Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_19-cv-05830/USCOURTS-cand-3_19-cv-05830-3/pdf.json

Parties Involved:
AR Resources, Inc.
Defendant
James Faircloth
Plaintiff

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

JAMES FAIRCLOTH,

Plaintiff,

v.

AR RESOURCES, INC.,

Defendant.

Case No. 19-cv-05830-JCS 

ORDER GRANTING MOTION TO 

DISMISS WITH PREJUDICE AND 

DENYING DEFENDANT’S MOTION 

FOR SANCTIONS

Re: Dkt. Nos. 41, 49

I. INTRODUCTION

Plaintiff James Faircloth brings this action against Defendant AR Resources, Inc. for 

alleged violations of the California Consumer Credit Reporting Agencies Act (“CCRAA,” Cal. 

Civ. Code § 1785.1 et. seq.). Defendant moves to dismiss Plaintiff’s Second Amended Complaint, 

and for sanctions under Rule 11 of the Federal Rules of Civil Procedure. The Court finds these 

matters suitable for resolution without oral argument and without further briefing on the motion 

for sanctions, and VACATES the hearings set for May 29, 2020 and July 10, 2020. For the 

reasons stated below, the motion to dismiss is GRANTED and the case is DISMISSED WITH 

PREJUDICE. The motion for sanctions is DENIED.1

II. BACKGROUND 

A. Procedural History 

This case was removed from California Superior Court in and for the County of Contra 

Costa because the original complaint alleged violations of the federal Fair Debt Collection Act and 

the Fair Credit Reporting Act (“FCRA”). Notice of Removal (dkt. 1) ¶¶ 1–3. Plaintiff filed the 

1 The parties have consented to the jurisdiction of the undersigned magistrate judge pursuant to 28 

U.S.C. § 636(c).

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First Amended Complaint (“FAC,” dkt. 14) on November 12, 2019. Defendant moved to dismiss 

the FAC on November 26, 2019. Motion to Dismiss FAC (dkt. 21). The Court granted the 

motion to dismiss the FAC with leave to amend on February 19, 2020. Order Granting Motion to 

Dismiss (dkt. 32).

2 Plaintiff filed the Second Amended Complaint (“SAC,” dkt. 35) on March 20, 

2020 alleging only violations of the California Credit Reporting Agencies Act (“CCRAA”). 

Defendant moves once again to dismiss, and the Court also issued an order to show cause why the 

case should not be remanded to state court for lack of subject matter jurisdiction. Order to Show 

Cause (“OSC,” dkt. 42). 

B. The Second Amended Complaint 

Plaintiff is a “debtor” and “consumer” who resides in Contra Costa County, California. 

SAC ¶ 2 (citing Cal. Civ. Code § 1788.2(b)). Defendant is an “information furnisher” who 

“regularly provid[es] information to consumer reporting agencies.” Id. ¶ 3 (quoting Cal Civ. Code 

§ 1785.3(j)) (internal quotation marks omitted). The SAC also names ten Doe Defendants, whose 

names “are currently unknown to Plaintiff” but who Plaintiff alleges are “legally responsible for 

the unlawful acts alleged herein.” Id. ¶ 5.

Plaintiff alleges that “Defendant reported false and derogatory information on Plaintiff’s 

credit report alleging a fabricated debt.” Id. ¶ 7. According to Plaintiff, he received emergency 

medical treatment at San Ramon Regional Medical Center on March 21, 2018, for which he was 

billed $1,026.00. Id. ¶ 8. Plaintiff’s insurance paid $975.80, leaving Plaintiff responsible for the 

$50.20 balance. Id. Plaintiff alleges that Defendant reported the outstanding debt to credit 

agencies on June 21, 2018, without first notifying Plaintiff. Id. ¶ 9–10. Defendant sent Plaintiff a 

letter dated July 2, 2018 notifying him of the debt, which Plaintiff alleges he received on July 14,

2018. Id. ¶ 11. Plaintiff claims that “the letter was mailed after Defendant had [al]ready reported 

to Plaintiff’s consumer credit report.” Id. Plaintiff alleges he disputed the debt on July 16, 2018, 

and that he received “requested information” from Defendant on September 21, 2018. Id. ¶ 12. 

