Montgomery v. Wells Fargo Bank, Nat'l Ass'n
| Decision Date | 13 November 2012 |
| Docket Number | NO. C12-3895 TEH,C12-3895 TEH |
| Parties | SARAH MONTGOMERY, Plaintiff, v. WELLS FARGO BANK, NAT'L ASS'N, et al. Defendants. |
| Court | U.S. District Court — Northern District of California |
ORDER DENYING MOTION TO DISMISS
This matter comes before the Court on Defendant Wells Fargo's motion, filed on September 19, 2012, which requests the dismissal of Plaintiff Sarah Montgomery's complaint in its entirety for failure to state a claim upon which relief may be granted. After carefully reviewing the parties' written arguments, the Court concludes that oral argument is unnecessary. For the reasons set forth below, the Court DENIES Wells Fargo's motion.
BACKGROUND
In this suit, Montgomery seeks redress under the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq. ("FCRA") and California law for Defendant Wells Fargo's allegedly inaccurate or incomplete reporting of a debt that was discharged in bankruptcy.
On March 8, 2010, Montgomery filed a petition under Chapter 7 of the Bankruptcy Code in the United States Bankruptcy Court for the Northern District of California. In a schedule accompanying her bankruptcy petition, Montgomery listed an unsecured debt of $8,718.00 in favor of Wells Fargo. (Compl. at ¶ 13.) The bankruptcy court granted Montgomery's petition on June 2, 2010, discharging all of her dischargable debts, includingher debt to Wells Fargo. (Compl. at ¶ 14.)1 Wells Fargo received electronic notice of the discharge on June 5, 2010. (Compl. at ¶ 15.)
Montgomery alleges that, on April 30, 2011 - almost a year after her bankruptcy petition was granted - she sent a written notice to the credit reporting agency Equifax in which she informed Equifax that her debt to Wells Fargo had been discharged. (Compl. at ¶¶ 10, 15.) In her written notice, Montgomery disputed Wells Fargo's continued reporting to Equifax that her account had been "charged off" and was in "collection." (Compl. at ¶¶ 10, 15.) Equifax then notified Wells Fargo that Montgomery disputed the accuracy of its reporting. (Compl. at ¶¶ 10, 23.)
Montgomery further alleges that, had Wells Fargo reasonably investigated her dispute of the "charged off" notation, it would have found two notices that had been sent to it from the bankruptcy noticing center that stated that Montgomery's debt had been discharged in bankruptcy. (Compl. at ¶ 24.) Having failed to reasonably investigate her dispute, Wells Fargo reported back to Equifax that Montgomery's account was "open" and had been "charged off." (Compl. at ¶ 24.)
On May 31, 2011, Montgomery received from Equifax a copy of her credit report on which her Wells Fargo account was listed as "charged off." (Compl. at ¶ 16.) According to Montgomery, Wells Fargo continues to refuse to correct its reporting. (Compl. at ¶ 17.)
Montgomery initiated the present action by filing her complaint in the Alameda County Superior Court on July 2, 2012. Wells Fargo removed the case to federal court on July 25, 2012, and on September 19, 2012, filed the motion to dismiss that is presently under consideration.
LEGAL STANDARD
A complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). A complaint's dismissal is appropriate under Federal Rule of Civil Procedure 12(b)(6) when a its allegations fail "to state a claim upon which relief can be granted."
In ruling on a motion to dismiss, a court must "accept all material allegations of fact as true and construe the complaint in a light most favorable to the non-moving party." Vasquez v. Los Angeles County, 487 F.3d 1246, 1249 (9th Cir. 2007). However, to be entitled to Rule 12(b)(6)'s presumption of truth, allegations in a complaint "may not simply recite the elements of a cause of action, but must contain sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively." Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011). Additionally, because a complaint must "state a claim to relief that is plausible on its face," Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007), "the factual allegations that are taken as true must plausibly suggest an entitlement to relief, such that it is not unfair to require the opposing party to be subjected to the expense of discovery and continued litigation." Starr, 652 F.3d at 1216.
DISCUSSION
Wells Fargo's motion to dismiss Montgomery's complaint primarily is based on its contention that reporting Montgomery's debt as "charged off" is accurate, and therefore does not run afoul of the FCRA or California law. Alternatively, Wells Fargo argues that Montgomery fails to plead adequately two of the remaining elements of her claims, namely that Wells Fargo received notice of her dispute of the "charged off" notation, and that she sustained actual damages.
