Ohaion v. Equifax Information Services, LLC

• Court: District Court, D. Nevada
• Decided: March 2, 2023
• Docket: 2:21-cv-02198
• Status: Unknown

Opinion

1 UNITED STATES DISTRICT COURT

2 DISTRICT OF NEVADA

3 HANIT OHAION, ) 4 ) Plaintiff, ) Case No.: 2:21-cv-02198-GMN-BNW 5 vs. ) ) ORDER 6 BANK OF AMERICA, N.A., ) 7 ) Defendant. ) 8 ) 9 Pending before the Court is the Motion to Dismiss, (ECF No. 18), filed by Defendant 10 Bank of America, N.A. (“Defendant”). Plaintiff Hanit Ohaion (“Plaintiff”) filed a Response, 11 (ECF No. 19), to which Defendant filed a Reply, (ECF No. 22). For the reasons discussed 12 below, Defendant’s Motion to Dismiss is GRANTED. 13 I. BACKGROUND 14 This action arises from a dispute regarding the accuracy of information reported on 15 Plaintiff’s credit report. (See generally Compl., ECF No. 1). Specifically, Plaintiff alleges that 16 Defendant furnished inaccurate information to a consumer reporting agency1 when Defendant 17 reflected the current payment status of Plaintiff’s credit account with Defendant as “charged 18 off”2 even though Plaintiff paid and closed this account and no longer had any obligation to pay 19 Defendant. (Id. ¶¶ 12–14). Plaintiff further alleges that she disputed the information on her 20 consumer report, but Defendant failed to reasonably investigate her dispute. (Id. ¶¶ 19–22). 21 Based on these allegations, Plaintiff brought two causes of action against Defendant under the 22

23 1 The consumer reporting agency is Equifax Information Services, LLC. (Compl. ¶ 6). Plaintiff originally named 24 Equifax as a Defendant in this action as well, but Plaintiff dismissed her claims against Equifax. (See Order Granting Stipulation, ECF No. 27). 25 2 “‘Charge off’ is a term of art for credit providers, understood as writing off a debt as a loss because payment is unlikely.” Makela v. Experian Info. Solutions, Inc., No. 6:21-cv-00386-MC, 2021 WL 5149699, at *3 (D. Or. Nov. 4, 2021) (citing Charge Off, Black’s Law Dictionary (11th ed. 2019)). 1 Fair Credit Reporting Act (“FCRA”): one for willful violation of the FCRA and one for 2 negligent violation of the FCRA. (Id. ¶¶ 42–62). Defendant now seeks to dismiss Plaintiff’s 3 Complaint. (See generally Mot. Dismiss, ECF No. 18). 4 II. LEGAL STANDARD 5 Dismissal is appropriate under Rule 12(b)(6) where a pleader fails to state a claim upon 6 which relief can be granted. Fed. R. Civ. P. 12(b)(6); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 7 555 (2007). A pleading must give fair notice of a legally cognizable claim and the grounds on 8 which it rests, and although a court must take all factual allegations as true, legal conclusions 9 couched as factual allegations are insufficient. Twombly, 550 U.S. at 555. Accordingly, Rule 10 12(b)(6) requires “more than labels and conclusions, and a formulaic recitation of the elements 11 of a cause of action will not do.” Id. “To survive a motion to dismiss, a complaint must contain 12 sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its 13 face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). “A 14 claim has facial plausibility when the plaintiff pleads factual content that allows the court to 15 draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. This 16 standard “asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. 17 “Generally, a district court may not consider any material beyond the pleadings in ruling

