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Maldonado v. HSBC Mortgage Systems, Inc.

United States District Court, D. Nevada

August 15, 2017

Raymond Maldonado, Plaintiff
v.
HSBC Mortgage Systems, Inc., Defendant

          ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION TO DISMISS [ECF NO. 16]

          Jennifer A. Dorsey United States District Judge.

         Defendant HSBC Mortgage Systems, Inc. requested plaintiff Raymond Maldonado's credit report from a credit-reporting agency so that it could review his longstanding account with HSBC. But Maldonado had discharged his HSBC account in bankruptcy a month prior, so he contends that this credit pull violated the Fair Credit Reporting Act (“FCRA”). Mandonado brought this suit alleging that he (and a class) is entitled to statutory damages from HSBC for violating the FCRA. HSBC moves to dismiss Maldonado's complaint on two grounds: (1) the entire complaint fails either because the alleged violation does not qualify for damages or because Maldonado has no standing to bring his claim; and (2) Maldonado's class allegations should be dismissed because they are too broad.

         Maldonado adequately alleges his statutory-damages claim under the FCRA. He alleges that HSBC received notice that his account was discharged and pulled his credit report anyway. Making all inferences in favor of Maldonado, a jury could find that HSBC willfully violated the FCRA because it had no permissible purpose for pulling his report.

         HSBC's standing argument also fails. Although I agree that Maldonado's negligible injuries are probably not concrete harms warranting entry into the federal courts, binding Ninth Circuit precedent says otherwise. In Syed v. M-I, LLC, a panel recently explained that when a defendant pulls a consumer's credit report without authorization, the consumer is “deprived of their ability to meaningfully authorize the credit check”-and that this harm is a concrete privacy injury that confers Constitutional standing. I am bound by this precedent.

         But I agree with HSBC that Maldonado's class allegations are insufficient, even at this early stage. Maldonado alleges a class that includes any consumer who filed bankruptcy within the last two years and whose credit was pulled by HSBC. This class extends to any HSBC customer who happened to have filed for bankruptcy protection in the last couple years-the class is not tied to members who would have a colorable claim against HSBC. I thus grant the defendant's motion to strike Maldonado's class allegations, but otherwise deny its motion.

         Discussion

         A. Motion-to-dismiss standards

         A properly pleaded complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.”[1] While Rule 8 does not require detailed factual allegations, it demands more than “labels and conclusions” or a “formulaic recitation of the elements of a cause of action.”[2] “Factual allegations must be enough to rise above the speculative level.”[3] To survive a motion to dismiss, a complaint must “contain [] enough facts to state a claim to relief that is plausible on its face.”[4]

         B. Maldonado plausibly alleges that HSBC willfully violated the FCRA.

         HSBC argues that Maldonado has not alleged an actionable claim under the FCRA because, although it may have committed a procedural violation, it did not act negligently or willfully as the statute requires. Creditors like HSBC are liable for violations of the FCRA only if they acted with culpable intent: either negligence or willfulness. If a plaintiff pursues a negligence theory, he must allege actual damages caused by the creditor's violation; if a plaintiff adequately alleges that a violation was willful, he need not allege actual damages because statutory damages are available.[5]

         I agree that Maldonado has not sufficiently alleged a negligence violation here because he does not allege that HSBC's caused him any actual damage when it pulled his credit report a single time. Maldonado contends that HSBC violated his privacy rights by prying into his credit report, and that this invasion of his privacy is “actual damage.” But he offers no authority to suggest that a bare invasion of a privacy interest is actual damage for purposes of the FCRA, and a number of courts have rejected this theory.[6] If Maldonado means to allege that this invasion of privacy caused some sort of emotional or other cognizable damage, he would need to sufficiently allege those facts.[7]

         Still, Maldondo plausibly alleges a claim for willful violation of the FCRA. A defendant wilfully violates the FCRA if it acted in “reckless disregard of statutory duty, ” or “know[ingly] violate[d] the Act.”[8] The defendant's violation must “show[] that the company ran a risk of violating the law substantially greater than the risk associated with . . . mere[] careless[ness].”[9]

         Maldonado states a plausible willful-violation claim because he alleges that HSBC was specifically notified that his account was discharged and it pulled his credit anyway. Maldonado alleges that HSBC received actual notice of his bankruptcy discharge, but that it nevertheless pulled his credit without his authorization.[10] HSBC does not meaningfully address the allegation that it knew Maldonado's account was discharged. The FCRA clearly states that a creditor may not pull a credit report for a customer who no longer has an account-so there is no plausible reading of the statute that would make HSBC's actions proper.[11] The Ninth Circuit and numerous district courts have found similar conduct to be willful.[12] At this stage, Maldonado has stated a plausible claim.

         C. Maldonado has suffered a concrete harm that gives him standing to bring this claim.

         To file a case in federal court, the U.S. Constitution requires that the plaintiff suffer a concrete injury.[13] Although a concrete injury need not be a tangible one, [14] the “plaintiff must allege facts, not mere legal conclusions, in compliance with the pleading standards established by Bell Atlantic Corp. v. Twombly.”[15]

         The Supreme Court has offered two guideposts for determining whether an intangible harm should be viewed as a concrete injury for purposes of Article III. First, Congress can “identify intangible harms that meet minimum Article III requirements.”[16] Although Congress does not automatically create standing merely by giving the public a right to sue when a defendant violates a statute, Congress's decision to protect against a certain injury can indicate that this injury is concrete for purposes of Article III.[17] Second, courts consider history: whether “an alleged intangible harm has a close relationship to a harm that has traditionally been regarded as providing a basis for a lawsuit in English or American ...


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