Opinion
CIVIL 6:23-CV-686
05-20-2024
TAILEIA GLASS, et al, Plaintiff, v. BREAD FINANCIAL HOLDINGS, INC., D.B.A. COMENITY CAPITAL BANK, MIDLAND CREDIT MANAGEMENT, INC., SCOTT & ASSOCIATES, P.C., EXPERIAN INFORMATION SOLUTIONS, INC. EQUIFAX INFORMATION SERVICES LLC, and TRANS UNION, LLC, Defendants.
TO: THE HONORABLE ALAN D ALBRIGHT, UNITED STATES DISTRICT JUDGE
REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE
JEFFREY C. MANSKE, UNITED STATES MAGISTRATE JUDGE.
This Report and Recommendation is submitted to the Court pursuant to 28 U.S.C. § 636(b)(1)(C), Fed.R.Civ.P. 72(b), and Rules 1(f) and 4(b) of Appendix C of the Local Rules of the United States District Court for the Western District of Texas, Local Rules for the Assignment of Duties to United States Magistrate Judges. Before the Court are Defendants Trans Union, LLC, Equifax Information Services LLC, and Experian Information Solutions, Inc.'s Joint Motion for Judgments on the Pleadings (ECF No. 32), Plaintiff's Response (ECF No. 33), and Defendants' Reply (ECF No. 35). For the following reasons, the undersigned RECOMMENDS Defendants' Motion be GRANTED.
I. BACKGROUND
In May 2020, Plaintiff Taileia Glass took out a $13,510 loan from Defendant Comenity Bank to pay for a medical procedure. Pl.'s Compl. at ¶ 20 (ECF No. 1). Plaintiff alleges that Comenity wrongfully froze her account two months later, making it impossible to make payments. Id. at ¶ 22. Defendant Midland Credit Management bought the account from Comenity in early 2021 and placed it in a collections account. Id. at ¶¶ 27-28. Scott & Associates, P.C., also a Defendant, sent a letter to Plaintiff seeking to collect on the account in August 2023. Id. at ¶ 33.
Three other defendants, Equifax Information Services, LLC; Experian Information Services, Inc.; and Trans Union, LLC (“CRA Defendants”), are consumer reporting agencies that furnish consumer information commonly known as “credit reports.” Id. at ¶¶ 9-11. The CRA Defendants published information about Plaintiff's debt being in a collections account. Id. at ¶¶ 43-45. Plaintiff alleges several legal harms from this misreporting: loss of creditworthiness, damage to her reputation, severe emotional distress, and inability to finish medical procedures. Pl.'s Compl. at ¶ 121. Plaintiff sued the CRA Defendants under §§ 1681(e)(b) and 1681(i)(a) of the Fair Credit Reporting Act (“FCRA”). The CRA Defendants moved for judgment on the pleadings under Fed.R.Civ.P. 12(c).
II. LEGAL STANDARDS
Federal Rule of Civil Procedure 12(c) provides that “[a]fter the pleadings are closed-but early enough to not delay trial-a party may move for judgment on the pleadings.” Fed.R.Civ.P. 12(c). A Rule 12(c) motion for judgment on the pleadings permits a court to dispose of a case at any time before trial “where the material facts are not in dispute and judgment on the merits can be rendered by looking at the substance of the pleadings and any judicially noted facts.” Hebert Abstract Co. v. Touchstone Props., Ltd., 914 F.2d 74, 76 (5th Cir. 2010).
“Rule 12(b)(6) decisions appropriately guide the application of Rule 12(c) because the standards for deciding motions under both rules are the same.” Grant Plains Tr. Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 313 n.8 (5th Cir. 2002). In deciding a 12(b)(6) motion, a “court accepts all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff.” In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) (quoting Martin K. Eby Constr. Co. v. Dall. Area Rapid Transit, 369 F.3d 464, 467 (5th Cir. 2004)). “To survive a Rule 12(b)(6) motion to dismiss, a complaint ‘does not need detailed factual allegations,' but must provide the plaintiff's grounds for entitlement to relief-including factual allegations that when assumed to be true ‘raise a right to relief above the speculative level.'” Culliver v. Taylor, 503 F.3d 397, 401 (5th Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). That is, “a 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 (2009) (quoting Twombly, 550 U.S. at 570).