18 on a Rule 12(b)(6) motion.” Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 19 1555 n.19 (9th Cir. 1990). “However, material which is properly submitted as part of the 20 complaint may be considered.” Id. Similarly, “documents whose contents are alleged in a 21 complaint and whose authenticity no party questions, but which are not physically attached to 22 the pleading, may be considered in ruling on a Rule 12(b)(6) motion to dismiss.” Branch v. 23 Tunnell, 14 F.3d 449, 454 (9th Cir. 1994) (overruled on other grounds by Galbraith v. Cty. of 24 Santa Clara, 307 F.3d 1119 (9th Cir. 2002)). On a motion to dismiss, a court may also take 25 judicial notice of “matters of public record.” Mack v. S. Bay Beer Distribs., 798 F.2d 1279, 1 1282 (9th Cir. 1986). Otherwise, if a court considers materials outside of the pleadings, the 2 motion to dismiss is converted into a motion for summary judgment. Fed. R. Civ. P. 12(d). 3 If the court grants a motion to dismiss for failure to state a claim, leave to amend should 4 be granted unless it is clear that the deficiencies of the complaint cannot be cured by 5 amendment. DeSoto v. Yellow Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992). Pursuant 6 to Rule 15(a), the court should “freely” give leave to amend “when justice so requires,” and in 7 the absence of a reason such as “undue delay, bad faith or dilatory motive on the part of the 8 movant, repeated failure to cure deficiencies by amendments previously allowed, undue 9 prejudice to the opposing party by virtue of allowance of the amendment, futility of the 10 amendment, etc.” Foman v. Davis, 371 U.S. 178, 182 (1962). 11 III. DISCUSSION 12 In the instant Motion, Defendant argues that dismissal is proper because Plaintiff lacks 13 Article III standing. (Mot. Dismiss 8:1–9:24, ECF No. 18). Additionally, Defendant avers that 14 Plaintiff’s claims fail as a matter of law because Defendant’s reporting was accurate. (Id. 4:13– 15 7:23). Conversely, Plaintiff asserts that she alleged an injury-in-fact sufficient for Article III 16 standing and alleged cognizable FCRA claims. (See generally Resp., ECF No. 19). The Court 17 will evaluate each argument in turn.

18 A. Article III Standing 19 “The irreducible constitutional minimum of standing” is comprised of three elements: 20 (1) The plaintiff must have suffered an “injury-in-fact,” which is a “concrete and 21 particularized” invasion of a legally protected interest; (2) there must be a “causal connection” 22 between the plaintiff’s injury and the defendant’s action; and (3) it must be “likely” that the 23 plaintiff’s injury will be “redressed by a favorable decision.” Lujan v. Defs. of Wildlife, 504 24 U.S. 555, 560–61 (1992) (citation omitted). “The party invoking federal jurisdiction bears the 25 burden of establishing these elements.” Id. at 561. 1 The Supreme Court evaluated the “injury-in-fact” requirement pursuant to an alleged 2 violation of the FCRA in Spokeo, Inc. v. Robins, 578 U.S. 330 (2016). In Spokeo, the plaintiff 3 alleged that the defendant inaccurately reported certain information about the plaintiff. 578 U.S. 4 at 333. The Supreme Court determined that a violation of the FCRA alone is insufficient to 5 establish an injury-in-fact. Id. at 342. A plaintiff alleging an FCRA violation must demonstrate 6 that the violation caused harm or presented a material risk of harm. Id. The Supreme Court 7 illustrated this rule with two examples of FCRA violations that may not give rise to Article III 8 standing: (1) a mere violation of the FCRA’s procedural requirements, such as if a consumer 9 reporting agency fails to provide the required notice to a user of the agency’s consumer 10 information but the information is entirely accurate; and (2) a violation of the FCRA’s mandate 11 to not report inaccuracies when the alleged inaccuracies do not cause harm or present any 12 material risk of harm, such as the inaccurate reporting of a plaintiff’s zip code. Id. 13 The Court ultimately remanded the case to the Ninth Circuit without deciding whether 14 the alleged infractions were sufficiently concrete. Id. On remand, the Ninth Circuit determined 15 that the plaintiff sufficiently alleged a concrete injury by asserting that the defendant “caused 16 actual harm to [his] employment prospects by misrepresenting facts that would be relevant to 17 employers, and that he suffers from anxiety, stress, concern, and/or worry about his diminished

18 employment prospects as a result” of the defendant’s inaccurate reporting. Robins v. Spokeo, 19 Inc., 867 F.3d 1108, 1117 (9th Cir. 2017) (internal quotations omitted). 20 Here, Plaintiff alleges that Defendant inaccurately reported the payment status of her 21 account as “charged off.” (Compl. ¶ 12). As a result of the alleged inaccurate reporting, 22 Plaintiff claims that she “suffered concrete harm in the form of loss of credit, loss of ability to 23 purchase and benefit from credit, a chilling effect on applications for future credit, and the 24 mental and emotional pain, anguish, humiliation and embarrassment of credit denial.” (Id. 25 ¶ 27). Based on these allegations, inaccurately reporting an account as “charged off” is 1 “substantially more likely” to cause concrete injury than the incorrect zip code example 2 provided by the Supreme Court. See Robins, 867 F. 3d at 1117. Further, the Court finds that 3 Plaintiff sufficiently alleges an injury that affects Plaintiff in a “personal and individual way.” 4 See Spokeo, 578 U.S. at 339. Therefore, Plaintiff has met her burden of establishing an injury- 5 in-fact that is concrete and particularized based on the harm alleged. See Harris v. Nissan– 6 Infiniti LT, No. 2:17–cv–191–JCM–VCF, 2018 WL 387397, at *4 (D. Nev. Jan. 11, 2018) 7 (holding that plaintiff who allegedly suffered credit denials, fear of credit denials, out of pocket 8 expenses and emotional distress plead concrete injury sufficient to satisfy Article III’s injury- 9 in-fact requirement). Having found that Plaintiff has Article III standing, the Court next 10 evaluates the facial plausibility of Plaintiff’s claims under the FCRA. 11 B. FCRA Claims 12 Congress adopted the FCRA to ensure that information furnishers and credit reporting 13 agencies “exercise their grave responsibilities” through adopting “reasonable procedures” that 14 ensure that a consumer’s report is accurate. See 15 U.S.C. § 1681. To sustain a valid FCRA 15 claim against a furnisher, the plaintiff must allege: (1) that the furnisher provided inaccurate 16 information to the credit reporting agency; (2) that the credit reporting agency notified the 17 furnisher of the dispute; and (3) that the furnisher failed to conduct a reasonable investigation

