Lovelady v. General Business Recoveries Incorporated

• Court: District Court, D. Arizona
• Decided: March 26, 2025
• Docket: 4:23-cv-00136
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 Crystal Lovelady, No. CV-23-00136-TUC-AMM

10 Plaintiff, ORDER

11 v.

12 General Business Recoveries Incorporated, et al., 13 Defendants. 14 15 Pending before the Court is Plaintiff Crystal Lovelady’s Motion for Partial 16 Summary Judgment and Defendant Experian Information Solutions, Inc.’s Motion for 17 Summary Judgment. (Docs. 45, 47.) The motions are fully briefed. (Docs. 52, 54, 61–62.) 18 The parties submitted Statements of Facts pursuant to Federal Rule of Civil Procedure 19 56(c) and Local Rule 56.1(a)–(b). (Docs. 46, 48, 53, 55.) Defendant requested oral 20 argument, which the Court held on February 6, 2025. For the following reasons, the Court 21 will deny Plaintiff’s Motion for Partial Summary Judgment and will grant Defendant’s 22 Motion for Summary Judgment. 23 On March 22, 2023, Plaintiff Crystal Lovelady (“Plaintiff” or “Ms. Lovelady”) sued 24 Experian Information Solutions, Inc. (“Experian”) and General Business Recoveries 25 Incorporated (“GBR”) alleging violations of the Fair Credit Reporting Act (“FCRA”) and 26 Fair Debt Collections Practices Act (“FDCPA”).1 (Doc. 1.) 27 In Count I, Plaintiff alleges Experian violated the FCRA, 15 U.S.C. § 1681e(b), by 28 1 Plaintiff stipulated to the dismissal of GBR on November 20, 2023. (Docs. 33–34.) 1 willfully failing to follow reasonable procedures to ensure the accuracy of Plaintiff’s 2 consumer report. (Doc. 1 at 12–13.) In Count II, Plaintiff alleges Experian failed to conduct 3 a “reasonable reinvestigation” when Plaintiff disputed the allegedly inaccurate information 4 in violation of the FCRA, 15 U.S.C. § 1681i. (Id. at 13–14.) Plaintiff seeks statutory and 5 punitive damages pursuant to 15 U.S.C. §§ 1681n and 1681o. (Id. at 12–14.) 6 I. Factual Background 7 Ms. Lovelady married Joshua Lovelady (“Mr. Lovelady”) in 2019 and together they 8 live in Sahuarita, Arizona. (Deposition of Crystal Lovelady “DCL” at 7:16, 14:1–8.) On 9 April 28, 2021, Mr. Lovelady underwent a root canal at Southern AZ Endodontics 10 (“Southern”). (Experian’s Statement of Facts “ESOF” ¶ 2.) Before the visit, Mr. Lovelady 11 signed Southern’s “Patient Registration Form,” taking financial responsibility for fees 12 incurred at the time of service. (Doc. 48 at 182–83.) Mr. Lovelady listed Plaintiff as his 13 spouse and emergency contact on the registration form. (See Plaintiff’s Statement of Facts 14 “PSOF” ¶ 6.) While Plaintiff initially alleged that neither she, nor her husband, had been 15 to Southern (Doc. 1 at 9), Plaintiff concedes she later learned that her husband received the 16 dental care in question (PSOF ¶ 5; DCL at 136:12–24). 17 Mr. Lovelady paid Southern $100.00 on the date of the root canal, and he signed a 18 “promise to pay” Southern $277.00 by May 28, 2021. (Doc. 48 at 184–85.) Plaintiff 19 testified that the signatures on the registration form and promissory note are her husband’s. 20 (PSOF ¶ 6; DCL at 136:12–137:15.) However, Mr. Lovelady did not pay the remaining 21 $431.58 balance to Southern. (See Doc. 48 at 185.) 22 Around March 31, 2022, Southern sent the $431.58 due on Mr. Lovelady’s account 23 to GBR, a debt collection agency.2 (ESOF ¶ 6; see Doc. 48 at 185.) Around May 2022, 24 GBR reported the approximately $437.003 collections account to Experian, a consumer 25 reporting agency (“CRA”).4 (ESOF ¶ 7; Doc. 48 at 179.) Experian then added the GBR

