1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 Pete Taylor, ) 9 ) Plaintiff, ) 10 ) No. CIV 20-494-TUC-CKJ vs. ) 11 ) ORDER IC System Incorporated, et al., ) 12 ) Defendants. ) 13 ) 14 Pending before the Court is the Motion to Dismiss for Failure to State a Claim and 15 Request for Judicial Notice (Doc. 39) filed by IC System, Inc. ("ICS"). Plaintiff Pete Taylor 16 ("Taylor") has filed a response (Doc. 27) and ICS has filed a reply (Doc. 29). Oral 17 argument has been requested. Because the parties have thoroughly presented the facts and 18 briefed the issues, the Court declines to set this matter for oral argument. See LRCiv 7.2(f); 19 27A Fed.Proc., L. Ed. § 62:361 (March 2021) ("A district court generally is not required to 20 hold a hearing or oral argument before ruling on a motion."). 21 22 Factual and Procedural Background 23 On April 8, 2022, Taylor filed a Second Amended Complaint ("SAC") in this case.1 24 The SAC alleges ICS began reporting a collection account on Taylor's Experian credit report 25 that did not belong to Taylor. Taylor called ICS on September 17, 2020, and informed ICS's 26 agent that ICS was reporting a collection account that did not belong to him on his credit 27 28 1 reports. After being unable to locate Taylor by his personal identifiers, ICS's agent advised 2 Taylor that the debt reporting on Taylor's credit report was a medical debt ("the Debt") 3 incurred in Alabama and was owed by a third party with a different name and a different 4 social security number. 5 Days after ICS confirmed that the subject debt did not belong to him, Taylor 6 submitted a dispute to Experian challenging ICS's reporting of the Debt and "requested 7 [ICS] and Experian remove [the Debt] from his Experian credit report." SAC (Doc. 35, p. 8 3). Experian notified ICS of Taylor's dispute within five days of receiving the dispute. 9 ICS continued to report the Debt as belonging to Taylor to Experian. ICS did not 10 request Experian to notate on Taylor's Experian credit report that the Debt was disputed by 11 Taylor. 12 Taylor's credit score has decreased as a result of ICS's erroneous credit reporting, 13 which has frustrated Taylor's ability to obtain credit. Taylor also alleges he has suffered 14 emotional distress and anxiety as a result of ICS's erroneous credit reporting. After Taylor 15 filed suit against ICS, ICS removed the Debt from Taylor's Experian credit report. 16 The SAC alleges violations of 15 U.S.C. §§ 1692e(8) and 1692f, under the Federal 17 Debt Collections Practices Act ("FDCPA"). 18 On May 6, 2022, ICS filed a Motion to Dismiss for Failure to State a Claim and 19 Request for Judicial Notice ("MTD") (Doc. 39). A response (Doc. 43) and a reply (Doc. 20 45) have been filed. 21 22 Request for Judicial Notice of the U.S. Consumer Financial Protection Bureau’s 2012 Key Dimensions and Processes in the U.S. Credit Reporting System ("CFPB Report") 23 ICS requests the Court take judicial notice of the CFPB Report. This report is 24 available on an official website of the United States government. See, 25 https://www.consumerfinance.gov/data-research/research-reports/key-dimensions-and-pr 26 ocesses-in-the-u-s-credit-reporting-system/. The Court finds it appropriate to take judicial 27 notice of this document. Arizona Libertarian Party v. Reagan, 798 F.3d 723, 727 (9th Cir. 28 1 2015), citations omitted (the Court may take judicial notice of "official information posted on 2 a governmental website, the accuracy of which [is] undisputed"); Gerritsen v. Warner Bros. 3 Entm't Inc., 112 F. Supp. 3d 1011, 1033 (C.D. Cal. 2015) (the court can take judicial notice of 4 "[p]ublic records and government documents available from reliable sources on the Internet," 5 such as websites run by governmental agencies), citations omitted. The Court will grant ICS's 6 request. 7 As pointed out by ICS: 8 Once the NCRAs have received trade line information from a furnisher they must assign it to a specific consumer’s identity. . . In a typical month, an NCRA receives 9 updates on over 1.3 billion trade lines. With this much information included in and added to their databases, the NCRAs face technical and operational challenges in 10 attributing information to the proper consumer’s file. 11 . . . 