Raina Gustafson v. Experian Information Solutions Inc. et al, No. 2:2014cv01453 - Document 20 (C.D. Cal. 2014)

Court Description: ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT SYSTEMS & SERVICES TECHNOLOGIES, INC.S MOTION TO DISMISS 14 by Judge Otis D. Wright, II: The Court GRANTS IN PART and DENIES IN PART SSTs Motion to Dismiss as enumerated above. Since the Court denies leave to amend on the grounds for which it grants SSTs Motion, SST shall file its answer to the Complaint within 14 days. (lc). Modified on 5/21/2014 .(lc).
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Raina Gustafson v. Experian Information Solutions Inc. et al Doc. 20 O 1 2 3 4 5 6 7 United States District Court Central District of California 8 9 10 11 Plaintiff, 12 13 Case No. 2:14-cv-01453-ODW(Ex) RAINA GUSTAFSON, ORDER GRANTING IN PART AND v. 14 EXPERIAN INFORMATION DENYING IN PART DEFENDANT 15 SOLUTIONS INC.; SYSTEMS & SYSTEMS & SERVICES 16 SERVICES TECHNOLOGIES, INC.; TECHNOLOGIES, INC.’S MOTION 17 HSBC BANK USA NATIONAL TO DISMISS [14] 18 ASSOCIATION; DOES 1–10, inclusive, 19 20 Defendants. I. INTRODUCTION 21 Plaintiff Raina Gustafson alleges that Defendant Systems & Services 22 Technologies, Inc. (“SST”) violated myriad federal and state debt-collection laws by 23 allegedly “double reporting” a debt. 24 reported the same $705 debt twice, though under different names and with different 25 account numbers, and failed to accurately conduct an investigation after receiving 26 dispute notice from her and Defendant Experian Information Solutions Inc. Various 27 federal-law provisions limit her ability to privately enforce her claims and preempt 28 portions of her state-law claims. But the Court finds that she has adequately pleaded Gustafson contends that SST inaccurately Dockets.Justia.com 1 the remainder of her claims. The Court therefore GRANTS IN PART and DENIES 2 IN PART SST’s Motion to Dismiss.1 (ECF No. 14.) 3 II. FACTUAL BACKGROUND 4 SST is a loan servicing and payment processing company, which reports 5 delinquent debts to credit bureaus and is a “furnisher” under the federal Fair Credit 6 Reporting Act (“FCRA”), 15 U.S.C. §§ 1681–81x. (Compl. ¶ 2.) 7 On February 8, 2012, Gustafson obtained a copy of her Experian credit report 8 and discovered two entries for an SST account. (Id. ¶ 8.) The first account read 9 “SST/CIGPFICORP, Account #1970xxxxxx; Status: charged off $705; Status Details: 10 this account is scheduled to continue on record until March 2014.” (Id.) The second 11 entry listed “SST/SYNOVUS, Account #403624000702xxx; Status: Closed $705 12 written off.” (Id.) 13 In February 2012, September 2013, October 2013, November 2013, December 14 2013, and January 2014, Gustafson requested that Experian investigate and remove 15 one of the SST accounts that was allegedly being double reported. (Id. ¶ 16.) 16 Gustafson obtained subsequent credit reports on October 22, 2013, and 17 November 11, 2013, and noted the same two SST entries. (Id. ¶¶ 10–11.) The 18 November 2013 report further stated that the credit grantor had verified the accuracy 19 of the entries and would not engage in further investigation of Gustafson’s disputes. 20 (Id. ¶ 11.) 21 On February 26, 2014, Gustafson filed this action against, among others, SST, 22 alleging violations of FCRA; California’s Rosenthal Fair Debt Collection Practices 23 Act (“RFDCPA”), Cal. Civ. Code §§ 1788–88.3; the federal Fair Debt Collection 24 Practices Act (“FDCPA”), 15 U.S.C. §§ 1692–92p; and the California Consumer 25 Credit Reporting Agencies Act (“CCCRAA”), Cal. Civ. Code §§ 1785.1–85.6. (ECF 26 No. 1.) On April 23, 2014, SST moved to dismiss Gustafson’s Complaint under 27 28 1 After carefully considering the papers filed in support of and in opposition to the Motion, the Court deems the matter appropriate for decision without oral argument. Fed. R. Civ. P. 78; L.R. 7-15. 2 1 Federal Rule of Civil Procedure 12(b)(6). (ECF No. 14.) Gustafson timely opposed. 2 (ECF No. 17.) That Motion is now before the Court for decision. III. 3 LEGAL STANDARD 4 A court may dismiss a complaint under Rule 12(b)(6) for lack of a cognizable 5 legal theory or insufficient facts pleaded to support an otherwise cognizable legal 6 theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 1990). To 7 survive a dismissal motion, a complaint need only satisfy the minimal notice pleading 8 requirements of Rule 8(a)(2)—a short and plain statement of the claim. Porter v. 9 Jones, 319 F.3d 483, 494 (9th Cir. 2003). The factual “allegations must be enough to 10 raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 11 U.S. 544, 555 (2007). That is, the complaint must “contain sufficient factual matter, 12 accepted as true, to state a claim to relief that is plausible on its face.” Ashcroft v. 13 Iqbal, 556 U.S. 662, 678 (2009). 