Plaintiff claims that Defendant’s actions violated the CCRAA, Cal. Civ. Code 

2 Faircloth v. AR Res., Inc., No. 19-cv-05830-JCS, 2020 WL 820307 (N.D. Cal. Feb. 19, 2020).

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§ 1785.26(b), which provides: “A creditor may submit negative credit information concerning a 

consumer to a consumer credit reporting agency, only if the creditor notifies the consumer 

affected.” Id. ¶ 21 (quoting Cal. Civ. Code § 1785.26(b)). Ultimately, Plaintiff alleges that 

“Defendant knowingly and willfully violated CCRAA” when it submitted information about the 

debt to credit agencies without notifying Plaintiff, which Plaintiff claims violates California Civil

Code sections 1785.26(a)(2) and (b); when it did not properly investigate and review his dispute,

which Plaintiff claims violates Civil Code section 1785.25(f); and when it continued to 

disseminate negative credit information related to the debt without notifying credit agencies that 

Plaintiff had disputed the debt, which Plaintiff alleges violates Civil Code section 1785.25(c). Id. 

¶ 26. 

III. ORDER TO SHOW CAUSE 

A. The Parties’ Arguments

Because all the federal causes of action were dismissed and Plaintiff did not reassert them 

in his present complaint, the Court ordered the parties to show cause why the Court should not 

remand the case for lack of subject matter jurisdiction. OSC at 2. In response, Plaintiff argues 

that the only potential basis for the Court to retain jurisdiction over this case is to exercise 

diversity jurisdiction under 28 U.S.C. § 1332, but that the requirements for such jurisdiction are 

not met. Pl.’s Response to OSC (dkt. 43) at 2. While he does not contest that the parties are 

diverse, Plaintiff argues Defendant has not met its burden to show that the amount in controversy 

exceeds $75,000. Id. at 3. Plaintiff claims that he is seeking $15,000 in statutory damages, 

leaving a $60,000 gap between the damages at stake and the amount in controversy required for 

diversity jurisdiction. See id. at 4 (stating that Plaintiff “seeks a maximum of $15,000 in statutory 

damages”). According to Plaintiff, Defendant is required to provide “summary judgment type 

evidence” to show, by preponderance of the evidence, that attorney’s fees will exceed the 

additional $60,000 required to meet the amount in controversy. Id. (quoting Ibarra v. Manheim 

Invs., Inc., 775 F.3d 1193, 1197 (9th Cir. 2015); Fritsch v. Swift Transp. Co. of Ariz., LLC, 899 

F.3d 785, 795–96 (2018)). Because Defendant had at that time not provided any evidence 

supporting its contention that attorney’s fees will increase the amount in controversy beyond the 

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jurisdictional minimum, Plaintiff argues, the case should be remanded back to California state 

court. 

Defendant responded to the OSC in its Reply (dkt. 46). It argues that the Court has 

diversity jurisdiction over this matter because the parties are completely diverse, Reply at 1 n.1, 

and because the amount in controversy exceeds $75,000, id. at 1. According to Defendant, the 

Court should calculate the amount in controversy based on the maximum amount recoverable 

under the statute. Id. at 2–3 (quoting Chavez v. JPMorgan Chase & Co., 888 F.3d 413, 414–15 

(9th Cir. 2018); Fritsch, 899 F.3d at 795; Arias v. Residence Inn by Marriott, 936 F.3d 920, 927 

(9th Cir. 2019)). Defendant looks to the CCRAA, which authorizes a maximum of $5,000 per 

alleged violation. Id. at 3. Because the SAC alleges three violations of the CCRAA, Defendant 

claims, the maximum amount Plaintiff can recover under the statute is $15,000. Id. (citing SAC 

¶¶ 26–27). 

To reach the amount in controversy, Defendant argues that the Court should include

attorney’s fees in its calculation, because the CCRAA authorizes victorious parties to recover 

attorney’s fees. Id. at 1, 3 (citing 28 U.S.C. § 1332(a)(1); Chavez, 888 F.3d at 414–15; Lopez v. 

CIT Bank, N.A., No. 15-cv-00759-BLF, 2016 WL3163175, at *3 (N.D. Cal. Jun. 7, 2016)). 

Defendant points to Ninth Circuit precedent stating that, for jurisdictional purposes, attorney’s 

fees should be calculated using the “lodestar method” by which courts multiply “the number of 

hours the prevailing party reasonably expended on the litigation by a reasonable hourly rate.” Id. 

