Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_14-cv-00098/USCOURTS-azd-2_14-cv-00098-0/pdf.json

Nature of Suit Code: 480
Nature of Suit: Consumer Credit
Cause of Action: 28:1441 Petition for Removal - 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 

WO 

IN THE UNITED STATES DISTRICT COURT 

FOR THE DISTRICT OF ARIZONA 

Donald L. Warring, et al., 

Plaintiffs, 

v. 

Green Tree Servicing LLC, et al., 

Defendants.

No. CV-14-0098-PHX-DGC

ORDER 

 Defendant E*Trade Financial Corporate Services, Inc. has filed a motion to 

dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. Doc. 4. The 

motion is fully briefed. The Court will grant in part and deny in part the motion for the 

reasons set forth below.1

 

I. Background. 

Plaintiffs Donald L. Warring and Suzanne Warring obtained a loan for $471,200 

from Countrywide Bank in June 2006 (the “first mortgage”). Doc. 4-1 at 2. The first 

mortgage was secured by a deed of trust encumbering the real property located at 2113 

Quartz St., Mesa, Arizona 85213. Id. The first mortgage was eventually assigned to 

Defendant. Id. Also in June 2006, Plaintiffs obtained a second loan in the amount of 

$58,900 from Countrywide Home Loans (the “second mortgage”). Id. at 3. The second 

 

1

 Plaintiffs’ request for oral argument is denied because the issues have been fully briefed and oral argument will not aid the Court’s decision. See Fed. R. Civ. P. 78(b); 

Partridge v. Reich, 141 F.3d 920, 926 (9th Cir. 1998). 

Case 2:14-cv-00098-DLR Document 17 Filed 06/11/14 Page 1 of 7
- 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 

mortgage was refinanced in December 2006 with a balance of $105,000. The second 

mortgage was also secured by a deed of trust encumbering the Quarz St. property and 

was ultimately assigned to former defendant, Green Tree Servicing LLC (“Green Tree”). 

Id. 

 In May 2012, Plaintiffs received approval from both Defendant and Green Tree to 

sell the Quartz St. property for $339,900, which was substantially less than the amounts 

owed under the first and second mortgages. Id. As part of the agreement, Defendant 

received $311,499 from Plaintiffs in satisfaction of the first mortgage. Plaintiffs take 

issue with the manner in which Defendant has subsequently reported the first mortgage to 

credit reporting agencies. Specifically, Plaintiffs have asked Defendant to stop reporting 

the account as “90 Days Past Due” and to remove the phrases “Account paid for less than 

the full balance” and “Account paid after foreclosure started.” Doc. 15 at 5. Plaintiffs 

commenced this action on December 16, 2013, alleging claims for violation of the Fair 

Credit Reporting Act, 15 U.S.C. § 1681 et seq. (“FCRA”), and breach of contract, and 

seeking a declaratory judgment that Defendant is currently reporting inaccurate 

information on their credit report. See Doc. 1-1. 

II. Legal Standard. 

When analyzing a complaint for failure to state a claim to relief under 

Rule 12(b)(6), the well-pled factual allegations are taken as true and construed in the light 

most favorable to the nonmoving party. Cousins v. Lockyer, 568 F.3d 1063, 1067 (9th 

Cir. 2009). Legal conclusions couched as factual allegations are not entitled to the 

assumption of truth, Ashcroft v. Iqbal, 556 U.S. 662, 680 (2009), and therefore are 

insufficient to defeat a motion to dismiss for failure to state a claim, In re Cutera Sec. 

Litig., 610 F.3d 1103, 1108 (9th Cir. 2010). To avoid a Rule 12(b)(6) dismissal, the 

complaint must plead enough facts to state a claim to relief that is plausible on its face. 

Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). This plausibility standard “is not 

akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a 

defendant has acted unlawfully.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 

Case 2:14-cv-00098-DLR Document 17 Filed 06/11/14 Page 2 of 7
- 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 

556). “[W]here the well-pleaded facts do not permit the court to infer more than the mere 

possibility of misconduct, the complaint has alleged – but it has not ‘show[n]’ – ‘that the 

pleader is entitled to relief.’” Id. at 679 (quoting Fed. R. Civ. P. 8(a)(2)).

