Opinion
CIVIL ACTION NO. 1:20-CV-04735-JPB
2021-07-19
Ajimary NJIE, Plaintiff, v. EXPERIAN INFORMATION SOLUTIONS, INC., Defendant.
Jenna Dakroub, Price Law Group, APC, Scottsdale, AZ, for Plaintiff. Eric A. Nicholson, Pro Hac Vice, Jones Day, Detroit, MI, Andrew Mark Ellis, Jones Day, Atlanta, GA, for Defendant.
Jenna Dakroub, Price Law Group, APC, Scottsdale, AZ, for Plaintiff.
Eric A. Nicholson, Pro Hac Vice, Jones Day, Detroit, MI, Andrew Mark Ellis, Jones Day, Atlanta, GA, for Defendant.
ORDER
J. P. BOULEE, United States District Judge
This matter comes before the Court on the Magistrate Judge's Report and Recommendation [Doc. 41]. This Court finds as follows:
1 Absent objection, a district judge has broad discretion to accept, reject or modify a magistrate judge's proposed findings and recommendations. United States v. Raddatz , 447 U.S. 667, 680, 100 S.Ct. 2406, 65 L.Ed.2d 424 (1980). Because no objections have been filed, and in accordance with 28 U.S.C. § 636(b)(1) and Rule 72 of the Federal Rules of Civil Procedure, the Court has reviewed the Report and Recommendation for clear error and finds none.
Accordingly, the Court APPROVES AND ADOPTS the Report and Recommendation [Doc. 41] as the order of the Court. For the reasons stated in the Magistrate Judge's Report and Recommendation, Defendant Experian Information Solutions, Inc.’s Motion to Dismiss [Doc. 20] is DENIED.
The Clerk is DIRECTED to return this matter to the Magistrate Judge for further proceedings.
SO ORDERED this 19th day of July, 2021.
REPORT AND RECOMMENDATION
LINDA T. WALKER, UNITED STATES MAGISTRATE JUDGE
This case is before the Court on a Motion to Dismiss filed by Defendant Experian Information Solutions, Inc. ("Experian"). [Doc. 20]. For the following reasons, the undersigned RECOMMENDS that the Motion be DENIED .
BACKGROUND
Plaintiff filed for Chapter 7 bankruptcy in August 2019. [Doc. 1 ¶30]. None of Plaintiff's debts were declared nondischargeable, and in January 2020 Plaintiff was discharged. [Id. ¶¶31–32]. In her Complaint, Plaintiff alleges Experian is reporting an "Auto Finance Account (the ‘Account’) ... with a $9,408 Balance owed, a $361 Monthly Payment, and a Payment Status of ‘Current, was past due 30 days three times.’ " [Id. ¶37]. According to Plaintiff, it is inaccurate for Experian to report that she "owes money on the discharged Account" because she "is no longer personally liable for the debt[,]" and Experian has actual knowledge of Plaintiff's Chapter 7 bankruptcy discharge. [Id. ¶¶43–44]. Plaintiff alleges she suffered "emotional distress" and that Defendant's reporting has resulted in the denial of credit opportunities. [Id. ¶¶45–46]. Based on these allegations, Plaintiff brings a single claim, an alleged violation of 15 U.S.C. § 1681e(b) of the Fair Credit Reporting Act ("FCRA"). [Id. ¶¶47–65].
LEGAL STANDARD
When deciding whether to dismiss for failure to state a claim, the Court accepts the factual allegations in the complaint as true and construes them in the light most favorable to the plaintiff. Speaker v. U.S. Dep't of Health & Human Servs. Ctrs. for Disease Control & Prevention, 623 F.3d 1371, 1379 (11th Cir. 2010). A complaint fails to state a claim when the facts as pled do not state a claim that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 679, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). To state a plausible claim, a plaintiff must plead "factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678, 129 S.Ct. 1937. "[C]onclusory allegations, unwarranted deductions of facts or legal conclusions masquerading as facts will not prevent dismissal." Oxford Asset Mgmt., Ltd. v. Jaharis, 297 F.3d 1182, 1188 (11th Cir. 2002). Generally, a court must treat a Rule 12 motion "as one for summary judgment under Rule 56" if "matters outside the pleadings are presented to and not excluded by the court." Fed. R. Civ. P. 12(d).
LEGAL ANALYSIS
Experian moves to dismiss on three grounds. First, Defendant argues Plaintiff's claim should be dismissed based on the doctrine of issue preclusion. [Doc. 20-1 at 12–16]. Second, Defendant contends its procedures were reasonable as a matter of law. [Id. at 16–23]. And third, Defendant asserts that Plaintiff lacks standing because she does not allege a plausible injury. [Id. at 23–25]. The undersigned addresses each argument in turn.
