Estrada v. Midland Credit Management Incorporated

1 WO [5] 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA [8] 9 Leticia Estrada, No. CV-21-01704-PHX-SMB 10 Plaintiff, ORDER 11 v. 12 Equifax Information Services LLC, et al., 13 Defendants. [14] 15 Pending before the Court is Defendants Craig Boundy and Christopher A. 16 Cartwright’s Joint Motion to Dismiss Plaintiff’s First Amended Complaint (“MTD”). 17 (Doc. 38.) Plaintiff, Leticia Estrada, filed a Response, (Doc. 43), and Defendants replied, 18 (Doc. 45). Additionally, Defendant Mark Begor filed a Motion for Judgment on the 19 Pleadings and Notice of Joinder in Co-Defendants Craig Boundy and Christopher A. 20 Cartwright’s MTD. (Doc. 47.) Plaintiff filed a Response. (Doc. 49.) Neither party 21 requested oral argument, and the Court declines to hold oral argument, finding that it is 22 unnecessary. See LRCiv. 7.2(f). The Court has considered the pleadings and relevant law 23 and will grant Defendants’ MTD and will deny Defendant Begor’s Motion for Judgment 24 on the pleadings as moot for the reasons discussed below. 25 I. BACKGROUND 26 Plaintiff’s First Amended Complaint (“FAC”) brings claims against the three major 27 credit reporting agencies—Equifax, Experian, and Trans Union (collectively, the 28 “CRAs”)—and their respective CEOs, alleging that Defendants violated the Fair Credit 1 Reporting Act (“FCRA”), 15 U.S.C. § 1681 , et seq. Specifically, the FAC alleges that the 2 CRAs failed to respond to communications or remove an errant account from Plaintiff’s 3 credit report.1 (See Doc. 25 at 21–23 ¶¶ 7–12.) Plaintiff’s FAC states that Plaintiff 4 contacted Mark Begor and Equifax by mail on April 2, 2021 to dispute an errant account 5 on her credit report. (Doc. 25 at 21 ¶ 7.) Plaintiff allegedly sent Mr. Begor a copy of a 6 letter that was sent to the creditor as well as a “Removal of Errant Account/Dispute” 7 request. (Id.) Despite receiving Plaintiff’s letter of dispute on April 7, 2021, Plaintiff 8 alleges that Mr. Begor and Equifax did not remove the allegedly errant account. (Id.) 9 Plaintiff allegedly sent similar letters to Mr. Boundy and Experian, as well as Mr. 10 Cartwright and Trans Union, but the allegedly errant account was never removed from 11 Plaintiff’s credit report even though the letters were received. (Id. at 23–25 ¶¶ 8–9.) 12 Despite Plaintiff’s claims that the account is erroneous, the CRAs have confirmed that they 13 are correctly reporting the account on Plaintiff’s credit report. (Id. at 25 ¶ 12.) 14 Plaintiff brings a claim against each of the CRAs and their respective CEOs for 15 violation of the FCRA, alleging that the CRAs willful refusal to delete or remove an 16 unverified account and willful ignorance of Plaintiff’s notice and dispute to remove an 17 errant account violate the FCRA’s reasonable procedures section, 15 U.S.C. § 1681e(b). 18 (Id. at 35–39.) 19 Defendants Boundy (CEO of Experian) and Cartwright (CEO of Trans Union) filed 20 their MTD arguing that Plaintiff’s claims against the CEO Defendants must be dismissed 21 for insufficient service of process pursuant to Rule 12(b)(5) and that Plaintiff’s FAC fails 22 to support a plausible claim against the CEO Defendants pursuant to Fed. R. Civ. P. 23 12(b)(6). Defendant Mark Begor (CEO of Equifax) filed a Motion for Judgment on the 24 Pleadings in which he joined in Defendants Boundy and Carwright’s MTD. (Doc. 47.) 25 II. LEGAL STANDARD 26 A. Rule 12(b)(5) Standard 27 Rule 12(b)(5) allows a party to move to dismiss claims against it for insufficient 28 1 Plaintiff also sued the creditor, Midland Credit Management, Inc., and its CEO, but the Plaintiff moved to voluntarily dismiss those Defendants on February 27, 2022. (Doc. 54.) 1 service of process. “A federal court is without personal jurisdiction over a defendant unless 2 the defendant has been served in accordance with Fed. R. Civ. P. 4.” Travelers Cas. & 3 Sur. Co. of Am. v. Brenneke, 551 F.3d 1132, 1135 (9th Cir. 2009) (citation omitted). While 4 “Rule 4 is a flexible rule that should be liberally construed so long as a party receives 5 sufficient notice of the complaint,” Whidbee v. Pierce Cty., 857 F.3d 1019, 1023 (9th Cir. 6 2017), “neither actual notice nor simply naming the defendant in the complaint will provide 7 personal jurisdiction” absent substantial compliance with Rule 4’s requirements, Benny v. 8 Pipes, 799 F.2d 489, 492 (9th Cir. 1986). The serving party bears the burden of 9 establishing the validity of service. Brockmeyer v. May, 383 F.3d 798, 801 (9th Cir. 2004). 