(quoting Camacho v. Bridgeport Fin., Inc., 523 F.3d 973, 978 (9th Cir. 2008)). 

Defendant provides a list of the tasks it expects Plaintiff’s counsel has undertaken or will 

undertake related to this action. Id. at 4–5. Based on counsel’s past billing rates, Defendant 

expects attorney’s fees in this case to exceed the $60,000 required beyond the statutory damages to 

exceed the jurisdictional minimum. Id. (citing Campbell Decl. (dkt. 46-1) ¶¶ 6–7). In a 

declaration, Defendant’s attorney R. Travis Campbell reproduces the list of tasks Plaintiff’s

counsel has or will likely undertake and estimates that Plaintiff’s counsel will spend “no less than

161 hours in attorney’s fees in connection with litigating Plaintiff’s claims through trial.” 

Campbell Decl. ¶ 6. He estimates that such hours will lead to attorney’s fees over $60,000. Id. ¶ 

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7. Campbell attached a copy of emails between the parties where Plaintiff’s counsel declined to 

stipulate to a damages cap under the jurisdictional threshold and expressed that they “reasonably 

expect this case will go to trial, incurring substantial costs and fees,” and that Plaintiff’s counsel 

“are not prepared to cap those unnecessarily.” Id. ¶ 10 & Ex. 1. Between the attorney’s fees and 

statutory damages, Defendant argues, the amount in controversy exceeds $75,000; accordingly, it 

argues, the requirements for diversity jurisdiction are met. 

Defendant also includes a declaration of Plaintiff’s attorney Todd M. Friedman submitted 

in another case detailing his legal education and experience and those of his co-counsel, Adrian

Bacon. Request for Judicial Notice (dkt. 46-2) Ex. A. According to this declaration, submitted on 

November 19, 2018, Mr. Friedman’s billing rate was $725 per hour and Mr. Bacon’s billing rate 

was $625. Id. ¶ 41; see also Reply at 3. Defendant asserts that these two declarations are enough 

to show by preponderance of the evidence that attorney’s fees will exceed $60,000 and, 

consequently, that the $75,000 amount in controversy requirement is met. Reply at 4. 

B. The Court Has Diversity Jurisdiction Over This Case Because the Parties Are 

Completely Diverse and the Amount in Controversy Exceeds $75,000

The parties do not contest that the requirement of complete diversity is satisfied. Reply at 

1 n.1; see also Civil Cover Sheet (dkt. 1-2) (checking a box indicating that Defendant is 

“Incorporated and Principal Place of Business In Another State”). In addition, Defendant has 

shown by preponderance of the evidence that the amount in controversy will exceed $75,000. 

Accordingly, the Court has jurisdiction over the present matter under 28 U.S.C. § 1332. 

In the Ninth Circuit, “the amount in controversy reflects the maximum recovery the 

plaintiff could reasonably recover.” Arias, 936 F.3d at 927. This includes attorney’s fees when, 

as here, the statute permits the prevailing party to recover them. Missouri State Life Ins. Co. v. 

Jones, 290 U.S. 199, 201 (1933); Fritsch, 899 F.3d at 794; see also Pl’s Response to OSC at 3 

(“Plaintiff does not dispute that attorneys’ fees can be taken into account in determining the 

amount in controversy if a statute [or contract] authorizes fees to a successful litigant.” (quoting 

Galt G/S v. JSS Scandinavia, 142 F.3d 1150, 1155 (9th Cir. 1998) (internal quotation marks 

omitted))). The party seeking removal (or, here, opposing remand) bears the burden of showing, 

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by preponderance of the evidence, that the amount in controversy exceeds the jurisdictional 

threshold. Chavez, 888 F.3d at 414–15. 

