cunningham (“Plaintiff”) brings claims against Litton and Ocwen for violations of the Fair
Credit Reporting Act (“FCRA”) (15 U.S.C. 1681s-2), the Fair Debt Collection Practices Act (15
U.S.C. § 1692a), and the Real Estate Settlement Procedures Act, (12 U.S.C. § 2603).
Plaintiff’s claims center around false or erroneous financial reports provided by Ocwen
and Litton to multiple consumer reporting agencies (“CRAs”) that detrimentally impacted
Plaintiff’s credit, caused him to lose a security clearance, and may ultimately cause him to be
involuntarily severed from service in the Army Reserves. (Complaint, DE 128, p. 2 ¶¶ 8-9.) At
issue in the instant motion are Plaintiff’s claims under the FCRA. (Complaint, DE 128, pp. 3-4 ¶

12.) In paragraph 12 of the complaint, Plaintiff asserts several claims against Litton and Ocwen
both individually and collectively.
Individually, Plaintiff claims that Ocwen reported on and verified information regarding
loans owned by Litton. (Complaint, DE 128, p. 3 ¶ 12.) Plaintiff further alleges that Litton: 1)
reported and verified information on loans it did not own; 2) did not conduct a reasonable
investigation into Plaintiff’s dispute of that information; and 3) failed to provide proper notice of
Plaintiff’s dispute as required by 15 U.S.C. § 16[81]s-2(a)(3). (Complaint, DE 128, p. 3 ¶ 12.)
Collectively, Plaintiff alleges that Litton and Ocwen: 1) re-aged one account in order to
erroneously report it beyond the 7 year limitation period established under the FCRA; 2)
willfully and knowingly reported inaccurate information as prohibited by 15 U.S.C. § 1681s2(a)(1)(A); 3) failed to provide an adverse action notice to Plaintiff; 4) failed to update and
correct information they knew to be incorrect in violation of 1681s-2(a)(2); and 5) that both
Litton and Ocwen continued to report inaccurate information after determining that the
information was inaccurate subsequent to Plaintiff’s dispute. (Complaint, DE 128, p. 2 ¶ 12.)
II.

ANALYSIS

A. Standard of Review
Dismissal under Rule 12(b) is appropriate where a party fails to state a claim upon which
relief may be granted. Fed. R. P. 12(b)(6). Although a plaintiff is not required to plead detailed
factual information in his complaint, to survive a motion to dismiss, his claim must include
“more than labels and conclusions, and a formulaic recitation of the elements of a cause of
action.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). Rather, Plaintiff’s “complaint
must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible
on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570).

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B. Grounds for decision
Litton and Ocwen argue that the FCRA does not provide for an individual cause of action
under 15 U.S.C. § 1681s-2(a) (“§ 1681s-2(a)”). (Defendant’s Memorandum in Support of Their
Partial Motion to Dismiss (“Defendants’ M., DE 132, pp. 5-6.) See Boggio v. USAA Fed. Sav.
Bank, 696 F.3d 611, 617 (6th Cir. 2012) (holding that 15 U.S.C. § 1681s-2(c) precludes all
individual claims except those under § (b)). Plaintiff concedes this issue. (Plaintiff’s Response
(“Response”), DE 137, p. 2 ¶ 5.) However, Plaintiff argues that certain of his claims fall within
the ambit of 15 U.S.C. § 1681s-2(b) (“§ 1681s-2(b)”) and must not be dismissed. Plaintiff
argues that he may pursue Defendants’ failure to conduct a reasonable investigation and reaging, or reinsertion, of financial information known to be erroneous. (Response, DE 137, p. 23.) The Magistrate Judge agrees.
The FCRA represents Congress’ intent to provide a means for consumers to “dispute[]
and, ultimately, correct[] inaccurate information on their credit reports.” Boggio, 696 F.3d at
616 (quoting Johnson v. MBNA Am. Bank, NA., 357 F.3d 426, 430-31 (4th Cir. 2004)). To that
end, the FCRA subjects companies who report financial information (“Reporting Agencies”) to
civil liability at the hands of the consumer under five circumstances. Id. First, upon receipt of a
dispute, Reporting Agencies, such as the Defendants here, must conduct a “fairly searching
inquiry” of the dispute.

Id.

Second, the Reporting Agency must consider “all relevant

information provided by the CRA pursuant to § 1681i(a)(2).” Id. Third, the Reporting Agency
must “report the results of its investigation to the CRA . . . irrespective of the outcome of the
investigation” Id. at 617 (quoting § 1681s-2(b)(1)(C) (internal quotations omitted)).
Fourth, upon finding that consumer “information [reported to the CRA] is incomplete or
inaccurate,” the Reporting Agency must “report the results [of the investigation] to all other

