1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 FOR THE EASTERN DISTRICT OF CALIFORNIA 10 11 SAMUEL PERRI, et al., No. 2:23-cv-02566-DAD-JDP 12 Plaintiffs, 13 v. ORDER GRANTING DEFENDANT U.S.

BANK, N.A.’S MOTION TO DISMISS

14 U.S. BANCORP, et al., PLAINTIFFS’ FIRST AMENDED

COMPLAINT

15 Defendants. (Doc. No. 33) 16 17 This matter is before the court on the motion to dismiss filed on behalf of defendant U.S. 18 Bank, N.A. (“U.S. Bank”) on March 22, 2024. (Doc. No. 33.) On April 8, 2024, the pending 19 motion was taken under submission to be decided on the papers pursuant to Local Rule 230(g). 20 (Doc. No. 35.) For the reasons explained below, the court will grant defendant U.S. Bank’s 21 motion to dismiss. 22 BACKGROUND 23 Plaintiffs Samuel Perri and Jessica Perri bring this action alleging violations of credit 24 reporting laws against defendant U.S. Bank (with whom plaintiffs took out a loan) and three 25 credit reporting agencies: defendants Equifax Information Services, LLC; Experian Information 26 Solutions, Inc.; and Trans Union LLC. (Doc. No. 18.) Plaintiffs have since settled their claims 27 with the defendant agencies. (See Doc. Nos. 44–54.) Accordingly, this case proceeds only 28 against defendant U.S. Bank (hereinafter, “defendant”). 1 Plaintiffs allege the following in their operative first amended complaint (“FAC”).1 In 2 July 2017, plaintiffs purchased a recreational vehicle (“RV”) from a dealership, Lemke RV 3 (“Lemke”), using a loan from defendant U.S. Bank to do so. (Doc. No. 18 at ¶ 25.) According to 4 the sales contract for that RV, plaintiffs agreed to make monthly installment payments of $154.15 5 to U.S. Bank on the 27th of each month, beginning on July 27, 2017. (Doc. No. 33-1 at 6.)2 6 Approximately six years later, on June 17, 2023, plaintiffs traded in that old RV to 7 purchase a new RV from Lemke, and in doing so, they “signed over liability of their old RV for a 8 new RV at Lemke.” (Doc. No. 18 at ¶ 26.) According to plaintiffs, as a result of this trade-in, 9 they “satisfied all prior financial obligations for the [old] RV.” (Id. at ¶ 27.) 10 On August 7, 2023, plaintiffs received two letters of delinquency from defendant 11 regarding their loan for the old RV, and plaintiffs immediately began disputing this financial 12 obligation with defendant, the credit reporting agencies, and Lemke. (Id. at ¶¶ 28–29.) On 13 August 22, 2023, plaintiff submitted written dispute letters regarding the late payments reported 14 by defendant U.S. Bank to the credit reporting agencies (“dispute letters”). (Id. at ¶ 31.) The 15 agencies received these dispute letters and notified defendant U.S. Bank of the disputes. (Id. at 16 ¶ 33.) These dispute letters provided a copy of the RV sales contracts with Lemke, “including the 17 newest one showing the trade in of the old RV as well as a narrative explaining why the reporting 18 ///// 19 1 Before the time had passed for defendants to respond to plaintiffs’ original complaint, plaintiffs 20 filed their FAC as a matter of course pursuant to Rule 15(a) of the Federal Rules of Civil Procedure. (Doc. No. 18.) It appears that the only changes plaintiffs made in their FAC was to 21 correct the identity of the bank defendant, who was incorrectly identified in the original complaint as US Bancorp. (Compare Doc. No. 1 with Doc. No. 18.) 22

23 2 Plaintiffs did not attach a copy of the RV sales contract to their FAC. In connection with its pending motion to dismiss, defendant requests that the court take judicial notice of the RV sales 24 contract (Doc. No. 33 at 4, n.1), which defendant attaches as an exhibit to its motion. (See Doc. No. 33-1 at 6–11.) Even though plaintiffs did not explicitly incorporate the sales contract by 25 reference in their FAC, their allegations do refer to and rely on that sales contract. (See Doc. No. 18 at ¶¶ 25, 27, 31–32.) Accordingly, the court will grant defendant’s request and take judicial 26 notice of the RV sales contract. See United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 2003) 27 (“Even if a document is not attached to a complaint, it may be incorporated by reference into a complaint if the plaintiff refers extensively to the document or the document forms the basis of 28 the plaintiff’s claim.”). 