26 2 GBR asserts it did not receive Mr. Lovelady’s account from Southern until on or about April 12, 2022. (Doc. 48 at 179–81.) 27 3 The parties did not address why GBR reported the original $431.58 balance as $437.00 to Experian. However, Plaintiff does not challenge the amount’s accuracy. 28 4 Under the FCRA, a “consumer reporting agency” is “any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the 1 debt for dental care to Plaintiff’s credit file and listed the account with the “responsibility” 2 field marked as a “joint account” with Mr. Lovelady. (See ESOF ¶ 8; PSOF ¶ 2; Doc. 46 3 at 115.) 4 On May 17, 2022, Plaintiff received an email from Experian alerting her that the 5 $437.00 GBR collections account was being reported on her consumer report with 6 Southern listed as the original creditor.5 (See PSOF ¶¶ 1–2; DCL at 25:11–27:17; Doc. 48 7 at 9.) At that time, Plaintiff did not know about the debt because she had never visited 8 Southern. (PSOF ¶ 3.) Believing the charge from Southern to be fraudulent, Plaintiff 9 contacted Southern who confirmed that Plaintiff was not listed in its system. (PSOF ¶ 3; 10 DCL at 27:2–13.) Plaintiff then contacted GBR and was informed that the collections 11 account was debt incurred from her husband’s dental care and that she was jointly 12 responsible for the debt because Arizona is “a community [property] state.” (ESOF ¶ 9; 13 PSOF ¶ 8; DCL at 27:16–28:12.) 14 On June 27, 2022, Plaintiff sent a letter to GBR advising that she and Mr. Lovelady 15 “are not going to pay this account.” (ESOF ¶ 10; Doc. 48 at 231.) On August 24, 2022, 16 Plaintiff mailed a dispute letter to Experian asserting that the GBR account does not belong 17 to her and requesting it be removed from her credit report.6 (PSOF ¶ 7; ESOF ¶¶ 11–13.) 18 Experian received Plaintiff’s dispute letter on September 7, 2022; Plaintiff did not attach 19 any documents to the letter regarding the GBR account. (ESOF ¶¶ 11–13.) 20 In response to Plaintiff’s dispute letter, Experian contacted GBR via an “Automated 21 Consumer Dispute Verification” (“ACDV”). (Id. ¶ 14.) The ACDV summarized Plaintiff’s 22 dispute and provided GBR with Plaintiff’s dispute letter and account information. (Id.) 23 GBR responded to Experian’s verification request on September 29, 2022 and “verif[ied] 24 practice of assembling or evaluating consumer credit information or other information on 25 consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing 26 consumer reports.” 15 U.S.C. § 1681a(f). 5 The consumer report showed the collections account was opened on April 12, 2022, with 27 an account number starting with D788. (PSOF ¶ 1.) 6 Plaintiff asserts that she also mailed the dispute letter to non-party Trans Union, a CRA, 28 which removed the GBR account from Plaintiff’s Trans Union consumer report by October 2022. (PSOF ¶¶ 7, 10.) 1 that Plaintiff was responsible for the account.” (Id. ¶ 15.) The ACDV reflects that the GBR 2 collections account was reported in Experian’s system with an “ECOA Code 2” (“Code 3 2”). (Doc. 46 at 80.) “Code 2” describes a “Joint Contractual Liability,” meaning “[t]his 4 consumer has a contractual responsibility for this joint account.”7 (Doc. 53 at 13.) 5 Experian sent Plaintiff the results of its “reinvestigation” on September 29, 2022, 6 communicating that GBR “certified to Experian that the information is accurate.” (Id. 7 ¶ 16.) Experian outlined actions Plaintiff could take if she disagreed with the results, such 8 as providing Experian with additional documentation or adding a statement of dispute 9 explaining her position. (Id. ¶ 18.) While Plaintiff received the results and advised Experian 10 that she could provide additional information, she failed to do so. (Id. ¶ 19.) Experian did 11 not remove the GBR account from Plaintiff’s consumer report, and the “responsibility” 12 field remained listed as a “joint account.” (Id. ¶ 17; PSOF ¶ 9.) 13 In August 2022, Plaintiff applied for credit but was denied by Bank of America, 14 USAA, Capital One, and Chase.8 (PSOF ¶¶ 11–14.) 15 II. Standard of Review 16 a. Summary Judgment 17 A court may grant summary judgment if the pleadings and supporting documents,

