Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_05-cv-01207/USCOURTS-caed-2_05-cv-01207-9/pdf.json

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

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Neither City Towing Body Shop nor Sears have submitted 1

papers either seeking dismissal or joining in the pending Motions

to Dismiss. Accordingly, the present Order shall have no

applicability as to them.

1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

DANIEL ROYBAL and VIDA ROYBAL,

2:05-cv-1207-MCE-KLM

Plaintiffs,

v. MEMORANDUM AND ORDER

EQUIFAX, TRANSUNION, EXPERIAN,

RICKENBACKER, MEDAMERICA, CITY

TOWING BODY SHOP, INC., SEARS,

and DOES 1 through 50,

Defendants.

----oo0oo----

Through the present action, Plaintiffs Daniel and Vida

Roybal (“Plaintiffs”) allege that Equifax, Transunion, Experian,

Rickenbacker, Medamerica, City Towing Body Shop, Inc. and Sears1

Case 2:05-cv-01207-MCE -KJM Document 85 Filed 04/04/06 Page 1 of 13
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The state claims that are the subject of this motion are 2

Unfair Business Practices, Cal. Bus. and Prof. Code §§ 17200 et.

seq. (first cause of action); Consumer Legal Remedies Act, Cal.

Civil Code § 1750 et. seq.(second cause of action); Negligent

Misrepresentation (third cause of action); and, Negligence; Cal.

Civil Code § 1714 (fourth cause of action); Fair Debt Collection

Practices Act, Cal. Civil Code § 1788.17 (eighth cause of

action)("State Claims"). 

The federal claims that are the subject of this motion are

Fair Credit Billing Act; 15 U.S.C. 1666 (fifth cause of action);

Fair Credit Reporting Act, 15 U.S.C. § 1681 et. seq. (sixth cause

of action); Fair Debt Collection Practices Act, 15 U.S.C. § 1692

et. seq. (seventh cause of action)(collectively, "Federal

Claims"). 

2

violated both state and federal consumer protection laws by 2

furnishing and reporting erroneous credit information on

Plaintiffs’ credit report.

Defendant credit reporting agencies Equifax, TransUnion,

Experian,(collectively, “CRA Defendants”) and Defendant furnisher

of credit Medamerica, Inc. (“Medamerica”) now move to dismiss

Plaintiffs’ State and Federal Claims pursuant to Federal Rule of

Civil Procedure 12(b)(6), or in the alternative Rule 12(c), on

the ground that Plaintiffs have failed to state a claim upon

which relief can be granted. For the reasons set forth below,

Defendants’ Motions to Dismiss Plaintiffs’ State and Federal

Claims are granted in part and denied in part.

BACKGROUND

The Court has previously set forth a detailed factual

background for this action in its Order of October 19, 2005,

which is incorporated by reference and need not be reproduced

herein. Mem. & Order 2-3, October 19, 2005. 

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STANDARD

On a motion to dismiss for failure to state a claim under

Rule 12(b)(6), all allegations of material fact must be accepted

as true and construed in the light most favorable to the

nonmoving party. Cahill v. Liberty Mut. Ins. Co., 80 F.3d 336,

337-38 (9th Cir. 1996). A complaint will not be dismissed for

failure to state a claim “‘unless it appears beyond doubt that

plaintiff can prove no set of facts in support of [his or] her

claim that would entitle [him or] her to relief.’” Yamaguchi v.

Dep’t of the Air Force, 109 F.3d 1475, 1480 (9th Cir. 1997)

(quoting Lewis v. Tel. Employees Credit Union, 87 F.3d 1537, 1545

(9th Cir. 1996)).

If the court grants a motion to dismiss a complaint, it must

then decide whether to grant leave to amend. The Court should

"freely give[]" leave to amend when there is no "undue delay, bad

faith[,] dilatory motive on the part of the movant, . . . undue

prejudice to the opposing party by virtue of . . . the amendment,

[or] futility of the amendment. . . ." Fed. R. Civ. P. 15(a);

Foman v. Davis, 371 U.S. 178, 182 (1962). Generally, leave to

amend is only denied when it is clear that the deficiencies of

the complaint cannot be cured by amendment. DeSoto v. Yellow

Freight Sys., Inc., 957 F.2d 655, 658 (9th Cir. 1992).

