In Mortimer v. JP Morgan Chase Bank, Nat. Ass’n, 2012 WL 3155563 (N.D.Cal. 2012), Judge Wilken addressed the impact of a now commonly-pleaded claim that a creditor continued to report late payments that were not made during a bankruptcy. Judge Wilkens found that Plaintiffs failed to plead an inaccuracy – meaning that they actually made the payments during the bankruptcy – but allowed the Plaintiff leave to amend.
Mortimer alleges the following. As of November 2009, he held a Chase credit card account. On November 3, 2009, he filed a voluntary petition for Chapter 7 bankruptcy in the Northern District of California. On February 8, 2010, he was granted a discharge of debts pursuant to 11 U.S.C. § 727. Compl., ¶ 15, Ex. B, Discharge of Debtor and Final Decree. ¶ On April 21, 2011, Mortimer sent a letter to Experian stating that, among other items allegedly in error, the Chase account ending in the numbers 0032 “was included in [his] bankruptcy and should not be showing any lates. Remove these lates now.” Compl., ¶ 16 and Ex. A, Dispute Letter. ¶ After receiving notice of Mortimer’s allegations from Experian, he complains, Chase failed to report that Mortimer disputed the account information. It is not clear why Mortimer complains of this fact, given that it was Experian that told Chase that he disputed the reports of delinquencies. ¶ On May 10, 2011, Mortimer requested his Experian credit report to verify that the inaccuracies were corrected. Compl. Ex. C, Experian Report. According to Mortimer, Chase had removed the previously reported delinquencies and reported to Experian that his account was closed before he filed for bankruptcy. Compl., ¶ 17. It is not clear whether he complains that Chase inaccurately reported his account as closed. ¶ On March 15, 2012, Mortimer received his Service 1st Credit Report, a compilation of credit reports from all three credit reporting agencies. Compl., Ex. D (Service 1st Report). Mortimer alleges that Chase “re-reported the disputed information to Experian, that Plaintiff’s account was open and delinquent in December 2009 and January 2010 even though Plaintiff filed for bankruptcy.” Compl., ¶ 18. Mortimer complains that Chase failed to report that Mortimer continued to dispute this account information. Compl., ¶ 18. ¶ It seems that the gravamen of Mortimer’s complaint is that Chase reported overdue payments on his account for two months after he filed for bankruptcy but before his debts had been discharged. He does not allege that this was inaccurate as a matter of fact.
Judge Wilken found that Plaintiff did not plead inaccuracy under the FCRA:
As noted earlier, Mortimer asserts a claim based on Chase’s alleged failure to report to Experian that Mortimer continued to dispute his payment delinquencies. Here, Mortimer has alleged that, after he sent Experian a written notice that he disputed Chase’s reporting, Experian notified Chase of his dispute, but Chase later failed to inform Experian of the results of its investigation, that is, that Mortimer still disputed the credit information. This claim is insufficiently alleged because Mortimer has not asserted that Chase reported incomplete or inaccurate information in the first place. “Holding that there is a private cause of action under § 1681s–2(b) does not mean that a furnisher could be held liable on the merits simply for a failure to report that a debt is disputed. The consumer must still convince the finder of fact that the omission of the dispute was ‘misleading in such a way and to such an extent that [it] can be expected to have an adverse effect.’ “ Id. at 1163 (citing Saunders v. Branch Banking & Trust Co. of Va., 526 F.3d 142, 150 (4th Cir.2008)). “In other words, a furnisher does not report ‘incomplete or inaccurate’ information within the meaning of § 1681s–2(b) simply by failing to report a meritless dispute, because reporting an actual debt without noting that it is disputed is unlikely to be materially misleading.” Id . ¶ Mortimer argues that he has alleged a claim under § 1681s–2(b) of the FCRA because Chase unlawfully reported delinquencies after he filed his bankruptcy petition. Mortimer claims, not that he made timely payments, but that Chase’s reporting violated the letter and the spirit of 11 U.S.C. § 362. Mortimer argues that this provision of the Bankruptcy Code, which in general imposes a stay on creditors’ collection activities, prohibits Chase from reporting any derogatory information arising while the bankruptcy petition was pending. Section 362 does not stand for the proposition that an individual is not obliged to make timely payments on his accounts while his petition for bankruptcy is pending. Rather, § 362 limits collection activities in pursuit of claims that arose before the bankruptcy petition. While it might be good policy in light of the goals of bankruptcy protection to bar reporting of late payments while a bankruptcy petition is pending, neither the bankruptcy code nor the FCRA does so. Mortimer has not alleged that he was timely in making payments on his Chase account in November 2009, December 2009 or January 2010. Thus, Mortimer has not alleged an inaccuracy or misleading statement for the purposes of his FCRA claim, and the failure to report his meritless dispute is not actionable. ¶ 4 In footnote seven of his opposition, Mortimer argues that the court’s decision in In re Burgess, 2007 WL 130818 (Bankr.E.D.Va.), demonstrates that a plaintiff may state a claim for violation of the automatic stay where the defendant reported post-petition delinquencies even though the credit report indicated that the plaintiff received a Chapter 7 discharge and carried a zero balance. The case is inapposite because it did not involve a claim under the FCRA, but instead concerned a motion to reopen a bankruptcy case and a claim for violation of the bankruptcy discharge injunction. ¶ Mortimer also contends in his opposition brief that he has alleged that Chase provided inaccurate and incomplete information because the Service 1st Report shows that his Chase account was open and collectable while he was in bankruptcy, when the account was closed. Such facts, however, are not alleged in Mortimer’s original complaint. Mortimer’s 1AC likewise does not allege that Chase continued to report that he had an account that was open and delinquent at a time when his account was closed with a zero balance. ¶ Thus, because Mortimer has not alleged that Chase furnished inaccurate credit information in the first instance or after investigation, he has insufficiently plead a FCRA violation for failure to investigate or failure to report its investigation of the dispute to Experian. Because Mortimer does not dispute that the payments were delinquent, there was no inaccuracy for Chase to investigate and no bona fide dispute or corrected information for Chase to report to back to Experian. However, Mortimer’s FCRA claim is dismissed with leave to amend his complaint to allege that Chase furnished material false information, and then failed to investigate and report Mortimer’s dispute and the corrected information.
