Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_15-cv-04622/USCOURTS-cand-5_15-cv-04622-3/pdf.json

Nature of Suit Code: 480
Nature of Suit: Consumer Credit
Cause of Action: 15:1681 Fair Credit Reporting Act

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

JACK WATTS,

Plaintiff,

v.

DIVERSIFIED ADJUSTMENT SERVICE, 

INC.,

Defendant.

Case No. 15-cv-04622-BLF 

ORDER GRANTING DEFENDANT

DIVERSIFIED ADJUSTMENT 

SERVICE, INC.’S MOTION TO 

DISMISS THE FIRST AMENDED 

COMPLAINT WITH LEAVE TO 

AMEND

[RE: ECF 44]

Defendant Diversified Adjustment Service, Inc. (“Diversified”) moves to dismiss 

Plaintiff’s First Amended Complaint under Federal Rule of Civil Procedure 12(b)(6). For the 

reasons stated on the record at the hearing on October 6, 2016 and discussed below, the motion is 

GRANTED WITH LEAVE TO AMEND.

 I. BACKGROUND

Plaintiff has filed a First Amended Complaint (“FAC”) containing allegations arising from 

an inaccuracy in his credit reports. Plaintiff alleges that he filed for Chapter 7 bankruptcy 

protection in January 2015 and his Chapter 7 bankruptcy was discharged in May 2015. In 

response to the perceived inaccuracies on Plaintiff’s credit report, Plaintiff disputed the inaccurate 

tradelines via certified mail with Experian Information Solutions, Inc.; Equifax, Inc.; and 

TransUnion, LLC. Plaintiff claims that the credit reporting agencies notified Diversified of the 

inaccuracies, but Diversified failed to perform a reasonable investigation, review Plaintiff’s 

dispute, follow its own policies regarding reporting an account after bankruptcy has been filed, or 

correct the inaccuracies reported to TransUnion, LLC. Plaintiff asserts claims under (1) the Fair 

Case 5:15-cv-04622-BLF Document 50 Filed 10/14/16 Page 1 of 5
2

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681s-2; and (2) the California Consumer Credit 

Reporting Agencies Act (“CCRA”), Cal. Civ. Code § 1785.25(a).

II. LEGAL STANDARD

A. Rule 12(b)(6)

Federal Rule of Civil Procedure 8(a) requires that the complaint contain “a short and plain 

statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). 

Federal Rule of Civil Procedure 12(b)(6) requires that the complaint “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, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “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.

B. Leave to Amend

Under Rule 15(a), a court should grant leave to amend “when justice so requires,” because 

“the purpose of Rule 15...[is] to facilitate decision on the merits, rather than on the pleadings or 

technicalities.” Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000) (en banc). A court may deny 

leave to amend for several reasons, including “undue delay, bad faith,...[and] futility of 

amendment.” Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052 (9th Cir. 2003).

 III. DISCUSSION

A. Plaintiff Fails to State a Claim to Relief That is Plausible On Its Face

Plaintiff’s FAC fails to meet the pleading requirements. As discussed in more detail 

below, Claim 1 and Claim 2 fail because Plaintiff does not plead a theory for which it can obtain 

relief under FCRA or CCRA on the face of the pleadings. 

1. Claim 1

Claim 1 is asserted under the FCRA, which is titled “Responsibilities of furnishers of 

information to consumer reporting agencies.” 15 U.S.C. § 1681s-2(b). The FCRA provides a 

private right of action under § 1681s-2(b) against a person who furnishes information to a credit 

reporting agency but fails to take certain steps when informed of a dispute regarding the 

completeness or accuracy of such information. See id. at 1060; Littleton v. Experian Info. Sols., 

Case 5:15-cv-04622-BLF Document 50 Filed 10/14/16 Page 2 of 5
3

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

Inc., No. 15-cv-01619-EJD, 2015 WL 4638308, at *1 (N.D. Cal. Aug. 4, 2015). A plaintiff 

asserting a claim under § 1681s-2(b) must allege what information the defendant furnished to the 

credit reporting agency and why that information was incomplete or inaccurate. See Littleton, 

2015 WL 4638308, at *2. 

Claim 1 of Plaintiff’s FAC alleges that “Defendant Diversified Adjustment Service, Inc. 

(Account # 1131xxxx) supplied inaccurate and misleading information to the Credit Reporting 

Agencies by reporting, after Plaintiff’s [C]hapter 7 filing and discharge, that the account was in 

collections and open and without noting that Plaintiff had filed for bankruptcy.” FAC ¶ 22. 