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CRAs to which the [Reporting Agency] furnished the information.” Id. (quoting § 1681s2(b)(1)(D)) (internal quotations omitted). Lastly, a Reporting Agency “must either modify,
delete, or permanently block reporting of information that it finds . . . to be inaccurate or
incomplete, or that cannot be verified after any reinvestigation.” Id. at 618 (quoting § 1681s2(b)(1)(E)) (internal quotations omitted).
The FCRA does require investigation of disputed information and correction of
inaccurate information under § 1682s-2(a)(2) & (8) as Defendants claim, but it includes parallel
provisions under § 1681s-2(b). See § 1681s-2(b)(1)(A) & (E). Thus, Plaintiff is entitled to
pursue his claims that Litton and Ocwen did not conduct reasonable investigations—those that
were “fairly searching . . . something more than a merely cursory review”—under § 1681s2(b)(1)(A). Boggio, 696 F.3d at 616. Likewise, Plaintiff may continue to pursue claims that
Litton and/or Ocwen did not “modify, delete, or permanently block reporting of information”
known to be inaccurate or incomplete. § 1681s-2(b)(1)(E). Id. at 618.
While it is clear that Plaintiff’s claims regarding Defendants failure to correct information
determined to be inaccurate may proceed under § 1681s-2(b)(1)(E), there is a complete lack of
precedent regarding Plaintiff’s claims of re-aging. Under the FCRA, Reporting Agencies are
required to report delinquencies to CRAs within 90 days of an “account” becoming delinquent.
§ 1681s-2(a)(5). The FCRA permits CRAs to report such delinquencies for a period of 7 years.
§ 1681c. Re-aging occurs when a Reporting Agency or a CRA modifies the date of last activity
on a delinquent account to extend the reporting date beyond the permissible 7 year timeframe.
See U.S.C. v. NCO Group et al, Fed. Trade Comm. File No. 992-3012, (May 13, 2004).
Plaintiff alleges that Ocwen and/or Litton re-aged, reinserted, information regarding a
loan account attributable to him to show that it was “seriously delinquent” when it had

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previously been shown as “paid in full with no delinquencies” and remained so. (Complaint, DE
128, p. 2 ¶ 8.) Further, Plaintiff asserts that Defendants did so after the account had been
disputed and Defendants had determined that the information was inaccurate. (Response, DE
137, p. 3 ¶¶ 10-12.) While re-aging or reinsertion is clearly governed by § 1681s-2(a) and
beyond Plaintiff’s reach, any knowing re-aging or reinsertion of inaccurate information
subsequent to an adequate investigation logically falls under § 1681s-2(b)(1)(E) as well.
A Reporting Agency that knowingly or negligently reinserts or re-ages inaccurate
information has not taken the appropriate steps to “permanently block” this information as is
required by under § 1681s-2(b)(1)(E). Further, permitting a Reporting Agency to reinsert this
information without recourse by the consumer would seriously undermine the intent behind the
FCRA. Consumers, such as Plaintiff here, would be trapped in an endless cycle of dispute
resolution that denies them “a means to . . . ultimately, correct [] inaccurate information on their
credit reports.” Boggio, 696 F.3d at 616.
III.

CONCLUSION

The Magistrate Judge finds that the FCRA does not provide a vehicle for Plaintiff to
advance his claims regarding Defendants’: 1) reporting on loans they did not own; 2) failure to
report the results of their investigation to him; 3) initial reports, those prior to any dispute or
investigation, to CRAs containing inaccurate information; and 4) failure to provide an adverse
action notice. However, the Magistrate Judge finds that § 1681s-2(b) does provide Plaintiff a
means to advance claims regarding Defendants’ failure to conduct reasonable investigations,
and/or “modify, delete, or permanently block” information known to be inaccurate, subsequent
to a dispute.

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IV.

RECOMMENDATION 1

For the reasons stated above, the undersigned recommends that the defendants’ Motion
to Dismiss be GRANTED in regard to Plaintiff’s claims that Defendants’: 1) reported on loans
they did not own; 2) failed to report the results of their investigation to him; 3) initially reported
inaccurate information to CRAs; and 4) failed to provide an adverse action notice; and that those
claims be DISMISSED. The Magistrate Judge also recommends that the defendants’ Motion to
Dismiss be DENIED in regard to Plaintiff’s claims that Defendants failed to conduct reasonable
investigations or that they failed to “modify, delete, or permanently block” inaccurate
information subsequent to an investigation; and that those claims be allowed to PROCEED.
The parties have fourteen (14) days of being served with a copy of this Review and
Recommendation to serve and file written objections to the findings and recommendation
proposed herein. A party shall respond to the objecting party’s objections to this R&R within
fourteen (14) days after being served with a copy thereof. Failure to file specific objections
within fourteen (14) days of receipt of this Review and Recommendation may constitute a
waiver of further appeal. Keeling v. Warden, Lebanon Corr. Inst., 673 F.3d 452, 458 (6th Cir.
2012) (citing Thomas v. Arn, 474 U.S. 140, reh’g denied, 474 U.S. 111 (1986)).
ENTERED this 10th day of December, 2013.

/s/Joe B. Brown
Joe B. Brown
Magistrate Judge

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Following a decision by the District Judge, the parties should contact the Magistrate Judge to determine what
discovery remains and to recommend a trial date.

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