A. Issue Preclusion
Experian argues Plaintiff is estopped from bringing her claim by a nation-wide class action Experian settled in California. [Id. at 12–16]. In 2005, Experian and the other major credit reporting agencies were sued in the Central District of California for their reporting of preexisting debts following a Chapter 7 bankruptcy. Eventually, the parties entered into a settlement agreement and release that was approved by the White Court (the " White Order"). White v. Experian Info. Sols., Inc., Case No. 05-CV-1073, 2008 WL 11518799 (C.D. Cal. Aug. 19, 2008). The parties agreed to the use of "new procedures that make use of assumptions regarding the likely discharged status of certain pre-bankruptcy tradelines." Id. at *3. Relevant here, Experian agreed to generally update installment debts—like Plaintiff's auto loan—to report as discharged, but it would exclude any tradeline that "is reporting either (a) in a Current Status or (b) with a $0 balance and in a status other than Major Derogatory." Id. at *10 ( White Order 3.2(b)(ii)(E)).
The White Court found that the procedures in the White Order "are reasonable procedures to assure the maximum possible accuracy of [Experian's] reporting of credit information regarding Consumers who have received a discharge pursuant to Chapter 7 of the United States Bankruptcy Code" and stated that the procedures "are conclusively deemed to comply with the FCRA, including but not limited to Section 1681e(b)." 2008 WL 11518799, at *14 (White Order 5.4 ). The White Order further provides:
This Order shall preclude all future litigation or attempted litigation under the FCRA ... regarding the reasonableness of Defendants’ post-discharge reporting of Consumer credit information relating to pre-bankruptcy debts or civil judgments, as well as the reasonableness of Defendants’ procedures for reinvestigations of Consumer disputes regarding the same, brought by any and all Consumers receiving bankruptcy discharges after the date of this Order. Consumers hereby are precluded from contending, absent a fundamental change in circumstance, that the procedures set forth in this Order are not reasonably designed to assure maximum possible accuracy under Section 1681e(b) ....
Id. ( White Order 5.6 ).
Defendant contends that the White Order unambiguously bars Plaintiff's claim. [Doc. 20-1 at 12]. Plaintiff, in turn, argues the White Order is not binding and that Experian did not comport with the terms of the White Order. [Doc. 30 at 12–15]. Plaintiff's second argument is dubious at best. See Hernandez v. Experian Information Solutions, Inc., Case No. LACV2009908DOCRAOX, 2021 WL 2325019 (C.D. Cal. June 4, 2021) ; Wheeler v. Trans Union LLC, Case No. LACV2011710DOCRAOX, 2021 WL 2290575 (C.D. Cal. June 4, 2021). But Plaintiff's argument that she is not bound by the terms of the White Order stands on surer footing.
As Defendant acknowledges, issue preclusion—also called collateral estoppel—usually applies during subsequent litigation "with the same party." [Doc. 20-1 at 12–13] (quoting Parklane Hosiery Co. v. Shore, 439 U.S. 322, 326, 99 S.Ct. 645, 58 L.Ed.2d 552 (1979) ). But Defendant brings up two "exceptions" to this rule. The first, nonmutual preclusion, allows someone "who was not a party to the original action [to] invoke collateral estoppel against" a party that did participate in the original action. Hart v. Yamaha-Parts Distributors, Inc., 787 F.2d 1468, 1473 (11th Cir. 1986) (emphasis added). Nonmutual preclusion is inapplicable here because Defendant is the one who participated in the White litigation. Plaintiff did not have "a full and fair opportunity to litigate the issue in the earlier proceeding" because she had no opportunity to opt out of or object to the settlement, and thus Defendant cannot use nonmutual preclusion against her. See Greenblatt v. Drexel Burnham Lambert, Inc., 763 F.2d 1352, 1360 (11th Cir. 1985).
The second "exception" to the same-party requirement is not much of an exception at all. "Class action judgments will typically bind all members of the class," regardless of whether the particular class member actively participated in the original litigation or not. Juris v. Inamed Corp., 685 F.3d 1294, 1312 (11th Cir. 2012). This is so because every member of a certified class is "considered a ‘party’ " for certain purposes, whether they are specifically named or not. See Smith v. Bayer Corp., 564 U.S. 299, 313, 131 S.Ct. 2368, 180 L.Ed.2d 341 (2011) (quoting Devlin v. Scardelletti, 536 U.S. 1, 7, 122 S.Ct. 2005, 153 L.Ed.2d 27 (2002) ). But this rule is inapplicable because Plaintiff is not a member of the White class.
