Nelson v. Equifax Information Services, LLC

• Decision Date: 05 April 2007
• Docket Number: No. CV 06-1568 RGK (PLAx).,CV 06-1568 RGK (PLAx).
• Citation: 522 F.Supp.2d 1222
• Court: U.S. District Court — Central District of California
• Parties: Laura NELSON v. EQUIFAX INFORMATION SERVICES, LLC; Arrow Financial Services, LLC, et al.

522 F.Supp.2d 1222

Laura NELSON v. EQUIFAX INFORMATION SERVICES, LLC; Arrow Financial Services, LLC, et al.

No. CV 06-1568 RGK (PLAx).

United States District Court, C.D. California.

April 5, 2007.

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Agnes O. Martin, Brennan Wiener and Simons, Robert F. Brennan, Robert A. Wiener, Brennan Wiener & Associates, La Crescenta, CA, for Plaintiff.

Abraham J. Colman, David S. Reidy, Deborah E. Yim, Felicia Yu, Scott H. Jacobs, Reed Smith, Los Angeles, CA, for Defendants.

Proceedings: (IN CHAMBERS) Defendant Arrow Financial Services LLC's Motion for Summary Judgment or in the alternative, Summary Adjudication (DE 40)

R. GARY KLAUSNER, District Judge.

I. INTRODUCTION

Plaintiff Laura Nelson ("Nelson") filed her Complaint on March 14, 2006 against Equifax Information Services LLC ("Equifax"), Arrow Financial Services LLC ("Arrow"), Magna Services ("Magna"), and Direct Merchants Bank ("Direct") (collectively "Defendants") for violations of the Fair Credit Reporting Act ("FCRA"), Fair Debt Collection Practices Act ("FDCPA"), and Rosenthal Fair Debt Collection Practices Act ("California FDCPA"). Nelson's claims arise out of Defendants' alleged reporting of erroneous information on her credit report.

Arrow's Motion for Summary Judgment is currently before the Court.

II. FACTUAL BACKGROUND

The facts of the case are alleged as follows.

Equifax is one of three major credit reporting agencies that collects and reports consumer credit information. Arrow is a debt collection agency that performs collection services for creditors. Direct and Magna are creditors who collect debts on behalf of themselves and other creditors by reporting allegedly delinquent debts to credit reporting agencies. In November 2001, Direct reported an account ("Account") to Nelson's credit files for $187.00 past due. Nelson requested that the Account be removed from her credit report because it was not hers.¹ On January 10, 2002, Equifax deleted the Account from her credit report. However, in September 2002, Arrow on behalf of Direct, began attempting to collect the disputed $187.00 debt from Nelson and reported the disputed Account as an unpaid debt on her credit report.

On September 14, 2002, Nelson sent a certified letter to Magna, a subsidiary of Direct, disputing the Account as fraudulent. Nelson also sent copies of this letter to the three main credit reporting agencies, Equifax, Experian and Transunion ("CRAs"). Despite Nelson's letter, the Account continued to appear on her credit report, so she sent another certified letter to the CRAs on November 2, 2003. In response, on November 18, 2003, Direct sent a letter to Nelson stating that it instructed the CRAs to show the Account as transferred/sold with a zero balance. In December 2003, Nelson sent copies of Direct's letter to the CRAs. On December 22, 2003, Arrow sent Nelson a letter confirming that they had instructed the CRAs to "Delete Account from Trade Line."

In response to Nelson's and Arrow's letters, Equifax and Transunion deleted the Account from Nelson's credit report. However, Experian continued to report the Account. In May 2004, Nelson filed a separate state court action against Arrow and Experian alleging they improperly collected upon and reported to third parties information regarding the disputed Account. On May 25, 2004, that action was removed to federal court (Case Number CV 04-3679). On September 16, 2004, Nelson voluntarily dismissed Arrow without prejudice from that action. Arrow and Nelson entered into a Settlement Agreement dated February 24, 2005, wherein Nelson released Arrow of all known or unknown claims relating to the Account, including collection and reporting of the Account to third parties, including CRAs. Nelson also settled its claims against Experian, and the entire action was dismissed on March 8, 2005.

On August 20, 2005, Nelson received a suspicious bill collection call. In response, Nelson retrieved a copy of her Equifax credit report, which again listed the disputed Account. On September 28, 2005, Nelson sent an FCRA dispute letter to the CRAs. She also sent copies to Magna, Direct, and Arrow. On October 22, 2005, Equifax informed Nelson that the disputed Account was not reported on her Equifax file. Thereafter, Experian and Transunion stopped reporting the Account, but Equifax continued to report the Account.

The evidence shows that the Account continued to appear on Nelson's credit report as late as December 27, 2005. Arrow also continued to assess interest on the Account until March 18, 2006.