Congress enacted the FCRA in 1970 in order to facilitate "fair and accurate credit reporting" by ensuring that "consumer reporting agencies exercise their grave responsibilities with fairness, impartiality, and a respect for the consumer's right to privacy." 15 U.S.C. §1681(a)(1) & (4). Initially, the FCRA did not impose any duties on "furnishers" -individuals and entities such as "credit card issuers, auto dealers, department and grocery stores, lenders, utilities, insurers, collection agencies, and government agencies" that provide information relating to consumer creditworthiness to consumer reporting agencies. H.R. Rep. No. 108-263, at 24 (2003). Provisions imposing duties on furnishers were added in 1996 based on the determination that "bringing furnishers of information under the provisions of the FCRA is an essential step in ensuring the accuracy of consumer report information." S. Rep. No. 104-105, at 49; Consumer Credit Reporting Reform Act of 1996, Pub. L. 104-208, ch. 1., sec. 2413, § 623 (). The amendment was intended to close a "gap in the FCRA's coverage" under which a consumer had no recourse against a furnisher that "act[ed] irresponsibly in verifying the information" disputed by the consumer. S. Rep. No. 103-209, at 6 (1993). Wells Fargo is a furnisher of information, subject to the provisions added to the FCRA in 1996.
Under these provisions, whenever a furnisher receives notice from a consumer reporting agency that a consumer disputes the completeness or accuracy of an item of information provided to the agency by the furnisher, the furnisher must "conduct an investigation with respect to the disputed information" and "report the results of the investigation to the consumer reporting agency." 15 U.S.C.A. § 1681s-2(b)(1)(A) & (C). If a furnisher determines, upon investigation, that information it previously provided to a consumer reporting agency is incomplete or inaccurate, the furnisher must report this determination to the consumer reporting agency. 15 U.S.C.A. § 1681s-2(b)(1)(C). A private right of action is available to consumers seeking to enforce these duties. Nelson v. Chase Manhattan Mortgage Corp., 282 F.3d 1057 (9th Cir. 2002).
Montgomery's complaint sets out three closely related claims, brought under the FCRA's furnisher provisions, discussed above, and California's Consumer Credit Reporting Agencies Act, Cal. Civ. Code § 1785.1, et seq. ("CCRAA"), and Unfair Competition Law, Cal. Bus. & Prof. Code § 17200 et seq. ("UCL"). The CCRAA's furnisher provision mandates, in pertinent part, that "[a] person shall not furnish information on a specifictransaction or experience to any consumer credit reporting agency if the person knows or should know the information is incomplete or inaccurate." Cal. Civ. Code § 1785.25(a). Sections 1785.25(g) and 1785.31(a) of the California Civil Code provide for private rights of action to enforce § 1785.25(a), quoted above. A third mechanism for enforcing the CCRAA against a furnisher is found in the UCL. The UCL "does not impose any duties" on furnishers; in this context, it "is merely another vehicle for enforcing section 1725.25(a)." Mortimer v. J.P. Morgan Chase Bank, 2012 WL 3155563, at *6 (N.D. Cal. Aug. 2, 2012); see also Farmers Ins. Exch. v. Superior Ct., 2 Cal. 4th 377, 383 (Cal. 1992) ().
Because the CCRAA's requirements of completeness and accuracy mirror those found in the FCRA, judicial interpretations of the federal provisions are "persuasive authority and entitled to substantial weight when interpreting the California provisions." Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 889 (9th Cir. 2010) (internal quotation marks and citation omitted). This element of Montgomery's claims under the CCRAA and UCL therefore will not be considered separately from the parallel element in her FCRA claim.
The dispute in the present case centers around the significance of the term "charge off." The FCRA permits credit reporting agencies to retain a notation in an individual's credit report that a debt has been "charged to profit and loss" - in other words, charged off - for seven years. 15 U.S.C. § 1681c(a)(4). Black's Law Dictionary, defines "charge off" as "to treat (an account receivable) as a loss or expense because payment is unlikely; to treat as a bad debt." Black's Law Dictionary 266 (9th Ed. 2009). "Bad debt," in turn, is defined as "[a] debt that is uncollectible and that may be deductible for tax purposes." Id. at 462.
Wells Fargo argues that its reporting of Montgomery's discharged debt as charged off is accurate because Wells Fargo treats the account as bad debt. Montgomery contends that Wells Fargo's reporting is inaccurate because the "charged off" notation suggests that the debt is legally, if not practically, collectable. In support of her position, Montgomery cites to a Federal Trade Commission staff opinion letter which states that:
In our view, it is not a reasonable procedure to label an account that has been discharged in bankruptcy as "charged off as bad debt" if the account...
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