18 into the disputed information. Harris, 2018 WL 387397, at *2 (citing Gorman v. Wolpoff & 19 Abramson, LLP, 584 F.3d 1147, 1154 (9th Cir. 2009)). 20 The threshold question in a FCRA claim against a furnisher is whether the plaintiff 21 alleged that the furnisher provided inaccurate information to the credit reporting agency. See 22 Abeyta v. Bank of Am., No. 2:15-cv-02320-RCJ-NJK, 2016 WL 1298109, at *2 (D. Nev. Mar. 23 31, 2016) (dismissing complaint when “[n]o allegation of actual falsity [had] been made”). But 24 technically correct information may still be considered inaccurate for purposes of the FCRA: 25 “An item on a credit report can be inaccurate ‘because it is patently incorrect, or because it is 1 [materially] misleading in such a way and to such an extent that it can be expected to adversely 2 affect credit decisions.’” Florence v. Cenlar Fed. Savings & Loan et al., No. 2:16–cv–0587– 3 GMN–NJK, 2018 WL 1145804, at *4 (D. Nev. Mar. 1, 2018) (citing Carvalho v. Equifax 4 Information Services, LLC, 629 F.3d 876, 890 (9th Cir. 2010)). 5 The allegedly inaccurate credit report item at issue here is a “charge off,” which is “a 6 term of art for credit providers, understood as writing off a debt as a loss because payment is 7 unlikely.” Makela v. Experian Info. Solutions, Inc., No. 6:21-cv-00386-MC, 2021 WL 8 5149699, at *3 (D. Or. Nov. 4, 2021) (citing Charge Off, Black’s Law Dictionary (11th ed. 9 2019)). A creditor charges off a debt when it “no longer considers the account balance an asset 10 for accounting purposes.” Christian v. Equifax Info. Servs., LLC, No. 18-13682, 2020 WL 11 2087869, at *4 (E.D. Mich. Apr. 30, 2020). “Banks are in fact required under Federal 12 Regulations to charge off debt that is past due by over 180 days.” Artemov v. TransUnion, LLC, 13 No. 20-cv-1892 (BMC), 2020 WL 5211068, at *3 (E.D.N.Y. Sept. 1, 2020). 14 “But charging off a debt does not diminish the legal right of the original creditor to 15 collect the full amount of the debt.” Butnick v. Experian Info. Sols., Inc., No. 20:cv-1631-PKC- 16 RLM, 2021 WL 395808, at *4 (E.D.N.Y. Feb. 4, 2021) (internal quotation marks omitted). 17 “Any other conclusion would be illogical; it would simply encourage a consumer to take out