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. “The tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions. Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. A court ruling on a 12(b)(6) motion may rely on the complaint, its proper attachments, “documents incorporated into the complaint by reference, and matters of which a court may take judicial notice.” Dorsey v. Portfolio Equities, Inc., 540 F.3d 333, 338 (5th Cir. 2008) (citations and internal quotation marks omitted). A court may also consider documents that a defendant attaches to a motion to dismiss “if they are referred to in the plaintiff's complaint and are central to her claim.” Causey v. Sewell Cadillac-Chevrolet, Inc., 394 F.3d 285, 288 (5th Cir. 2004). But because the court reviews only the well-pleaded facts in the complaint, it may not consider new factual allegations made outside the complaint. Dorsey, 540 F.3d at 338. “[A] motion to dismiss under 12(b)(6) ‘is viewed with disfavor and is rarely granted.'” Turner v. Pleasant, 663 F.3d 770, 775 (5th Cir. 2011) (quoting Harrington v. State Farm Fire & Cas. Co., 563 F.3d 141, 147 (5th Cir. 2009).
III. DISCUSSION
A. The CRA Defendants' Motion should be granted because they are not required to determine the legal validity of a debt.
Claims under §§ 1681(e)(b) and 1681(i)(a) of the FCRA require a plaintiff to establish both (1) inaccurate reporting by a CRA, and (2) that the CRA failed to conduct a reasonable investigation into the dispute. Washington v. CSC Credit Servs., Inc., 199 F.3d 263, 267 (5th Cir. 2000). The FCRA does not impose a duty on CRAs to resolve issues regarding the legal validity of the debt. DeAndrade v. Trans Union, 523 F.3d 61, 68 (1st Cir. 2008). Challenges to the legal validity of a debt are dismissible “collateral attacks” that do not fall within the intended scope of the FCRA. Id. (“this is not a factual inaccuracy that could have been uncovered by a reasonable investigation, but rather a legal issue that a credit agency ... is neither qualified nor obligated to resolve under the FCRA”). The legal question, therefore, is whether the CRA Defendants' alleged misreporting stems from a factual inaccuracy or a legal dispute. Chuluunbat v. Experian Info. Sols., Inc., 4 F.4th 562, 568 (7th Cir. 2021).
Challenges to the validity of a debt are generally legal disputes. See DeAndre, 523 F.3d at 67. Examples of factual inaccuracies in a debt include the amount of the debt or when a consumer opened an account. Chuluunbat, 4 F.4th at 568. An argument that a debt exists and is reported in the right amount but is invalid due to a violation of law is a legal issue. Id. The key inquiry is “whether an alleged inaccuracy turns on applying law to facts or simply examining the facts alone.” Id.
Here, Plaintiff does not allege that the debt does not exist or is reported in the wrong amount. See Pl.'s Resp. at 6-7. Instead, Plaintiff argues the debt was improperly classified as a collections account and that this is a factual issue. Id. But to determine the proper status of the account, the CRA Defendants would have to resolve the ongoing legal dispute between Plaintiff, Comenity, and Midland. See Defs.' Reply at 3. The FCRA imposes no such obligation. Wright v. Experian Info. Sols., Inc., 805 F.3d 1232, 1242 (10th Cir. 2015) (“A reasonable investigation ... does not require CRAs to resolve legal disputes about the validity of the underlying debts they report”).
The CRA Defendants bolster their claim by pointing out that the debt was plainly classified as a collections account by the lenders, and the CRA Defendants merely reported the account as it was described to them. Defs.' Mot. at 5. Courts widely recognize that the FCRA is not a vehicle for collateral attacks over the validity of consumer debts. Humphrey v. Trans Union LLC, 759 Fed.Appx. 484, 488 (7th Cir. 2019). If a lender's legal failure creates a misreported account, CRAs are not required to apply the law to resolve those parties' legal disputes. Chuluunbat, 4 F.4th at 568. Because any misreporting that occurred was due to legally disputed issues, the FCRA does not provide a claim for the CRA Defendants' alleged misreporting. See id.