1 of the [U.S. Bank] account was inaccurate.” (Id. at ¶ 32.)3 According to plaintiffs’ dispute 2 letters—in short—plaintiffs provided Lemke with the loan payoff amount when they traded in the 3 old RV for the new RV on June 17, 2023, and they expected Lemke to then pay off their loan 4 with U.S. Bank. (Doc. No. 33-1 at 2.) But Lemke did not pay off the loan at that time, causing 5 missed payments for June 27, 2023 and July 27, 2023, which led U.S. Bank to send the 6 delinquent notices to plaintiffs, which they received on August 7, 2023. (Id.) Plaintiffs contacted 7 Lemke on August 8, 2023, and then on August 9, 2023, they spoke with Lemke’s owner, Phil 8 Cooper, who told plaintiffs that the loan was paid off on the day before (August 8, 2023). (Id.) 9 Despite this explanation, defendant rejected plaintiffs’ disputes and verified the U.S. Bank 10 credit account information that appeared (and continues to appear) on plaintiffs’ consumer credit 11 reports (i.e., that there were two late payments on that account). (Doc. No. 18 at ¶¶ 36–39.) 12 According to plaintiffs, defendant was required to conduct a reasonable investigation into the 13 U.S. Bank credit account on plaintiffs’ consumer report, but its investigation was unreasonable. 14 (Id. at ¶¶ 34, 42.) Specifically, defendant “should have discovered from [its] own records, 15 including Plaintiffs’ formal dispute, that the information being reported was inaccurate and 16 materially misleading since Plaintiffs provided information showing that the debt was resolved.” 17 3 Notably, plaintiffs’ allegations do not describe any of the “narrative” explanation that was 18 given to defendant and the credit agencies in plaintiffs’ dispute letters, nor do plaintiffs otherwise 19 provide any context whatsoever as to why there were apparent late payments on their RV loan account and why they disputed the accuracy of U.S. Bank’s reporting of late payments and 20 delinquency on that account. Plaintiffs did not attach a copy of the dispute letters to their FAC. In connection with its motion to dismiss, defendant requests that the court take judicial notice of 21 the dispute letters (Doc. No. 33 at 5, n.2), which defendant attaches as exhibits to its motion. (See Doc. No. 33-1.) Even though plaintiffs did not explicitly incorporate the dispute letters by 22 reference in their FAC, their allegations do refer to and rely on the dispute letters extensively. 23 (See Doc. No. 18 at ¶¶ 29, 31–38, 43, 60, 62, 65, 79.) Moreover, the dispute letters are allegedly the source of notice to defendant of plaintiffs’ dispute regarding the accuracy of the information 24 reported, and such notice is an integral part of plaintiffs’ claims. See Johnson v. Wells Fargo Home Mortg., Inc., 558 F. Supp. 2d 1114, 1120 (D. Nev. 2008) (“[A] furnisher’s duty to 25 investigate does not arise unless it receives notice of the dispute from the [credit agencies] directly.”). Accordingly, the court will also grant defendant’s request in this regard and take 26 judicial notice of the dispute letters. See United States v. Ritchie, 342 F.3d 903, 908 (9th Cir. 27 2003) (“Even if a document is not attached to a complaint, it may be incorporated by reference into a complaint if the plaintiff refers extensively to the document or the document forms the 28 basis of the plaintiff’s claim.”). 1 (Id. at ¶ 43.) Further, “it was unreasonable for defendant[] to not contact plaintiffs for further 2 information if needed” and “not contact any individuals of parties associated with the prior matter 3 to determine the status of the debt.” (Id. at ¶ 44.) According to plaintiffs, defendant “failed to 4 conduct a reasonable investigation with respect to the disputed information as required by [credit 5 reporting laws] by failing to remove all of the disputed and incorrect information.” (Id. at ¶ 46.) 6 Based on the foregoing allegations, plaintiffs bring two claims against defendant in their 7 FAC: (1) violation of the Fair Credit Reporting Act, 15 U.S.C. §§ 1681, et seq. (“FCRA”); and 8 (2) violation of the California Consumer Credit Reporting Agencies Act, California Civil Code 9 §§ 1785.1, et seq. (“CCRAA”). 