18 massive amounts of debt and wait around six months for it to be wiped away.” Artemov, 2020 19 WL 5211068, at *4. Moreover, when “a debt which has been charged off by the creditor and is 20 later settled for an amount less than the original balance due,” the account retains the 21 derogatory reference of “charged off” because “[t]his information, which reflects the efforts 22 required to collect a debt, is clearly of interest to potential creditors and would be effectively 23 hidden by a credit report that treated the account as being in good standing.” Cahlin v. Gen. 24 Motors Acceptance Corp., 936 F.2d 1151, 1158 (11th Cir. 1991). 25 /// 1 1. Actual Falsity 2 Defendant argues that Plaintiff fails to state a claim because Defendant’s reporting of 3 Plaintiff’s account as “charged off” was accurate. (Mot. Dismiss 4:13–7:23). Plaintiff responds 4 that the “information was inaccurate because the payment status field indicates that the account 5 is currently in a ‘charge off’ status despite the fact that it had been closed and paid to the 6 satisfaction of the lender with a $0 balance.” (Resp. 3:7–9). Plaintiff relies heavily on the 7 Eleventh Circuit decision in Cahlin and asserts that “Cahlin stands for the proposition that past 8 derogatory information should remain on the credit report, but only with reference to the 9 payment history section.” (Resp. 7:14–15) (emphasis added). 10 In Cahlin, the derogatory information was an “I9” rating, which “signifies that the 11 account has been charged off or is a bad debt.” 936 F.2d at 1155. Like the Defendant in this 12 case, the defendants in Cahlin continued to report the account as charged off even after the 13 plaintiff settled the debt for an amount less than the full balance due.3 Id. at 1158. The 14 Eleventh Circuit affirmed the grant of summary judgment in favor of defendants because the 15 plaintiff failed to show that the defendants had reported any “inaccurate” information. Id. at 16 1154. Specifically, the Eleventh Circuit concluded that the plaintiff’s account, “even if 17 reported today, might be reported as an ‘I9’ with a zero balance.” Id. 1159.

18 Upon review of the Cahlin opinion, it appears that this case actually supports 19 Defendant’s position, not Plaintiff’s. Indeed, Plaintiff’s Equifax Report, which Plaintiff 20 included as an exhibit to her Response, indicates that the status of the account in question is 21 charged off and the balance of the account is zero—the very reporting that Cahlin determined is 22 accurate for an account that was charged off and later settled. (See Equifax Report at 4, Ex. A 23 24 3 The Complaint does not allege when Plaintiff paid off her account or whether she settled the debt for less than the amount due. (See generally Compl.). Defendant asserts that Plaintiff settled her debt for less than the amount 25 due after the debt was charged off. (See Mot. Dismiss 7:7–10). Plaintiff does not dispute Defendant’s assertion, but states more vaguely that her account “had been closed and paid to the satisfaction of the lender with a $0 balance.” (Resp. 3:7–9). 1 to Resp., ECF No. 19-1).4 The Court disagrees that Cahlin recognized that any notation 2 regarding the charge-off must be relegated to the payment history section. Accordingly, the 3 Court finds that Defendant’s reporting was, technically speaking, accurate. 4 2. Materially Misleading 5 Even if a furnisher’s reporting is technically accurate, information may nonetheless be 6 inaccurate for purposes of the FCRA if it is “materially misleading.” See Florence, 2018 WL 7 1145804, at *4. Plaintiff argues that continuing to report her account as charged off is 8 materially misleading under the FCRA.5 (Resp. 4:22–23). Plaintiff again relies on nonbinding 9 authority to support her argument. In Koropoulos v. Credit Bureau, Inc., the defendant 10 reported the plaintiff’s loan as having a current status of “I9” with a “0” balance. 734 F.2d 37, 11 38 (D.C. Cir. 1984). The D.C. Circuit concluded that dismissal of the plaintiff’s FCRA claims 12 “by summary judgment on the grounds that the information in the report was technically 13 accurate . . . was improper” because a genuine issue of fact remained “as to whether the report 14 was sufficiently misleading.” Id. at 42. Specifically, the D.C. Circuit noted that the report 15 could be found to be misleading because the plaintiff repaid the debt in full and the defendant 16 did not suffer a total loss. Id. 17 The Ninth Circuit has not adopted Koropoulos. See Shaw v. Experian Info. Solutions,

