Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-casd-3_13-cv-02272/USCOURTS-casd-3_13-cv-02272-0/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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UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF CALIFORNIA

MARK POTTER,

Plaintiff,

CASE NO. 13cv2272-LAB (NLS)

ORDER GRANTING MOTION TO

DISMISS FOR FAILURE TO

STATE A CLAIM

vs.

CHEX SYSTEMS, INC.,

Defendant.

In his amended complaint, Plaintiff Mark Potter seeks damages for violations of the

Fair Credit Reporting Act, 15 U.S.C. §§ 1681 et seq. Potter admits he overdrew his checking

account with US Bank in October, 2010, and that his account was later closed as a result.

He then paid US Bank the amount he owed, and unsuccessfully attempted to get negative

information removed from his credit report. He alleges Defendant Chex Systems, Inc., a

consumer reporting agency, failed to remove the negative information, and failed to respond

adequately to his many letters.

Chex moved to dismiss the original complaint. Instead of opposing the motion to

dismiss, Potter filed an amended complaint. Chex then moved to dismiss the amended

complaint for failure to state a claim, pursuant to Fed. R. Civ. P. 12(b)(6).

Legal Standards

A Rule12(b)(6) motion to dismiss tests the sufficiency of the complaint. Navarro v.

Block, 250 F.3d 729, 732 (9th Cir. 2001). Under Fed. R. Civ. P. 8(a)(2), only “a short and

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plain statement of the claim showing that the pleader is entitled to relief,” is required, in order

to “give the defendant fair notice of what the . . . claim is and the grounds upon which it

rests.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 554–55 (2007). “Factual allegations

must be enough to raise a right to relief above the speculative level . . . .” Id. at 555. “[S]ome

threshold of plausibility must be crossed at the outset” before a case is permitted to proceed.

Id. at 558 (citation omitted). The well-pleaded facts must do more than permit the Court to

infer “the mere possibility of conduct”; they must show that the pleader is entitled to relief.

Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009).

When determining whether a complaint states a claim, the Court accepts all

allegations of material fact in the complaint as true and construes them in the light most

favorable to the non-moving party. Cedars–Sinai Medical Center v. National League of

Postmasters of U.S., 497 F.3d 972, 975 (9th Cir. 2007) (citation omitted). But the Court is

“not required to accept as true conclusory allegations which are contradicted by documents

referred to in the complaint,” and does “not . . . necessarily assume the truth of legal

conclusions merely because they are cast in the form of factual allegations.” Warren v. Fox

Family Worldwide, Inc., 328 F.3d 1136, 1139 (9th Cir.2003) (citations and quotation marks

omitted).

Discussion

Potter admits he overdrew his account, and allowed it to remain overdrawn, and that

after an unspecified time the bank closed it. Only after his account was closed did he pay

off his debt of $577.61 to US Bank. (Am. Compl., ¶¶ 12–14.) He has not alleged he had an

overdraft agreement in place with US Bank, or that US Bank in any other way consented to

allow him to maintain his account in an overdrawn state. Rather, the decision to close the

account makes clear the bank thought he was acting illicitly and did not consent to it.

After the account was closed, Chex reported Potter’s checking account for “Account

Abuse.” According to the allegations, this was an accurate report. See Steward v. Wells

Fargo Bank, N.A., 2011 WL 3207037, at *6–7 (D.Minn., June 10, 2011) (where plaintiff failed

to cover overdraft when requested to do so and the account was then closed, report that the

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account was closed for “account abuse” was true). Although Potter alleged that the report

of “account abuse” was inaccurate and ought to have been removed (Am. Compl., ¶¶ 17–18,

75, 83), these allegations are conclusory and not entitled to be presumed true. See

Eisberner v. Discover Prods., Inc., 921 F. Supp. 2d 946, 948 (E.D. Wis. 2013) (rejecting as

conclusory the assertion, unsupported by factual allegations, that describing certain

accounts as “charged off” was inaccurate). Apparently, Potter seems to be arguing that

paying off an account that was closed for account abuse absolves him of the abuse (see

Am. Compl., Ex. 1), which is not correct. Agencies may, and do, report violations of credit

agreements even after payment is received. See, e.g., Narog v. Certegy Check Servs., Inc.,

759 F. Supp. 2d 1889, 1193–95 (N.D.Cal., 2011) (holding that plaintiff whose credit report

showed he had a 120-day late payment on a debt he had since paid off had no cause of

action under the FCRA). 

