Opinion
3:21-cv-00242-SB
11-02-2021
CEDAR KELLY, Plaintiff, v. EXPERIAN INFORMATION SOLUTIONS, INC. et al., Defendants.
FINDINGS AND RECOMMENDATION
HON. STACIE F. BECKERMAN, UNITED STATES MAGISTRATE JUDGE
Cedar Kelly (“Kelly”) brings this action against TD Bank USA, N.A. (“TD Bank”), among others, alleging violations of the Fair Credit Reporting Act (“FCRA”). TD Bank moves to dismiss Kelly's claim against it for failure to state a claim upon which relief can be granted. The Court has jurisdiction over this matter pursuant to 28 U.S.C. § 1331. For the reasons explained below, the Court recommends that the district judge grant TB Bank's motion to dismiss.
Although Kelly's complaint alleges four FCRA claims against TD Bank, the other named defendants, and unnamed Doe defendants (see Compl. at 9, 12, 14-15), Kelly acknowledges that he is only bringing one claim against TD Bank. (See Pl.'s Opp'n to Def.'s Mot. to Dismiss (“Pl.'s Opp'n”) at 8, noting that Kelly's “cause of action [against TD Bank] alleges a violation of 15 U.S.C. § 1681s-2(b)”; see also Compl. ¶¶ 75, 97, alleging that TD Bank violated this FCRA provision).
LEGAL STANDARDS
To survive a motion to dismiss under Fed.R.Civ.P. 12(b)(6), a plaintiff's “complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). “The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Mashiri v. Epsten Grinnell & Howell, 845 F.3d 984, 988 (9th Cir. 2017) (simplified).
DISCUSSION
Kelly's FCRA claim against TD Bank is based on the theory that TD Bank inaccurately reported that Kelly's TD Bank account had been “charged[d] off more than once, ” even though a “single debt can only be charged off one time[.]” (Compl. ¶¶ 2, 10, 56, 61-62, 69, 96-100.) TD Bank argues that Kelly's FCRA claim fails to state a claim upon which relief can be granted. The Court agrees and, therefore, recommends that the district judge grant TD Bank's motion to dismiss.
In its motion to dismiss, TD Bank relies largely on Steinmetz v. American Honda Financial Corporation, 835 Fed.Appx. 199 (9th Cir. 2020), a recent Ninth Circuit opinion affirming the dismissal of an almost identical FCRA claim. In Steinmetz, as here, the plaintiff based his FCRA claim on a creditor's reporting of “multiple charge-offs” where it was “undisputed that an account can be charged off only once.” Id. at 201. In affirming the district court's dismissal of the claim, the Ninth Circuit held that “[t]he report of multiple charge-offs does not support a plausible claim under [FCRA], because [the plaintiff] failed to plead that anyone would believe that the account had been charged off more than once, ” noting that “the standard for actionable [FCRA] conduct is that the imprecision alleged could negatively affect credit decisions.” Id. (citing Shaw v. Experian Info. Sols., Inc., 891 F.3d 749, 757 (9th Cir. 2018)).
The district court in Steinmetz made similar observations: “Steinmetz contends that listing multiple ‘charge-offs' on his Syncb/Sam's Club account was . . . inaccurate, as these tradelines could only be charged off once. Indeed, the parties tacitly agree that an account can be charged-off only once. . . . Consequently, there is nothing to indicate, as Steinmetz intimates, that anyone would believe there has been more than one charge off because, as all parties agree, there is only one charge off event. Further, Steinmetz has failed to allege how reporting charge-offs on a single tradeline in consecutive months would be misleading in such a way and to such an extent that it can be expected to adversely affect credit decisions.” Steinmetz v. Am. Honda Fin., No. 2:19-cv-00064, 2019 WL 4415090, at *5 (D. Nev. Sept. 16, 2019) (simplified), aff'd in part & rev'd in part, 835 Fed.Appx. at 200-02.