18 Inc., 891 F.3d 749, 757 n.4 (9th Cir. 2018) (“Far from adopting [Koropoulos] in full, we have 19 quoted it parenthetically only a handful of times, and only in support of the unremarkable 20 definition of ‘inaccurate.’”). In the Ninth Circuit, “incomplete or inaccurate” items within the 21 meaning of the FCRA’s furnisher investigation provision includes technically accurate 22 information that is “misleading in such a way and to such an extent that it can be expected to 23 24 4 The Court considers the Equifax Report in the Motion to Dismiss stage under the doctrine of incorporation by reference because the Complaint “necessarily relies” on the Report and the Report’s authenticity and its 25 relevance is not disputed. Coto Settlement v. Eisenberg, 593 F.3d 1031, 1038 (9th Cir. 2010). 5 Defendant’s Reply does not address Plaintiff’s argument that Defendant’s reporting was materially misleading. (See generally Reply, ECF No. 22). 1 adversely affect credit decisions.” Carvalho, 629 F.3d at 890 (quoting Gorman v. Wolpoff & 2 Abramson, LLP, 584 F.3d 1147, 1163 (9th Cir. 2009)). 3 Plaintiff argues that “[r]eporting the current status of the account as a “charge off” 4 despite the fact that it had been satisfied is materially misleading because it makes it appear as 5 though Plaintiff is less creditworthy than she really is.” (Resp. 8:7–9). But Plaintiff offers no 6 legal citation other than Koropoulos supporting the proposition that continuing to accurately 7 report an account as charged off after the debtor has paid is misleading to the extent that it can 8 be expected to adversely affect credit decisions.6 9 Lastly, Plaintiff argues that the “algorithms that generate credit scores interpret the 10 ‘payment status’ section as a current status, thus nullifying the effect that the credit report, 11 viewed as a whole, may have on the account status section.” (Resp. 15:23–16:2) (internal 12 citation omitted). Although the Complaint alleges that this aspect of the credit scoring 13 algorithms would cause a lower credit score to be generated for a charged off account status 14 than a closed account status, (see Compl. ¶ 15), Plaintiff fails to allege how this fact is 15 misleading. Indeed, Plaintiff cites to case law that suggests a charged off account, even one 16 that has been paid off, should retain derogatory remarks. See Cahlin, 936 F.2d at 1158. The 17 Court concludes that the accurate reporting of a charged off account is not misleading.

18 In sum, nowhere in her Complaint or her Response to the instant Motion does Plaintiff 19 articulate what, exactly, Defendant reported inaccurately. Because it is not inaccurate to 20 continue to report an account as charged off after a debtor settled the account for less than the 21 full balance, Plaintiff must allege some other fact demonstrating how Defendant’s reporting 22 was inaccurate, or how Defendant’s reporting was so misleading that it should be considered 23 24 6 Plaintiff additionally cites to non-binding case law on the tangentially related topic of pay status claims. (See Resp. 8:6– 11:3). The Court does not find these cases persuasive or relevant because, unlike a previously 25 delinquent account that is no longer delinquent because the debtor paid, a charged off account remains charged off even after the debtor pays. Compare Barrow v. Trans Union, LLC, No. 20-cv-3628, 2021 WL 1424681, at *1 (E.D. Pa. Apr. 13, 2021) with Cahlin, 936 F2d 1151. 1 inaccurate under the FCRA. Absent a plausible allegation of actual falsity or materially 2 misleading reporting, the Court must GRANT Defendant’s Motion.7 See Abeyta, 2016 WL 3 1298109 at *2. 4 C. Leave to Amend 5 Rule 15(a)(2) of the Federal Rules of Civil Procedure permits courts to “freely give 6 leave [to amend] when justice so requires.” Fed. R. Civ. P. 15(a)(2). The Ninth Circuit “ha[s] 7 held that in dismissing for failure to state a claim under Rule 12(b)(6), ‘a district court should 8 grant leave to amend even if no request to amend the pleading was made, unless it determines 9 that the pleading could not possibly be cured by the allegation of other facts.’” Lopez v. Smith, 10 203 F.3d 1122, 1127 (9th Cir. 2000) (quoting Doe v. United States, 58 F.3d 494, 497 (9th Cir. 11 1995)). 12 The Court finds that Plaintiff may be able to plead additional facts to support her FCRA 13 claims. Accordingly, the Court will grant Plaintiff leave to file an amended complaint. Plaintiff 14 shall file her amended complaint within fourteen (14) days of the date of this Order. 15 /// 16 /// 17 ///

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24 7 Defendant asks the Court to take judicial notice of the Automated Credit Dispute Verification, attached to the 25 instant Motion as Exhibit A. (Mot. Dismiss 4:10–11); (Automated Credit Dispute Verification, Ex. A to Mot. Dismiss, ECF No. 18-1). Because the Court GRANTS Defendant’s Motion without relying on Defendant’s Exhibit, the Court does not address whether judicial notice of Defendant’s Exhibit is appropriate. 1 V. CONCLUSION 2 IT IS HEREBY ORDERED that Defendant’s Motion to Dismiss, (ECF No. 18), is 3 GRANTED. 4 IT IS FURTHER ORDERED that Plaintiff shall have fourteen (14) days from the date 5 of this Order to file an amended complaint. Failure to file an amended complaint by the 6 required date shall result in the Court dismissing Plaintiff’s claims with prejudice. 7 DATED this __2___ day of March, 2023. 8 9 ___________________________________ Gloria M. Navarro, District Judge 10 UNITED STATES DISTRICT COURT 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25