Opinion
Case No. 2:22-cv-3331
10-11-2023
Hannah CUNNINGHAM, et al., Plaintiffs, v. TRANS UNION, LLC, et al., Defendants.
John N. Ellem, Ellem Law Office, Parkersburg, WV, Benjamin Matthew Sheridan, Pro Hac Vice, Klein & Sheridan, LC, Hurricane, WV, Susan Mary Rotkis, Pro Hac Vice, Consumer Attorneys PLC, Tucson, AZ, for Plaintiffs. William Madison Huse, Schuckit & Associates, P.C., Zionsville, IN, Albert E. Hartmann, Pro Hac Vice, Michael O'Neil, Pro Hac Vice, Reed Smith, LLP, Chicago, IL, for Defendant Trans Union, LLC.
John N. Ellem, Ellem Law Office, Parkersburg, WV, Benjamin Matthew Sheridan, Pro Hac Vice, Klein & Sheridan, LC, Hurricane, WV, Susan Mary Rotkis, Pro Hac Vice, Consumer Attorneys PLC, Tucson, AZ, for Plaintiffs. William Madison Huse, Schuckit & Associates, P.C., Zionsville, IN, Albert E. Hartmann, Pro Hac Vice, Michael O'Neil, Pro Hac Vice, Reed Smith, LLP, Chicago, IL, for Defendant Trans Union, LLC. OPINION AND ORDER MICHAEL H. WATSON, JUDGE
Experian Information Solutions, Inc. and Equifax Information Services LLC (collectively "Defendants") move to dismiss Hannah Cunningham's and Nancy Carl's (collectively "Plaintiffs") claims against them. ECF No. 55. For the following reasons, the motion is GRANTED.
As an initial matter, the parties recently moved to stay discovery pending a ruling on the motion to dismiss. Mot., ECF No. 66. Because this Opinion and Order rules on the motion to dismiss, the motion to stay discovery is DENIED AS MOOT.
I. FACTS
The Court accepts Plaintiffs' factual allegations as true for Defendants' motion. Wamer v. Univ. of Toledo, 27 F.4th 461, 466 (6th Cir. 2022).
Defendants are consumer reporting agencies ("CRA"). Am. Compl. ¶¶ 10, 13, ECF No. 52. In 2020, Plaintiffs co-signed on a lease for an apartment. Id. ¶¶ 19-20. After some negotiations with the apartment complex, Plaintiffs decided "not to proceed" with the lease agreement. Id. ¶¶ 23-24. The apartment complex demanded full payment of lease (the "Lease Debt") and referred collection of the Lease Debt to National Credit Systems, Inc. Id. ¶¶ 26-27. When Plaintiffs refused to pay, National Credit Systems, Inc. reported to Defendant and another CRA (the "Delinquency Information") that Plaintiffs were delinquent on the Lease Debt. Id. ¶ 28. Plaintiffs twice wrote to all three credit bureaus, disputing that they owed the Lease Debt. Id. ¶ 29, 32. In Plaintiffs' view, there was never a final lease contract and, therefore, Plaintiffs had no obligation to pay the Lease Debt. Id. ¶ 30. None of the credit bureaus corrected the Delinquency Information on Plaintiffs' consumer reports. Id. ¶¶ 31, 36. Plaintiffs allege that, as a result of the Delinquency Information on their Reports, they have lost credit opportunities and have a lower credit score. Id. ¶¶ 62-63.
II. STANDARD OF REVIEW
A complaint survives a motion to dismiss under Rule 12(b)(6) if it "contain[s] 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, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007)). "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." Id. (quoting Twombly, 550 U.S. at 556, 127 S.Ct. 1955). This standard "calls for enough fact to raise a reasonable expectation that discovery will reveal evidence of [unlawful conduct]." Twombly, 550 U.S. at 556, 127 S.Ct. 1955. A pleading's "[f]actual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the [pleading] are true (even if doubtful in fact)." Id. at 555, 127 S.Ct. 1955 (internal citations omitted). At the motion-to-dismiss stage, a district court must "construe the complaint in the light most favorable to the plaintiff, accept its allegations as true, and draw all reasonable inferences in favor of the plaintiff." Wamer, 27 F.4th at 466 (internal quotation marks and citations omitted). However, the non-moving party must provide "more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555, 127 S.Ct. 1955.
III. ANALYSIS
As labelled in the Amended Complaint, Plaintiffs assert two claims against Defendants on an individual and class-wide basis: (1) a violation of the Federal Fair Credit Reporting Act ("FCRA"), specifically 15 U.S.C. § 1681e(b) ("Section 1681e(b)"); and (2) defamation. Am. Compl. ¶¶ 78-88, ECF No. 52.
Plaintiffs have since clarified that they did not intend to label their second claim "defamation" and that it is, instead, an FCRA claim alleging violations of 15 U.S.C. § 1681i(a) ("Section 1681i(a)"). Resp. 20, ECF No. 57. Whether the Court allows this constructive amendment or construes Plaintiffs' representation as a motion for leave to amend, the result is ultimately the same because Plaintiffs' Section 1681i(a) claim fails as a matter of law. The Section 1681i(a) claim fails for the same reason the Section 1681e(b) fails: allegations that a CRA's report or file contain legal inaccuracies is not a cognizable claim under the FCRA.