12 Typically, the furnisher reports the personally identifying information that was provided by the consumer in the consumer’s original application for credit or through 13 updates (such as for current address or married name) that a consumer may provide in the course of his or her relationship with the furnisher. 14 . . . 15 Once a trade line has passed the NCRAs’ initial vetting and screening, the NCRAs 16 assign or post that trade line to the credit file of a specific consumer if they believe there is a match. 17 MTD (Doc. 39, p. 7), citing CFPB Report, § 5.0, pp. 21-22. NCRAs are nationwide 18 consumer reporting agencies and, for purposes of the CFPB Report, means Equifax, 19 Experian, or TransUnion. CFPB Report, Glossary, p. 40. 20 Additionally, the CFPB Report states that the NCRAs' data screens "rely on 21 underlying furnisher data to be valid." CFPB Report, § 4.2, p. 19. The CFPB Report also 22 discuses the NCRAs reliance upon data furnished to them: 23 The NCRAs do not conduct independent checks or audits to determine if the data is 24 accurate, such as contacting a consumer to ask if she is properly associated with an account or if the balance reported on an account is true, or checking the 25 record-keeping practices of a furnisher. The NCRAs generally rely on furnishers to report information on consumers that is complete and accurate. 26 Id. Indeed: 27 [F]urnishers have enhanced obligations to supply accurate data. Each furnisher is 28 1 required to "establish and implement reasonable written policies and procedures concerning the accuracy and integrity of the information it furnishes to consumer 2 reporting agencies."48 The procedures should address "deleting, updating, and correcting information in the furnisher's records, as appropriate, to avoid furnishing 3 inaccurate information."49 The procedures must be appropriate to the "nature, size, complexity, and scope of each furnisher’s activities."50 Appropriate procedures 4 include using standard data reporting formats, maintaining records for a reasonable period of time, providing appropriate oversight of service providers (e.g., companies 5 that provide core processing systems or software used for recordkeeping and account management), furnishing information in a way that prevents re-aging,g duplicative 6 reporting, association of information with the wrong consumer, and providing sufficient identifying information about consumers. 7 g Re-aging in this context refers to erroneously extending the reporting period 8 of derogatory consumer information by creating a new, later start date when the derogatory event occurred, thus pushing back the clock for removing the 9 derogatory item from the credit report. 10 48 12 C.F.R. § 1022.42, (2012). 49 12 C.F.R. pt. 1022, Appendix E, III(h) (2012). 11 50 12 C.F.R. § 1022.42(a) (2012). 12 Id. at § 4.3, p. 20.
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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 Pete Taylor, ) 9 ) Plaintiff, ) 10 ) No. CIV 20-494-TUC-CKJ vs. ) 11 ) ORDER IC System Incorporated, et al., ) 12 ) Defendants. ) 13 ) 14 Pending before the Court is the Motion to Dismiss for Failure to State a Claim and 15 Request for Judicial Notice (Doc. 39) filed by IC System, Inc. ("ICS"). Plaintiff Pete Taylor 16 ("Taylor") has filed a response (Doc. 27) and ICS has filed a reply (Doc. 29). Oral 17 argument has been requested. Because the parties have thoroughly presented the facts and 18 briefed the issues, the Court declines to set this matter for oral argument. See LRCiv 7.2(f); 19 27A Fed.Proc., L. Ed. § 62:361 (March 2021) ("A district court generally is not required to 20 hold a hearing or oral argument before ruling on a motion."). 