United States District Court, W.D. Washington, Seattle
GEORGE L. SCHILLING and SHU Y. SCHILLING, Plaintiffs,
JPMORGAN CHASE & CO. d/b/a JP MORGAN CHASE BANK, N.A.; TRANSUNION, LLC; EXPERIAN INFORMATION SOLUTIONS INC.; and EQUIFAX INC., Defendants.
ORDER DENYING DEFENDANT'S MOTION TO
RICARDO S. MARTINEZ CHIEF UNITED STATES DISTRICT JUDGE
matter comes before the Court on Defendant JPMorgan
Chase's Motion to Dismiss under Federal Rule of Civil
Procedure 12(b)(6). Dkt. #16. Defendant seeks to dismiss
Plaintiffs' claims under the Federal Credit Reporting Act
(“FCRA”) and the Washington Consumer Protection
Act (“CPA”). Defendant argues that
Plaintiffs' FCRA claim fails as a matter of law because:
(1) Plaintiffs cannot claim their debt was settled through a
short pay off, and (2) Plaintiffs failed to allege that
Defendant received a notice of dispute, a prerequisite for
liability under FCRA. Id. Defendant also attacks
Plaintiffs' CPA claim, arguing that: (1) FCRA preempts
CPA claims, and (2) Plaintiffs' pleadings merely parrot
the elements of a state law CPA claim. Dkt. #16 at 13-18.
respond that their claims should not be dismissed because:
(1) Defendant accepted a payment to settle Plaintiffs'
debt, constituting accord and satisfaction, so reporting the
debt as “charged off” is inaccurate; (2) the
Complaint sufficiently alleges the “notice”
element of a FCRA claim; (3) their CPA claim is not preempted
because the conduct giving rise to their state law claim is
separate from their FCRA claim, and (4) they have adequately
pled elements of a CPA claim. Dkt. #23.
reasons set forth below, the Court agrees with Plaintiffs and
DENIES Defendant's Motion.
to the financial crisis, Plaintiffs George and Shu Schilling
obtained a second mortgage loan from Washington Mutual for
$230, 000. Dkt. #1 at ¶ 10. Defendant JPMorgan Chase
acquired the loan after Washington Mutual failed in
2008. Id. After health issues arose,
Plaintiffs fell behind on their payments. Dkt. #1 at ¶
11. In 2015, Defendant initiated negotiations by sending
offers to Plaintiffs to settle the balance of the debt for
less than they owed. Id. Specifically, on September
23, 2015, Defendant sent Plaintiffs a letter offering to
“greatly reduce the remaining balance of $190, 950.89
on your account, so it's easier for you to settle this
account once and for all.” Dkt. #1-2 at 49.
Defendant's offer listed three figures:
• One-Time Payment of $26, 642.63 (Payoff Dated: October
• Monthly Payments of $2, 592.00 (Payoff Dated: November
• Monthly Payments of $992.00 (Payoff Dated: November 1,
offer further stated: “Once your settlement payoff is
complete, we'll release any remaining lien(s) we may hold
on the property and notify the credit reporting agencies that
the balance has been resolved.” Dkt. #1-2 at 49.
Defendant's letter explicitly states that it constituted
a “valid offer that ends on October 27, 2015.”
October 15, 2015, Plaintiffs' counsel informed Defendant
of his representation and faxed Defendant a letter proposing
to tender $10, 000.000 in exchange for Defendant's
release and conveyance of Plaintiffs' Deed of Trust.
Dkts. #1 at ¶ 12 and #1-2 at 15.
October 21, 2015, Defendant sent a letter to Plaintiffs'
counsel acknowledging that Plaintiffs had retained counsel.
Dkt. #1-2 at 83. However, Defendant did not address the
counteroffer included in Plaintiffs' October 15, 2015,
October 26, 2015, Plaintiffs' counsel submitted a
cashier's check in the amount of $10, 000.00. Dkt. #1 at
¶ 12. Counsel expressly specified the payment was made
“in consideration for Chase releasing the note and
re-conveyance of the Deed of Trust associated with the
Loan's account number XXXXX.” Id. and #1-2
at 18. Defendant cashed the check immediately on October 28,
2015, Dkt. #1-2 at 18, and did not provide any additional
notation or protest on the face of the check itself.
parties do not dispute that Defendant has since reported the
debt as “charged off” rather than paid off by a
compromised amount. Dkt. #1 at ¶ 17. Plaintiffs'
Complaint cites to Experian's website for the definition
of “charged off, ” which means “that the
original creditor has given up on being repaid according to
the original terms of the loan. It considers the remaining
balance to be bad debt, but that doesn't mean you no
longer owe the amount that has not been repaid.” Dkt.