10 On March 22, 2024, defendant filed the pending motion to dismiss plaintiffs’ claims 11 pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. (Doc. No. 33.) Plaintiffs filed 12 an opposition to the pending motion on April 5, 2024. (Doc. No. 34.). Defendant filed its reply 13 thereto on April 25, 2024. (Doc. No. 39.) 14 LEGAL STANDARD 15 The purpose of a motion to dismiss pursuant to Rule 12(b)(6) is to test the legal 16 sufficiency of the complaint. N. Star Int’l v. Ariz. Corp. Comm’n, 720 F.2d 578, 581 (9th Cir. 17 1983). “Dismissal can be based on the lack of a cognizable legal theory or the absence of 18 sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dep’t, 901 19 F.2d 696, 699 (9th Cir. 1990). A plaintiff is required to allege “enough facts to state a claim to 20 relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). “A 21 claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw 22 the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. 23 Iqbal, 556 U.S. 662, 678 (2009). 24 In determining whether a complaint states a claim on which relief may be granted, the 25 court accepts as true the allegations in the complaint and construes the allegations in the light 26 most favorable to the plaintiff. Hishon v. King & Spalding, 467 U.S. 69, 73 (1984). However, 27 the court need not assume the truth of legal conclusions cast in the form of factual allegations. 28 U.S. ex rel. Chunie v. Ringrose, 788 F.2d 638, 643 n.2 (9th Cir. 1986). While Rule 8(a) does not 1 require detailed factual allegations, “it demands more than an unadorned, the-defendant- 2 unlawfully-harmed-me accusation.” Iqbal, 556 U.S. at 678. A pleading is insufficient if it offers 3 mere “labels and conclusions” or “a formulaic recitation of the elements of a cause of action.” 4 Twombly, 550 U.S. at 555; see also Iqbal, 556 U.S. at 676 (“Threadbare recitals of the elements 5 of a cause of action, supported by mere conclusory statements, do not suffice.”). It is 6 inappropriate to assume that the plaintiff “can prove facts that it has not alleged or that the 7 defendants have violated the . . . laws in ways that have not been alleged.” Associated Gen. 8 Contractors of Cal., Inc. v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983). 9 In ruling on a motion to dismiss under Rule 12(b)(6), the court is permitted to consider 10 material that is properly submitted as part of the complaint, documents that are not physically 11 attached to the complaint if their authenticity is not contested and the plaintiffs’ complaint 12 necessarily relies on them, and matters of public record. Lee v. City of Los Angeles, 250 F.3d. 13 668, 688–89 (9th Cir. 2001). 14 ANALYSIS 15 “The FCRA arose out of ‘congressional concern over abuses in the credit reporting 16 industry.’” Shaw v. Experian Info. Sols., Inc., 891 F.3d 749, 755 (quoting Guimond v. Trans 17 Union Credit Info. Co., 45 F.3d 1329, 1333 (9th Cir. 1995)). “Congress thus enacted the FCRA 18 in order ‘to ensure fair and accurate credit reporting.’” Id. (quoting Safeco Ins. Co. of Am. v. 19 Burr, 551 U.S. 47, 52 (2007)). As relevant here, to assert a claim under either 15 U.S.C. §§ 20 1681e(b) or 1681i of the FCRA—alleging either that a consumer report is inaccurate or that a 21 CRA did not conduct a proper investigation to determine whether the disputed information is 22 inaccurate—a plaintiff must plead the existence of a factual inaccuracy within the report. See 23 Guimond, 45 F.3d at 1333 (“In order to make out a prima facie violation under § 1681e(b), a 24 consumer must present evidence tending to show that a credit reporting agency prepared a report 25 containing inaccurate information.”); Carvalho v. Equifax Info. Servs., LLC, 629 F.3d 876, 890 26 (9th Cir. 2010) (“Although the FCRA’s reinvestigation provision, 15 U.S.C. § 1681i, does not on 27 its face require that an actual inaccuracy exist for a plaintiff to state a claim, many courts, 28 including our own, have imposed such a requirement.”); Zavala v. Trans Union, LLC, No. 2:20- 1 cv-02276-TLN-DB, 2023 WL 6387220, at *2 (E.D. Cal. Sept. 29, 2023) (“To state a claim 2 pursuant to the FCRA, a plaintiff must show an inaccuracy in their credit report.”). Further, 3 “[j]ust as in a lawsuit against a credit reporting agency, to prevail on a FCRA claim against a 4 furnisher, a consumer must make a prima facie showing that the furnisher’s report was 5 inaccurate.”4 Gross v. CitiMortgage, Inc., 33 F.4th 1246, 1251 (9th Cir. 2022). Information in a 6 credit report is inaccurate if it is “patently incorrect or materially misleading in such a way and to 7 such an extent that it can be expected to adversely affect credit decisions.” Carvalho, 629 F.3d at 8 890–91. 