Kelly asserts that TD Bank's reliance on Steinmetz is misplaced. Kelly argues that “[a] crucial distinction between [his] allegations and those set forth in Steinmetz . . . is that . . . most lenders . . . only review a consumer's FICO Score, or average of scores, in order to make determinations on [extending] credit” and “[a] charge off repeated month after month increases [the] frequency and recency of the derogatory reporting, and in turn decreases the FICO Score more and more with each additional notation.” (Pl.'s Opp'n at 9.) Kelly relies instead on Wilson v. Equifax Information Services, LLC, No. 2:19-cv-00055-RFB, 2020 WL 2771184, at *1 (D. Nev. May 27, 2020) (Pl.'s Opp'n at 9), but that case predated the Ninth Circuit's decision in Steinmetz.
The Court finds that Kelly has failed meaningfully to distinguish Steinmetz. Kelly's allegations here are nearly identical to the Steinmetz plaintiff's allegations. The Steinmetz plaintiff complained about “multiple charge-off notations” on his account which he asserted were “inaccurate” because the account “[t]radelines could only be charged off once.” Compl. at 11-12, Steinmetz v. Am. Honda Fin., No. 2:19-cv-00064-JC-VCF (D. Nev. Mar. 11, 2019), ECF No. 44. Like here, the Steinmetz plaintiff did not dispute that that he was personally responsible for the charged-off debt, nor that his tradelines were, in fact, charged-off. See Steinmetz, 2019 WL 4415090, at *5. Notably, the Steinmetz plaintiff alleged that the defendant's reporting of multiple charge-offs for one tradeline “damaged” and “diminished” his “creditworthiness” and caused him to be “skeptical about applying for credit for fear of being denied.” (Steinmetz Compl. at 21, 23.)
The Court takes judicial notice of the operative Steinmetz complaint. See Blyden v. Navient Corp., No. 14-cv-02456, 2016 WL 6601658, at *1 n.4 (C.D. Cal. Feb. 16, 2016) (“[T]he Court takes judicial notice of these documents on its own motion as they are court filings in the public record and are related to the matter before the Court.”) (simplified).
“A tradeline is an account entry on a credit report and, in addition to the name and address of the creditor, typically includes information like the ‘account type, opening date of account, credit limit, account status, and payment history.'” Dreher v. Experian Info. Sols., Inc., 856 F.3d 337, 341 (4th Cir. 2017) (quoting Trans Union Corp. v. Fed. Trade Comm'n, 245 F.3d 809, 812 (D.C. Cir. 2001)).
Similarly here, Kelly alleges that his “TD Bank account is being reported as a charge off more than once, which is inaccurate”; that a “charge off is a one-time event”; and that “a single debt cannot be charged off repeatedly.” (Compl. ¶¶ 10-11.) Kelly alleges that he has been “denied credit [by an unnamed lender] and is unable to rebuild his credit based on the inaccurate reporting by [TD Bank].” (Compl. ¶ 74.) As particularly relevant to the Court's analysis here, Kelly alleges that the reporting of multiple charge-offs impacted his creditworthiness and, specifically, his FICO credit score. (See Compl. ¶¶ 13, 19, 23, 28, 30-32, 69, alleging that “[d]ifferent lenders use different versions of FICO Scores when evaluating a consumer's creditworthiness”; FICO “uses mathematical algorithms to predict . . . credit risk”; “repeated charge offs compound the derogatory impact [on a credit score, ] as seen by the tally of the total number of charge offs on a given account which is listed in the account summary”; “[t]here are five (5) key factors that a FICO Score considers [including] payment history”; “thirty-five percent (35%) of a consumer's FICO Score relate to payment history”; “[t]he more severe, recent, or frequent the late payment information, the greater the impact on a FICO Score”; “[r]epeated derogatory payment history (e.g., repeated monthly ‘CO' [or charge-off] notations) increases the recency and frequency calculation; therefore, repeated negative items in the payment history [are] more sever[e] and detrimental to a FICO Score”; each of TD Bank's multiple charge-offs is “increasing the frequency and recency of the derogatory reporting, and therefore, compounding the negative impact on [Kelly's] FICO Score”; and “[t]his inaccurate and misleading [reporting of payment history] causes specific harm to [Kelly's] FICO score and his ability to obtain new credit”).