10 B. Rule 12(b)(6) Standard 11 To survive a Rule 12(b)(6) motion for failure to state a claim, a complaint must meet 12 the requirements of Rule 8(a)(2). Rule 8(a)(2) requires a “short and plain statement of the 13 claim showing that the pleader is entitled to relief,” so that the defendant has “fair notice 14 of what the . . . claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, [15] 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). Dismissal 16 under Rule 12(b)(6) “can be based on the lack of a cognizable legal theory or the absence 17 of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police 18 Dep’t, 901 F.2d 696, 699 (9th Cir. 1988). A complaint that sets forth a cognizable legal 19 theory will survive a motion to dismiss if it contains sufficient factual matter, which, if 20 accepted as true, states a claim to relief that is “plausible on its face.” Ashcroft v. Iqbal, [21] 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570 ). Facial plausibility exists if 22 the pleader sets forth “factual content that allows the court to draw the reasonable inference 23 that the defendant is liable for the misconduct alleged.” Id. “Threadbare recitals of the 24 elements of a cause of action, supported by mere conclusory statements, do not suffice.” [25] Id. Plausibility does not equal “probability,” but requires “more than a sheer possibility 26 that a defendant has acted unlawfully.” Id. “Where a complaint pleads facts that are 27 ‘merely consistent’ with a defendant’s liability, it ‘stops short of the line between 28 possibility and plausibility of entitlement to relief.’” Id. (quoting Twombly, 550 U.S. at 1 557). 2 Although a complaint attacked for failure to state a claim does not need detailed 3 factual allegations, the pleader’s obligation to provide the grounds for relief requires “more 4 than labels and conclusions, and a formulaic recitation of the elements of a cause of action 5 will not do.” Twombly, 550 U.S. at 555 (internal citations omitted). 6 In ruling on a Rule 12(b)(6) motion to dismiss, the well-pled factual allegations are 7 taken as true and construed in the light most favorable to the nonmoving party. Cousins v. 8 Lockyer, 568 F.3d 1063, 1067 (9th Cir. 2009). However, legal conclusions couched as 9 factual allegations are not given a presumption of truthfulness, and “conclusory allegations 10 of law and unwarranted inferences are not sufficient to defeat a motion to dismiss.” Pareto 11 v. FDIC, 139 F.3d 696, 699 (9th Cir. 1998). A court ordinarily may not consider evidence 12 outside the pleadings in ruling on a Rule 12(b)(6) motion to dismiss. See United States v. 13 Ritchie, 342 F.3d 903, 907 (9th Cir. 2003). “A court may, however, consider materials— 14 documents attached to the complaint, documents incorporated by reference in the 15 complaint, or matters of judicial notice—without converting the motion to dismiss into a 16 motion for summary judgment.” Id. at 908 . 17 C. Rule 12(c) Standard 18 Rule 12(c) states, “[a]fter the pleadings are closed—but early enough not to delay 19 trial—a party may move for judgment on the pleadings.” A court’s analysis under Rule 20 12(c) is “substantially identical” to analysis under Rule 12(b)(6) because, under both rules, 21 “a court must determine whether the facts alleged in the complaint, taken as true, entitle 22 the plaintiff to a legal remedy.” Chavez v. United States, 683 F.3d 1102, 1109 (9th Cir. 23 2012). “As with a motion to dismiss, a court must assume that the non-moving party’s 24 allegations are true and must draw all reasonable inferences in its favor.” Reilly v. Wozniak, 25 No. CV-18-03775-PHX-MTL, 2020 WL 1033156 , at *2 (D. Ariz. Mar. 3, 2020) (citing 26 Hal Roach Studios, Inc. v. Richard Feiner & Co., 896 F.2d 1542, 1550 (9th Cir. 1989)). 27 “Courts have discretion to grant leave to amend in conjunction with 12(c) motions, and 28 may dismiss causes of action rather than grant judgment.” Id. (quoting Moran v. Peralta 1 Cmty. Coll. Dist., 825 F. Supp. 891, 893 (N.D. Cal. 1993)). 