To state a claim under Section 1681e(b), a plaintiff must allege, among other things, that "the defendant reported inaccurate information about the plaintiff." Twumasi-Ankrah v. Checkr, Inc., 954 F.3d 938, 941 (6th Cir. 2020) (quotation marks and citation omitted). Similarly, to assert a claim under Section 1681i(a), a plaintiff must allege that the CRA's file contains an inaccuracy. Jones v. Equifax Info. Servs., LLC, No. 2:18-CV-2814-JPM-CGC, 2019 WL 5872516, at *3 (W.D. Tenn. Aug. 8, 2019) (citing cases).
Defendant argues that, to state a claim under either Section 1681e(b) or Section 1681 i(a), a plaintiff must allege that the CRA's file or report contains a factual inaccuracy, not a legal inaccuracy. Mot. 7-14, ECF No. 55. Further, Defendants argue, because Plaintiffs are disputing the legal validity of the Lease Debt, they have failed to state a claim under Section 1681e(b) or Section 1681i(a). Id.
Although the Sixth Circuit has not addressed the issue, several circuits have concluded that a claim alleging that a credit report contains legal inaccuracies is not a cognizable claim under the FCRA. See, e.g., Denan v. Trans Union LLC, 959 F.3d 290, 296 (7th Cir. 2020) (interpreting "inaccurate information under § 1681i [and § 1681e] to mean factually inaccurate information, as consumer reporting agencies are neither qualified nor obligated to resolve legal issues"); Wright v. Experian Info. Sols., Inc., 805 F.3d 1232, 1244 (10th Cir. 2015) (concluding that the "FCRA and relevant case law do not impose such a duty [to investigate the legal validity of a tax lien] on the CRAs."); Phillips v. Archstone Simi Valley LLC, 740 F. App'x 603 (Mem), 604 (9th Cir. 2018) (agreeing with the district court that the plaintiff did not state a claim under Section 1681e(b) and Section 1681i(a) because the allegations "concerned the legal validity of the alleged debt and therefore did not constitute inaccurate information for the purposes of the FCRA"); see also Losch v. Nationstar Mortg. LLC, 995 F.3d 937, 946 (11th Cir. 2021) (noting that "a reasonable reinvestigation does not require credit-reporting agencies to resolve legal disputes about the validity of the underlying debts they report," but concluding the at-issue dispute was factual (cleaned up)); but see Sessa v. Trans Union, LLC, 74 F.4th 38, 43 (2d Cir. 2023) ("[T]here is no bright-line rule providing . . . that only purely factual or transcription errors are actionable under the FCRA.").
Moreover, at least one other district court in this circuit reached a similar conclusion. See Hyde v. Trans Union, LLC, No. 2:21-CV-230, 2023 WL 2816029 (W.D. Mich. Feb. 3, 2023), report and recommendation adopted, No. 2:21-CV-230, 2023 WL 2399831 (W.D. Mich. Mar. 8, 2023), reconsideration denied, No. 2:21-CV-230, 2023 WL 5016651 (W.D. Mich. Apr. 5, 2023). The Hyde court held that, although the FCRA requires CRAs "to take reasonable measures to ensure that they are reporting factually accurate information," CRAs "are neither qualified, nor obligated to resolve legal issues under the FCRA." Id. at *4 (cleaned up and citing cases).
This Court now adopts the reasoning of Hyde—and of several circuit courts—and holds that claims that a credit report or file contains legal inaccuracies "are not cognizable under the FCRA." Hyde, 2023 WL 2816029, at * 4 (quotation marks and citation omitted). First, the FCRA and its implementing regulations place a duty on furnishers of credit information (here, the apartment complex) to provide information that correctly reflects the "liability for the account." 12 C.F.R. § 1022.41. However, neither "FCRA nor its implementing regulations impose a comparable duty upon consumer reporting agencies, much less a duty to determine the legality of a disputed debt." Denan, 959 F.3d at 295. Second, as other courts have explained, CRAs are not tribunals or courts and are "neither qualified, nor obligated to resolve legal issues under the FCRA." Hyde, 2023 WL 2816029, at *4 (cleaned up). In sum, if an FCRA plaintiff points to only legal (rather than factual) inaccuracies, she does not state a claim under the FCRA.
Here, the heart of Plaintiffs' claims is that the Delinquency Information was incorrect because Plaintiffs were not legally obligated to pay the Lease Debt. This dispute is legal, not factual. See Chaitoff v. Experian Info. Sols., Inc., 79 F.4th 800, 815 (7th Cir. 2023) ("[L]egal disputes amount to collateral attacks on the disputed debt."). As a result, Plaintiffs' claims are not cognizable under the FCRA.
