Espinoza v. Hunt & Henriques, Attorneys at Law et al, No. 5:2018cv02752 - Document 76 (N.D. Cal. 2018)

Court Description: ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT MERRICK'S MOTION TO DISMISS. Re: Dkt. No. 50 . Espinoza must file her amended complaint or give notice that she does not intend to amend by 1/4/2019. Signed by Judge Nathanael Cousins. (lmh, COURT STAFF) (Filed on 12/3/2018)
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Espinoza v. Hunt & Henriques, Attorneys at Law et al Doc. 76 1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 NORTHERN DISTRICT OF CALIFORNIA 9 10 DIANAH ESPINOZA, 11 United States District Court Northern District of California Plaintiff, 12 v. 13 HUNT & HENRIQUES, ATTORNEYS AT LAW, et al., 14 Case No.18-cv-02752-NC ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT MERRICK’S MOTION TO DISMISS Re: Dkt. No. 50 Defendants. 15 16 Defendant Merrick Bank Corporation moves to dismiss plaintiff Dianah Espinoza’s 17 18 claims against it for violation of California’s credit reporting law and intentional 19 misrepresentation. Merrick argues that Espinoza’s state law claims are preempted by 20 federal law. Because only one of Espinoza’s claims is preempted, the Court GRANTS in 21 part and DENIES in part Merrick’s motion to dismiss. 22 I. 23 Relevant Allegations in the Complaint and Procedural History Espinoza opened a credit card account with Merrick on May 5, 2011. See Compl. 24 ¶ 17. She made her last payment on that card a year later in October 2012. Id. ¶ 18. 25 However, Merrick reported to credit reporting agencies that Espinoza made her last 26 payment on August 2, 2013 and charged off the account—with a reported balance of 27 $1,422.80—on April 30, 2013. Id. ¶¶ 19, 20, 27, 30. On June 23, 2017, Merrick engaged 28 co-defendant law firm Hunt & Henriques to collect on that debt. Id. ¶ 21. Dockets.Justia.com A few months later, Espinoza disputed her credit reports with Equifax and 1 2 TransUnion, arguing that the date of her last payment on the Merrick account was in 3 October 2012, not August 2, 2013. Id. ¶ 30. Equifax and TransUnion both notified 4 Merrick of Espinoza’s dispute and Merrick updated its records to reflect a last payment 5 date of October 2012 for Espinoza’s account. Id. ¶¶ 31, 32. 6 Apparently, Merrick had attempted to process three payments for Espinoza’s 7 account, with the final payment occurring on August 2, 2013. Id. ¶ 33. All three of those 8 payments attempted to draw funds from Espinoza’s account with SchoolsFirst Credit 9 Union, but the credit union rejected those drafts as invalid and did not post them to 10 Espinoza’s account. Id. ¶¶ 33–38. Espinoza sued Hunt & Henriques and Merrick on May 10, 2018. See generally id. United States District Court Northern District of California 11 12 In her complaint, Espinoza alleged that Merrick (1) violated the California Consumer 13 Credit Reporting Agencies Act (“CCRAA”), Cal. Civ. Code §§ 1785, et seq.; and (2) made 14 intentional fraudulent misrepresentations. Id. ¶¶ 50 –62. Espinoza also brought a claim 15 against Hunt & Henrique under the Fair Debt Collection Practices Act, 15 U.S.C. §§ 1692, 16 et seq. See id. ¶ 47–49. That claim is not at issue here. Dkt. No. 50 at 4. Merrick now 17 moves to dismiss Espinoza’s claims against it. See Dkt. No. 50. The motion is now fully 18 briefed. See Dkt. Nos. 50, 60, 62, 64, 68, 71. All parties have consented to the jurisdiction 19 of a magistrate judge. See Dkt. Nos. 10, 16, 17. 20 II. 21 Legal Standard A motion to dismiss for failure to state a claim under Rule 12(b)(6) tests the legal 22 sufficiency of a complaint. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). On a 23 motion to dismiss, all allegations of fact are taken as true and construed in the light most 24 favorable to the non-moving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336, 337–38 25 (9th Cir. 1996). The Court, however, need not accept as true “allegations that are merely 26 conclusory, unwarranted deductions of fact, or unreasonable inferences.” St. Clare v. 27 Gilead Scis., Inc. (In re Gilead Scis. Sec. Litig.), 536 F.3d 1049, 1055 (9th Cir. 2008). 28 Although a complaint need not make detailed factual allegations, it must contain sufficient 2 1 factual matter, accepted as true, to “state a claim that is plausible on its face.” Bell Atl. 2 Corp. v. Twombly, 550 U.S. 544, 570 (2007). A claim is facially plausible when it “allows 3 the court to draw the reasonable inference that the defendant is liable for the misconduct 4 alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). 5 6 pleading could not possibly be cured by the allegation of other facts. Lopez v. Smith, 203 7 F.3d 1122, 1127 (9th Cir. 2000). 