Plaintiff asserts that the reporting was inaccurate and misleading because “one viewing the 

account could reasonably conclude that Plaintiff owed [Diversified] money and that the account 

was in collections rather than discharged in Plaintiff’s [C]hapter 7 bankruptcy.” FAC ¶ 23. 

Plaintiff’s bankruptcy filings show that at the time Plaintiff filed his Chapter 7 petition, the 

balance on his Diversified account was $0. See Order Granting Def.’s Mot. to Dismiss Compl., 

ECF 41; see also, Def.’s Req. for Judicial Notice, ECF 33-1. Because Plaintiff did not owe 

Diversified a debt at the time he filed his petition, no such debt could have been discharged in the 

bankruptcy. Thus, it appears that Diversified had no duty to disclose that “Plaintiff had filed for 

Bankruptcy” in its reporting of Plaintiff’s account. As such, Plaintiff has not plausibly alleged a 

claim for relief. At the hearing on this Motion, Plaintiff conceded the inadequacy of his claims 

and requested leave to amend consistent with the allegations described in his opposition brief.

In his Opposition to Diversified’s Motion to Dismiss, Plaintiff now asserts that 

Diversified’s reporting of Plaintiff’s account was misleading because “Plaintiff owes Defendant 

no money and Plaintiff’s complaint as pled suggests the account is in an active collection status.” 

See Pl.’s Opp’n, p. 4-5. Or as stated elsewhere in Plaintiff’s Opposition: “The [i]nformation is 

[i]Inaccurate and [m]isleading [b]ecause it [s]uggests Plaintiff [s]till [o]wes Defendant [m]oney.” 

See id, p. 4.

When assessing whether a plaintiff has met his pleading burden, the Court is confined to 

the facts plead in the operative complaint. See Iqbal, 556 U.S. at 678 (affirming the complaint 

must “contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible 

Case 5:15-cv-04622-BLF Document 50 Filed 10/14/16 Page 3 of 5
4

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

on its face”). In this case, Plaintiff has alleged one theory in the FAC, and another theory in his

briefing. See, e.g., Pl.’s Opp’n, p. 4. The Court can consider this new theory only in relation to 

whether leave to amend will be granted.

2. Claim 2

Claim 2 is asserted under § 1785.25(a) of the CCRA, which provides that “[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.” Cal. 

Civ. Code § 1785.25(a). 

Plaintiff pleads that “Defendant [...] intentionally and knowingly reported misleading and 

inaccurate account information to TransUnion, LLC.” Plaintiff “realleges and incorporates” the 

same allegations listed in Claim 1. FAC ¶ 26. At the hearing on this motion, Plaintiff also 

conceded this claim was inadequately pled and requested leave to amend.

For the reasons discussed above regarding Claim 1, Claim 2 fails because Plaintiff has not 

alleged facts sufficient to show incomplete or inaccurate reporting.

B. The Court Grants Plaintiff Leave to Amend

Plaintiff concedes the insufficiency of his FAC and requests another opportunity to amend.

In considering whether leave to amend should be granted, courts consider the following factors: 

“undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure 

deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue 

of allowance of the amendment, futility of amendment, etc.” Eminence Capital, 316 F.3d at 

1051–52 (quoting Foman v. Davis, 371 U.S. 178, 182 (1962)).

Here, the record does not reflect any undue delay or bad faith. Plaintiff has not repeatedly 

failed to cure the deficiencies in his pleadings as he has been given only one such opportunity to 

date. This case is in an early stage, so amendment will not impose undue prejudice on Diversified. 

Finally, it is not apparent that Plaintiff’s proposed amendment would be futile. 

Accordingly, Defendant Diversified’s Motion to Dismiss is GRANTED WITH LEAVE 

TO AMEND as to Claims 1 and 2.

Case 5:15-cv-04622-BLF Document 50 Filed 10/14/16 Page 4 of 5
5

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

United States District Court

Northern District of California

 IV. ORDER

(1) Defendant Diversified’s motion to dismiss is GRANTED WITH LEAVE TO 

AMEND as to Claims 1 and 2;

(2) Leave to amend is limited to the claims alleged in the FAC; Plaintiff may not 

add additional claims or parties without express leave of the Court; and

(3) Any amended pleading shall be filed on or before November 3, 2016. 

IT IS SO ORDERED.

Dated: October 14, 2016

 ______________________________________

BETH LABSON FREEMAN

United States District Judge

Case 5:15-cv-04622-BLF Document 50 Filed 10/14/16 Page 5 of 5