Kelly attempts to distinguish Steinmetz on the ground that the Steinmetz plaintiff did not specifically allege that the frequency and timing of multiple charge-offs impacted his FICO credit score (Pl.'s Opp'n at 9), but the Steinmetz plaintiff did so allege. See Steinmetz Compl. at 21-23 (alleging that “third parties [had] accessed and obtained his credit report”; “payment history is a major factor in credit scoring models”; “a consumer's payment history makes up 35% of the FICO score”; “[the defendant] recognize[d] that payment history is the ‘most influential' factor for both FICO score factors and for VantageScore, another widely used credit reporting product”; “[the defendant's] list of ‘score factors' . . . indicates the presence of numerous coded ‘Adverse Action Reason[s]' which suggest that payment history on an account can serve as a significant factor in establishing a credit score”; and “[the defendant's] list of ‘score factors' also indicate numerous items suggesting that the timing of information on a payment history grid-such as multiple charge-offs [for a single account]-can serve as a factor in establishing a credit score”). Although the Ninth Circuit did not specifically address the Steinmetz plaintiff's allegations about the impact of multiple charge-offs on his credit score, the plaintiff in that case raised the same allegations Kelly raises here.
The Court concludes that Kelly's theory of FCRA liability is the same theory the Ninth Circuit rejected in Steinmetz. Notably, Kelly and the plaintiff in Steinmetz both claim that the continued reporting of a charge-off following a single charge-off event damaged their creditworthiness and ability to obtain credit. As in Steinmetz, it is undisputed here that a creditor may charge off an account only once and thus there is only one charge-off event, regardless of whether the defendant continues to report that the account was, in fact, charged off. Accordingly, as in Steinmetz, “[t]he report of multiple charge-offs does not support a plausible claim under [FCRA]” where it is not plausible that anyone would believe that the account had been charged off more than once. Steinmetz, 835 Fed.Appx. at 201; see also Steinmetz, 2019 WL 4415090, at *5 (“Consequently, there is nothing to indicate, as Steinmetz intimates, that anyone would believe there has been more than one charge off because, as all parties agree, there is only one charge off event.”).
The Court also notes that Kelly's allegations about how the continued reporting of the charge-off impacted his ability to obtain credit are speculative and conclusory, and he fails plausibly to allege either that the continued reporting of the single charge-off impacted his credit score or that a lender denied him credit based only on his credit score. (See Compl. ¶ 36, “If a lender . . . did look past the FICO Score into a consumer's reports, chances are they either do not understand the tradeline meanings themselves, or, if they do and realize something appears incorrect, they are incapable of recalculating the complex mathematical algorithms in a FICO Score to take the found error into consideration” (emphasis added); Compl. ¶ 70, alleging only that “most lenders” do not “pour[] through each tradeline of every account listed to obtain context, ” i.e., there was only one charge-off event for the account, and instead “approve or deny credit based [only] on a consumer's credit score”; but cf. Compl. ¶ 99, alleging that TD Bank, a company that provides personal banking services, “should have known its account could not be charged off multiple times on a monthly basis”).
Consistent with the Ninth Circuit's Steinmetz opinion affirming the dismissal of a nearly identical FCRA claim, the district judge should dismiss Kelly's FCRA claim against TD Bank.
CONCLUSION
For the reasons stated, the Court recommends that the district judge GRANT TD Bank's motion to dismiss (ECF No. 27).
SCHEDULING ORDER
The Court will refer its Findings and Recommendation to a district judge. Objections, if any, are due within fourteen (14) days. If no objections are filed, the Findings and Recommendation will go under advisement on that date. If objections are filed, a response is due within fourteen (14) days. When the response is due or filed, whichever date is earlier, the Findings and Recommendation will go under advisement.