#1 at ¶ 28. Having been “charged
off” by the original lender, the account is generally
sent to a collection agency, which will then attempt to
recover the remaining amount and potentially additional
interests and fees. Id.
depositing Plaintiffs' check, Defendant continued
reporting the debt as “charged off, ” and
continued to issue debt collection demands to Plaintiffs,
including almost daily collection calls. Dkt. #1 at ¶
¶ 13 and 17. Over the course of the following months,
Plaintiffs sent Defendant multiple letters disputing
Defendant's reporting of the debt as “charged
off” rather than paid off by settlement, and requesting
investigation, which went unanswered by
Defendant.Plaintiffs allege at least two of these
written disputes were sent to Trans Union, Experian and
Equifax, id., the three entities Plaintiffs'
Complaint alleges are “credit reporting agencies”
within the meaning of FCRA. Id. at ¶ 3, 4 and
12(b)(6) permits a court to dismiss a complaint for failure
to state a claim. Fed.R.Civ.P. 12(b)(6). The Rule requires
the Court to assume the truth of the Complaint's factual
allegations, credit all reasonable inferences arising from
those allegations, and resolve doubts in favor of the
plaintiff. Sanders v. Brown, 504 F.3d 903, 910 (9th
plaintiff must point to factual allegations that “state
a claim to relief that is plausible on its face.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 568
(2007). A defendant's motion should be denied when there
is “any set of facts consistent with the allegations in
the complaint” that would entitle the plaintiff to
relief, id. at 563; Ashcroft v. Iqbal, 556
U.S. 662, 679 (2009), “even if it strikes a savvy judge
that actual proof of those facts is improbable.”
Twombly, 550 U.S. at 556.
12(b)(6) motion to dismiss tests the legal sufficiency of the
claims alleged in the complaint. Ileto v. Glock,
Inc., 349 F.3d 1191, 1199-1200 (9th Cir. 2003).
Dismissal of the complaint, or any claim within it, may be
based on either a “‘lack of a cognizable legal
theory' or ‘the absence of sufficient facts alleged
under a cognizable legal theory.'” Johnson v.
Riverside Healthcare Sys., LP, 534 F.3d 1116, 1121-22
(9th Cir. 2008) (quoting Balistreri v. Pacifica Police
Dep't, 901 F.2d 696, 699 (9th Cir. 1990)). Thus,
this Court must determine whether Plaintiffs have stated a
plausible legal claim, not whether they will be successful on
the merits of such claim. This standard bears repeating
because Defendant largely concentrates on the merits of
Plaintiffs' claim, rather than focusing on the 12(b)(6)
standard. This Court analyzes this motion in a manner
consistent with the Rule 12(b)(6) standard.
general rule, the Court may not consider any material beyond
the pleadings and attached exhibits. Lee v. City of Los
Angeles, 250 F.3d 668, 688-89 (9th Cir. 2001). Because
neither party has asked the Court to consider materials
beyond the four corners of the Complaint and Exhibits
attached thereto, the Court does not depart from the general
Plaintiff's FCRA Claim: Inaccuracy
noted above, Defendant admits it is a “furnisher”
as defined by FCRA. “Furnishers” are sources that
provide credit information to credit reporting agencies.
Gorman v. Wolpoff & Abramson, LLP, 584 F.3d
1147, 1153 (9th Cir. 2009). Under FCRA,
“furnishers” have the duty to investigate and/or
correct inaccurate information, and an individual may bring a
private cause of action to sue a furnisher for its failure to
fulfill those duties. 15 U.S.C. § 1681s-2(b); Nelson
v. Chase Manhattan Mortg. Corp., 282 F.3d 1057, 1060
(9th Cir. 2002). In order to state such a claim under FCRA,
Plaintiffs must, “at a minimum, ” allege: (1)
factual content showing an inaccuracy in their credit report;
and (2) that they communicated their disputes to the credit
reporting agencies (“CRAs”). Gorman, 584
F.3d at 1154, 1162.
respect to the “inaccuracy” element, Plaintiffs
allege that Defendant reported their debt to three CRAs as
“charged off” rather than paid off by a
compromised amount, and that this reporting is inaccurate as
of October 2015 when Plaintiffs satisfied the debt by
tendering the short pay off amount of $10, 000.00. Dkt. #1 at
¶ 17. In other words, Plaintiffs assert that their
payoff constituted accord and satisfaction of their debt.