21 22 Factual and Procedural Background 23 On April 8, 2022, Taylor filed a Second Amended Complaint ("SAC") in this case.1 24 The SAC alleges ICS began reporting a collection account on Taylor's Experian credit report 25 that did not belong to Taylor. Taylor called ICS on September 17, 2020, and informed ICS's 26 agent that ICS was reporting a collection account that did not belong to him on his credit 27 28 1 reports. After being unable to locate Taylor by his personal identifiers, ICS's agent advised 2 Taylor that the debt reporting on Taylor's credit report was a medical debt ("the Debt") 3 incurred in Alabama and was owed by a third party with a different name and a different 4 social security number. 5 Days after ICS confirmed that the subject debt did not belong to him, Taylor 6 submitted a dispute to Experian challenging ICS's reporting of the Debt and "requested 7 [ICS] and Experian remove [the Debt] from his Experian credit report." SAC (Doc. 35, p. 8 3). Experian notified ICS of Taylor's dispute within five days of receiving the dispute. 9 ICS continued to report the Debt as belonging to Taylor to Experian. ICS did not 10 request Experian to notate on Taylor's Experian credit report that the Debt was disputed by 11 Taylor. 12 Taylor's credit score has decreased as a result of ICS's erroneous credit reporting, 13 which has frustrated Taylor's ability to obtain credit. Taylor also alleges he has suffered 14 emotional distress and anxiety as a result of ICS's erroneous credit reporting. After Taylor 15 filed suit against ICS, ICS removed the Debt from Taylor's Experian credit report. 16 The SAC alleges violations of 15 U.S.C. §§ 1692e(8) and 1692f, under the Federal 17 Debt Collections Practices Act ("FDCPA"). 18 On May 6, 2022, ICS filed a Motion to Dismiss for Failure to State a Claim and 19 Request for Judicial Notice ("MTD") (Doc. 39). A response (Doc. 43) and a reply (Doc. 20 45) have been filed. 21 22 Request for Judicial Notice of the U.S. Consumer Financial Protection Bureau’s 2012 Key Dimensions and Processes in the U.S. Credit Reporting System ("CFPB Report") 23 ICS requests the Court take judicial notice of the CFPB Report. This report is 24 available on an official website of the United States government. See, 25 https://www.consumerfinance.gov/data-research/research-reports/key-dimensions-and-pr 26 ocesses-in-the-u-s-credit-reporting-system/. The Court finds it appropriate to take judicial 27 notice of this document. Arizona Libertarian Party v. Reagan, 798 F.3d 723, 727 (9th Cir. 28 1 2015), citations omitted (the Court may take judicial notice of "official information posted on 2 a governmental website, the accuracy of which [is] undisputed"); Gerritsen v. Warner Bros. 3 Entm't Inc., 112 F. Supp. 3d 1011, 1033 (C.D. Cal. 2015) (the court can take judicial notice of 4 "[p]ublic records and government documents available from reliable sources on the Internet," 5 such as websites run by governmental agencies), citations omitted. The Court will grant ICS's 6 request. 7 As pointed out by ICS: 8 Once the NCRAs have received trade line information from a furnisher they must assign it to a specific consumer’s identity. . . In a typical month, an NCRA receives 9 updates on over 1.3 billion trade lines. With this much information included in and added to their databases, the NCRAs face technical and operational challenges in 10 attributing information to the proper consumer’s file. 11 . . . 12 Typically, the furnisher reports the personally identifying information that was provided by the consumer in the consumer’s original application for credit or through 13 updates (such as for current address or married name) that a consumer may provide in the course of his or her relationship with the furnisher. 14 . . . 15 Once a trade line has passed the NCRAs’ initial vetting and screening, the NCRAs 16 assign or post that trade line to the credit file of a specific consumer if they believe there is a match. 17 MTD (Doc. 39, p. 7), citing CFPB Report, § 5.0, pp. 21-22. NCRAs are nationwide 18 consumer reporting agencies and, for purposes of the CFPB Report, means Equifax, 19 Experian, or TransUnion. CFPB Report, Glossary, p. 40. 