Court Opinion

ID: 614144
Source: CourtListenerOpinion
Date Created: 2011-09-23 19:48:35+00
Date Added: 2024-06-11T17:50:28.673590
License: Public Domain

Not for Publication in West's Federal Reporter

           United States Court of Appeals
                       For the First Circuit

No. 10-2249

                 FRANK M. BARREPSKI, JR., ET AL.,

                       Plaintiffs, Appellants,

                                     v.

                           CAPITAL ONE BANK,

                         Defendant, Appellee.

           APPEAL FROM THE UNITED STATES DISTRICT COURT

                 FOR THE DISTRICT OF MASSACHUSETTS

          [Hon. Michael A. Ponsor,         U.S. District Judge]

                                  Before

                  Torruella, Boudin and Thompson,
                          Circuit Judges.

      Frank M. Barrepski, Jr. and Carrie M. Barrepski on brief pro
se.
      Robert C. Brady and Timothy J. Duva on brief for appellee.

                          September 23, 2011
            Per Curiam.     In this pending appeal, the Massachusetts

district court (1) removed the entry of a default that had been

entered against appellee Capital One Bank and (2) dismissed the

complaint filed by appellants Frank Barrepski and his wife, Carrie.

This complaint, in turn, was based on Capital One’s failure to have

corrected   allegedly inaccurate        information contained    in Frank

Barrepski’s credit report -- i.e., that he owed money to Capital

One for charges that had been made to his credit card.          Appellants

claimed that this conduct violated the Fair Credit Reporting Act

(FCRA), 15 U.S.C. § 1681s-2(b).         We find no abuse of discretion in

the removal of the default but disagree with the district court’s

conclusion that appellants have failed to state a claim for a

violation of § 1681s-2(b).         For purposes of the following, we

assume familiarity with the facts.

            1.   As for the removal of the entry of default, we begin

by emphasizing our “philosophy that actions should ordinarily be

resolved on their merits.”       Coon v. Grenier, 867 F.2d 73, 76 (1st

Cir. 1989).      In light of this preference, it is dispositive (1)

that   Capital    One   missed   the   deadline   for   responding   to   the

complaint by less than two weeks (assuming, without deciding, that

service had been properly effected on July 30, 2009) and (2) that

appellants have shown no prejudice attributable to this very brief

delay.   As a result, the district court plainly did not abuse its

discretion in vacating the default.          See KPS & Associates, Inc. v.

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Designs By FMC, Inc., 318 F.3d 1, 12 (1st Cir. 2003) (a district

court's   decision       to    vacate    an   entry   of   default     will    not   be

overturned unless it is “clearly wrong”; internal quotation marks

and citation omitted).               Appellants also have not proffered any

viable reasons why the lower court abused its discretion in denying

their motion for reconsideration.

            2. Section 1681s-2(b) sets forth the duties of those who

furnish consumer information to credit reporting agencies (CRAs),

such as Experian, the agency that prepared Barrepski's credit

report. Under that statute, after a furnisher, such a Capital One,

receives notice from a CRA that a consumer disputes the accuracy of

information      that    the    furnisher     has   provided    to the       CRA, the

furnisher must conduct a reasonable investigation, take appropriate

action, and report the results of the investigation back to the

CRA.    See Chiang v. Verizon New England Inc., 595 F.3d 26, 35-36

(1st Cir. 2010).

            Prior to invoking this right, however, the consumer must

notify the pertinent CRA of the dispute.               Id. at 35.          Once notice

has been given, the CRA then is required to advise the furnisher of

the    dispute   and     to    provide    the   furnisher      with    the    relevant

information.       Id.         The   furnisher's obligation           to   conduct   an

investigation, and its period of liability, begins ONLY upon the

furnisher’s receipt of notice FROM THE CRA; notice directly from

the consumer is not enough.               Id. at 35 n.8.         Here, appellants

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allege that they notified Experian, the pertinent CRA, of their

dispute on June 11, 2009, and, although they did not allege the

date that Experian provided the required notice to Capital One,

Capital One does not claim that it did not receive such notice.

             In evaluating whether appellants' complaint states a

claim under § 1681s-2(b), we begin with Fed. R. Civ. P. 8(a)(2).

Under this Rule, a plaintiff is required to provide “only a short

and plain statement of the claim showing that the pleader is

entitled to relief, in order to give the defendant fair notice of

what   the   claim   is   and   the   grounds   upon   which   it   rests.”

Sepulveda-Villarini v. Department of Educ. of Puerto Rico, 628 F.3d

25, 28-29 (1st Cir. 2010) (internal punctuation and citations

omitted).     As we have explained, [t]he make-or-break standard . .

