Alsibai v. Experian Info. Solutions, Inc., File No. 20-cv-0963 (ECT/DTS)

• Decision Date: 23 September 2020
• Docket Number: File No. 20-cv-0963 (ECT/DTS)
• Citation: 488 F.Supp.3d 840
• Parties: Abdulhadi ALSIBAI, Plaintiff, v. EXPERIAN INFORMATION SOLUTIONS, INC. and Trans Union, LLC, Defendants.
• Court: U.S. District Court — District of Minnesota

488 F.Supp.3d 840

Abdulhadi ALSIBAI, Plaintiff,

v.EXPERIAN INFORMATION SOLUTIONS, INC. and Trans Union, LLC, Defendants.

File No. 20-cv-0963 (ECT/DTS)

United States District Court, D. Minnesota.

Signed September 23, 2020

Douglas M. Weimerskirch, Hoglund, Chwialkowski, & Mrozik, PLLC, Roseville, MN; Jenna Dakroub, Price Law Group, APC, Scottsdale, AZ, for Plaintiff Abdulhadi Alsibai.

Amy M. Sieben and Bradley D. Fisher, Fisher Bren & Sheridan LLP, Minneapolis, MN; Kari A. Morrigan, Schuckit & Associates, P.C., Zionsville, IN, for Defendant Trans Union, LLC.

OPINION AND ORDER

Eric C. Tostrud, United States District Judge

Plaintiff Abdulhadi Alsibai sued three consumer credit reporting agencies under the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. § 1681e(b). See Am. Compl. at 1 [ECF No. 24]. He claims that Defendants "fail[ed] to establish and/or follow reasonable procedures to assure maximum possible accuracy in the preparation of [his] credit reports and credit files[.]" Id. ¶ 45. As factual support for this legal conclusion, Alsibai alleges that, in September 2019, Defendants reported an account that was discharged in Alsibai's July 2019 bankruptcy as "charged off," and that this characterization "impl[ied] the debt was still owed[ ]" when it was not. Id. ¶ 44; see id. at ¶¶ 12, 14–23. Defendant Trans Union, LLC, has filed a motion for judgment on the pleadings. ECF No. 37. Trans Union argues that its report of the account was accurate and that, in any event, it maintained reasonable procedures to ensure accuracy, which is all the statute requires. Def.’s Mem. in Supp. at 1–2 [ECF No. 38]. Trans Union's motion will be denied because Alsibai has plausibly alleged that Trans Union did not use reasonable procedures to assure maximum possible accuracy in its preparation of Alsibai's credit reports.¹

I

According to the operative complaint, Alsibai filed a Chapter 7 bankruptcy petition in the United States Bankruptcy Court for the District of Minnesota in April 2019. Am. Compl. ¶ 11. He obtained a discharge on July 9, 2019. Id. ¶ 12. About two months later, on September 4, 2019, he requested and received consumer credit reports from three different companies—Experian, Equifax, and Trans Union—"to make sure the bankruptcy reporting was accurate." Id. ¶ 14.

This lawsuit centers on how the September 2019 reports described a credit card account that Alsibai used to have with Citibank ("the Citibank Account"). As relevant here, Trans Union's report shows that the Citibank Account was opened in February 2011 and closed in September 2013. ECF No. 46-1.² As of August 2019, its "Pay Status" was "Charged Off," id. ; see Am. Compl. ¶ 21, and the report shows a "Charged Off" status for every month dating back to March 2014. ECF No. 46-1; Am. Compl. ¶ 22. For most of the months in that timeframe, the report shows a zero balance for the Citibank Account, but for April through June of 2019, there is no balance entry at all. ECF No. 46-1. Above the table showing these zero balances, however, the report shows a "High Balance of $5,344" from March 2017 to March 2019 and from July to August 2019. Id.

Alsibai believes that this description of the Citibank Account was inaccurate because it did not show the debt as discharged in bankruptcy. Elsewhere, the report acknowledged that he had obtained a bankruptcy discharge, ECF No. 46-1 at 2, and it reported his other debts as discharged, Am. Compl. ¶ 25. But according to Alsibai, "[t]he status of Charge[d] Off in the credit reporting industry guidelines means that a debt may be owed," id. ¶ 24, and because no debt from the Citibank Account would have survived his bankruptcy discharge, it was inaccurate to describe it as "Charged Off." Id. ¶ 44. The resulting inaccuracy "damaged [his] credit, which he is attempting to rebuild after bankruptcy." Id. ¶ 39. Specifically, he "applied for and received a TCF credit card at less favorable rates due to [Trans Union's] inaccurate reporting," and he has also sustained "actual damages including but not limited to, embarrassment, anguish, and emotional and mental pain." Id. ¶¶ 38, 41.

II

A motion for judgment on the pleadings under Rule 12(c) is assessed under the same standard as a motion to dismiss under Rule 12(b)(6). Ashley Cty. v. Pfizer, Inc. , 552 F.3d 659, 665 (8th Cir. 2009). In reviewing a motion to dismiss for failure to state a claim under Rule 12(b)(6), a court must accept as true all of the factual allegations in the complaint and draw all reasonable inferences in the plaintiff's favor. Gorog v. Best Buy Co. , 760 F.3d 787, 792 (8th Cir. 2014) (citation omitted). Although the factual allegations need not be detailed, they must be sufficient to "raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (citation omitted). The complaint must "state a claim to relief that is plausible on its face." Id. at 570, 127 S.Ct. 1955.