20 Additionally, the CFPB Report states that the NCRAs' data screens "rely on 21 underlying furnisher data to be valid." CFPB Report, § 4.2, p. 19. The CFPB Report also 22 discuses the NCRAs reliance upon data furnished to them: 23 The NCRAs do not conduct independent checks or audits to determine if the data is 24 accurate, such as contacting a consumer to ask if she is properly associated with an account or if the balance reported on an account is true, or checking the 25 record-keeping practices of a furnisher. The NCRAs generally rely on furnishers to report information on consumers that is complete and accurate. 26 Id. Indeed: 27 [F]urnishers have enhanced obligations to supply accurate data. Each furnisher is 28 1 required to "establish and implement reasonable written policies and procedures concerning the accuracy and integrity of the information it furnishes to consumer 2 reporting agencies."48 The procedures should address "deleting, updating, and correcting information in the furnisher's records, as appropriate, to avoid furnishing 3 inaccurate information."49 The procedures must be appropriate to the "nature, size, complexity, and scope of each furnisher’s activities."50 Appropriate procedures 4 include using standard data reporting formats, maintaining records for a reasonable period of time, providing appropriate oversight of service providers (e.g., companies 5 that provide core processing systems or software used for recordkeeping and account management), furnishing information in a way that prevents re-aging,g duplicative 6 reporting, association of information with the wrong consumer, and providing sufficient identifying information about consumers. 7 g Re-aging in this context refers to erroneously extending the reporting period 8 of derogatory consumer information by creating a new, later start date when the derogatory event occurred, thus pushing back the clock for removing the 9 derogatory item from the credit report. 10 48 12 C.F.R. § 1022.42, (2012). 49 12 C.F.R. pt. 1022, Appendix E, III(h) (2012). 11 50 12 C.F.R. § 1022.42(a) (2012). 12 Id. at § 4.3, p. 20. 13 14 Requirement to State a Claim Upon Which Relief Can Be Granted 15 As the Court has previously stated, a complaint is to contain a "short and plain 16 statement of the claim showing that the pleader is entitled to relief[.]" Fed.R.Civ.P. 8(a). 17 The United States Supreme Court has found that a plaintiff must allege "enough facts to 18 state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twombly, 550 U.S. 19 544, 570 (2007). While a complaint need not plead "detailed factual allegations," the factual 20 allegations it does include "must be enough to raise a right to relief above the speculative 21 level." Id. 555; see also Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011) ("If there are 22 two alternative explanations, one advanced by defendant and the other advanced by plaintiff, 23 both of which are plausible, plaintiff's complaint survives a motion to dismiss[.]"). 24 The Court considers the SAC in light of Twombly and must determine if Taylor has 25 "nudge[d] [the] claims across the line from conceivable to plausible." Twombly. 550 U.S. 26 at 570. This requires "a flexible ‘plausibility standard,' which obliges a pleader to amplify 27 a claim with some factual allegations in those contexts where such amplification is needed 28 1 to render the claim plausible." Iqbal v. Hasty, 490 F.3d 143, 157-58 (2nd Cir. 2007); see 2 also Moss v. U.S. Secret Service, 572 F.3d 962 (9th Cir. 2009) (for a complaint to survive 3 a motion to dismiss, the non-conclusory "factual content," and reasonable inferences from 4 that content, must be plausibly suggestive of a claim entitling the plaintiff to relief)." 5 This Court must take as true all allegations of material fact and construe them in the 6 light most favorable to Taylor. See Cervantes v. United States, 330 F.3d 1186, 1187 (9th 7 Cir. 2003). Nonetheless, the Court does not accept as true unreasonable inferences or 8 conclusory legal allegations cast in the form of factual allegations. Western Mining Council 9 v. Watt, 643 F.2d 618, 624 (9th Cir. 1981). 