Defendant provided a detailed list of the tasks it expects Plaintiff’s attorney to undertake in 

its work on the case through trial, which includes reasonable estimates of the time that such tasks 

might require. Reply at 4–5; Campbell Decl. ¶ 6. The total amount of time to prosecute the case 

estimated in Campbell’s declaration comes to 186 hours, see Campbell Decl. ¶ 6, which would 

exceed $60,000 at a billing rate of only $325 per hour. Defendant also provided a declaration 

from one of Plaintiff’s attorneys listing his hourly rate and the rate of his partner, both of which 

greatly exceed that amount. Id. (citing Request for Judicial Notice Ex. A). At least one court in 

this district has found such declarations meet the preponderance of the evidence standard for 

subject matter jurisdictional purposes. See Ramirez v. Benihana Nat’l Corp., No. 18-CV-05575-

MMC, 2019 WL 131843, at *2 (N.D. Cal. Jan. 8, 2019) (finding declarations from attorneys’ 

previous case was “adequate” evidence). The Court is also convinced that the level of detail in the 

Campbell Declaration’s accounting of attorneys’ tasks in the case satisfies the evidentiary 

requirement. See Campbell Decl. ¶ 6. Accordingly, Defendant has met its burden and established 

that Plaintiff could reasonably be expected to recover attorney’s fees exceeding $60,000 if the case 

proceeded through trial and, when those fees are added to the $15,000 that Plaintiff seeks in 

statutory damages, that the amount in controversy requirement is satisfied and the Court has 

diversity jurisdiction over this case.

IV. DEFENDANT’S MOTION TO DISMISS THE SAC 

A. The Parties’ Arguments

Defendant’s present motion argues primarily that Plaintiff’s claims under the CCRAA 

must be dismissed as preempted by the FCRA. Defendant also contends that aspects of Plaintiff’s 

complaint do not include sufficient factual allegations to plausibly state a claim on which relief 

may be granted. This order addresses the parties’ arguments on those two issues in turn. 

1. Federal Preemption 

Defendant argues that Plaintiff’s CCRAA claim, which arises under sections 1785.26(b), 

1785.25(f), and 1785.25(c) of the Civil Code, is preempted by the federal FCRA and its express 

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preemption provision. Mot. at 4 (citing 15 U.S.C. § 1681t(b)(1)(F)). Defendant points to 

Carvalho v. Equifax Information Services, LLC, 629 F.3d 876, 888–89 (9th Cir. 2010), where the 

Ninth Circuit held that the FCRA’s express preemption clause preempts all claims brought under 

the CCRAA that concern conduct regulated under 15 U.S.C. § 1681s-2, except for those brought 

under section 1785.25(a). Id. (citing Carvalho, 629 F.3d at 888–89; 15 U.S.C. § 1681t(b)(1)(F)).

Defendant argues that all the sections under which Plaintiff brings his claims “are identical to 

those mandated by section 1681s-2 of the FCRA” and are therefore preempted by the federal law. 

Id. 

First, Defendant argues that each of the Plaintiff’s claims under the CCRAA is preempted 

by its federal equivalent in the FCRA. Id. at 4. According to Defendant, Plaintiff’s claim under 

section 1785.26(b) regarding notice of reporting negative credit information to credit bureaus is 

identical to a claim brought under § 1681s-2(a)(7), which provides no private right of action, and 

is therefore preempted by that section. Id. at 4–5 (citing 15 U.S.C. § 1681s-2(a)(7)). Defendant 

cites cases from this circuit where courts have found section 1785.26(b) claims preempted by 

§ 1681s-2(a)(7) because the two provisions imposed identical requirements. Id. (citing Tuck v. 

Portfolio Recovery Assocs., LLC, No. 19-CV-1270-CAB-AHG, 2019 WL 6497758, at *2 (S.D. 

Cal. Dec. 3, 2019); Kayan v. Asset Acceptance, LLC, No. CV12-03610-JGB-FMO, 2013 WL 

12415355, at *3 (C.D. Cal. Apr. 24, 2013); Oganyan v. Square Two Fin., No. CV 11-10226 RGK 

(VKB), 2012 WL 3656355, at *4 (C.D. Cal. Aug. 24, 2012)). 

Defendant makes the same argument about Plaintiff’s CCRAA claim under section 

1785.25(f) regarding Defendant’s behavior after Plaintiff disputed the debt; it argues that this 

claim is preempted by its federal analogue in § 1681s-2(b). Id. at 6 (citing Gugger v. USAA Fed. 

Sav. Bank, No. 17-cv-1518-AJB-AGS, 2017 WL 5552254, at *4–5 (S.D. Cal. Nov. 17, 2017); 

Fair v. Experian Info. Sols., Inc., Nos. C 16-5712 CW et al., 2017 WL 1164225, at *8 (N.D. Cal. 

Mar. 29, 2017)). 