The White Order defines the "23(b)(2) Settlement Class" as "all Consumers whose credit Files include a Discharge Date prior to the month of the Approval Date," i.e. before August 2008. 2008 WL 11518799, at *7 (White Order 2.32 ). The portion of the White Order certifying the plaintiff class also makes clear that the class only included "Consumers whose credit Files include a Discharge Date prior to the month of the Approval Date." Id. at *15 ( White Order 8.1 ). The Court need not address whether the White Court could have certified a class including anyone who would ever file a Chapter 7 bankruptcy going forward. By the plain terms of the White Order, the plaintiff class did not include anyone, like Plaintiff, who received a discharge after July 2008.
The Eleventh Circuit and the Supreme Court have left open the question of whether it is impossible for a court to provide "meaningful notice for ‘future’ claimants." See Juris, 685 F.3d at 1317 n.21.
Defendant's cases are thus readily distinguishable.[Doc. 20-1 at 13–16]. In Riddick ex rel. Riddick v. Sch. Bd. of City of Norfolk, 784 F.2d 521 (4th Cir. 1986) the class in the original lawsuit at issue included all "black school students in the Norfolk school system." Id. at 532. The Fourth Circuit held the prior decision was binding on future "black school students in the Norfolk school system," even though "the actual makeup of class members may be different." Id. Likewise, the Third Circuit has held a prior class settlement was binding going forward because "the settlement included claims of ‘future’ students." Blunt v. Lower Merion Sch. Dist., 767 F.3d 247, 282 n.51 (3d Cir. 2014). And in LeClair v. Massachusetts Bay Transportation Auth., 300 F. Supp. 3d 318 (D. Mass. 2018) the court found a prior class settlement binding by noting the "class explicitly included future members." Id. at 324. The final case cited by Defendant dealt with whether an order that was "continuing in nature" was binding. Martin v. Davies, 917 F.2d 336, 339 (7th Cir. 1990). There is no suggestion in any of these cases that the prior classes at issue were temporally limited like the class in White. Defendant cites, and the Court has found, no authority holding that a class action settlement is binding on an individual who is not a member of the class at all.
Defendant also cites Hansberry v. Lee, 311 U.S. 32, 61 S.Ct. 115, 85 L.Ed. 22 (1940), but the proposition it cites is dicta. See [Doc. 20-1 at 15–16]. The Supreme Court explicitly did not decide whether "some of the members of [a] class could stand in judgment for all" because "the procedure and the course of litigation" in Hansberry did not "insure the full and fair consideration of [a] common issue." 311 U.S. at 43–44, 61 S.Ct. 115.
The Court notes that the White Order indicates that it "shall preclude all future litigation or attempted litigation under the FCRA ... regarding the reasonableness of Defendants’ post-discharge reporting of Consumer credit information relating to pre-bankruptcy debts or civil judgments." However, the White Order is not binding on this Court in a stare decisis sense. See McGinley v. Houston, 361 F.3d 1328, 1331 (11th Cir. 2004) (noting the general rule that a district judge's decision does not bind another district judge). And for the reasons discussed above, the undersigned concludes that the White Order is not binding on Plaintiff under either the doctrine of nonmutual collateral estoppel or by virtue of her purported membership in the White class.
As noted by Experian in its supplemental authority, the judge who issued the White Order has found it to be binding in three subsequent cases. [Doc. 39]; see also Hernandez, 2021 WL 2325019 ; Wheeler, 2021 WL 2290575 ; Sunseri v. Experian Information Solutions, Inc., Case No. LACV2008932DOCRAOX, 2021 WL 2327934 (C.D. Cal. June 4, 2021). In each case, the court relied on Riddick, Blunt, and Martin to support the conclusion that collateral estoppel prevented the plaintiffs from relitigating issues decided in the White Order. Hernandez, 2021 WL 2325019, at *3–4 ; Wheeler, 2021 WL 2290575, at *3 ; Sunseri, 2021 WL 2327934, at *3. But for the reasons discussed above, the undersigned is not persuaded that those authorities support such a conclusion. While the Riddick Court recognized that the particular composition of a class can change over time, the Riddick Court did not endorse the notion that the very definition of the class could be changed ex post facto. See 784 F.2d at 532. The same is true of Blunt, where the settlement class explicitly included " ‘future’ students." See 767 F.3d at 282 n.51. And Martin dealt with a "continuing" order that bound all pre-trial detainees—past, present, and future. See 917 F.2d at 339. The White Order, by contrast, only covered potential plaintiffs who received a discharge before August 2008. 2008 WL 11518799, at *15 (White Order 8.1 ).