9 To state a claim under CCRAA—which courts interpret consistently with FCRA—a 10 plaintiff must likewise show that information in their credit report is inaccurate. See Galea v. 11 Wells Fargo Bank, N.A., 388 F. Supp. 3d 1212, 1217 (E.D. Cal. 2019) (citing Carvalho, 629 F.3d 12 at 890–91 (explaining that “in considering whether [the plaintiff’s] credit report was inaccurate 13 within the meaning of the CCRAA, [the court is] guided by [the Ninth Circuit’s] “patently 14 incorrect or materially misleading” standard)). 15 In the pending motion, defendant argues that plaintiffs’ claims “fail as a matter of law 16 because U.S. Bank’s reporting that the June and July 2023 payments were delinquent is accurate.” 17 (Doc. No. 33 at 3.) Defendant contends that plaintiffs’ reliance on Lemke “to provide the payoff 18 payment to U.S. Bank does not relieve them from their contractual obligations to make monthly 19 payments on the traded-in [RV] until paid in full.” (Id.) Defendant emphasizes that plaintiffs 20 admit that the June and July 2023 payments were not made and that Lemke did not send the 21 payoff payment to U.S. Bank until August 8, 2023—the day after plaintiffs received letters from 22 U.S. Bank notifying them of their delinquency. (Id. at 5.) According to defendant, because 23 plaintiffs’ delinquency as to those two late monthly payments was accurately reported to the 24 /////

25 4 Although the FCRA does not define the term “furnisher,” courts have defined the term to refer to a person or entity that provides information about a consumer to any consumer reporting 26 agency. See Ali v. Capital One, No. 1:11-cv-02115-LJO-SKO, 2012 WL 260023, at *3 n.2 (E.D. 27 Cal. Jan. 27, 2012); Wang v. Asset Acceptance LLC, No. C 09-04797 SI, 2010 WL 2985503, at *2 (N.D. Cal. July 27, 2010). Here, plaintiffs allege that defendant U.S. Bank is a furnisher of 28 information under FCRA. (Doc. No. 18 at ¶ 16.) 1 credit agencies, plaintiffs cannot maintain their FCRA and CCRAA claims in this action. (Id. at 2 3.) 3 In their opposition to the pending motion, plaintiffs assert in conclusory fashion that they 4 have alleged that the credit reporting by defendant “was factually inaccurate and materially 5 misleading in violation of the FCRA.” (Doc. No. 34 at 10, 12.) Importantly, plaintiffs do not 6 specify in their FAC what statement they contend was inaccurate in defendant’s reporting of their 7 credit account, nor do plaintiffs provide any clarity in their opposition brief in this regard. Oddly, 8 plaintiffs devote much of their opposition brief to opposing defendant’s request that the court take 9 judicial notice of plaintiffs’ dispute letters (id. at 13–15), even though it is those dispute letters 10 that provide the court with the necessary factual context underlying plaintiffs’ claims asserted in 11 this action. Indeed, plaintiffs’ FAC merely alleges that they received delinquency letters (with no 12 clarification as to what was the purported delinquency), and they submitted dispute letters 13 regarding the late payments reported by defendant to the credit agencies (with no explanation on 14 the nature of the actual dispute). Further, plaintiffs’ allegations are themselves misleading. 15 Plaintiffs allege that “plaintiffs were informed by Phil Cooper, the owner of Lemke, that the 16 payoff for the first RV had been provided to [U.S. Bank]” (Doc. No. 18 at ¶ 30)—without 17 specifying the date that the payment was made, i.e., that the payment was made only after 18 plaintiffs received the delinquency letters from defendant—and plaintiffs allege that “the 19 information being reported was inaccurate and materially misleading since plaintiffs provided 20 information showing that the debt was resolved” (id. at ¶ 43). Taken together, and in the absence 21 of the explanation that plaintiffs relied on in their dispute letters, plaintiffs’ FAC misleadingly 22 suggests that the inaccuracy they allege is that defendant reported delinquency despite payments 23 having already been made. In sum, plaintiffs have not adequately alleged any inaccuracy in 24 defendant’s reporting. 