III. Analysis. 

 A. FCRA Claim. 

As an initial matter, Defendant argues that Plaintiffs’ complaint relies on two 

irrelevant Arizona statutes. Doc. 4-1 at 6-7. Plaintiffs’ complaint alleges that “[i]t is not 

accurate for a lender . . . to report any derogatory information to Credit Reporting 

Agencies, in the event of default by the borrower . . . of a non-recourse loan.” Doc. 1-1, 

¶ 34 (emphasis in original). Plaintiffs allege that the first mortgage “is a non-recourse 

loan, pursuant to A.R.S. §§ 33-814(g) and 33-729.” Id., ¶ 21. Defendant argues that its 

responsibilities are the same whether a loan is recourse or non-recourse, and that 

Plaintiffs’ cited statutes are not applicable. Doc. 4-1 at 6. A.R.S. § 33-814(G) states that 

if a trust property is sold pursuant to the trustee’s power of sale, “no action may be 

maintained to recover any difference between the amount obtained by sale and the 

amount of the indebtedness[.]” Section 33-729 states that in the case of a purchase 

money mortgage: 

[T]he lien of judgment in an action to foreclose such mortgage shall not 

extend to any other property of the judgment debtor, nor may general 

execution be issued against the judgment debtor to enforce such judgment, 

and if the proceeds of the mortgaged real property sold under special 

execution are insufficient to satisfy the judgment, the judgment may not 

otherwise be satisfied out of the other property of the judgment debtor[.] 

 These statutes are not applicable here. Plaintiffs do not allege that their property 

was sold pursuant to a trustee’s power of sale or that Defendant initiated any action to 

foreclose on the first mortgage. The Court will grant the motion to dismiss to the extent 

Plaintiffs’ claims rely on these statutes. 

 Plaintiffs’ reliance on these Arizona statutes, however, does not necessarily 

provide a basis to dismiss Plaintiffs’ claim under § 1681s-2(b). That claim depends on 

Case 2:14-cv-00098-DLR Document 17 Filed 06/11/14 Page 3 of 7
- 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 

whether Plaintiffs have successfully alleged that Defendant reported inaccurate or 

incomplete information to credit reporting agencies. Defendant argues that Plaintiffs 

have not stated a claim under § 1681s-2(b) because they have not alleged that any 

information reported by Defendant was inaccurate per se. Doc. 4-1 at 5. Defendant 

contends that the short sale agreement between it and Plaintiffs “did not address how 

[Defendant] would report the E*Trade Loan to consumer reporting agencies,” and that it 

was “otherwise accurate and proper for [Defendant] to report the loan as it did.” Id. at 6. 

Plaintiffs allege that Defendant “knowingly and intentionally failed to note that the 

[Plaintiffs] dispute [Defendant’s] inaccurate report[.]” Doc. 1-1, ¶ 50. Plaintiffs argue 

that because Defendant has failed to report their account as disputed, Defendant has 

reported inaccurate and incomplete information to credit reporting agencies. Doc. 15 

at 7. Plaintiffs find support in Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147 (9th 

Cir. 2009), where the Ninth Circuit held that “[a] disputed credit file that lacks a notation 

of a dispute may well be ‘incomplete or inaccurate’ within the meaning of the FCRA, and 

the furnisher has a privately enforceable obligation to correct the information after 

notice.” Id. at 1164. 

Gorman also noted that “a furnisher does not report ‘incomplete or inaccurate’ 

information within the meaning of § 1681s-2(b) simply by failing to report a meritless 

dispute[.]” Id. at 1163. Defendant contends that Plaintiffs’ dispute is meritless because 

the information reported by Defendant is accurate, and Gorman accordingly does not 

salvage Plaintiffs’ claim. Doc. 4-1 at 5-7. Plaintiffs respond that Defendant is reporting 

the first mortgage as “currently 90 days past due,” which they contend is inaccurate 

because their payment of $311,499 was tendered in “full and final satisfaction” of the 

first mortgage. Doc. 15 at 7-8. 

 Although Defendant’s citation to Gorman is correct, it does not provide a basis for 

dismissal here. Plaintiffs allege that they disputed Defendant’s reporting of their account 

and that Defendant failed to reasonably investigate or report their dispute. This is 

sufficient to state a claim under § 1681s-2(b). See Gorman, 584 F.3d at 1163. Whether 

Case 2:14-cv-00098-DLR Document 17 Filed 06/11/14 Page 4 of 7
- 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 

the dispute was in fact meritless, whether Defendant’s investigation was reasonable, and 

whether the information reported was accurate are questions for a trier of fact and are not 

properly considered at this stage. The Court will deny Defendant’s motion to dismiss 

Plaintiffs’ FCRA claim. 

B. Breach of Contract Claim. 

 Under Arizona law, a breach of contract claim requires the plaintiff to show (1) a 

contract, (2) a breach, and (3) damages. Thunderbird Metallurgical, Inc. v. Ariz. Testing 

Lab., 423 P.2d 124, 126 (Ariz. 1967). Plaintiffs’ allege that Defendant “agreed to report 

this matter to the Credit Reporting Agencies a certain way.” Doc. 1-1, ¶ 57. Plaintiffs 

submitted with their complaint a copy of their short sale agreement with Defendant. 