The distinction is important because it goes to the core of a court's constitutional authority. "A court's judgment binds only the parties to a suit, subject to a handful of discrete and limited exceptions." Smith, 564 U.S. at 312, 131 S.Ct. 2368. Of course, the "unnamed members of a class action [can] be bound, even though they are not parties to [a] suit." Id. at 314, 131 S.Ct. 2368. But a class action "with binding effect on nonparties[ ] can come about in federal courts in just one way—through the procedure set out in Rule 23." Id. at 315, 131 S.Ct. 2368. And Rule 23 provides that the judgment in a 23(b)(2) class action—like the one in White—must "include and describe those whom the court finds to be members of the class." Fed. R. Civ. P. 23(c)(3). The judgment can bind "unnamed members of [a properly certified] class," but to bind people who are not members of the class would improperly circumvent the procedural protections of Rule 23. See Smith, 564 U.S. at 314, 131 S.Ct. 2368.
Due process requires that the members of a Rule 23 class action receive adequate notice and representation, otherwise they are not bound by the judgment. See Juris, 685 F.3d at 1317–28. When a court tries to bind anyone who might ever raise a claim at any point in the future, such a judgment raises grave concerns regarding the adequacy of a potential future plaintiff's notice and representation. See Amchem Prod., Inc. v. Windsor, 521 U.S. 591, 626–28, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997) (holding that a settlement was not binding because of a lack of "structural assurance of fair and adequate representation" to account for the "disparity between the [the interests of] currently injured" class members and members with potential future claims); see also id. at 628, 117 S.Ct. 2231 (1997) (recognizing "the gravity of the question whether class action notice sufficient under the Constitution and Rule 23 could ever be given" to the "unselfconscious and amorphous" group of potential future claimants). But again, the Court need not address whether the White Court could have bound all potential future claimants. The preclusive effect of White is limited to the parties in that case and to the members of the class as defined in the White Order. See Smith, 564 U.S. at 312–15, 131 S.Ct. 2368. That does not include Plaintiff. See White, 2008 WL 11518799, at *15 (White Order 8.1 ).
Defendant contends that such reasoning will "encourage rather than prevent" the relitigation of settled issues and that "no rational party would enter a consent decree or injunctive settlement" if they knew future plaintiffs could simply relitigate the same issues. See [Doc. 20-1 at 15–16]; [Doc. 31 at 6]. The Court is not insensitive to these concerns, but "this form of argument flies in the face of the rule against nonparty preclusion." See Smith, 564 U.S. at 316, 131 S.Ct. 2368. The White Order was only binding "as to [the named] Plaintiffs, Defendants and [the] 23(b)(2) Settlement Class members." See 2008 WL 11518799, at *16 (White Order 9.6 ). Because the White class does not include individuals like Plaintiff, Defendant must rely "on principles of stare decisis and comity among courts to mitigate the sometimes, substantial costs of similar litigation brought by different plaintiffs." Smith, 564 U.S. at 317, 131 S.Ct. 2368. The answer is not to "bind[ ] nonparties to a judgment." See id.
B. Whether Defendant's Procedures are Reasonable
Defendant next argues that, even if the White Order is not binding per se , Defendant's actions were necessarily reasonable because it followed the procedures outlined in the White Order, and Plaintiff did not submit to the White Order's "remedial mechanism" for correcting any inaccuracy. [Doc. 20-1 at 16–18]. But the White Court's decision that the procedures outlined therein "were reasonable" is not binding on this Court. See McGinley, 361 F.3d at 1331. And the "remedial measures" in the White Order are not binding on Plaintiff because she is not a member of the White class, as explained above.
Defendant also contends that, regardless of the White Order, it is reasonable for Experian to report a preexisting secured loan as open and current following a Chapter 7 discharge. [Doc. 20-1 at 18–22]. Any time a consumer receives a Chapter 7 discharge, credit reporting agencies are stuck on the horns of a dilemma. If they automatically report a loan as discharged, they risk inaccurately reporting reaffirmed debts. But if they automatically report the loan as still open, they risk inaccurately reporting discharged debts. Because, Defendant argues, consumers "reaffirm [secured] debts with regularity," it is reasonable for Defendant to assume that certain secured debts have been reaffirmed, not discharged. [Doc. 20-1 at 19]. This is essentially the balance that the White Court struck. But Defendant does not point to any binding authority holding that this balance is reasonable as a matter of law (again, White is not binding in a stare decisis sense). See [Doc. 20-1 at 18–22]; [Doc. 31 at 2–5]; see also McGinley, 361 F.3d at 1331.