Finally, Defendant argues that Plaintiff’s CCRAA claim under section 1785.25(c), alleging

that Defendant continued to report the debt to credit reporting agencies without notifying them that 

Plaintiff disputed the debt, is preempted by § 1681s-2(a)(3) of the federal law. Id. at 6–7 (citing 

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Cal. Civ. Code § 1785.25(c); 15 U.S.C. § 1681s-2(a)(3); Wang v. Asset Acceptance, LLC, 681 F. 

Supp. 2d 1143, 1147–48 (N.D. Cal. 2010); Marseglia v. JP Morgan Chase Bank, No. 09-cv-2857 

JAH(RBB), 2011 WL 13134334, at *4–5 (S.D. Cal. Aug. 3, 2011)). 

Plaintiff counters by asserting that his primary CCRAA claim arises out of section 

1785.25(a), which is not preempted by the FCRA. Opp’n (dkt. 41) at 4. He argues that the FCRA 

only preempts those parts of the CCRAA that are inconsistent with federal laws, and only to the 

extent that those laws are inconsistent. Id. at 4–5 (citing Sanai v. Saltz, 170 Cal. App. 4th 746

(2009); 15 U.S.C. § 1681(t)(b)). He argues that “Defendant’s own caselaw supports the 

contention that 1785.25(a) is expressly excluded from pre-emption.” Id. at 5 (citing Mot. at 1). 

According to Plaintiff, the FCRA’s preemption clause only applies to those parts of the CCRAA 

that concern “any subject matter regulated under” § 1681t(b)(1), which does not include section 

1785.25(a). Id. (quoting 15 U.S.C. § 1681(t)(b)(1)). He further argues that the FCRA only 

preempts those sections of the CCRAA that are inconsistent with federal law and only may not 

“exclude more law than is necessary to alleviate the inconsistency” with federal law. Id. at 5–6 

(citing 15 U.S.C. § 1681t(b)(1)(a)). Because Plaintiff’s claims are brought under California Civil 

Code section 1785.25(a) and are not inconsistent with federal law, he argues, they are not 

preempted. 

In response, Defendant points to cases where district courts have held that allegations that 

a defendant failed to notify credit reporting agencies are treated like claims under Civil Code 

sections 1785.26(b), 1785.25(c), and 1785.25(f) and are therefore preempted by the FCRA 

regardless of their label. Reply at 7 (citing Wang, 681 F. Supp. 2d at 1147–48; Marseglia, 2011 

WL 13134334, at *4–5). As in those cases, he argues, this Court should find Plaintiff’s failure to 

notify claim to be preempted as well, regardless of whether Plaintiff attempts to frame it as a claim 

under section 1785.25(a). Id. 

2. Sufficiency of the SAC 

In addition to preemption, Defendant argues that the allegations in the SAC do not state a 

claim under the CCRAA because, as the Court found in its Order granting the motion to dismiss 

the FAC, Plaintiff has not pleaded that the information Defendant reported to the credit agencies 

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was false. Mot. at 2 (citing SAC ¶¶ 7–12). According to Defendant, the only parts of the SAC 

that are well-pleaded fall under those provisions of the CCRAA that are preempted by the FCRA, 

relating to obligations distinct from section 1788.25(a)’s prohibition against reporting false or 

incomplete information. Id. at 3–4 (citing SAC ¶ 26). 

Plaintiff argues that the SAC states a claim under section 1785.25(a) because he alleges 

that Defendant reported incorrect credit information when it reported a debt that Plaintiff claims is 

fabricated, and incomplete information when it failed to report Plaintiff’s dispute to credit 

reporting agencies. Opp’n at 3; see also SAC ¶ 7 (describing the debt as “fabricated”). Plaintiff 

further argues that the SAC also alleged that Defendant knew or should have known that the 

information it provided to the credit reporting agencies was inaccurate or incomplete. Id. at 4; see 

also SAC ¶¶ 26–27 (alleging that Defendant acted “knowingly and willfully”). 

B. Legal Standard Under Rule 12(b)(6)

A complaint may be dismissed under Rule 12(b)(6) of the Federal Rules of Civil Procedure 

for failure to state a claim on which relief can be granted. “The purpose of a motion to dismiss 

under Rule 12(b)(6) is to test the legal sufficiency of the complaint.” N. Star Int’l v. Ariz. Corp. 