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4

ANALYSIS

1. Fair Credit Reporting Act

A. CRA Defendants

Credit reporting agencies (“CRAs”) have an obligation under

the Fair Credit Reporting Act (“FCRA”) to follow reasonable

procedures to assure maximum possible accuracy of the information

concerning the individual about whom the report relates. 15

U.S.C. 1681e(b). In tandem with the foregoing requirement, CRAs

must respond to a consumer’s direct report of disputed credit

entries by investigating the reported dispute within thirty days

of the date notice of such dispute is received. 15 U.S.C. §

1681i(a)(1)(A). The FCRA provides for compensation in the form

of actual damages and attorneys’ fees if a CRA negligently fails

to comply with any provision of FCRA. 15 U.S.C. § 1681o. In

addition, a consumer can recover punitive damages for willful

non-compliance. 15 U.S.C. § 1681n; see also Guimond v. Trans

Union Credit Info. Co., 45 F.3d 1329, 1333 (9th Cir. 1995).

Liability for failing to accurately report a consumer’s

credit history is predicated on the consumer’s obligation to

report any alleged inaccuracy to the CRA directly. 15 U.S.C. §

1681i(a)(1)(A). The CRA Defendants collectively contend that

Plaintiffs failed to allege they directly noticed the CRAs of the

inaccurate credit entries. In reviewing Plaintiffs’ Complaint,

the Court agrees and finds that Plaintiffs failed to properly

allege they tendered notice to the CRAs in the first instance.

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Plaintiffs merely state they “complained on numerous occasions

for months about this unfair business practice and its negative

impact on their credit.” Pl’s. Compl. ¶ 12. Even taking the

facts in the light most favorable to the Plaintiffs as the Court

must, Plaintiffs have failed to adequately allege notice. Each

CRA Defendant’s obligation to reasonably investigate a claim does

not arise until notice has been tendered. Accordingly, liability

cannot be established absent specific allegations demonstrating

what notice, if any, was tendered to each Defendant CRA. In re

Silicon Graphics, 970 F.Supp. 746, 752 (N.D. Cal. 1997) (holding

that a plaintiff suing multiple defendants is obligated to

distinguish among those they sue and enlighten each defendant as

to his or her part in the alleged wrongdoing). Accordingly, the

CRA Defendants’ Motion to Dismiss is granted with twenty (20)

days leave to amend from the date of this Memorandum and Order.

B. Furnisher of Credit Defendant

Medamerica is the only furnisher of credit presently seeking

dismissal. Medamerica is in precisely the same position in this

litigation as was Defendant Rickenbacker in its Motion to

Dismiss. Accordingly, the rationale applied to Defendant

Rickenbacker in this Court’s October 19, 2006, Memorandum and

Order applies with equal force to Defendant Medamerica. 

Specifically, as a furnisher of credit, a private right of action

under the FCRA exists only if the disputatious consumer notifies

the CRA in the first instance. Once a claim is deemed viable,

the CRA must contact the furnisher of the credit information

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which affords an opportunity to investigate and rectify erroneous

reports.

See Mem. & Order, October 19, 2006, Section 1. Accordingly,

Medamerica’s Motion to Dismiss Plaintiffs’ FCRA claim is granted

with leave to amend.

2. Fair Credit Billing Act

Plaintiffs do not oppose either the CRA Defendants’ or

Medamerica’s Motions to Dismiss the Fair Credit Billing Act

claim. Accordingly, that claim is dismissed with prejudice and

without leave to amend as to all moving Defendants.

3. Fair Debt Collection Practices Act

A. CRA Defendants

The CRA Defendants are seeking to have Plaintiffs’ Fair Debt

Collection Practices Act (“FDCPA”) claims dismissed, first, on

the ground that the statute of limitations for this claim has

expired and, second, that the CRA Defendants are not “debt

collectors” and, therefore, not subject to the FDCPA.

The purpose of the FDCPA is “to eliminate abusive debt

collection practices by debt collectors, to insure that those

debt collectors who refrain from using abusive debt collection

practices are not competitively disadvantaged, and to protect

consumers against debt collection issues.” 15 U.S.C. § 1692(e). 

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The FDCPA defines the term “debt collector” as any person who

uses an instrumentality of interstate commerce or the mails in

any business the principal purpose of which is the collection of

any debts, or who regularly collects or attempts to collect,

directly or indirectly, debts owed or due or asserted to be owed

or due another. 15 U.S.C. § 1692(a).

The CRA Defendants collectively assert that they do not fit

the foregoing definition because they do not collect debts either

directly or indirectly, on their own behalf or on behalf of

others. Accordingly, they conclude, they are not subject to

liability under the FDCPA. The Court agrees.