. is that the combined allegations, taken as true, must state a

plausible, not a merely conceivable, case for relief.”              Id. at 29.

             In concluding that appellants had not met this standard,

the magistrate judge to whom the matter had been referred, and

whose report the district judge adopted, gave three reasons, all of

which we find unpersuasive.       First, appellants do not dispute that

the operative date for purposes of § 1681s-2(b) is the June 11th

notice to Experian, and they do not argue that their contacts

directly with Capital One prior to that date were sufficient,

standing alone, to invoke the statute.

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            Second, we do not think that holding Capital One liable

for damages as the result of the denial of appellants' mortgage

application would impermissibly turn subsection (b) into a "strict

liability scheme."     That is, in Ruffin-Thompkins v. Experian Info.

Solutions, Inc., 422 F.3d 603 (7th Cir. 2005), the case upon which

the magistrate judge relied, the Seventh Circuit granted summary

judgment    to   the   defendant   because   it   had   not   received   the

statutorily required notice until AFTER the plaintiff had sustained

her damages (the denials of credit).         As a result, the plaintiff

simply could not show a causal relationship between the allegedly

erroneous information in her credit report and the damages -- i.e.,

since the alleged violation of the statute could not have occurred

until AFTER the defendant's receipt of notice, such violation could

not have caused the prior loss of credit.         Id. at 609.

            Ruffin-Thomkins, however, is distinguishable.           In the

case at hand, the harm for which appellants seek damages -- the

denial of their mortgage application -- occurred either on June 30,

2009, when Carrie Barrepski spoke with the credit union, or on July

2, 2009, the date that appellants received the letter denying the

mortgage.   It therefore is clear that, unlike in Ruffin-Thompkins,

appellants' June 11th notice PRECEDED their damages, and, although

this notice was provided to Experian, not Capital One, we note that

Capital One, at least at this early stage in the proceedings, has

not asserted that it received notice from Experian after July 2nd.

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Thus, holding Capital One liable for damages does NOT impermissibly

turn § 1681s-2(b) into a strict liability statute.

            Finally, we turn to the the magistrate judge's statement

that appellants' failure to have disputed the Capital One debt on

Barrepski's credit report was "fatal" to any claim under subsection

(b).   Although not entirely clear, we assume that the magistrate

judge was relying on Capital One's argument that because appellants

had never disputed that Barrepski ORIGINALLY had owed Capital One

the roughly $540 charged to his credit card, the entry on the

Experian credit report was not invalid.           The problem is that

appellants are NOT contending that Barrepski's credit report is

inaccurate because he never owed the money in the first place.

Rather, they are arguing that the SETTLEMENT between Capital One

and Barrepski -- i.e., the WITH PREJUDICE dismissal of Capital

One's earlier action for the collection of the debt -- operated as

an adjudication on the merits of Capital One's entitlement to the

money and precluded it from continuing to report the $540 in

charges as a debt.    Capital One does not argue that claims based on

settlements such as this are not cognizable under § 1681s-2(b),

and,   in   fact,    Ruffin-Thompkins    itself   involved   a   similar

settlement.    See 422 F.3d at 605-06.

            Since the reasons for the district court's dismissal do

not withstand scrutiny, we look to the allegations in the complaint

in order to determine if they are sufficient to state a claim.       In

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this regard, appellants alleged (1) that they had given notice to

Experian that Capital One had furnished incorrect information, (2)

that Capital One, after learning of the error, had refused to

correct it, and (3) that appellants had been denied a mortgage as

a result of Capital One’s violation of the FCRA.           Significantly,

Capital   One    has   never   argued    that   these   allegations   were

insufficient to provide it with fair notice of appellants’ claim.

We therefore conclude that the purpose of the Rule 8(a)(2) pleading

standard has been satisfied in this case and that appellants have

stated a plausible, not merely speculative, claim for relief.

          We only add that Capital One’s arguments for why the

complaint failed to state a claim – (1) that it had 30 days in

which to conduct an investigation and (2) that the terms of the

settlement itself did not obligate it to void the debt – are not

persuasive.     That is, it is clear that what Capital One really is

arguing is that, for these reasons, it is not liable on the MERITS.

However, even if this turns out to be the case, such arguments are

more appropriate for summary judgment.

          3.     As for appellants' state claims, they specifically

waived these claims below, and, as a result, such claims are not

now before us.

          Based on the foregoing, we (1) affirm the order of the

district court vacating the entry of default and (2) reverse the

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judgment of dismissal and remand for further proceedings. No costs

are awarded.

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