18 7 “The Credit Reporting Resource Guide defines ECOA ‘Code 2’ as indicating the account is a ‘joint contractual liability’ of the consumer and another individual.” (Doc. 53 at 5.) 19 Other ECOA Codes include: “Code 1” describing an “Individual” relationship between the consumer and the account, meaning “[t]his consumer has contractual responsibility for this 20 account and is primarily responsible for its payment”; “Code 3” describing an “Authorized User,” meaning “[t]his consumer is an authorized user of this account; another consumer 21 has contractual responsibility”; “Code 4” describing a “Co-maker or Guarantor,” meaning “[t]his consumer is the co-maker or guarantor for this account, who becomes liable if the 22 maker defaults”; and “Code 7” describing a “Maker,” meaning “[t]his consumer is the maker who is liable for the account but a co-maker or guarantor is liable if the maker 23 defaults.” (Id. at 13.) 8 On August 29, 2022, Chase denied Plaintiff’s request for a credit line increase citing 24 “charge off(s) or bad debt collection(s)” as the basis for its refusal. (PSOF ¶ 12; Doc. 48 at 483–84.) Likewise, on September 26, 2022, USAA denied Plaintiff’s application for a 25 credit card, citing Plaintiff’s Experian consumer report and reasons including “derogatory public record or collection filed.” (PSOF ¶ 13; Doc. 48 at 487.) Plaintiff asserts these 26 denials were because of the GBR collections account listed on Experian consumer report. (PSOF ¶¶ 11–14.) Navy Federal approved Plaintiff for a loan in August 2022 and a credit 27 increase in September 2022. (Id. ¶ 15.) Plaintiff asserts Navy Federal Credit Union did not place a “hard inquiry” to Experian for Plaintiff’s consumer report in August 2022 (Id.), 28 however, it appears Navy Federal Credit Union conducted a hard inquiry to Experian on September 5, 2022 (Doc. 48 at 245). 1 viewed in the light most favorable to the non-moving party, “show that there is no genuine 2 issue as to any material fact and that the moving party is entitled to judgment as a matter 3 of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (quoting Fed. R. Civ. P. 56(c)). 4 An issue is genuine when the disputed fact “could reasonably be resolved in favor of either 5 party.” Ellison v. Robertson, 357 F.3d 1072, 1075 (9th Cir. 2004) (citing Anderson v. 6 Liberty Lobby, Inc., 477 U.S. 242, 250–51 (1986)). A disputed fact is material if it “might 7 affect the outcome of the suit under the governing law.” Anderson, 477 U.S. at 248. 8 In the cross-summary judgment evaluation, the court must “review each 9 motion . . . separately, giving the nonmoving party for each motion the benefit of all 10 reasonable inferences.” Brunozzi v. Cable Commc’ns, Inc., 851 F.3d 990, 995 (9th Cir. 11 2017), cert. denied, 138 S. Ct. 167 (2017). In addition, the court may consider either party’s 12 evidence in the opposing party’s motion when deciding whether to grant either summary 13 judgment motion. See Fair Hous. Council v. Riverside Two, 249 F.3d 1132, 1136–37 (9th 14 Cir. 2001). 15 Even though the court may evaluate either party’s evidence, evidence must be 16 admissible to be considered. Moran v. Selig, 447 F.3d 748, 759–60 (9th Cir. 2006) 17 (pleading and opposition must be verified to constitute opposing affidavits); FDIC v. New 18 Hampshire Ins. Co., 953 F.2d 478, 484 (9th Cir. 1991) (court may strike inadmissible 19 declarations and other evidence). Furthermore, a party cannot create a genuine issue of 20 material fact by making barren assertions in its legal memoranda. See Varig Airlines v. 21 Walter Kidde & Co., 690 F.2d 1235, 1238 (1982). 22 b. FCRA 23 Congress enacted the FCRA to promote “fair and accurate credit reporting” by 24 “requir[ing] that consumer reporting agencies adopt reasonable procedures for meeting the 25 needs of commerce for consumer credit . . . in a manner which is fair and equitable to the 26 consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of 27 such information . . . .” 15 U.S.C. §§ 1681(a)(1)–(b). 28 A consumer reporting agency can be liable for failing to “follow reasonable 1 procedures to assure maximum possible accuracy of the information concerning the 2 individual about whom the report relates.” 