Judge Wilken also held that FCRA did not pre-empt the CCRAA or UCL claims, explaining:
Mortimer alleges a CCRAA claim under section 1785.25(a), which states, “A person shall not furnish information on a specific transaction or experience to any consumer credit reporting agency if the person knows or should know the information is incomplete or inaccurate.” Mortimer alleges that Chase “intentionally and knowingly reported inaccurate and false information regarding delinquency in payment to credit reporting agencies and date of discharge in violation of California Civil Code § 1785.25.” Compl. at ¶ 50. Unlike the FCRA, the CCRAA includes a private right of action to enforce the prohibition against supplying incomplete or inaccurate consumer credit information. Cal. Civ.Code § 1785.25(g) (“A person who furnishes information to a consumer credit reporting agency is liable for failure to comply with this section, unless the furnisher establishes by a preponderance of the evidence that, at the time of the failure to comply with this section, the furnisher maintained reasonable procedures to comply with those provisions.”). Mortimer’s CCRAA claim is not preempted by the FCRA. Gorman, 584 F.3d at 1169; see also Carvalho v. Equifax Information Services, LLC, 629 F.3d 876, 888–89 (9th Cir.2010). As explained above, however, Mortimer has failed to allege a falsity. Therefore, Mortimer’s CCRAA claim under section 1785.25(a) is dismissed with leave to amend to allege one. ¶ Mortimer also asserts a UCL claim. In El–Aheidab v. Citibank (South Dakota), N.A., 2012 WL 506473 (N.D.Cal.), relying on Gorman, another judge in this district ruled that, to the extent the plaintiff based his UCL claim solely on violations of section 1785.25(a), such a claim is not preempted because it does not impose any additional substantive duties on the defendant and is merely an additional procedural vehicle for enforcing section 1725.25(a). Although Gorman did not address whether FCRA preempted a claim under the UCL, it considered a defendant’s argument that the plaintiff’s claim under section 1785.25(a) was preempted, despite the language of the § 1681t(b)(1)(F) exception, because the two provisions that established a private right of action to enforce section 1785.25(a) were found elsewhere in the state Civil Code and were not expressly excepted from FCRA preemption. The Ninth Circuit, however, rejected this argument, because the two provisions referred to do not impose a “requirement or prohibition” but instead “merely provide a vehicle for private parties to enforce other sections, which do impose requirements and prohibitions.” 584 F.3d at 1171. ¶ As alleged in Mortimer’s claim, the UCL does not impose any additional duties, but is merely another vehicle for enforcing section 1725.25(a). A UCL claim under section 17200 “ ‘borrows’ violations of other laws and treats them as unlawful practices independently actionable under section 17200.” Saunders v. Superior Court, 27 Cal.App. 4th 832, 838–39 (1994). ¶ Wang v. Asset Acceptance, LLC, 681 F.Supp.2d 1143, 1150 (N.D.Cal.2010), also relied on Gorman, but concluded that the plaintiff’s UCL claims were preempted without regard to whether they were predicated on a violation of section 1725.25(a). Wang determined that the UCL “does impose a requirement or prohibition. This statutory scheme prohibits ‘any unlawful, unfair or fraudulent business act or practice … [and] provides plaintiffs with an independent cause of action.” 681 F.Supp.2d at 1150. This Court finds El–Aheidab more persuasive because the fact that the UCL provides for a cause of action does not demonstrate that the law itself imposes an additional requirement. ¶ Thus, Mortimer’s UCL claim is not preempted, but it is dismissed because, as explained above, he has not alleged an inaccuracy in the first instance.