25 In addition, the court is not persuaded by plaintiffs’ argument that they have sufficiently 26 alleged that defendant’s report was “misleading” (Doc. No. 34 at 10–13), because the allegations 27 they purport to rely on are not actually included in their FAC. Specifically, plaintiffs contend that 28 they allege “on multiple occasions that it was misleading for [U.S. Bank] to report derogatory 1 information to the credit [agencies] since plaintiffs made [U.S. Bank] fully aware of third-party 2 error that led to the missed payments,” and “Lemke has admitted to the error, giving [U.S. Bank] 3 no basis to report the missing payments as late.” (Doc. No. 34 at 13.) According to plaintiffs, 4 “[f]ailure to correct the misleading reporting so created the false impression that plaintiffs were 5 the types of individuals that did not honor their financial obligations and this misleading 6 impression caused plaintiffs to experience adverse credit decisions.” (Id.) However, none of 7 those assertions—or even the factual context on which they could be based—are alleged in 8 plaintiffs’ FAC. For this reason, plaintiffs’ argument fails, and the court readily concludes that 9 plaintiffs have not sufficiently alleged any misleading statements in defendant’s 10 reporting. 11 The court concludes that plaintiffs have failed to state a cognizable claim under FCRA 12 and CCRAA. Accordingly, the court will grant defendant’s motion to dismiss plaintiffs’ claims 13 brought against it in this action. 14 The only remaining question is whether the court should also grant plaintiffs leave to file a 15 second amended complaint. Leave to amend should be granted “freely” when justice so requires. 16 Fed. R. Civ. P. 15(a). The Ninth Circuit maintains a policy of “extreme liberality generally in 17 favoring amendments to pleadings.” Rosenberg Bros. & Co. v. Arnold, 283 F.2d 406, 406 (9th 18 Cir. 1960). Reasons “such as undue delay, bad faith or dilatory motive . . . repeated failure to 19 cure deficiencies . . . undue prejudice to the opposing party . . . [or] futility” may support denial of 20 leave to amend. Foman v. Davis, 371 U.S. 178, 182 (1962). In their opposition, plaintiffs state 21 that if the court grants defendant’s motion to dismiss, they “request leave to amend to cure the 22 operative pleading of any perceived deficiencies.” (Doc. No. 34 at 8.) Out of an abundance of 23 caution, the court will grant plaintiffs leave to file a second amended complaint. However, 24 plaintiffs’ counsel is reminded of the obligations under Rule 11 of the Federal Rules of Civil 25 Procedure, and in particular, Rule 11(b)’s provision that by presenting the court with a pleading, 26 the attorney “certifies that to the best of the person’s knowledge, information, and belief, formed 27 after an inquiry reasonable under the circumstances: . . . the factual contentions have evidentiary 28 ///// 1 | support or, if specifically so identified, will likely have evidentiary support after a reasonable 2 | opportunity for further investigation or discovery ...” Fed. R. Civ. P. 11(b)(3). 3 CONCLUSION 4 For the reasons explained above, 5 1. Defendant’s request for judicial notice (Doc. No. 33 at 4, n.1; 5, n.2) is granted; 6 2. Defendant’s motion to dismiss (Doc. No. 33) is granted; 7 3. Plaintiffs’ first amended complaint (Doc. No. 18) is dismissed, with leave to 8 amend, due to plaintiffs’ failure to state a cognizable claim; and 9 4. Plaintiffs shall file their second amended complaint, or alternatively, a notice of 10 their intent to not file a second amended complaint, within fourteen (14) days from 11 the date of entry of this order. 12 IT IS SO ORDERED. | Dated: _ August 15, 2024 Da A. 2, ye 14 DALE A. DROZD 5 UNITED STATES DISTRICT JUDGE

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