2 III. DISCUSSION 3 Because Defendant Begor joins in the MTD, (Doc. 47 at 2), and because the 4 standards for analyzing a motion to dismiss and motion for judgment on the pleadings are 5 the same, the Court will analyze the motions together. The Court will analyze each of the 6 arguments in the MTD in turn. 7 A. Rule 12(b)(5) Arguments 8 Defendants first argue that Plaintiff’s claims against the CEO Defendants should be 9 dismissed due to insufficient service of process. Defendants argue that Plaintiff served the 10 registered agents for the CRAs and did not personally serve the CEOs themselves. (Doc. 11 38 at 5.) This, Defendants claim, is insufficient for service of process of an individual 12 under Rule 4(e) and the laws of the states where the CEOs are located. (Id. at 6.) 13 In response, Plaintiff argues that Mr. Boundy’s attorney emailed her on November 14 2, 2021 telling her that Mr. Boundy was willing to waive service, (Doc. 43 at 2), and that 15 process servers completed service on the CRA CEOs by executing service on their 16 respective corporate offices. (Id. at 3.) 17 In their Reply, Defendants explain that despite initially agreeing to waive service of 18 process, no waiver was ever in effect because Plaintiff failed to follow up to the email from 19 Mr. Boundy’s counsel. (Doc. 45 at 3, 7–12.) 20 Here, Plaintiff has failed to personally serve the CEO Defendants. Pursuant to Rule 21 4(e), an individual person located in the United States may be served by “following state 22 law for serving a summons in an action brought in courts of general jurisdiction in the state 23 where the district is located or where service is made,” or by (1) “delivering a copy of the 24 summons and complaint to the individual personally,” (2) by “leaving a copy of each at the 25 individual’s dwelling or usual place of abode with someone of suitable age and discretion 26 who resides there,” or (3) “delivering a copy of each to an agent authorized by appointment 27 or by law to receive service of process.” Fed. R. Civ. P. 4(e). Defendants assert that the 28 laws of Arizona, California, and Illinois do not allow service of process of an individual 1 through the registered agent of the company that employs the individual. Plaintiff has not 2 shown otherwise. Undisputedly, Plaintiff attempted to serve the CEOs by having a copy 3 of the summons and complaint delivered to the corporate office of the company for which 4 each CEO worked. (See Doc. 43 at 2–3; Doc. 15.) But this is not sufficient for serving an 5 individual defendant within the United States. See Fed. R. Civ. P. 4(e). Furthermore, while 6 the statutory agents served were authorized to accept service of process on behalf the 7 corporations, there is no proof that they were authorized to accept service on behalf of the 8 individual CEOs. Thus, the CEO Defendants were not properly served in their individual 9 capacities. 10 Plaintiff has failed to substantially comply with Rule 4(e) by failing to serve the 11 CEO Defendants individually, and no CEO Defendant effectively waived service. 12 Accordingly, the Court does not have jurisdiction over the CEO Defendants in this case. 13 See Benny, 799 F.2d at 492 (“[N]either actual notice nor simply naming the defendant in 14 the complaint will provide personal jurisdiction without substantial compliance with Rule 15 4.”) (internal quotation marks omitted); Omni Cap. Int’l, Ltd. v. Rudolf Wolff & Co., 484 16 U.S. 97, 104 (1987) (“Before a federal court may exercise personal jurisdiction over a 17 defendant, the procedural requirement of service of summons must be satisfied.”). Thus, 18 the Court is without jurisdiction over the CEO Defendants. Even if the Plaintiff had 19 properly served the CEO Defendants, Plaintiff’s claims against them fail for other reasons 20 as discussed further below. 21 B. Rule 12(b)(6) Arguments 22 Defendants next argue that “Plaintiff does not allege any facts in her FAC that, if 23 accepted as true, would subject the CEO Defendants to liability under the FCRA.” (Doc. 24 38 at 6.) 25 The FCRA states: [26] It is the purpose of this subchapter to require that consumer reporting [27] agencies adopt reasonable procedures for meeting the needs of commerce for 28 consumer credit, personnel, insurance, and other information in a manner 1 which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information in accordance [2] with the requirements of this subchapter. [4] 15 U.S.C. § 1681 (b) (emphasis added). The Act defines “consumer reporting agency as: [5] 6 [A]ny person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or 7 evaluating consumer credit information or other information on consumers 8 for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of 9 preparing or furnishing consumer reports. [10] 15 U.S.C. § 1681a(f). A “person” is defined by the Act as “any partnership, corporation, [11] trust, estate, cooperative, association, government, or government subdivision or agency, [12] or other entity.” 