8 III. Discussion 9 10 United States District Court Northern District of California If a court grants a motion to dismiss, leave to amend should be granted unless the A. Preemption by the FCRA The primary issue here is whether the federal Fair Credit Reporting Act (“FCRA”), 11 15 U.S.C. §§ 1681 et seq., preempts Espinoza’s state law claims under the CCRAA and 12 California common law. If the FCRA preempts Espinoza’s state law claims, those claims 13 must be dismissed without leave to amend. See Carvalho v. Equifax Info. Servs., LLC, 629 14 F.3d 876, 888–89 (9th Cir. 2010) (sustaining demurrer without leave to amend of CCRAA 15 claim under Cal. Civ. Code § 1785.25(f) because the claim is preempted). Merrick bears 16 the burden of establishing preemption. See Jimeno v. Mobil Oil Corp., 66 F.3d 1514, 1526 17 n.6 (9th Cir. 1995). 18 The FCRA provides that “[n]o requirement or prohibition may be imposed under 19 the laws of any State . . . relating to the responsibilities of persons who furnish information 20 to consumer reporting agencies . . . .” 15 U.S.C. § 1685t(b)(1)(F). It also expressly saves 21 from preemption “section 1785.25(a) of the California Civil Code.” Id.; see also Gorman 22 v. Wolpoff & Abramson, LLP, 584 F.3d 1147 (9th Cir. 2009). Section 1785.25(a) provides 23 that “[a] person shall not furnish information on a specific transaction or experience to any 24 consumer credit reporting agency if the person knows or should know the information is 25 incomplete or inaccurate.” Cal. Civ. Code § 1785.25(a). 26 In her complaint, Espinoza alleges that Merrick violated § 1785.25(a). See Compl. 27 ¶ 51. Thus, on the face of her complaint, Espinoza’s CCRAA claim is not preempted by 28 the FCRA. See U.S.C. § 1685t(b)(1)(F). Merrick, however, argues that Espinoza’s 3 United States District Court Northern District of California 1 CCRAA claim is really a claim under § 1785.25(e), which is not saved from FCRA 2 preemption. See Dkt. No. 50 at 10–12. Section 1785.25(e) provides that: 3 A person who places a delinquent account for collection (internally or by 4 referral to a third party), charges the delinquent account to profit or loss, or 5 takes similar action, and subsequently furnishes information to a credit 6 reporting agency regarding that action, shall include within the information 7 furnished the approximate commencement date of the delinquency which 8 gave rise to that action, unless that date was previously reported to the credit 9 reporting agency. 10 Cal. Civ. Code § 1785.25(e). Merrick argues that the allegedly inaccurate reporting was 11 obligated by § 1785.25(e), not § 1785.25(a), because the date of Espinoza’s last payment is 12 the “approximate commencement date of the delinquency which gave rise to” its collection 13 attempt in state court. Id. Thus, according to Merrick, Espinoza’s CCRAA claim arises 14 under § 1785.25(e) and is preempted. 15 The Court is not convinced by Merrick’s argument. Section 1785.25(e) is narrow. 16 It only governs a person’s reporting obligations when that person furnishes information in 17 connection with “plac[ing] a delinquent account for collection [or] charg[ing] the 18 delinquent account to profit or loss.” Id. It does not govern a creditor’s reporting 19 obligations at any other time. Indeed, § 1785.25(e) expressly acknowledges that a 20 furnisher of information does not need to report the delinquency date if “that date was 21 previously reported . . . .” Id. On the other hand, § 1785.25(a) has a much broader reach. 22 It generally prohibits furnishing information to a consumer reporting agency that is 23 “incomplete or inaccurate” in any context not specifically addressed by another section. 24 See Cal. Civ. Code § 1785.25(a). 25 Put another way, a furnisher of information violates § 1785.25(e) only when it 26 reports inaccurate information about the commencement date of a delinquency in 27 connection with a report that it has placed a delinquent account for collection or charged 28 that account to profit or loss. See Cal. Civ. Code § 1785.25(e). Reporting inaccurate 4 1 information about the commencement date of a delinquency at any other time is simply 2 beyond the reach of § 1785.25(e). 3 For example, if Merrick inaccurately reported Espinoza’s last payment date to 4 Equifax or TransUnion on June 24, 2017—the day after it placed her account for collection 5 (see Compl. ¶ 22)—Merrick’s inaccurate reporting would be a violation of § 1785.25(e). 6 On the other hand, if Merrick reported Espinoza’s last payment date to Equifax or 7 TransUnion on August 3, 2013, that reporting would not be governed by § 1785.25(e), 8 because the information was not “include[d]” with “information . . . regarding” placing an 9 account for collection or charging the account to profit or loss. Id. United States District Court Northern District of California 10 Espinoza’s complaint does not make clear when Merrick reported the allegedly 11 inaccurate information to the consumer reporting agencies. In Exhibit 2 to her complaint, 12 the delinquency is listed as reported to the consumer reporting agencies on July 13, 2017. 