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Hansen v. JP Morgan Chase Bank, N.A.

United States District Court, D. Utah

March 27, 2017

RICK D. HANSEN and CONNIE B. HANSEN, individual citizens of Utah, Plaintiffs,
v.
JPMORGAN CHASE BANK, NA, CHASE BANK, JPMORGAN, JPMORGAN CHASE & CO., CENLAR, FSB, EQUIFAX, INC., EXPERIAN INFORMATION SOLUTIONS, INC., INNOVIS DATA SOLUTIONS, INC., TRANSUNION, LLC, and JOHN DOES 1 - 25, Defendants.

          MEMORANDUM DECISION AND ORDER GRANTING DEFENDANT TRANSUNION, LLC'S MOTION TO DISMISS

          David Nuffer, District Judge

         This case involves claims for damages arising from alleged incomplete or inaccurate reporting of a government taking of real property owned by Plaintiffs Rick D. Hansen and Connie B. Hansen (the “Hansens”) which had negative effects on the Hanses' credit rating.[1] The Hansens assert two claims against Defendant TransUnion, LLC (“TransUnion”): violation of the Fair and Accurate Transactions Act of 2003 (“FACTA”);[2] and violations of the Consumer Credit Reporting Reform Act of 1996 (“CCRRA”).[3] TransUnion seeks dismissal of the Hansens' claims pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim on which relief may be granted.[4]

         Because the Hansens' Complaint[5] fails to allege sufficient facts to support its claims against TransUnion, TransUnion's Motion to Dismiss[6] is GRANTED.

         Contents

         BACKGROUND ............................................................................................................................ 2

         DISCUSSION ................................................................................................................................. 5

         The Hansens' Complaint fails to satisfy the basic pleading requirements of the federal rules to state a claim against TransUnion .................................................................................... 6

         The Hansens' Complaint fails to state a claim for violation of the FACTA against TransUnion ............................................................................................................. 7

         The Hansens' Complaint fails to state a claim for violations of the CCRRA against TransUnion ............................................................................................................. 9

         The argument and new theory of TransUnion's liability in the Hansens' Response to TransUnion's Motion to Dismiss do not save their claims from dismissal .......... 12

         ORDER ......................................................................................................................................... 15

         BACKGROUND

         The Hansens were owners of certain real property in Spanish Fork, Utah (the “Property”) where they had lived and Mr. Hansen conducted a cement curbing business for more than two decades.[7] On December 20, 2013, the Hansens transferred ownership of the Property to the cities of Spanish Fork and Springville as a result of an eminent domain taking for the expansion of the Spanish Fork/Springville Municipal Airport.[8] The Hansens were paid the Property's fair market value for the taking.[9] However, the payment was insufficient to cover the existing debt owed on the Property.[10]

         Prior to the taking, by letters dated July 22, 2013, the Hansens notified the Property's lien holders, Chase Bank and CENLAR, FSB (“CENLAR”), of the government's intent to exercise eminent domain on the Property.[11] This spurred a series of communications over a period of several months between the Hansens and Chase Bank and CENLAR regarding the debts owed on the Property.[12] Despite being repeatedly informed that the transaction was a government taking, Chase Bank and CENLAR treated the Hansens' notice as a request for a short sale.[13] A “short sale” is a sale for less than value, which is treated in the industry as a foreclosure.[14]

         The taking resulted in Chase Bank and CENLAR settling the debts for an amount that was less than full payment.[15] When the Hansens later attempted to obtain a replacement property, they discovered that their credit rating had dropped as a result of information Chase Bank and CENLAR furnished to the major credit reporting agencies concerning the debts.[16]Chase Bank and CENLAR had furnished information that the Hansens were delinquent in their payments on the debts from October 2013 through December 2013, and that the Property was sold for less than value.[17]

         Beginning on January 8, 2014, the Hansens sent letters to Chase Bank and CENLAR demanding that the information furnished to the major credit reporting agencies be corrected to reflect a government taking.[18] In response, CENLAR issued letters recanting use of the term “short sale, ” and acknowledging that the transaction was a government taking and that the debt was “paid in full.”[19] CENLAR's letters were publicly noticed and shared with the major credit reporting agencies.[20] However, CENLAR later furnished information to the major credit reporting agencies that the debt was “settled for less than the full amount … due to eminent domain of the [Property].”[21]