15 U.S.C. § 1681a(b). The portion of the Act under which Plaintiff [13] attempts to hold the CEO Defendants liable—the reasonable procedures section—states, [14] “[w]henever a consumer reporting agency prepares a consumer report it shall follow [15] reasonable procedures to assure maximum possible accuracy of the information concerning [16] the individual about whom the report relates.” 15 U.S.C. § 1681e(b). [17] Generally, “individual defendants cannot be held liable solely because they are chief [18] executive officers for the corporate defendants.” McNack v. Smith, No. 2:14-cv-0481019 CAS(SPx), 2015 WL 7302218 , at *5 (C.D. Cal. Nov. 16, 2015) (quoting Sloan v. [20] TransUnion, LLC, 2010 WL 1949621 , at *2 (E.D. Mich. Apr. 22, 2010)). “Instead, [c]ases [21] which have found personal liability on the part of corporate officers have typically involved [22] instances where the defendant was the guiding spirit behind the wrongful conduct … or the [23] central figure in the challenged corporate activity.” Id. (quoting Davis v. Metro [24] Productions, Inc., 885 F.2d 515 , 532 n. 10 (9th Cir. 1989)) (internal quotation marks [25] omitted). [26] Here, the CEO Defendants are not CRAs for the purposes of the FCRA but are [27] merely officers of the CRAs themselves. The FAC contains no allegations which would [28] 1 allow the Court to find that the CEOs are themselves CRAs. Furthermore, the allegations 2 in the FAC do not allege that the CEOs took actions individually which led to the CRA 3 violations. Instead, the allegations merely conflate the CEOs with the CRAs themselves. 4 This is insufficient for the Court to find liability on behalf the CEO Defendants 5 individually. Additionally, no allegations in the FAC allege that CEOs were the “guiding 6 spirits” behind the conduct that allegedly caused the FCRA violations. 7 Accordingly, Plaintiff has not alleged sufficient facts to hold the CEO Defendants 8 liable under the FCRA. The Court’s conclusion is in accord with other decisions to 9 examine that have examined the issue. See, e.g., Bath v. Boundy, No. 18-CV-00384-RBJ10 STV, 2018 WL 3382934 , at *3 (D. Colo. June 12, 2018), report and recommendation 11 adopted, No. 18-CV-00384-RBJ, 2018 WL 4368677 (D. Colo. Aug. 6, 2018) (dismissing 12 FCRA claim against Mr. Boundy where it was unclear whether plaintiff was alleging that 13 Mr. Boundy personally engaged in the activities alleged or whether the corporate entity 14 took the actions). Thus, the Court will grant Defendants’ Motion to Dismiss under Rule 15 12(b)(6). 16 C. Leave to Amend 17 When granting a 12(b)(6) motion to dismiss, district courts should grant leave to 18 amend unless it is “absolutely clear” that the plaintiff cannot cure its deficiencies by 19 amendment. Jackson v. Barnes, 749 F.3d 755, 767 (9th Cir. 2014); Lopez v. Smith, 203 20 F.3d 1122, 1131 (9th Cir. 2000) (holding that a pro se litigant must be given leave to amend 21 his or her complaint if it appears at all possible that the plaintiff can correct the deficiencies 22 in the complaint). Here, it is absolutely clear that Plaintiff cannot cure the deficiencies in 23 her FAC against the individual CEO Defendants. Accordingly, the Court declines to grant 24 the Plaintiff leave to amend her FAC. 25 IV. CONCLUSION 26 The Court does not have jurisdiction over the CEO Defendants because Defendant 27 failed to properly serve them. Even if this were not so, Plaintiff’s FAC does not allege 28 valid claims under the FCRA against the CEO Defendants. Thus, the Court will dismiss 1|| Plaintiff's FAC. Because Defendant Begor joined in Defendants’ MTD, the Court will 2|| grant the MTD as to all of the CEO Defendants and will deny Defendant Begor’s Motion 3 || for Judgment on the Pleadings as moot. Accordingly, 4 IT IS ORDERED granting Defendants’ Motion to Dismiss, (Doc. 38), and 5 || dismissing Plaintiff's First Amended Complaint against Defendants Boundy, Cartwright, || and Begor, with prejudice. 7 IT IS FURTHER ORDERED denying Defendant Begor’s Motion for Judgment 8 || on the Pleadings, (Doc. 47), as moot. 9 IT IS FURTHER ORDERED denying as moot Defendant Begor’s request to 10 || respond to any of Plaintiff's remaining claims within fourteen (14) days of this Order. 11 Dated this 12th day of July, 2022. [12] 13 = fe M4 > fonorable Susan M. Brovich 15 United States District Judge [28] -9-