Thus, if Plaintiffs have plausibly alleged accord and
satisfaction under Washington contract law, they have also
adequately pled the “inaccuracy” element of their
Washington law, the doctrine of “accord and
satisfaction” recognizes a debtor and creditor's
agreement to settle a claim by some performance that differs
from that which is claimed due-once the creditor accepts the
substituted performance, it amounts to full satisfaction of
the claim. Northwest Motors, Ltd. v. James, 118
Wash.2d 294, 303 (1992) (en banc). If the substitute
agreement is consummated, it supersedes the original
contract. Northwest Motors, 118 Wash.2d 305;
Evans v. Columbia Int'l Corp., 3 Wash.App. 955,
957 (1970). The three essential elements for an accord and
satisfaction are: (1) the existence of a bona fide dispute;
(2) an agreement to settle the dispute; and (3) performance
of the agreement. Ward v. Richards & Rossano,
Inc., 51 Wash.App. 423, 429 (1988).
Bona Fide Dispute
first argues there can be no accord and satisfaction because
the amount of debt Plaintiffs owed was never in dispute. Dkt.
#16 at 10. Plaintiffs respond that the
Defendant's offers to settle the balance of the debt for
“pennies on the dollar” rendered the amount owed
uncertain, unliquified, or disputed. Dkt. #23 at 9.
Specifically, Plaintiffs point out that Defendant's
letter - sent only weeks before Plaintiffs made their
counteroffer and tendered their check - explicitly offers to
reduce the remaining balance on Plaintiffs' account and
contains three different amounts. See Dkts. #1 at 3
and #1-2 at 49 (“We're offering to greatly reduce
the remaining balance of $190, 950.89 on your
account.”). For the reasons discussed herein, the Court
agrees with Plaintiffs.
the amount owed is in dispute, acceptance of a lower amount
by the creditor constitutes an accord and satisfaction.
Field Lumber Co. v. Petty, 9 Wash.App. 378, 379 (1973).
However, if the amount owed is not in dispute, then there can
be no accord and satisfaction without proof of additional
consideration. Id. at 378, 380. Likewise,
“[w]hen there is a dispute between the debtor and the
creditor as to the amount due, one claiming that a certain
sum is due and the other claiming that another sum is the
proper amount, the demand is unliquidated, within the meaning
of that term as applied to accord and satisfaction.”
Paulsen Estate, Inc. v. Naches- Selah Irr. Dist.,
190 Wash. 205, 208 (1937).
all factual allegations as true, the Complaint and attached
Exhibits give rise to an inference that there was a bona fide
dispute over the amount owed on the debt. At the time
Plaintiffs made their counteroffer and then tendered their
check, they had been provided three different pay off
amounts, all lower than $190, 950.89, the acceptance of any
of which would have resolved their debt. At the least, the
debt was uncertain.
argues that Plaintiffs' Complaint does not actually
allege that the amount owed was uncertain. Dkt. # 24 at 6.
While it is true that Plaintiffs' Complaint does not use
the words “the debt was uncertain, ” the
Complaint as written provides adequate notice to the
Defendant of Plaintiffs' theory. See Dkt. #1 at
¶ 17 (alleging Defendant reported Plaintiffs' debt
as “charged off” rather than paid off by a
compromised amount even though Plaintiffs satisfied the debt
by tendering the short pay off amount of $10, 000.00).
further argues that even if there was a dispute, the parties
disputed the amount of the settlement offer, not the amount
of the outstanding balance. Dkt. #24 at 6. But Defendant is
drawing a distinction without a difference. See First
Nat'l Bank v. White-Dulaney Co., 123 Wash. 220, 224
(1923) (internal citations omitted). The Washington Supreme
Court has long held that when the parties agree on the amount
of debt owed, but the debtor has an offset or claim against
the creditor, the debt owed is considered disputed. First
Nat'l Bank v. White-Dulaney Co., 123 Wash. 220, 224
(1923). Similarly, when the parties agree on the amount of
the debt owed, but there is a dispute about the debtor's
right to a set-off or counter claim, the claim as a whole is
rendered disputed. Id. The reason for this is
simple: “[T] here is no material difference between a
dispute directly involving the claim itself and a dispute
involving an offset against the claim; that whatever may be
the ground of the dispute the fact remains that there is
for the first time in its reply brief, Defendant questions
Plaintiffs' good faith belief that there was a dispute
about any amount. Dkt. #24 at 6. Since “[i]t
is well established that new arguments . . . presented for
the first time in Reply are waived, ” Docusign,
Inc. v. Sertifi, Inc., 468 F.Supp.2d 1305, 1307 (W.D.
Wash. 2006), the Court will not address this argument.