Defendant cites authority holding that the FCRA does not impose strict liability, which is certainly true. [Doc. 31 at 5–6]. Such authority supports the notion that procedures may be reasonable even if they result in an inaccuracy. But as will be discussed below, the determination of whether the procedures are reasonable (even though they result may result in an inaccuracy) depends on matters outside the scope of Plaintiff's Complaint.
Instead, Defendant's argument that its assumptions regarding secured loans are reasonable relies on matters outside the pleadings—such as a 2019 report regarding the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 ("BAPCPA") and a law review article discussing reaffirmation agreements and the use of "ride-throughs." See [Doc. 20-1 at 19 & n.6]. Defendant cites, and the Court has found, no authority holding that the Court can take judicial notice of or otherwise consider the factual assertions in those documents at the motion to dismiss stage. See [Doc. 20-1 at 19–22]; see also Bryant v. Avado Brands, Inc., 187 F.3d 1271, 1278 n.10 (11th Cir. 1999) (explaining that public documents can be considered "to show what statements the documents contain" but declining to address whether the documents can be used, at the motion to dismiss stage, to prove the truth of the statements).
Defendant's stronger argument is that it did not violate the FCRA because the procedures it uses are "dictated by a binding court order that held as a matter of law that the procedures ... comply with § 1681e(b)." See [Doc. 20-1 at 22–23]. While the White Order is not binding on Plaintiff, as explained above, it was binding on Defendant as a party to that case. It may be that it was reasonable, as a matter of law, for Defendant to implement the procedures in the White Order and to use those procedures going forward, regardless of whether the White Order is technically binding on individuals like Plaintiff. But such a determination depends on evidence outside the scope of the pleadings, such as how Defendant implemented the procedures from the White Order and what information Defendant received regarding the Account at issue in this case. At this stage, the Court cannot say that Defendant's actions were reasonable as a matter of law.
For example, Defendant argues it "had no reason to know that Plaintiff discharged her car loan" because neither "Plaintiff nor her creditor ever notified Experian that this was the case." [Doc. 31 at 4]. Obviously, Plaintiff makes no allegations in her Complaint to that effect. See [Doc. 1].
C. Standing
Defendant's last argument is that Plaintiff lacks standing because she has not alleged an injury-in-fact. [Doc. 20-1 at 23–25]. As Plaintiff points out, she does allege that she suffered harm, such as certain credit denials. [Doc. 30 at 25]; see also [Doc. 1 ¶¶45–46]. Defendant argues Plaintiff's allegation is implausible because it requires the Court to assume "these lenders were untroubled by Plaintiff's recent decision to file for bankruptcy" and instead decided to deny Plaintiff credit because she kept "making timely payments on a car loan." [Doc. 31 at 10]. The Court need not make any such implausible assumption.
The Complaint alleges Defendant reported "a $9,408 Balance owed [and] a $361 Monthly Payment" on the account at issue. [Doc. 1 ¶37]. According to Plaintiff, Experian should have reported both amounts as $0 because Plaintiff "is no longer personally liable for the debt[.]" See [id. ¶¶43–44]. What might have caused potential lenders "heartburn," as Defendant puts it, is not the fact that Plaintiff "continue[d] making timely payments on a car loan." See [Doc. 31 at 10]. Instead, potential lenders might have decided to deny Plaintiff credit opportunities because they believed Plaintiff owed "a $9,408 Balance owed [and] a $361 Monthly Payment" on the car loan, as Defendant reported in an allegedly inaccurate matter. See [Doc. 1 ¶37]. It is not at all implausible to infer that lenders consider a person's debt-to-income ratio in deciding whether to extend credit. Whether lenders decided to deny Plaintiff credit because of her recent bankruptcy or because they believed she already had too much debt is a question of fact. At this stage, the Court must construe the allegations in the Complaint in the light most favorable to Plaintiff. Speaker, 623 F.3d at 1379. Doing so here, the undersigned concludes that Plaintiff plausibly alleges an injury-in-fact sufficient to confer standing in the form of, at a minimum, the denial of credit opportunities. See [Doc. 1 ¶¶45–46].
CONCLUSION
For the reasons explained above, the undersigned RECOMMENDS the Motion to Dismiss ([Doc. 20]) be DENIED .
SO REPORTED AND RECOMMENDED , this 25th day of June, 2021.