On March 14, 2006, Nelson filed her Complaint in the current action. In her Complaint, Nelson alleges Arrow (1) changed her account number to make investigation and deletion more difficult, (2) failed to properly re-investigate and delete the disputed Account from her credit report, and (3) re-reported the disputed Account, knowing it was false. Arrow now seeks summary judgment as to all claims alleged against it.

III. JUDICIAL STANDARD

A motion for summary judgment shall be granted if the "pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c).

Even if the moving party lacks the ultimate burden of persuasion at trial, it nonetheless has the initial burden of production on a motion for summary judgment. Nissan Fire & Marine Ins. Co., Ltd. v. Fritz Cos., Inc., 210 F.3d 1099, 1102 (9th Cir. 2000). A moving party lacking the burden of persuasion at trial may carry its burden of production by (1) demonstrating, through evidence, that there is no triable issue of material fact as to each element of the affirmative defenses and counterclaims or (2) showing that the nonmoving party lacks evidence for an essential element of a claim on which it carries the burden of persuasion at trial. Id.

IV. DISCUSSION

Under the federal statutory scheme, the FCRA governs the conduct of credit reporting agencies and furnishers of information, while the FDCPA governs the conduct of debt collectors. The California FDCPA governs the conduct of debt collectors, but defines "debt collector" more broadly than the FDCPA.² Based on the statutory definitions, Arrow is considered both a furnisher of information, as well as a debt collector.

For the foregoing reasons, the Court finds that Nelson has produced only sufficient evidence to, support her federal and California FDCPA claims; her remaining claims fail because they are not supported by the evidence, or are otherwise barred.

A. Violation of Fair Credit Reporting Act

The FCRA's purpose is to ensure CRAB adopt reasonable procedures so that consumers are treated fairly and equitably. 15 U.S.C. § 1681. FCRA Section 1681s-2 imposes duties on furnishers of information to CRAB to help achieve the FCRA's purpose. 15 U.S.C. 1681s-2.

Nelson alleges that Arrow, acting as a furnisher of information, violated the FCRA by failing to reinvestigate the disputed Account after receiving notice of such dispute from Equifax. In turn, Arrow contends that Nelson's FCRA claim fails because (1) there is no private right of action under FCRA Section 1682s-2(a), (2) Nelson bases her claim on Arrow's conduct which was released in the settlement agreement, (3) Arrow's statutory duty to investigate was not triggered, and (4) Nelson lacks evidence showing Arrow's alleged non-compliance was negligent or willful. For the following reasons, Arrow prevails on this claim.

1. Private Right of Action under FCRA

Nelson alleges that Arrow violated the FCRA under two provisions: Sections 1682s-2(a) and 1682s-2(b).

Arrow correctly points out that Nelson's FCRA Section 1682s-2(a) claim is barred because there is no private right of action for violations of that section of the statute. 15 U.S.C. § 1681s-2(d). The FCRA was enacted to ensure that credit reporting agencies use reasonable procedures which ensure fairness, impartiality, accuracy, and confidentiality. See 15 U.S.C. § 1681. However, enforcement of specific sections of the Act, like Section 1681s-2(a)'s duty on furnishers to report accurate information, is limited to federal agencies and officials and state officials. 15 U.S.C. § 1681s-2(d). Thus, to the extent that Nelson alleges violations of Section 1681s-2(a), Arrow's Motion is granted as to those claims.

Unlike FCRA Section 1681s-2(a), Section 1681s-2(b) is privately enforceable. Nelson v. Chase Manhattan Mortgage Corp., 282 F.3d 1057, 1060 (9th Cir.2002). Therefore, a private right of action exists under Section 1681s-2(b).

2. Nelson's FCRA Section 1681s-2(b) Claim and the Prior Settlement Agreement

Arrow contends that Nelson's 1681s-2(b) claim is barred because it is based on conduct that occurred prior to execution of the February 2005 Settlement Agreement and was released by that Agreement. Nelson does not challenge the ground on which Arrow bases its position. Rather, she argues that Arrow breached the Agreement, and therefore cannot claim the benefit of the Agreement.

As Arrow points out, the Settlement Agreement contains an explicit release of all claims relating to the Account, including unknown claims pursuant to a California Civil Code Section 1542 waiver.³ The Settlement Agreement also contains a choice of law provision providing that California law governs interpretation of the Agreement. Generally, California law dictates that a release "extinguishes any obligation covered by the release's terms, provided it has not been obtained by fraud, deception, misrepresentation, duress, or undue influence." Skrbina v. Fleming Cos., 45 Cal.App.4th 1353, 53 Cal.Rptr.2d 481, 488-89 (1996). Arrow contends that the release covers its alleged wrongful conduct and therefore, any claim based on that conduct fails. Nelson does...