15 U.S.C. § 1681e(b). “In such lawsuits, before 3 a court considers the reasonableness of the agency’s procedures, the consumer must make 4 a ‘prima facie showing’ of the inaccuracy in the agency’s reporting.” Gross v. 5 CitiMortgage, Inc., 33 F.4th 1246, 1251 (9th Cir. 2022) (citing Shaw v. Experian Info. 6 Sols., Inc., 891 F.3d 749, 756 (9th Cir. 2018)). Likewise, “a Plaintiff filing suit under 7 section 1681i must make a ‘prima facie showing of inaccurate reporting.’” Carvalho v. 8 Equifax Info. Servs., LLC, 629 F.3d 876, 890 (9th Cir. 2010) (quoting Dennis v. BEH-1, 9 LLC, 520 F.3d 1066, 1069 (9th Cir. 2008)). “[I]f there is no inaccuracy, then the 10 reasonableness of the investigation is not in play.” Gross, 33 F.4th at 1251. 11 “On the flip side, if there is an inaccuracy, to succeed, the plaintiff must establish 12 that the investigation was unreasonable.” Id. “The FCRA does not impose strict liability, 13 however—an agency can escape liability if it establishes that an inaccurate report was 14 generated despite the agency’s following reasonable procedures.” Guimond v. Trans Union 15 Credit Info. Co., 45 F.3d 1329, 1333 (9th Cir. 1995). “The reasonableness of the procedures 16 and whether the agency followed them will be jury questions in the overwhelming majority 17 of cases.” Id. However, a reinvestigation claim under the FTCA is not a proper vehicle for 18 collaterally attacking the legal validity of a debt. Carvalho, 629 F.3d at 891. 19 III. Discussion 20 a. Defendant’s Motion for Summary Judgment 21 Experian moves for summary judgment on all claims because (1) Plaintiff cannot 22 meet her threshold burden of establishing that Experian prepared a report containing 23 inaccurate information; (2) Plaintiff’s dispute was an improper collateral attack on the GBR 24 debt; (3) Plaintiff cannot show Experian failed to maintain reasonable procedures or to 25 conduct a reasonable reinvestigation; and (4) Plaintiff cannot show Experian acted 26 willfully. (Doc. 45 at 7, 10–20.) 27 To establish a prima facie case under Section 1681e or Section 1681i, Plaintiff must 28 prove that Experian published inaccurate information. Carvalho, 629 F.3d at 890. A 1 consumer report is “inaccurate” if the report is “patently incorrect or materially 2 misleading.” Id. at 890–91. Information is “materially misleading” when it is reported “in 3 such a way and to such an extent that it can be expected to adversely affect credit 4 decisions.” Shaw, 891 F.3d at 756 (citation omitted). However, “information is only 5 materially misleading when it is open to an interpretation that is directly contradictory to 6 the true information.” Sanchez v. JPMorgan Chase Bank NA, 643 F. Supp. 3d 1025, 1033 7 (D. Ariz. 2022) (internal quotations omitted). In evaluating information’s accuracy, the 8 court must view the report as a whole and assess the entire tradeline to determine the 9 accuracy of any piece of information. See id. at 1033–34. 10 Here, Plaintiff fails to establish a prima facie case because she cannot show that 11 Experian’s reporting was inaccurate as a matter of law. Notably, Plaintiff “does not argue 12 that it was inaccurate to describe her as having some liability for her husband’s account 13 with [Southern].” (Doc. 62 at 4.) Instead, she argues that “Experian’s reporting was 14 inaccurate because it would lead a reasonable user to believe that Plaintiff had made a 15 contract with [Southern] and had breached it.” (Id.) Plaintiff asserts that because she never 16 signed Mr. Lovelady’s contract with Southern or consented to being a “joint account 17 holder,” she did not meet Experian’s “joint account holder” definition as “a primary 18 borrower who signs ‘as a co-borrower or cosigner’ on a credit application.”9 (Id. at 8–9.) 19 Plaintiff further argues that Experian’s reporting was inaccurate because she was not—and 20 could not be—“personally liable” for the community debt until after the debt was properly 21 adjudicated under A.R.S. § 25-215(D), which it had not been.10 Lastly, Plaintiff argues 22 Experian’s reporting is also materially misleading to potential creditors because a creditor 23 could not access her “separate property” to pay the community debt. (See Doc. 47 at 10.) 24 Plaintiff’s arguments are unpersuasive. Under Arizona law, Plaintiff does not need 25 to be a party to the contract to be jointly liable for Mr. Lovelady’s debt. Arizona law

