District Court (Cal.) Says Creditor’s Failure to Report Account in Bankruptcy Was Not Actionable, But Grants Leave to Amend to Allege that Account Was Reported Inaccurately Because of the Bankruptcy

In Watts v. Diversified Adjustment Service, Inc., 2016 WL 6025496, at *1–2 (N.D.Cal., 2016), Judge Freeman granted a Motion to Dismiss, but granted leave to amend.

Claim 1 is asserted under the FCRA, which is titled “Responsibilities of furnishers of information to consumer reporting agencies.” 15 U.S.C. § 1681s-2(b). The FCRA provides a private right of action under § 1681s-2(b) against a person who furnishes information to a credit reporting agency but fails to take certain steps when informed of a dispute regarding the completeness or accuracy of such information. See id. at 1060; Littleton v. Experian Info. Sols., Inc., No. 15-cv-01619-EJD, 2015 WL 4638308, at *1 (N.D. Cal. Aug. 4, 2015). A plaintiff asserting a claim under § 1681s-2(b) must allege what information the defendant furnished to the credit reporting agency and why that information was incomplete or inaccurate. See Littleton, 2015 WL 4638308, at *2.  Claim 1 of Plaintiff’s FAC alleges that “Defendant Diversified Adjustment Service, Inc. (Account # 1131xxxx) supplied inaccurate and misleading information to the Credit Reporting Agencies by reporting, after Plaintiff’s [C]hapter 7 filing and discharge, that the account was in collections and open and without noting that Plaintiff had filed for bankruptcy.” FAC ¶ 22. Plaintiff asserts that the reporting was inaccurate and misleading because “one viewing the account could reasonably conclude that Plaintiff owed [Diversified] money and that the account was in collections rather than discharged in Plaintiff’s [C]hapter 7 bankruptcy.” FAC ¶ 23.  Plaintiff’s bankruptcy filings show that at the time Plaintiff filed his Chapter 7 petition, the balance on his Diversified account was $0. See Order Granting Def.’s Mot. to Dismiss Compl., ECF 41; see also, Def.’s Req. for Judicial Notice, ECF 33-1. Because Plaintiff did not owe Diversified a debt at the time he filed his petition, no such debt could have been discharged in the bankruptcy. Thus, it appears that Diversified had no duty to disclose that “Plaintiff had filed for Bankruptcy” in its reporting of Plaintiff’s account. As such, Plaintiff has not plausibly alleged a claim for relief. At the hearing on this Motion, Plaintiff conceded the inadequacy of his claims and requested leave to amend consistent with the allegations described in his opposition brief.  In his Opposition to Diversified’s Motion to Dismiss, Plaintiff now asserts that Diversified’s reporting of Plaintiff’s account was misleading because “Plaintiff owes Defendant no money and Plaintiff’s complaint as pled suggests the account is in an active collection status.” See Pl.’s Opp’n, p. 4-5. Or as stated elsewhere in Plaintiff’s Opposition: “The [i]nformation is [i]Inaccurate and [m]isleading [b]ecause it [s]uggests Plaintiff [s]till [o]wes Defendant [m]oney.” See id, p. 4.  When assessing whether a plaintiff has met his pleading burden, the Court is confined to the facts plead in the operative complaint. See Iqbal, 556 U.S. at 678 (affirming the complaint must “contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face”). In this case, Plaintiff has alleged one theory in the FAC, and another theory in his briefing. See, e.g., Pl.’s Opp’n, p. 4. The Court can consider this new theory only in relation to whether leave to amend will be granted.