The FCRA imposes procedural and substantive requirements meant to "ensure fair and accurate credit reporting, promote efficiency in the banking system, and protect consumer privacy."

Poehl v. Countrywide Home Loans, Inc. , 528 F.3d 1093, 1096 (8th Cir. 2008) (quoting Safeco Ins. Co. of Am. v. Burr , 551 U.S. 47, 52, 127 S.Ct. 2201, 167 L.Ed.2d 1045 (2007) ). As relevant to this case, a "consumer reporting agency"³ must "follow reasonable procedures to assure maximum possible accuracy of the information" in a consumer's credit report. 15 U.S.C. § 1681e(b).

To maintain his claim under § 1681e(b), Alsibai must plausibly allege "that (1) [Trans Union] failed to follow reasonable procedures intended to assure the accuracy of its reports, (2) [it] reported inaccurate credit information about [him], (3) [he] suffered harm, and (4) [Trans Union's] failure to follow reasonable procedures was the cause of [his] harm." Paul v. Experian Info. Sols., Inc. , 793 F. Supp. 2d 1098, 1101 (D. Minn. 2011). Trans Union focuses on the first two elements, arguing that Alsibai's claim fails as a matter of law because its reporting on the Citibank Account was accurate, it followed reporting procedures that have been "conclusively deemed to comply with the FCRA," and Alsibai never provided it with notice of the inaccuracy by "disput[ing] the account." Def.’s Mem. in Supp. at 1–2.

A

The first issue is also the most complicated. Trans Union argues that its September 2019 report was accurate because it described the Citibank Account as closed five years before Alsibai's bankruptcy with "a $0 balance, $0 scheduled payment and $0 past due amount." Def.’s Mem. in Supp. at 5; ECF No. 46–1. Trans Union thus reads the report to say clearly that any debt related to the Citibank Account no longer existed when Alsibai filed for bankruptcy, and any references to previously existing debt were simply accurate historical information. In fact, Trans Union argues that under these circumstances, it would have been in accurate to describe the debt as discharged in bankruptcy, since "[i]t is axiomatic that a consumer cannot discharge a debt that did not exist at the time of bankruptcy." Id. Alsibai responds that the report's use of the phrase "Charged Off" and its notation of a "High Balance" in July and August of 2019 render it "patently inaccurate" or, at the very least, misleading. Pl.’s Mem. in Opp. at 3–10 [ECF No. 46].

Alsibai has the better argument. Even assuming that the report is "technically correct," it "may nevertheless be considered inaccurate if it is misleading."⁴ Morris v. Experian Info. Sols., Inc. , 478 F. Supp. 3d 765, 768, No. 20-cv-0604 (PJS/HB) (D. Minn. Aug. 13, 2020) (to be published); see also Beseke v. Equifax Info. Servs. LLC , 420 F. Supp. 3d 885, 901 (D. Minn. 2019). In the context of a consumer's Chapter 7 bankruptcy discharge, the question whether a credit report is misleading "comes down to whether [it] unambiguously communicate[s] that the debt reported on the challenged tradeline[ ] did not exist on the date that [the plaintiff] filed for Chapter 7 bankruptcy." Morris , 478 F. Supp. 3d at 770. If the report can be read to say that the plaintiff "owe[d] an unsecured debt to a particular creditor" as of the bankruptcy filing date, and the agency knew of the consumer's subsequent discharge but did not report the debt as discharged, then there is a plausible FCRA claim. Id. at 769–70. If, instead, "the credit report is clear that the consumer did not owe a debt to the creditor at the time that [the plaintiff] filed for bankruptcy," then the agency has no duty to "report that the debt formerly owed to the creditor was discharged in bankruptcy." Id. (emphasis added).

In Morris , Trans Union reported, after the plaintiff's bankruptcy discharge, that one of the plaintiff's accounts was "Charged Off" and closed with a zero balance before the plaintiff filed her bankruptcy petition. Id. at 766–67, 770–71. As Judge Schiltz noted, however, this was not the same thing as reporting that no debt existed at the time of the bankruptcy filing. "A debt that is ‘charged off’ still exists, and nothing prevents the creditor from selling it or taking steps to collect it." Id. at 771 (citing In re Belton v. GE Cap. Retail Bank , 961 F.3d 612, 614 (2d Cir. 2020) (noting that reporting a debt as "charged off" indicates that "the debt was severely delinquent but still outstanding")). Because the report in Morris did not report the bankruptcy discharge on the challenged tradeline, it "could be read to report an existing, undischarged, pre-bankruptcy debt." Id. at 771.

There are no material differences between Morris and this case. Here, too, Trans Union reported that Alsibai's Citibank Account was closed with a zero balance well before he filed his Chapter 7 bankruptcy petition. ECF No. 46-1. But it also reported that the account's "Pay Status" was "Charged Off," id. , and Alsibai has specifically alleged that "Charged Off" status "means that a debt may be owed." Am. Compl. ¶ 24....