13 See Dkt. No. 1-2 at 2 (excerpts from Espinoza’s Equifax and TransUnion credit reports). 14 This report is subsequent to Merrick placing her account for collection. Thus, this report is 15 likely governed by § 1785.25(e) and therefore preempted by the FCRA. However, in 16 paragraph 53 of her complaint, Espinoza vaguely alleges that Merrick violated its CCRAA 17 obligations “numerous times by furnishing inaccurate information regarding the date of the 18 last payment made . . . .” See Compl. ¶ 53. If one of those times was prior to Merrick 19 placing the account for collection, Espinoza’s claim would be governed by § 1785.25(a) 20 and is not preempted by the FCRA. The burden of establishing preemption, however, lies 21 with Merrick. See Jimeno, 66 F.3d at 1526 n.6. Because Merrick has not shown that 22 Espinoza’s CCRAA claim is preempted, the Court DENIES Merrick’s motion to dismiss. 23 B. Intentional Fraudulent Misrepresentation 24 Espinoza also brings a claim for intentional fraudulent misrepresentation under 25 California common law. Although the Ninth Circuit has not directly addressed FCRA 26 preemption of state common law claims, district courts in the Ninth Circuit have held that 27 the FCRA totally preempts all state common law causes of action. See, e.g., Finley v. 28 Capital One, No. 16-cv-01392-YGR, 2017 WL 1365207, at *4 (N.D. Cal. April 14, 2017); 5 United States District Court Northern District of California 1 Langan v. United Servs. Auto. Ass’n, 69 F. Supp. 3d 965, 985 (N.D. Cal. 2014); cf. 2 Gorman, 584 F.3d at 1165–67 (declining to decide if the FCRA preempts common law 3 cause of action for libel); Carvalho, 629 F.3d at 888–89 (FCRA preempts claims under 4 Cal. Civ. Code § 1785.25(f) “[b]ecause section 1785.25(a) is the only substantive CCRAA 5 furnisher provision specifically saved by the FCRA . . . .”). 6 The Court agrees. The FCRA unambiguously states that “[n]o requirement or 7 prohibition may be imposed under the laws of any State . . . relating to the responsibilities 8 of persons who furnish information to consumer reporting agencies . . . .” 15 U.S.C. 9 § 1685t(b)(1)(F). Unlike claims under Cal. Civ. Code § 1785.25(a), common law 10 intentional misrepresentation and fraud claims are not saved by the FCRA. Therefore, 11 Espinoza’s intentional fraudulent misrepresentation claim is preempted. 12 In her opposition, Espinoza argues that her intentional fraudulent misrepresentation 13 claim is also based on Merrick’s “attempts to steal money from [her] credit union account 14 by presenting multiple fraudulent checks to that account.” See Dkt. No. 60 at 4. But her 15 complaint is largely devoid of any allegations of facts that plausibly infer Merrick 16 attempted to steal money from her by forging checks. Indeed, the only allegation relating 17 to this assertion is Espinoza’s single statement that Merrick “improperly created and 18 presented two checks from” her credit union account. See Compl. ¶ 62a. This lone 19 statement does not “nudged [her] claim[] across the line from conceivable to plausible.” 20 Twombly, 550 U.S. at 570. She does not, for example, allege any facts that would explain 21 why she believes Merrick created the two checks. Nor does she allege any facts plausibly 22 suggesting that Merrick knew those checks were invalid, but presented them to her credit 23 union anyway. Moreover, claims alleging fraud must be alleged with particularity. See 24 Fed. R. Civ. P. 9(b). 25 Accordingly, the Court GRANTS Merrick’s motion to dismiss Espinoza’s 26 intentional fraudulent misrepresentation claim with leave to amend to the extent that claim 27 is based on Merrick’s alleged forgery of checks. Espinoza’s intentional fraudulent 28 misrepresentation claim is otherwise dismissed without leave to amend. 6 1 2 The Court DENIES Merrick’s motion to dismiss Espinoza’s second claim under 3 Cal. Civ. Code § 1785.25(a). The Court GRANTS Merrick’s motion to dismiss 4 Espinoza’s third claim for intentional fraudulent misrepresentation with leave to amend to 5 the extent it is based on Merrick’s alleged forgery of checks. Espinoza’s third claim is 6 otherwise dismissed without leave to amend. Espinoza must file her amended complaint 7 or give notice that she does not intend to amend by January 4, 2019. The amended 8 complaint may not add any claims or parties without leave of the Court. 9 10 11 United States District Court Northern District of California IV. Conclusion Merrick may file an answer no later than 14 days after Espinoza files an amended complaint or gives notice that she does not intend to amend. IT IS SO ORDERED. 12 13 14 Dated: December 3, 2018 _____________________________________ NATHANAEL M. COUSINS United States Magistrate Judge 15 16 17 18 19 20 21 22 23 24 25 26 27 28 7