10 11 Alleged Violations of FDCPA § 1692e(8) 12 The FDCPA states a "debt collector may not use any false, deceptive, or misleading 13 representation or means in connection with the collection of any debt." 15 U.S.C. § 1692e. 14 This includes a requirement that a debt collector not "[c]ommunicat[e] or threaten[] to 15 communicate to any person credit information which is known or which should be known 16 to be false, including the failure to communicate that a disputed debt is disputed." 15 17 U.S.C. § 1692e(8). 18 ICS asserts Taylor has failed to state a claim for violations of this statute because it 19 did not report the Debt to Taylor's credit report. Rather, as a furnisher, it submitted trade 20 line information to credit reporting agencies. However, Taylor argues that, by providing 21 incorrect information to Experian (a third party), ICS communicated false credit information 22 to a third party.2 ICS does not point to any authority that, to state a claim under § 1692e(8), 23 reporting of a debt must be to a credit report as opposed to any third party. 24 ICS argues that the Report demonstrates that it is NCRAs who determine which 25 consumer's credit report to which a negative trade line is assigned. See Report, p. 21. 26 2Taylor alleges, "Defendant reported to Experian a past due medical debt allegedly 27 owed by Plaintiff to Foley Emergency Physicians in the amount of $935." SAC (Doc. 35, 28 p. 2). The supporting attachment, however, does not reference Taylor. Id. at Ex. A. 1 However, the Report also recognizes that a furnisher typically reports personally identifying 2 information. Id. In other words, although the attachment to the SAC does not reference 3 Taylor, the Court finds Taylor's allegation that "Defendant reported to Experian a past due 4 medical debt allegedly owed by Plaintiff to Foley Emergency Physicians in the amount of 5 $935" sufficiently alleges ICS represented to a third party a delinquent account belonging 6 to Taylor. See SAC (Doc. 35, p. 2; Ex. A). 7 Additionally, ICS asserts that its failure to mark the Debt as disputed after Taylor 8 disputed the debt as belonging to Taylor with Experian and ICS fails to state a claim 9 because it is speculative. ICS points out the SAC states Taylor spoke with ICS on 10 September 17, 2020, and days later he disputed the debt with Experian. Taylor then filed 11 his suit on October 7, 2020. ICS asserts that, pursuant to the FCRA, it had 30 days to 12 investigate and respond to the dispute, but Taylor "filed suit before ICS had an opportunity 13 to respond to the dispute." Motion (Doc. 39, p. 9). Taylor asserts, however, § 1692e(8) 14 does not require more than what Taylor has alleged. In other words, that ICS may have a 15 timing defense does not affect the fact Taylor has stated a claim upon which relief can be 16 granted under § 1692e(8). 17 The Court agrees Taylor has adequately stated a claim upon which relief can be 18 granted. Taylor has alleged ICS communicated to Experian, a third party, credit information 19 which was known or which should have been known to be false, including that ICS failed 20 to communicate the Debt was disputed. See e.g. Creager v. Columbia Debt Recovery, LLC, 21 No. 2:21-CV-00431-BJR, 2021 WL 3187596, at *4 (W.D. Wash. July 28, 2021) (finding 22 allegations a debt collector reported false information concerning plaintiff to a credit 23 reporting agency to be sufficient to state a §1692e(8) claim at the pleading stage). 24 25 Alleged Violations of FDCPA § 1692f 26 Under the FDCPA, a “debt collector may not use unfair or unconscionable means to 27 collect or attempt to collect any debt.” 15 U.S.C. § 1692f. Taylor alleges ICS’s conduct of 28 1 continuing to report the Debt to Experian despite having actual knowledge that the debt 2 belonged to a third party violates this provision. As summarized by ICS: 3 Congress intended for this section of the FDCPA to only cover claims not specifically addressed in other areas of the FDCPA, and SCOTUS has interpreted it 4 as such: 5 This Court has not had occasion to construe the terms “unfair” and “unconscionable” in § 1692f. The FDCPA's legislative history suggests that 6 Congress intended these terms as a backstop that would enable “courts, where appropriate, to proscribe other improper conduct ... not specifically addressed” 7 by the statute. S.Rep. No. 95–382, p. 4 (1977). Courts have construed these terms, consistent with other federal and state statutes that employ them, to 8 borrow from equitable and common-law traditions. See, e.g., LeBlanc v. Unifund CCR Partners, 601 F.3d 1185, 1200–1201 (C.A.11 2010) (per 9 curiam); Beler v. Blatt, Hasenmiller, Leibsker & Moore, LLC, 480 F.3d 470, 473–474 (C.A.7 2007). 10 Motion (Doc. 39, p. 8), citing Midland Funding, LLC v. Johnson, 137 S. Ct. 1407, 1418, fn. 11 4 (2017) (Sotomayor, J., dissenting). ICS points out the cases relied upon by this Court in 12 addressing the First Amended Complaint pre-dated this authority. Further, ICS argues 13 "[s]ection 1692f 'serves a backstop function, catching those "unfair practices" which 14 somehow manage to slip by §§ 1692d & 1692e.'" Motion (Doc. 39, p. 9), citations omitted. 15 Because Taylor has not alleged any "misconduct beyond that which [Taylor] [] assert[s] 16 violate[s] other provisions of the FDCPA" ICS argues Taylor's claim is deficient. Sussman 17 v. I.C. System, Inc., 928 F.Supp.3d 784, 797 (S.D.N.Y. 2013); Ashlund v. I.C. System, Inc., 18 No. 3:17CV65 (JBA), 2018 WL 3448163 (D. Conn. July 17, 2018). Motion (Doc. 39, p. 19 9). 20 However, neither the majority opinion nor the dissenting opinion in Midland found 21 that one action cannot violate multiple section of the FDCPA. Midland held "that filing (in 22 a Chapter 13 bankruptcy proceeding) a proof of claim that is obviously time barred is not 23 a false, deceptive, misleading, unfair, or unconscionable debt collection practice within the 24 meaning of the Fair Debt Collection Practices Act." Midland, 137 S. Ct. at 1415–16. 25 However, ICS points to a line of authority where § 1692f claims are dismissed when they 26 are based on facts that also serve as the basis for a more specific FDCPA claim. See e.g., 27 Martin v. Target Card Servs., No. CV 17-5372 PA (MRWx), 2018 WL 2723258 (C.D. Cal. 28 1 || Apr. 24, 2018); Lake v. Consumer Adjustment Co., Inc., No. 4:15-CV-01495-JCH, 2015 WL 2 || 8770719 (E.D. Mo. Dec. 14, 2015); Foti v. NCO Fin. Sys., Inc., 424 F. Supp. 2d 643, 667 3 || (S.D.N.Y. 2006); Turner v. Prof'l Recovery Servs., Inc., 956 F.Supp. 2d 573, 580-81 (D.N.J. 4 || 2013); Sussman v. [.C. System, Inc., 928 F.Supp.3d 784, 797 (S.D.N.Y. 2013). 5 The Court does not find Midland affects the authority set forth in Clark v. Capital 6 || Credit & Collection Service, 460 F.3d 1162, 1177 (9th Cir. 2006), Ruvalcaba v. Ocwen 7 || Loan Servicing, LLC, No. 15-CV-744-BAS-DHB, 2016 WL 7178855, at *5 (S.D. Cal. Dec. 8 || 9, 2016), and Currier v. First Resolution Inv. Corp., 762 F.3d 529, 536 (6th Cir. 2014). 9 || Rather, as in Clark, Taylor has raised issues under multiple provisions of the FDCPA. 10 || However, the conduct which serves as the basis for the § 1692f claim is encompassed in the 11 || conduct for which the § 1692e(8) claims are based. The Court finds Taylor has failed to 12 |) state a claim upon which relief can be granted as to his § 1692f claim; dismissal of this 13 || claim is appropriate. 14 Accordingly, IT IS ORDERED: 15 l. The Request for Judicial Notice (Doc. 39) is GRANTED. 16 2. The Motion to Dismiss for Failure to State a Claim and Request for Judicial 17 || Notice (Doc. 39) is GRANTED IN PART AND DENIED IN PART. Taylor's FDCPA § 18 | 1692f claim is DISMISSED WITH PREJUDICE. Taylor's claims pursuant to FDCPA 19 || §1692e(8) may proceed. 20 3. ICS shall file an Answer to the Second Amended Complaint within 20 days 21 || of the date of this Order. 22 4. The stay of discovery in this matter is lifted. If needed, the parties shall 23 || submit a proposed order of modified deadlines. 24 DATED this 5th day of October, 2022. 25 EZ. ving HO Qo gore 27 Cindy K. Jorgénso 38 United States District Judge
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