The complaint, and Potter’s letters (attached as exhibits) show that Potter was not

disputing the fact that US Bank closed his checking account after he maintained an

overdraft, and that he paid off his debt only after the account was closed. What he was and

is disputing is the use of “account abuse”, as his letter of July 3, 2013 makes clear:

Your computers will “verify” I bank with US Bank as I have many accounts

with them. They will verify I have had an account closed. But you need to

verify the actual information I’m disputing. I’m disputing that it is accurate to

have words anything like “account abuse” related to me.

(Ex. 10 at 1–2.) But Potter’s behavior can fairly be called “account abuse.” The FCRA does

not require that accurate negative information be removed from credit reports, even if a

consumer disagrees with the language that is used to report it. See Samadi v. Bank of

America, N.A., 476 Fed. Appx. 819, 823 (11 Cir. 2012). th

Potter has not identified any other inaccuracy other than the “account abuse”

language. He has not, for example, alleged that his report inaccurately said he had never

paid off the debt. Chex says the report was updated to show Potter paid US Bank what he

owed (see Am. Compl., Ex. 2), and he does not dispute this.

/ / /

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Potter also alleges that Chex violated its duties under § 1681e(b) by failing to adopt,

implement, and follow procedures assuring the accuracy of credit reports; failing to conduct

a reasonable investigation of inaccurate information within 30 days of receipt of his dispute

letters; failing to delete inaccurate information; and failing to certify information as accurate

before reinserting it into his credit report. Violation of certain provisions of the FCRA can

entitle consumers to damages. But here, the complaint does not adequately allege any

violations that resulted in harm to him.

First, as discussed, the information Chex reported was accurate. Even if, in the

abstract, Chex failed to maintain and follow adequate procedures to ensure accuracy of

reporting, its failure to do this had no effect on Potter. The remaining letters merely repeat

what the earlier letters said, re-asserting that the information was inaccurate.

Potter also argues that he was entitled to have Chex provide him personalized letters,

instead of form letters; that he had a right to be provided with details about the verification

process; and that Chex was required to conduct its verification of credit information by

contacting a person he designated. But under the FCRA, he is entitled to none of this. The

FCRA only required Chex to conduct a reasonable investigation to determine whether the

disputed information was accurate, and either confirm or delete it within 30 days.

§ 1681i(a)(1). As long as Chex did what the FCRA required, it was not obligated to comply

with Potter’s demands for personalized letters or detailed explanations.

Potter also alleges that Chex should have contacted the US Bank representative he

designated, who could confirm that the information was false; he identifies this

representative in his letter of July 3, 2013 simply as “Chris at my branch.” (Ex. 10.) The letter

says Chris called Chex, asking Chex to remove the “false negative information” removed,

but Chex refused. The remainder of the letter makes clear the information, even if negative,

was not false. If Chex’s failure to contact Chris rendered its investigation unreasonable,

Potter has not explained how. He has not, for example, alleged who Chris was or what Chris

could have said that would have shown Potter never committed “account abuse.”

/ / /

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The remainder of the complaint does not show how Chex violated Potter’s rights

under the FCRA, or if it did, how Potter was injured and why he is entitled to relief.

Conclusion and Order

For these reasons, the motion to dismiss is GRANTED, and the amended complaint

is DISMISSED. 

Potter has already amended once, and it appears unlikely, though not impossible, that

he could successfully amend. If he thinks he can amend his complaint successfully, he must

file an ex parte motion for leave to do so, attaching his proposed second amended complaint

as an exhibit and explaining in the body of his motion how the proposed second amended

complaint remedies the defects identified in this order. The body of the motion must not

exceed five pages, and he must file it by October 2, 2014. If he files such a motion, Chex

may file a response by October 16, 2014. Any motion not in compliance with this order will

be rejected for filing, which will likely result in the motion being untimely. 

If Potter fails to show, within the time permitted, why he should be given leave to

amend, this action will be dismissed with prejudice.

IT IS SO ORDERED.

DATED: September 17, 2014

HONORABLE LARRY ALAN BURNS

United States District Judge

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