14 The determination whether a complaint satisfies the plausibility standard is a 15 “context-specific task that requires the reviewing court to draw on its judicial 16 experience and common sense.” Id. at 679. A court is generally limited to the 17 pleadings and must construe all “factual allegations set forth in the complaint . . . as 18 true and . . . in the light most favorable” to the plaintiff. Lee v. City of L.A., 250 F.3d 19 668, 688 (9th Cir. 2001). But a court need not blindly accept conclusory allegations, 20 unwarranted deductions of fact, and unreasonable inferences. Sprewell v. Golden 21 State Warriors, 266 F.3d 979, 988 (9th Cir. 2001). 22 As a general rule, a court should freely give leave to amend a complaint that has 23 been dismissed. Fed. R. Civ. P. 15(a). But a court may deny leave to amend when 24 “the court determines that the allegation of other facts consistent with the challenged 25 pleading could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well 26 Furniture Co., 806 F.2d 1393, 1401 (9th Cir.1986); see Lopez v. Smith, 203 F.3d 27 1122, 1127 (9th Cir. 2000). 28 /// 3 IV. 1 DISCUSSION 2 The Court finds that some of Gustafson’s claims are preempted by federal law 3 or limited to government enforcement. But the Court finds that Gustafson properly 4 pleaded the remaining claims. 5 A. FCRA 6 FCRA prohibits, among other things, “furnishers of information” from 7 providing information to a credit-reporting agency that they know or have to reason to 8 believe is inaccurate about a consumer. 15 U.S.C. § 1681s-2(a)(1)(A). If a furnisher 9 receives notice of a consumer dispute from a credit-report agency, FCRA obligates the 10 furnisher to conduct a reasonable investigation of the disputed information. § 1681s- 11 2(b)(1)(A); Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147, 1157 (9th Cir. 12 2009) (interpreting the word “investigation” to mean a “reasonable” investigation). 13 FCRA empowers an individual to bring a private right of action against any 14 “person” who either willfully fails to comply with the Act’s requirements, § 1681n, or 15 who negligently fails to do so, § 1681o. But FCRA expressly limits a private action 16 against a furnisher to only damages arising out of a furnisher’s failure to comply with 17 the investigation requirements triggered upon a credit-reporting-agency dispute notice. 18 § 1681s-2(c)(1). That is, a consumer has no ability to bring suit against a furnisher for 19 failure to conduct a reasonable investigation when the consumer disputes the 20 information directly with the furnisher. Id. Enforcement of, among others, § 1681s- 21 2(a) is left to federal and state agencies and officials. § 1681s-2(d). 22 SST argues that a consumer has no private right of action against a furnisher of 23 information under 15 U.S.C. § 1681s-2(a), because enforcement is limited to 24 government agencies. To the extent that Gustafson alleges a § 1681s-2(b) failure-to- 25 investigate claim, SST asserts that the record is clear that SST promptly investigated 26 Gustafson’s dispute and reported the investigation’s results to the credit-reporting 27 agencies. Finally, SST contends that FCRA empowers CIGPFI as a debt purchasher 28 to separately report its account. SST attached a copy of Plaintiff’s credit report to its 4 1 Motion. SST claims that it reported the Synovus debt as charged-off, whereas it 2 reported the CIGPFI active collection account as delinquent consistent with FCRA. 3 Gustafson does not dispute that a private person may not bring her own claim 4 under § 1681s-2(a). Rather, she contends that she brings her FCRA claim under 5 § 1681s-2(b) by alleging that SST failed to properly investigate her claim after being 6 informed of the dispute by Experian. Plaintiff also disputes SST’s reliance upon her 7 credit report, arguing that SST failed to properly authenticate it and that the Court may 8 not consider it on a Rule 12(b)(6) motion. Lastly, Gustafson claims that there is no 9 authority presented that permits a furnisher to double report the same debt in the 10 manner as SST did. In her Complaint, Gustafson does not actually cite to any particular FCRA 11 12 sections when alleging that SST violated the Act. But many of her allegations 13 bespeak a violation of § 1681s-2(a) in that SST allegedly provided inaccurate 14 information to the credit-reporting agencies. To the extent that Gustafson attempts to 15 bring these claims, she has no private right of action to enforce them. § 1681s-2(c)(1). 