         Chase Bank initially responded to the Hansens' demands by indicating that it “sent an electronic notification to the major credit agencies (Equifax, Experian, Innovis and TransUnion) requesting that they suppress the delinquent payments reporting on [the Hansens'] account for October 2013, November 2013, and December 2013.”[22] Chase Bank also notified the Hansens that it asked the “four major credit agencies (Equifax, Experian, Innovis and TransUnion) to show that [the Hansens had] paid off (or settled) the account for less than the full balance as of December 27, 2013.”[23] However, Chase Bank later informed that Hansens that it “requested that the credit reporting agencies report the loan as paid in full for less than the full balance - settled. The credit bureaus do not report the narrative ‘Short Sale.'”[24] Chase Bank continues to characterize the debt as settled for “less than the full balance, ” without reference to a government taking or the exercise of eminent domain.[25]

         Despite the drop in their credit rating, the Hansens purchased a replacement property.[26]However, they received a higher interest rate which increased their monthly mortgage payments by approximately $400.[27] The authorized limits on the Hansens' personal and business credit cards also suffered reductions which impacted the Mr. Hansen's ability to conduct his cement curbing business and secure future contracts.[28]

         DISCUSSION

         TransUnion seeks dismissal of the Hansens' claims pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.[29] A defendant is entitled to dismissal under Rule 12(b)(6) when the complaint, standing alone, is legally insufficient to state a claim for which relief may be granted.[30] When considering a motion to dismiss for failure to state a claim, the thrust of all well-pleaded facts in the complaint is presumed, but conclusory allegations need not be considered.[31] Nor are the complaint's legal conclusions and opinions accepted, whether or not they are couched as facts.[32]

         The United States Supreme Court has held that satisfying the basic pleading requirements of the federal rules “demands more than an unadorned, the defendant-unlawfully-harmed-me accusation.”[33] “A pleading that offers labels and conclusions or a formulaic recitation of the elements of a cause of action will not do.”[34] “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.”[35] Moreover, “naked assertions devoid of further factual enhancement” are insufficient to state a claim that will survive a motion to dismiss.[36]

         “The allegations must be enough that, if assumed to be true, the plaintiff plausibly (not just speculatively) has a claim for relief.”[37] “This requirement of plausibility serves not only to weed out claims that do not (in the absence of additional allegations) have a reasonable prospect of success, but also to inform the defendants of the actual grounds of the claim against them.”[38]

         The Hansens' Complaint fails to satisfy the basic pleading requirements of the federal rules to state a claim against TransUnion

         The Hansens' Complaint asserts two claims against TransUnion: violation of the FACTA;[39] and violations of the CCRRA.[40] However, the only factual allegations regarding TransUnion relate to the information Chase Bank and CENLAR furnished to the major credit reporting agencies concerning the debts on the Property.[41] There are no factual allegations regarding TransUnion's conduct or actions relating to the information it was furnished. Indeed, TransUnion is expressly referenced in only three of the Complaint's factual allegations, and these allegations pertain solely to the actions of Chase Bank:

67. On January 16, 2014 a fax was sent to Plaintiffs' counsel regarding the credit information reported by Chase. The letter concluded by stating that:
“Chase sent an electronic notification to the major credit agencies (Equifax, Experian, Innovis and TransUnion) requesting that they suppress the delinquent payments reporting on this account for October 2013, November 2013, and December 2013. Our records show we are not reporting any other delinquent payment to the major credit agencies.”[42]
85. On June 27, 2014 Chase sent a notice to Plaintiff through counsel that Chase had asked “four major credit agencies (Equifax, Experian, Innovis and TransUnion) to show that you paid off (or settled) the account for less than the full balance as of December 27, 2013.”[43]
97. Defendant Chase characterized to the credit reporting bureaus, including but not limited to Equifax, Experian, Innovis and TransUnion, that the government taking of the Plaintiffs' real property was “settled for less than full amount” without explanation of the true nature of the government taking, resulting in the deliberate prejudicial type casting of the transaction, not as a government taking to satisfy eminent domain and the public good, which leaves no negative credit implication on the Plaintiffs, but rather to negatively and deliberately lead to the false light conclusion, in credit terms, that it was the equivalent to a foreclosure sale, with the negative effect on the credit rating of the Plaintiffs.[44]

         There are no allegations that the Hansens contacted TransUnion regarding the information Chase Bank and CENLAR furnished. There are no allegations regarding what TransUnion did with the information Chase Bank and CENLAR furnished. And there are no allegations that TransUnion was ever aware, or reasonably should have been aware, that the Hansens disputed the completeness or accuracy of the information Chase Bank and CENLAR furnished.