Plaintiffs do not rebut the CRA Defendants’ assertion that

they are not debt collectors and therefore are not subject to the

FDCPA, rather, Plaintiffs limit their reply to arguing that the

statute of limitations has not expired because the CRA

Defendants’ continuing violations of the FDCPA have restarted the

limitations period anew. Even assuming, without conceding, there

were continuing violations of the FDCPA, Plaintiffs’ argument is

nonetheless unavailing as to the CRA Defendants. Specifically,

the CRA Defendants are not subject to the FDCPA because they are

not debt collectors as that term is defined under the FDCPA. 

Consequently, the CRA Defendants’ Motion to Dismiss Plaintiffs’

FDCPA claim is dismissed without leave to amend.

B. Furnisher of Credit

Defendant Medamerica seeks dismissal on the ground that the

statute of limitations on this claim is expired. 

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Plaintiffs, as noted above, aver that the continuing violations

doctrine applies to claims under the FDCPA and that Defendant

Medamerica’s pattern of conduct has restarted the limitations

period.

The Court elects not to dispose of this claim on the briefs

submitted. Rather, the Court directs the Clerk to set a hearing

for further oral argument on this issue at a time that is

convenient for the Court. The Court Orders that only Plaintiffs’

Counsel and Medamerica’s counsel need appear. The Court further

Orders that no additional briefing will be permitted.

4. Preemption of State Law Claims

A. CRA Defendants

Resolution of this issue begins with a plain reading of the

text of the FCRA. Specifically, Section 1681t deals with

preemption of state laws and provides as follows:

“No requirement or prohibition may be imposed under the

laws of any State (1) with respect to any subject

matter regulated under section 611 [§ 1681i], relating

to the time by which a consumer reporting agency must

take any action, including the provision of

notification to a consumer or other person, in any

procedure related to the disputed accuracy of

information in a consumer's file, except that this

subparagraph shall not apply to any State law in effect

on the date of enactment of the Consumer Credit

Reporting Reform Act of 1996. [enacted September 30,

1996]” 

15 U.S.C. § 1681t(b)(1)(B). The foregoing clarifies that state

laws which impose requirements or prohibitions relating to the

procedure of resolving disputed credit entries in effect on

September 30, 1996, are not preempted.

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The CRA Defendants contend, however, that Section 1681h(e)

is a more specific provision that expressly precludes common law

causes of action for defamation, invasion of privacy and

negligence. In fact, Section 1681(h)(e) provides as follows:

Except as provided in sections 616 and 617 [§§ 1681n

and 1681o] of this title, no consumer may bring any

action or proceeding in the nature of defamation,

invasion of privacy, or negligence with respect to the

reporting of information against any consumer reporting

agency, any user of information, or any person who

furnishes information to a consumer reporting agency,

based on information disclosed pursuant to section 609,

610, or 615 [§§ 1681g, 1681h, or 1681m] of this title

or based on information disclosed by a user of a

consumer report to or for a consumer against whom the

user has taken adverse action, based in whole or in

part on the report, except as to false information

furnished with malice or willful intent to injure such

consumer.

See Id. at 1681h(e)(emphasis added). A fastidious reading of

this section reveals that it applies only to causes of action

based on information disclosed to consumers [15 U.S.C. § 1681g],

the conditions and forms of disclosures to consumers [15 U.S.C. §

1681h] and requirements on users of consumer reports [15 U.S.C. §

1681m]. As was aptly explained in Whitesides v. Equifax Credit

Info. Servs., Section 1681h(e) is not actually a preemption

provision. Rather, it is a grant of protection for disclosures

mandated under Section 1681g, 1681h and 1681m. See Whitesides v.

Equifax Credit Info. Servs., 125 F. Supp. 2d 807, 811 (D. La.

2000). The disclosures contemplated by 1681h(e) are not at issue

in this case. Particularly, Plaintiffs do not contend that the

CRA Defendants improperly disclosed information to them or

improperly used Plaintiffs’ credit report. 

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Rather, Plaintiffs here complain that the CRA Defendants failed

to accurately maintain Plaintiffs’ credit information as required

by Sections 1681e and 1681i. Consequently, the Court finds that

Section 1681(h)(e) does not preempt Plaintiffs’ State Claims.

B. Furnishers of Credit

The Court’s October 19, 2006, Order clarified that

"No requirement or prohibition may be imposed under the

laws of any State with respect to any subject matter

regulated under section 1681s-2, relating to the

responsibilities of persons who furnish information to

consumer reporting agencies, except that this paragraph

shall not apply with respect to section 1785.25(a) of

the California Civil Code...."

15 U.S.C. § 1681t(b)(1)(F)(ii). Pursuant to the foregoing, the

Court dismissed all State Claims against Defendant Rickenbacker

as a furnisher of credit. That holding governs the disposition

of Medamerica’s Motion to Dismiss.