16 Gustafson also alleges that SST “failed to correct the errors [on her credit 17 report] and failed to undertake sufficient investigation upon being notified of the 18 errors [by Experian].” (Compl. ¶ 18.) This allegation makes out a § 1681s-2(b) 19 claim, which is subject to private enforcement by Gustafson. 20 A host of problems plague SST’s arguments that the record purportedly 21 establishes that SST properly investigated the dispute. First, the Court must accept 22 Gustafson’s factual allegations as true at this stage—including that SST failed to 23 investigate the dispute. SST may not turn this Motion to Dismiss into a mini-trial of 24 Gustafson’s FCRA claim by arguing that Plaintiff’s factual allegations are “untrue.” Second, even if the Court may consider Gustafson’s credit report under the 25 26 incorporation-by-reference doctrine, SST wholly failed to authenticate it.2 27 2 28 SST SST also violated Local Rule 5.2-1 by failing to redact what appears to be Gustafson’s home address. Continued failures to comply with any applicable rules will subject counsel to sanctions within this Court’s discretion under Local Rule 83-7. 5 1 simply attached the report to its Motion with no accompanying declaration from a 2 person with personal knowledge of its origin and accuracy. The Court thus gives 3 short shrift to the document. 4 Finally, SST misrepresents what the report says, further straining its credibility. 5 SST states, “Here, SST/Synovus reported the debt as charged-off, whereas 6 SST/CICPFI [sic] reports the active collection account as delinquent.” (Mot. 7:2–3.) 7 But in reality, the credit report at Exhibit A establishes the exact opposite, which then 8 does absolutely nothing to bolster SST’s argument that FCRA entitled CIGPFI to 9 report the debt it purchased from Synovus as delinquent. (Mot. Ex. A.) 10 SST correctly points out that the Federal Trade Commission has interpreted 11 FCRA to permit a furnisher to report an account as both charged-off and delinquent if 12 both of those events occur. 13 Commentary on the Fair Credit Reporting Act, 55 FR 18804-01, 18818 (May 4, 14 1990). Gustafson maintains that the double entries were not accurate and thus that 15 FCRA does not allow the reporting in the manner done by SST. But any inaccuracy 16 in reporting is not privately actionable per § 1681s-2(c)(1). So even if Gustafson were 17 correct that FCRA does not allow the two tradelines that SST included on her report, 18 she may not maintain her claim for those alleged violations. Statement of General Policy or Interpretation; 19 The Court therefore GRANTS SST’s Motion WIHTOUT LEAVE TO 20 AMEND with respect to any of Gustafson’s claims for violations of § 1681s-2(a) or 21 for double reporting. The Court DENIES the Motion on all other FCRA grounds, 22 including violation of § 1681s-2(b). 23 B. FDCPA Congress enacted the FDCPA to eliminate abusive debt collection practices, 24 25 including the harassment and abuse of consumers. 26 effectuate this purpose, the Act prohibits a ‘debt collector’ from making false or 27 misleading representations and from engaging in various abusive and unfair 28 /// 6 15 U.S.C. § 1692(e). “To 1 practices.” Izenberg v. ETS Servs., LLC, 589 F. Supp. 2d 1193, 1198 (C.D. Cal. 2 2008); 15 U.S.C. §§ 1692(d)–(f). 3 Gustafson alleges that SST violated three different FDCPA provisions: 4 §§ 1692d, 1692e, and 1692f. (Compl. ¶ 25(a)–(c).) Section 1692d prohibits a debt 5 collector from engaging in “any conduct the natural consequence of which is to 6 harass, oppress, or abuse any person in connection with the collection of a debt.” 7 Neither may a debt collector “use any false, deceptive, or misleading representation or 8 means in connection with the collection of any debt,” such as falsely representing the 9 character or legal status of the debt or threatening to take an action that cannot be 10 legally done. § 1692e. Further, the FDCPA proscribes the use of “unfair or 11 unconscionable means to collect or attempt to collect any debt,” including collecting 12 any amount not permitted by law. § 1692f. 13 Citing to Kohut v. Trans Union LLC, No. 04 C 2854, 2004 WL 1882239 (N.D. 14 Ill. Aug. 11, 2004), SST argues that “it is not ‘false, deceptive, or misleading’ to 15 report that a consumer failed to pay a debt after it went to collection when that 16 consumer also failed to pay the debt before it went to collection.” Id. at *2. SST thus 17 recapitulates its argument that double reporting—such as the two tradelines for 18 SST/Synovus and SST/CIGPFI—is not actionable under the FDCPA. 