26 9 Plaintiff cites “Ben Luthi, Authorized user vs. Joint Account Holder: What’s the difference? Experian (2021), https://www.experian.com/blogs/ask-experian/authorized- 27 user-vs-joint-account-holder-whats-the-difference/#s3 (last visited May 19, 2024),” which appears to be a blog post discussing two ways to share a credit card with another person. 28 (Doc. 47 at 8–9.) 10 Plaintiff did not brief this argument and raised it for the first time at oral argument. 1 establishes that “[d]uring marriage, either spouse may contract a debt for the benefit of the 2 community . . . .” Samaritan Health Sys. v. Caldwell, 957 P.2d 1373, 1375 (Ariz. Ct. App. 3 1998) (citing Arizona Revised Statute (“A.R.S.”) § 25-215(D)); see also In re Rollinson, 4 322 B.R. 879, 883 (D. Ariz. 2005) (“[O]ne spouse can unilaterally obligate the community 5 under Arizona law.”). The relevant Arizona statute states: 6 Except as prohibited in § 25-214, either spouse may contract debts and otherwise act for the benefit of the community. In an 7 action on such a debt or obligation the spouses shall be sued 8 jointly and the debt or obligation shall be satisfied: first, from the community property, and second, from the separate 9 property of the spouse contracting the debt or obligation. 10 A.R.S. § 25-215(D). “[N]ecessary medical care provided to a spouse is presumed to be 11 ‘intended to benefit the community, which is the test of whether an obligation is a 12 community debt.’” Caldwell, 957 P.2d at 1376 (citing Phx. Baptist Hosp. & Med. Ctr. v. 13 Aiken, 877 P.2d 1005, 1008 (Ariz. Ct. App. 1994)). “[C]ommunity debts remain the joint 14 obligation of both parties, and a creditor can look to either spouse for satisfaction of the 15 entire debt.” Id. As such, Plaintiff is jointly liable for the community debt Mr. Lovelady 16 incurred when he received dental care at Southern.11 Schlaefer, 996 P.2d at 748 (“[A]ll 17 debts incurred during marriage are presumed to be community obligations unless there is 18 clear and convincing evidence to the contrary.”). 19 Similarly, neither Arizona statute nor case law support Plaintiff’s claim that she 20 cannot be held “personally liable” for the community debt until after the debt is adjudicated 21 under A.R.S. § 25-215(D). To the contrary, under Arizona law, the nature of a debt as a 22 community obligation starts when the debt is incurred. See Schlaefer, 996 P.2d at 749–50 23 (quoting Cmty. Guardian Bank v. Hamlin, 898 P.2d 1005, 1009 (Ariz. Ct. App. 1995)) 24 25 11 “[P]arties may enter into a premarital agreement [to] prospectively abrogate their 26 respective rights to community property.” Elia v. Pifer, 977 P.2d 796, 805 (Ariz. Ct. App. 1998); A.R.S. §§ 25-203(A)(1), (8); see also Schlaefer v. Fin. Mgmt. Serv., Inc., 996 P.2d 27 745, 748 (Ariz. Ct. App. 2000) (“Nothing in [§ 25-203] prohibits such parties from agreeing to keep their property and their debts separate during marriage.”). Here, however, 28 Plaintiff and Mr. Lovelady did not enter into a premarital agreement to keep their debts separate during marriage. (ESOF ¶ 5; DCL at 139:8–10.) 1 (“The court’s allocation of a community debt does not change its nature or limit the right 2 of a creditor to seek satisfaction from either spouse; it only determines the rights and 3 obligations of the spouses ‘with respect to each other.’”). Moreover, Plaintiff’s claim that 4 she is not liable for the community debt until after it is adjudicated under Arizona law is a 5 legal argument not cognizable under the FCRA. See Carvalho, 629 F.3d at 892 (plaintiff’s 6 argument that the collections account for her medical debt was inaccurately reported 7 because her insurer “wrongfully refused to pay” the debt was an improper collateral attack 8 on the legal validity of the debt). 