Plaintiffs argue that the Court should reevaluate its

position with respect to this holding. Specifically, Plaintiffs

extend the argument made in Section 4.A. against the CRA

Defendants to Medamerica. As discussed repeatedly above,

Medamerica is a furnisher of credit rather than a credit

reporting agency and, therefore, is exposed to different levels

of liability under the FCRA.

Here, Plaintiffs are seeking recovery from Medamerica for

failing to correct allegedly false credit entries on their credit

report. The obligation of furnishers of credit to accurately

report credit information is contained in Section 1681s-2.

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Plaintiffs’ allegation that Medamerica is liable to them for

failing to correct inaccurate credit information is an allegation

that Medamerica has violated Section 1681s-2(b). Section

1681t(b)(1)(F)(ii) expressly provides that states may not impose

any regulations or prohibitions with respect to matter regulated

under section 1681s-2. Plaintiffs’ State Claims against

Medamerica, as a furnisher of credit, fall within the purview of

Section 1681s-2 and are, therefore, preempted by the FCRA. 

Accordingly, Medamerica’s Motion to Dismiss Plaintiffs’ State

Claims is granted with prejudice and without leave to amend.

5. Plaintiffs’ Counsel

On October 19, 2006, this Court issued an Order dismissing

Defendant Rickenbacker from this litigation as follows:

Plaintiffs’ FCRA and Fair Credit Billing Act claims were

dismissed with leave to amend, however, Plaintiffs’ Fair Debt

Collection Practices Act claim and State Claims were dismissed

with prejudice. Despite this Court’s Order dismissing

Plaintiffs’ State Claims against Defendant Rickenbacker as

preempted under the FCRA, on October 27, 2006, Plaintiffs’

counsel, Mr. Nathan Potratz, willfully disregarded this Court’s

Order by refiling a number of those same State Claims against

Defendant Rickenbacker in the California Superior Court. 

In addition, Mr. Potratz filed a document with this Court

entitled “Supplemental Opposition and Response to Defendants’

Motion to Dismiss.” 

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This document, while couched as an opposition, was in fact a

Motion for Reconsideration filed in violation of Local Rule 78-

230.

Further, Mr. Potratz twice requested continuances of this

matter due to calender conflicts. The Court granted Mr. Potratz’

first motion and continued this matter to April 3, 2006. The

Court, however, denied Mr. Potratz second request to continue the

hearing and ordered that Mr. Potratz personally appear for oral

argument. See Mem. & Order, March 31, 2006. Plaintiffs’ counsel

inquired of the Court whether his Motion for Continuance of the

April 3, 2006, hearing had been granted. When the Court replied

that it had been denied and that he was to personally appear,

Plaintiffs’ Counsel advanced the following email reply:

“Obviously, I cannot be at 2 places at once so I think the denial

of the motion to continue is unreasonable. The matter then will

have to be submitted on the briefs without oral argument.”

Aware of Mr. Potratz’ email indicating his refusal to

appear, the Court delayed calling the April 3, 2006, hearing to

order until 9:10 a.m. Despite Mr. Potratz’ absence, the Court

proceeded with the hearing and concluded oral argument on this

matter at 9:18 a.m. Mr. Potratz then arrived in court after the

Parties who did appear for the hearing were dismissed. As a

result of Mr. Potratz’ failure to personally attend the hearing

as ordered, the Court issued sanctions in the amount of $500

payable within ten (10) days. The Court further ordered that Mr.

Potratz submit a declaration that the funds used to pay his

sanction were not drawn from client funds.

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The court reaffirms its order of sanctions against Mr.

Potratz for his failure to timely appear at the hearing as

ordered. Mr. Potratz is warned that blatantly disregarding this

Court’s orders and/or making unilateral decisions such as when

his appearance is required and/or deciding when matters will be

submitted on the briefs without oral argument may subject him to

further sanctions.

CONCLUSION

The CRA Defendants’ Motion to Dismiss Plaintiffs’ 1) FCRA

claim is granted with leave to amend; 2) FCBA claim is granted

withoutleave to amend; 3) FDCPA claim is dismissed without leave

to amend; 4) State Claims is denied. Medamerica’s Motion to

Dismiss Plaintiffs’ 1) FCRA claim is granted with leave to amend;

2) FCBA is granted without leave to amend; 3) State Claims is

granted without leave to amend. Medamerica’s Motion to Dismiss

Plaintiffs’ FDCPA claim shall be set for additional oral argument

at a time that is convenient for the Court.

IT IS SO ORDERED. 

DATED: April 4, 2006

_____________________________

MORRISON C. ENGLAND, JR

UNITED STATES DISTRICT JUDGE

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