Comm’n, 720 F.2d 578, 581 (9th Cir. 1983). Generally, a plaintiff’s burden at the pleading stage 

is relatively light. Rule 8(a) of the Federal Rules of Civil Procedure states that a “pleading which 

sets forth a claim for relief . . . shall contain . . . a short and plain statement of the claim showing 

that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a). 

In ruling on a motion to dismiss under Rule 12(b)(6), the court analyzes the complaint and 

takes “all allegations of material fact as true and construe[s] them in the light most favorable to the 

non-moving party.” Parks Sch. of Bus. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). 

Dismissal may be based on a lack of a cognizable legal theory or on the absence of facts that 

would support a valid theory. Balistreri v. Pacifica Police Dep’t, 901 F.2d 696, 699 (9th Cir. 

1990). A complaint must “contain either direct or inferential allegations respecting all the material 

elements necessary to sustain recovery under some viable legal theory.” Bell Atl. Corp. v. 

Twombly, 550 U.S. 544, 562 (2007) (citing Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 

1106 (7th Cir. 1984)). “A pleading that offers ‘labels and conclusions’ or ‘a formulaic recitation 

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of the elements of a cause of action will not do.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) 

(quoting Twombly, 550 U.S. at 555). “[C]ourts ‘are not bound to accept as true a legal conclusion 

couched as a factual allegation.’” Twombly, 550 U.S. at 555 (quoting Papasan v. Allain, 478 U.S. 

265, 286 (1986)). “Nor does a complaint suffice if it tenders ‘naked assertion[s]’ devoid of 

‘further factual enhancement.’” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557) 

(alteration in original). Rather, the claim must be “‘plausible on its face,’” meaning that the 

plaintiff must plead sufficient factual allegations to “allow[] the court to draw the reasonable 

inference that the defendant is liable for the misconduct alleged.” Id. (quoting Twombly, 550 U.S. 

at 570).

C. Preemption of Plaintiff’s Claims

The federal FCRA expressly “preempts most state laws concerning the duties of persons 

who furnish information to [credit reporting agencies],” including many provisions of the

CCRAA. Huizar v. Wells Fargo Bank, N.A., 257 F. Supp. 3d 1103, 1107 (E.D. Cal. 2017); see 15

U.S.C. § 1681t(b)(1)(F) (preempting state laws “with respect to any subject matter regulated under

. . . section 1681s-2 of this title, relating to the responsibilities of persons who furnish information 

to consumer reporting agencies”). However, section 1785.25(a) is expressly excluded from the

FCRA’s preemption provision. Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147, 1169 (9th 

Cir. 2009); see also Carvalho, 629 F.3d at 888 (noting that the FCRA “also expressly saves from 

preemption section 1785.25(a) of the California Civil Code” (citing 15 U.S.C. 

§ 1681t(b)(1)(F)(ii))). That section 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 argues “[t]he primary claim, the whole of Plaintiff’s complaint as identified in the 

first paragraph, stems from CCRAA § 1785.25(a)” and is therefore not preempted. Opp’n at 3; 

see also SAC ¶ 1 (“This is an action for damages brought by an individual consumer for 

Defendant’s violations of the California Consumer Credit Reporting Agencies Act, California 

Civil Code § 1785.25 (a)”). The SAC alleges that Defendant violated three specific sections of the 

CCRAA. SAC ¶ 26. First, Plaintiff alleges Defendant’s conduct ran afoul of section 

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1785.26(a)(2), which is not preempted because the FCRA specifically exempts that statute from 

preemption. Id. 

However, Plaintiff also alleges Defendant violated section 1785.25(f), which is preempted. 

See Carvalho, 629 F.3d at 889 (“Because section 1785.25(a) is the only substantive CCRAA 

furnisher provision specifically saved by the FCRA, Carvalho’s section 1785.25(f) claim is 

preempted.”). Plaintiff’s claims under section 1785.25(c), which is also not exempted in the 

express preemption provision and concerns conducted regulated by 15 U.S.C. § 1681s1-2, and 

section 1785.26(b), are similarly preempted by the FCRA. See Farrell v. Portfolio Recovery 

Assocs., No. CV 14-03941 RGK, 2014 WL 7745881, at *4 (C.D. Cal. Sept. 19, 2014) (holding 

that claims under section 1785.25(c) are not exempt from preemption and regulate conduct found 

in § 1681s1-2); Oganyan, 2012 WL 3656355, at *4 (“Because California Civil Code § 1785.26(b) 

requires creditors to provide notification prior to reporting negative information and 

§ 1681s-2(a)(7) has a similar requirement, § 1785.26(b) is preempted by the [FCRA].”). 