In the alternative, Plaintiff argues that even if the debt's status is a legal dispute, the CRA Defendants are wrongly suggesting there is no duty to reasonably investigate, and that a reasonable trier of fact could conclude that the CRA Defendants conducted no investigation. Pl.'s Resp. at 5. Indeed, CRAs must have reasonable procedures and investigations. Washington, 199 F.3d at 267. However, plaintiffs may not challenge a CRA's procedures and investigations unless their pleadings plausibly suggest factually inaccurate reporting occurred. Chuluunbat, 4 F.4th at 566-67. Plaintiff pleads legally inaccurate, not factually inaccurate reporting. See Pl.'s Compl. at ¶¶ 28-34. Moreover, the parties agree that Defendants verified Plaintiff's debt status several times, indicating that at least some level of review occurred. Id. at ¶ 32. The CRA Defendants cannot be expected to further resolve the debt's underlying legal dispute. See Wright, 805 F.3d at 1242.
Plaintiff fails to plead any factual misreporting of a debt, but only pleads misreporting due to an underlying legal dispute. See Pl.'s Compl. at ¶¶ 28-34. The FCRA does not require CRAs to resolve legal disputes in their investigations. See Wright, 805 F.3d at 1242. Consequently, the CRA Defendants' Motion for Judgment on the Pleadings should be granted.
B. Plaintiff should not receive leave to amend her Complaint.
Plaintiff alternatively requests leave to amend her Complaint. Pl.'s Resp. at 8. Generally, district courts should freely grant leave to amend. Foman v. Davis, 371 U.S. 178, 182 (1962). However, if amendment would be futile, the Court need not grant leave. Id. Amendment is futile if the amended complaint would lack sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Thomas v. Chevron U.S.A., Inc., 832 F.3d 586, 588 (5th Cir. 2016).
Plaintiff argues that amendment would not be futile because “she could list additional facts that, taken as true, would demonstrate the CRAs failed to conduct a reasonable investigation[.]” Pl.'s Resp. at 8 (emphasis added). However, if a plaintiff does not explain what additional material facts she would add or how she would have overcome the deficiencies, the Court need not grant leave to amend. Goldsmith v. Hood Cnty. Jail, 299 Fed.Appx. 422, 423 (5th Cir. 2008). Here, Plaintiff does not elaborate as to which facts Plaintiff could plead to make her claim plausible. See Pl.'s Resp. at 8. Plaintiff only asserts that such facts exist but leaves details to the imagination. Id. Absent any detailed facts that would make the claim plausible, amendment is futile. Goldsmith, 299 Fed.Appx. at 423. The Court should, therefore, deny Plaintiff's request for leave to amend.
IV. CONCLUSION
For the foregoing reasons, the undersigned RECOMMENDS that the CRA Defendants Motion for Judgment on the Pleadings (ECF No. 32) be GRANTED.
V. OBJECTIONS
The parties may wish to file objections to this Report and Recommendation. Parties filing objections must specifically identify those findings or recommendations to which they object. The District Court need not consider frivolous, conclusive, or general objections. See Battle v. U.S. Parole Comm'n, 834 F.2d 419, 421 (5th Cir. 1987).
A party's failure to file written objections to the proposed findings and recommendations contained in this Report within fourteen (14) days after the party is served with a copy of the Report shall bar that party from de novo review by the District Court of the proposed findings and recommendations in the Report. See 28 U.S.C. § 636(b)(1)(C); Thomas v Arn, 474 U.S. 140, 150-53 (1985); Douglass v. United Servs. Auto. Ass'n, 79 F.3d 1415 (5th Cir. 1996) (en banc). Except upon grounds of plain error, failing to object shall further bar the party from appellate review of unobjected-to proposed factual findings and legal conclusions accepted by the District Court. See 28 U.S.C. § 636(b)(1)(C); Thomas, 474 U.S. at 150-53; Douglass, 79 F.3d at 1415.