9 Finally, as to Plaintiff’s claim that Experian’s reporting is materially misleading, the 10 question of “which property a creditor could satisfy the debt from” (i.e., community or 11 separate) does not change that Plaintiff is jointly liable for the entire debt. As such, even if 12 a creditor interpreted the “joint account” notation to mean Plaintiff personally incurred the 13 debt, this interpretation would not be materially misleading to render the reporting 14 actionable. See Shaw, 891 F.3d at 758 (“[E]ven if code combination 9-68 could stand for 15 other derogatory events and thereby be ‘misleading,’ that alone would not render 16 Experian’s reporting actionable. The reporting must be ‘misleading in such a way and to 17 such an extent that it can be expected to adversely affect credit decisions.’”).12 As CRAs 18 serve an economic purpose, excluding the community debt from Plaintiff’s consumer 19 report would fail to put creditors on notice of her obligations. Gutierrez v. Gutierrez, 972 20 P.2d 676, 679 (Ariz. App. 1st Div. 1998) (the presumption that debt incurred during 21 marriage is community debt is “primarily intended for the benefit of creditors”). 22 Additionally, “[t]he FCRA does not require that accurate negative information be removed 23 from credit reports merely because the consumer disagrees with the language used.” Potter 24 v. Chex Sys., Inc., 128 F. Supp. 3d 1276, 1279 (S.D. Cal. 2015) (CRA’s failure to remove 25 from consumer’s credit report notation that consumer engaged in “account abuse” did not

26 12 Indeed, when asked at oral argument, Plaintiff could not identify an ECOA code that more accurately reflects Plaintiff’s admitted responsibility for the debt other than the 27 industry-standard Code 2 for “joint contractual liability.” As Experian’s counsel explained, the ECOA codes are not developed by Experian and are industry-standard codes specified 28 in the Credit Reporting Resource Guide and used by all CRAs. 1 || amount to reporting inaccurate information, even when the bank furnishing the information 2|| did not use that language). 3 For these reasons, Experian’s reporting was neither patently incorrect nor materially 4|| misleading. Even viewing the facts in the light most favorable to Plaintiff, Plaintiff cannot 5 || succeed on her FCRA claims because she fails to establish inaccuracy, which is the first 6 || element of her prima facie case. The Court will grant Experian’s motion and need not || address Experian’s remaining arguments for summary judgment. 8 b. Plaintiff's Motion for Partial Summary Judgment 9 Plaintiff seeks summary judgment on the sole issue of “accuracy.” (Doc. 47 at 5—6, || 12.) For the reasons already discussed, Plaintiff fails to show that the information Experian 11 || reported was inaccurate, patently incorrect, or materially misleading. As such, Plaintiff is 12 || not entitled to summary judgment on the issue of accuracy as a matter of law. See Celotex |} Corp., 477 U.S. at 322-23. The Court will deny Plaintiff's motion. 14 IV. CONCLUSION 15 For the foregoing reasons, 16 IT IS ORDERED that Plaintiff Crystal Lovelady’s Motion for Partial Summary 17 || Judgment is DENIED. (Doc. 47.) 18 IT IS FURTHER ORDERED that Defendant Experian Information Solutions, Inc.’s Motion for Summary Judgment is GRANTED. (Doc. 45.) The Clerk of Court shall 20 || enter judgement in favor of Defendant Experian, docket accordingly, term any pending motions, and close the file in this case. 22 Dated this 25th day of March, 2025. 23 24 Dini Dr tn KAT 25 ~ Honorable Angela M. Martinez 6 United States District Judge 27 28

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