Plaintiff’s argument that the Court should consider whether those provisions are 

“inconsistent” with the FCRA neglects that they are governed by the FCRA’s express requirement 

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 who furnish information to consumer reporting agencies”—except for 

two expressly exempted state laws, section 1785.25(a) and a Massachusetts statute not at issue 

here. See 15 U.S.C. § 1681t(b). As the Ninth Circuit has recognized, the express preemption 

provisions of § 1681t(b) serve as “exceptions” to the “general rule” that the FCRA only preempts 

state laws inconsistent with the FCRA’s substantive terms. Gorman, 584 F.3d at 1166. Because 

sections 1785.25(c), 1785.25(f), and 1785.26(b) are governed by § 1681t(b), the Court need not 

consider whether they conflict with any other term of the FCRA. Accordingly, while Plaintiff’s 

claim under section 1785.25(a) is not preempted by the FCRA, his allegations that Defendant 

violated sections 1785.25(c), 1785.25(f), and 1785.26(b) are preempted. 

D. Sufficiency of Allegations Regarding Section 1785.25(a)

The remaining claim under the CCRAA that is not preempted by the FCRA arises under 

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section 1785.25(a), 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 alleges 

in the SAC that Defendant violated section 1785.25(a) in two ways: first by reporting a debt that 

Plaintiff claims does not exist and secondly by failing to notify credit reporting agencies that the 

debt was in dispute. Opp’n at 3; see also SAC ¶ 26. For different reasons, neither of these 

allegations are sufficient to state a claim for relief under section 1785.25(a). Therefore, 

Defendant’s motion to dismiss is GRANTED, and the complaint is DISMISSED. 

1. Plaintiff’s Allegation that Defendant Violated the CCRAA by Not Reporting 

the Dispute Is Not Cognizable Under Section 1785.25(a)

Courts in this circuit have held that a defendant’s failure to notify credit reporting agencies

of a dispute is not “incomplete or inaccurate” information of the the type prohibited by section

1785.25(a), because it falls squarely within section 1785.25(c)’s requirement that where a 

customer has consumer a debt, “the person may not furnish the information to any consumer credit 

reporting agency without also including a notice that the information is disputed by the 

consumer,” see Cal. Civ. Code § 1785.25(c). In Wang, 681 F. Supp. 2d at 1148, for example, the 

court considered the plaintiff’s argument that the defendant’s failure to notify a credit reporting 

agency about a dispute stated a claim under section 1785.25(a). Based on principles of statutory 

interpretation under California law, the court held that it did not: 

[T]he general obligation in section 1785.25(a) not to furnish [credit 

reporting agencies] with incomplete or inaccurate information 

cannot have been intended to include the obligation to notify [credit 

reporting agencies] of disputed debts. Otherwise, section 1785.25(c) 

would be superfluous and unnecessary. . . . Since Wang’s claim, 

when properly construed, arises under section 1785.25(c) of the 

CCRAA, and since this provision is preempted by the FCRA, the 

Court must dismiss Wang’s second cause of action.

681 F. Supp. 2d at 1147–48; see also Marseglia, 2011 WL 13134334, at *4–5 (quoting and 

following Wang). Plaintiff does not address these cases, despite Defendant’s reliance on them in 

its motion. See Mot. at 7; see generally Opp’n. The Court is persuaded by this reasoning and 

holds Plaintiff’s allegation that Defendant did not notify credit reporting agencies about the 

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dispute does not state a claim under section 1785.25(a), but instead must be construed as a claim 

under section 1785.25(c), which is preempted as discussed above. 

2. Plaintiff Has Not Cured the Defects In His Previous Pleading Regarding the 

Status of the Debt 

Plaintiff’s other allegation under section 1785.25(a) is also deficient. Plaintiff has not 

cured the defect that led the Court to dismiss the FAC. In the order granting Defendant’s motion 

to dismiss the FAC, the Court held: 

Plaintiff does not allege that any of the information Defendant 

reported was false. He does not allege that he paid the debt, and he 

admits to receiving the services at San Ramon Regional Medical 

Center and incurring a $50.20 outstanding debt. Without that 

information, the allegation that the debt is “fabricated” is the type of 

“‘naked assertion[]’ devoid of ‘further factual enhancement’” that 

Iqbal finds inadequate at the pleading stage. 