Courts generally may not consider material outside of the pleadings in deciding a 

12(b)(6) motion, but it is well settled that a district court may consider materials properly 

submitted as part of the complaint. Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 

F.2d 1542, 1555 (9th Cir. 1989). Defendant argues that the short sale agreement did not 

contain any provision addressing how Defendant would report the first mortgage to credit 

reporting agencies following the sale of Plaintiffs’ home. Doc. 4-1 at 8. Defendant is 

correct. Although the agreement states that Defendant would accept the proceeds of the 

sale of Plaintiffs’ home as “full and final satisfaction on the first mortgage indebtedness,” 

the agreement does not contain any provision on how Defendant would report the loan 

after the sale. See Doc. 1-1 at 20-21. Thus, the Court cannot conclude that Plaintiffs 

have alleged facts sufficient to show either the existence of a contract on the issue of how 

Defendant would report the first mortgage to credit reporting agencies or a breach of the 

short sale agreement. 

 Plaintiffs also argue that Defendant’s actions are “an attempt to collect a debt that 

has allegedly been fully and finally settled, and accordingly it is a breach of contract.” 

Doc. 15 at 8. Plaintiffs’ complaint alleges that “[Defendant’s] failure to accurately report 

the [first mortgage] . . . to the Credit Reporting Agencies constitutes a continued effort to 

collect a debt that the [Defendant is] not entitled to collect,” and is therefore a breach of 

Case 2:14-cv-00098-DLR Document 17 Filed 06/11/14 Page 5 of 7
- 6 - 

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 

the short sale agreement. Doc. 1-1, ¶ 58. But Plaintiffs cite no authority for the 

proposition that reporting “Account paid for less than the full balance,” “Account paid 

after foreclosure started,” or “90 days past due” constitute efforts to collect a debt. 

Plaintiffs cite no other efforts by Defendant to collect any portion of the first mortgage. 

This allegation, without more, is not sufficient to state a claim for breach of contract. 

The Court will grant Defendant’s motion to dismiss the breach of contract claim.2

C. Declaratory Judgment. 

Plaintiffs plead their declaratory judgment claim “pursuant to the provisions of 

A.R.S. § 12-1831, et seq,” Arizona’s Declaratory Judgments Act. Doc. 1-1, ¶ 65. 

Defendant argues that this state-law claim should be dismissed because a more 

appropriate remedy is available and because the declaratory judgment claim is preempted 

by the FCRA. Doc. 4-1 at 8-9. Defendant cites a number of cases holding that the FCRA 

preempts state statutory and common law causes of action arising out of conduct 

proscribed by § 1681s-2. Id. at 9 (citing cases). 

 In response, Plaintiffs request that the Court “enter a judgment that the [Plaintiffs] 

do not owe anything under this loan.” Doc. 15 at 10. Plaintiffs’ complaint, however, 

does not request such relief. Plaintiffs’ complaint asks the Court to declare that 

Defendant “improperly reported and [is] continuing to report inaccurate information,” 

(Doc. 1-1, ¶ 65), that the Court order Defendant to report the first mortgage to credit 

reporting agencies as “paid as agreed,” (id., ¶ 66), and that the Court order Defendant to 

“delete any reference to ‘account paid for less than the full balance,’ ‘account paid after 

foreclosure started,’ and/or ‘90 days past due,’” (id., ¶ 67). 

 Section 1681t(b)(1)(F) of the FCRA provides that “[n]o requirement or prohibition 

may be imposed under the laws of any State [ ] with respect to any subject matter 

regulated under . . . section 1681s-2 of this title, relating to the responsibilities of persons 

 

2

 Plaintiffs attempt to argue that Defendant has violated 15 U.S.C. § 1692(e)(2)(8) 

by failing to communicate that their debt is disputed. Doc. 15 at 8. Because Plaintiffs’ 

complaint does not state any claim under § 1692, the Court need not consider this 

argument. 

Case 2:14-cv-00098-DLR Document 17 Filed 06/11/14 Page 6 of 7
- 7 - 

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 

who furnish information to consumer reporting agencies[.]” 15 U.S.C. § 1681t(b)(1)(F). 

Plaintiffs’ requested declaratory relief appears to cover a subject regulated by § 1681s-2, 

namely the reporting of inaccurate information to credit reporting agencies. See 15 

U.S.C. § 1681s-2(a)(1)(A)-(B). The Court accordingly will grant Defendant’s motion to 

dismiss. See Keshishian v. AFNI Inc., No. CV 12-4204-GAF, 2012 WL 5378819, at *4 

(C.D. Cal. Nov. 1, 2012) (noting that the Ninth Circuit has not yet addressed this issue 

and finding that “the majority of district courts have favored the total preemption 

approach, determining that § 1681t(b)(1)(F) totally preempts all state statutory and 

common law causes of action which fall within conduct proscribed under § 1681s-2.”) 

(internal citation, quotation marks, and brackets omitted). 

IT IS ORDERED that Defendant’s motion to dismiss (Doc. 4) is granted in part

and denied in part as set forth above. 

 Dated this 11th day of June, 2014. 

Case 2:14-cv-00098-DLR Document 17 Filed 06/11/14 Page 7 of 7