19 But Gustafson distinguishes Kohut, pointing out that unlike in that case, the 20 parties here dispute whether the tradelines are accurate in the first place. Gustafson 21 also cites her own case which established that a furnisher double reporting the same 22 debt could be actionable under the FDCPA. See Morris v. Risk Mgmt. Alternatives, 23 Inc., 203 F.R.D. 336, 339 (N.D. Ill. 2001) (finding only that double reporting created a 24 common legal question sufficient for class certification). 25 SST’s reliance on Kohut is misplaced. In that case, the court specifically noted 26 that “the parties agree[d] that [the furnisher’s] report was accurate.” 2004 WL 27 1882239, at *2. 28 accurate. If she is correct that the double entries are not accurate, then that reporting But here, Gustafson disputes whether the two tradelines were 7 1 would constitute a “false, deceptive, or misleading representation” actionable under 2 the FDCPA. See § 1692e. SST also does not dispute Gustafson’s §§ 1692d and 1692f 3 allegations. The Court accordingly DENIES SST’s Motion on all FDCPA grounds. 4 C. RFDCPA 5 The California Legislature explicitly incorporated the FDCPA’s provisions into 6 the RFDCPA, including the proscriptions in §§ 1692d–f. Cal. Civ. Code § 1788.17. 7 SST simply reiterates its FDCPA arguments with respect to Gustafson’s RFDCPA 8 claim. Since the Court denied SST’s Motion with respect to the federal claim, the 9 Court similarly DENIES SST’s Motion on all RFDCPA grounds. 10 D. CCCRAA 11 Gustafson also alleges that SST violated the CCCRAA. The Act provides that a 12 “person shall not furnish information on a specific transaction or experience to any 13 consumer credit reporting agency if the person knows or should know the information 14 is incomplete or inaccurate.” Cal. Civ. Code § 1785.25(a). This section’s commands 15 are “nearly identical” to those in § 1681s-2(a) of FCRA. Gorman, 584 F.3d at 1172. 16 While FCRA expressly preempts any state requirements or prohibitions with 17 respect to the subject matter regulated under 15 U.S.C. § 1681s-2(a), Congress 18 specifically exempted California Civil Code section 1785.25(a) from preemption. 19 This exclusion works a strange result. A plaintiff may not bring a private action to 20 enforce violations relating to inaccurate information under FCRA, but she may bring 21 one on the same basis under the CCCRAA. Equally as strange, while a plaintiff may 22 bring a failure-to-investigate claim under FCRA, Congress did not exempt 23 CCCRAA’s failure-to-investigate provision from preemption. Carvalho v. Equifax 24 Info. Servs., LLC, 629 F.3d 876, 889 (9th Cir. 2010) (holding that FCRA preempts 25 section 1785.25(f) relating to failure to investigate upon receipt of dispute notice from 26 a credit-reporting agency). 27 SST argues that Gustafson’s CCCRAA claim fails with her FCRA claim and 28 that the “record” contradicts her failure-to-investigate claim. SST also points out that 8 1 FCRA preempts CCCRAA’s attempt to regulate failures to investigate. But 2 Gustafson contends that her CCRAA claims relies upon section 1785.25(a), which 3 Congress saved from the preemption chopping block. 4 To the extent that Gustafson brings a failure-to-investigate claim under the 5 CCCRAA, FCRA preempts that claim. The Court thus GRANTS SST’s Motion on 6 that ground WITHOUT LEAVE TO AMEND. But Gustafson’s litany of false- 7 information allegations survives FCRA preemption and is actionable under 8 section 1785.25(a). The Court accordingly DENIES the Motion on this basis. V. 9 CONCLUSION 10 For the reasons discussed above, the Court GRANTS IN PART and DENIES 11 IN PART SST’s Motion to Dismiss as enumerated above. (ECF No. 14.) Since the 12 Court denies leave to amend on the grounds for which it grants SST’s Motion, SST 13 shall file its answer to the Complaint within 14 days. 14 IT IS SO ORDERED. 15 16 May 21, 2014 17 18 19 ____________________________________ OTIS D. WRIGHT, II UNITED STATES DISTRICT JUDGE 20 21 22 23 24 25 26 27 28 9