Order Granting Motion to Dismiss the FAC at 14 (internal citations omitted). Although the Court 

granted leave to amend to cure that defect, Plaintiff has not pleaded any additional facts and 

continues to refer to the debt as “fabricated” without any other details or allegations as to why that 

conclusory label applies. Compare SAC ¶ 7 (“Defendant reported false and derogatory 

information on Plaintiff’s credit report alleging a fabricated debt.”) with FAC ¶ 7 (“Defendant 

reported false and derogatory information on Plaintiff’s credit report alleging a fabricated debt.”). 

The Court finds this allegation inadequate in the SAC for the same reasons it was inadequate in 

the FAC. 

E. Dismissal with Prejudice 

Because Plaintiff has not cured the defects the Court identified in the FAC, the Court 

dismisses the case with prejudice. In the Ninth Circuit, “[f]ive factors are frequently used to 

assess the propriety of a motion for leave to amend: (1) bad faith, (2) undue delay, (3) prejudice to 

the opposing party, (4) futility of amendment; and (5) whether plaintiff has previously amended 

his complaint.” Allen v. City of Beverly Hills, 911 F.2d 367, 373 (9th Cir. 1990) (citing Ascon 

Properties, Inc. v. Mobil Oil Co., 866 F.2d 1149, 1160 (9th Cir. 1989)). In Allen, the Ninth 

Circuit upheld a district court decision to dismiss a claim with prejudice based on the final two 

factors. Id. The Court looks to the same two factors here: Plaintiff’s repeated failure to plead 

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additional facts beyond his conclusory assertion that the debt was fabricated suggests that 

additional amendment would be futile; in addition, as explained above, the factual claim in the 

SAC is identical to the claim the Court found deficient in the FAC even though this is Plaintiff’s 

second attempt to amend. See generally SAC ¶ 7 (describing the debt as “fabricated” but not 

specifying whether he paid the debt). Therefore, Plaintiff’s second amended complaint is 

DISMISSED WITH PREJUDICE. 

V. DEFENDANT’S MOTION FOR RULE 11 SANCTIONS 

Defendant filed a motion to sanction Plaintiff under Rule 11 of the Federal Rules of Civil 

Procedure for filing claims that, according to Defendant, “are clearly preempted by binding 

precedent.” Motion for Sanctions (dkt. 49) at 7–8 (citing Kuroiwa v. United States, 351 F. App’x 

238 (9th Cir. 2009); Shepard-Hall v. Gordon & Wong Law Grp. PC, No. 2:16-CV-01361-MCEGGH, 2017 WL 2654855 (E.D. Cal. June 20, 2017)). Defendant argues that Plaintiff’s claims 

under the CCRAA are preempted and that, by asserting these claims, Plaintiff’s attorneys either 

failed to conduct necessary diligent research or acted strategically and improperly. Id. (citing 

Carvalho, 629 F.3d at 888–89). However, neither Carvalho nor any other Ninth Circuit precedent

of which this Court is aware announces a rule directly addressing the issue of whether a cause of 

action brought under section 1785.25(a) but concerning conduct regulated by another substantive 

area of the CCRAA is automatically preempted by the FCRA. Although, as discussed above, the 

Court is persuaded by district court authority holding that such claims are preempted, and 

therefore concludes that the SAC is subject to dismissal, the Court does not find the SAC to be 

frivolous, baseless, or presented for an improper purpose. See Fed. R. Civ. P. 11(b)(1)–(3) (listing 

situations in which Rule 11 sanctions are appropriate). Accordingly, Defendant’s motion for 

sanctions under Rule 11 is DENIED. 

VI. CONCLUSION 

For the reasons stated above, Defendant’s motion to dismiss Plaintiff’s second amended

complaint is GRANTED and the case is DISMISSED with prejudice. Defendant’s motion for 

/ / /

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sanctions under Rule 11 of the Federal Rules of Civil Procedure is DENIED. The Clerk shall 

enter judgment in favor of Defendant and close the case.

IT IS SO ORDERED.

Dated: May 27, 2020

______________________________________

JOSEPH C. SPERO

Chief Magistrate Judge

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