         The Hansens' Complaint fails to state a claim for violation of the FACTA against TransUnion

         In asserting the Hansens' claim for violation of the FACTA against TransUnion, the Complaint includes only generalized, conclusory statements that:

• The FACTA amends the Fair Credit Reporting Act (“FCRA”) to improve the accuracy of credit reporting, and Plaintiffs have a right to have their credit fairly reported and to make informed credit decisions not influenced by inaccurate reporting;[45] and
• “Defendants” violated the FACTA by deliberately reporting the government taking in a way that adversely affected the Hansens' credit score, after notice and objection was asserted by the Hansens, and after having admitted that reporting the transaction in such a manner was likely to result in a negative credit report.[46]

         The Complaint's allegations are insufficient to inform TransUnion of the actual grounds of the Hansens' violation of the FACTA claim. The Complaint does not specify what section of the FACTA or the FCRA that TransUnion violated. Nor does it allege, even upon information and belief, any conduct of TransUnion in relation to the claim. The Complaint does allege that a credit report was generated, which includes the information furnished by Chase Bank and CENLAR and the drop in the Hansens' credit rating.[47] However, there is no allegation that TransUnion prepared this report or any other report containing the information Case Bank and CENLAR furnished.[48] The credit report attached to the Complaint also does not identify who or what entity or agency prepared it.[49] Regardless, even if the Complaint alleged that TransUnion had prepared the credit report, there is no allegation that TransUnion failed to follow reasonable procedures to assure the accuracy of the report, [50] or that the report was ever communicated to a third party.[51]

         The Hansens' Complaint also contains no allegation that the Hansens, Chase Bank, or CENLAR ever provided TransUnion with notice of the Hansens' dispute regarding the completeness or accuracy of the information Case Bank and CENLAR furnished.[52] The Complaint does allege that Case Bank and CENLAR updated and corrected the information they furnished to the major credit reporting agencies concerning the debts on the Property.[53]However, the documents referenced in support of these allegations do not state that the credit reporting agencies were ever informed that the updates and corrections were in response to a dispute made by the Hansens.[54] And even if the Complaint alleged that TransUnion had prepared a credit report containing the information furnished by Chase Bank and CENLAR, and that TransUnion had notice of the Hansens' dispute, there is no allegation that TransUnion failed to follow reasonable procedures to reinvestigate the disputed information.[55]

         Therefore, the Hansens' Complaint[56] fails to state a claim for violation of the FACTA against TransUnion.

         The Hansens' Complaint fails to state a claim for violations of the CCRRA against TransUnion

         In asserting the Hanses' claim for violation of the CCRRA against TransUnion, the Complaint references the obligations the FCRA imposes on furnishers of information to credit reporting agencies under 15 U.S.C. §§ 1681s-2(a) and 1681s-2(b).[57] Section 1681s-2(a) pertains to the duty of furnishers to provide accurate information to credit reporting agencies.[58]

         Section 1681s-2(b) pertains the duties of furnishers to comply with certain investigative procedures after receiving notice from a credit reporting agency that a consumer disputes the completeness or accuracy of furnished information.[59] The Complaint also includes a generalized, conclusory statement that:

125. Plaintiffs alleges that none of the [CCRRA's] mandatory [investigative] steps were followed and that the information given to the [credit reporting agencies] was intended to disrupt the [CCRRA's] procedure to create a conclusionary prejudice inclined to trigger a derogatory credit history event that even furnishers CENLAR and Chase admittedly knew and warned was a likelihood of their actions.[60]

         The Complaint's allegations are insufficient to state claim against TransUnion for violations of the CCRRA. The Tenth Circuit has held that “while [the] FCRA allows federal agencies and state officials to enforce the[] obligations [of Section 1681s-2(a)], it does not allow consumers … a private right of action to do so.”[61] Therefore, even assuming that the Hansens' Complaint includes allegations demonstrating that the duties of Section 1681s-2(a) apply to TransUnion, which it does not, and allegations that TransUnion violated these duties, which it also does not, any claim that TransUnion violated Section 1681s-2(a) fails as a matter of law.

         Additionally, while a private right of action exists for violations of Section 1681s-2(b), [62]the Tenth Circuit has held that “[t]he furnisher's duty to investigate arises only after a [credit reporting agency] notifies the furnisher of a dispute and, conversely, does not arise when notice is provided directly from a consumer.”[63] “Thus, a consumer cannot recover under [Section] 1681s-2(b) if they do not initiate the process for recovery by notifying a [credit reporting agency] of the dispute.”[64]

         The Hansens' Complaint fails to allege sufficient facts, even upon information and belief, to support a claim that TransUnion violated Section 1681s-2(b). There is no allegation that TransUnion ever furnished inaccurate information to a credit reporting agency regarding the Hansens. Indeed, the Complaint alleges that TransUnion is a credit reporting agency, not a furnisher of information to credit reporting agencies.[65] There is also no allegation that the Hansens, as consumers, ever initiated the investigative procedures of Section 1681s-2(b) by providing notice of their dispute to TransUnion or any other credit reporting agency. Rather, the Complaint alleges that the Hansens raised their dispute directly with Chase Bank and CENLAR, and through the office of Senator Orrin Hatch.[66] And there is no ...


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