Plaintiffs disagree. First, Plaintiffs argue the CRAs have an obligation to follow reasonable procedures to ensure the maximum possible accuracy in their reports, conduct reinvestigations as required by statute, and "do more than parrot the investigation results of a furnisher." Resp. 3-10, ECF No. 57. The Court agrees with those broad statements. However, these statements have little to do with whether a claim alleging legal inaccuracies in a file or report is cognizable under the FCRA.
Next, Plaintiffs argue the Court should adopt the Second Circuit's rule in Sessa. As noted above, Sessa concluded that "there is no bright-line rule" that "only purely factual or transcription errors are actionable under the FCRA." 74 F.4th at 43. Instead, the Sessa test is whether the inaccuracies are "objectively and readily verifiable." Id. (cleaned up). For the reasons explained above, the Court declines to adopt Sessa's rule. However, even if the Court were to adopt that rule, it would not help Plaintiffs here. Plaintiffs allege that there is a lease contract signed by all parties, but that, despite the signatures, the contract was never finalized and, therefore, is not valid or enforceable. Am. Compl. ¶¶ 19-30, ECF No. 52. Thus, Plaintiffs' alleged inaccuracy is not "objectively and readily verifiable." Instead, Plaintiffs raise precisely the kind of legal dispute CRAs are ill-equipped to handle. See Denan, 959 F.3d at 295 ("The power to resolve these legal issues exceeds the competencies of consumer reporting agencies."). Thus, Plaintiffs' Sessa argument is unavailing.
Similarly, Plaintiffs mistakenly rely on Chaitoff. 79 F.4th 800. According to Plaintiffs, Chaitoff casts doubt on earlier Seventh Circuit cases' conclusions that FCRA claims must allege a factual, not a legal, inaccuracy. Mot. 2, ECF No. 60. Not so. Chaitoff does not reject the earlier distinction between factual and legal inaccuracies. 79 F.4th at 814. Instead, Chaitoff merely concludes that the at-issue inaccuracy was factual and, therefore, was a "question within the competency of a CRA to identify and correct." Id. Accordingly, Plaintiffs' reliance on Chaitoff misses the mark.
Plaintiffs also argue that their disputes were factual, not legal. Plaintiffs assert that:
(1) [Plaintiffs] had not agreed to the conditions proposed by [the apartment complex] and, therefore, could not possibly owe any rent because there was no lease, and (2) the premises had been leased to a third party and had thus not been empty for an entire year and therefore (even if Plaintiffs had agreed to the lease) Plaintiffs could not possibly
owe an entire year's rent to [the apartment complex.Resp. 14, ECF No. 57.
Plaintiffs' framing of these questions as "factual" is unpersuasive. First, take Plaintiffs' alleged rejection of the apartment complex's conditions. It is true that whether Plaintiffs rejected these conditions could be a factual issue. However, whether the resolution of that factual dispute matters depends on the resolution of legal issues. For example: was the rejection valid? Do the apartment complex's allegedly additional conditions constitute a counteroffer? Or, are those additional conditions better understood as an attempt to amend an already-formed contract? What was the legal effect of either? Similarly, whether Plaintiffs' proposed apartment was leased to someone else is a factual question. Also similarly, however, whether the answer to that factual question matters turns on legal questions: does Texas have a default rule for mitigation of damages in housing leases? What is that rule and how does it apply? Or, in the alternative, does the rule depend on the language of the lease? If so, what does this lease say about it? Again, a CRA is not well positioned to address those legal questions. See Denan, 959 F.3d at 295. Put simply, Plaintiffs' argument that they pointed to factual, not legal, inaccuracies is unconvincing.
Finally, Plaintiffs argue that, under Defendants' rule, any consumer dispute could be labelled "legal" and, therefore, CRAs would routinely avoid liability. Resp. 15, ECF No. 57. The Court need not and will not decide whether future, unknown, and abstract alleged inaccuracies would be "legal" or "factual," because the Court does not rule on hypotheticals. See Detroit Fire Fighters Ass'n, Loc. No. 344, I.A.F.F. v. Dixon, 572 F.2d 557, 559 (6th Cir. 1978) (per curiam) ("Courts do not rule on hypothetical cases."). The Court decides only that the dispute in this case is legal and, therefore, Plaintiffs have not stated a cognizable claim under the FCRA.
At bottom, all of Plaintiffs' arguments are unpersuasive. Plaintiffs' allegations are based on their contention that the Reports contained legal inaccuracies. As a result, Plaintiffs' claims are not cognizable under the FCRA.
IV. CONCLUSION
For these reasons, Plaintiffs' claims against Defendants are DISMISSED WITH PREJUDICE. Plaintiffs are ORDERED to show cause WITHIN FOURTEEN DAYS why Claims I and II should not also be dismissed as to Defendant Trans Union, LLC.
The Clerk shall terminate ECF Nos. 55 and 66; the Clerk shall also terminate Experian Information Solutions, Inc. and Equifax Information Services LLC as Defendants.
IT IS SO ORDERED.