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Reeves v. Nelnet Loan Services

United States District Court, S.D. Texas, Houston Division

May 14, 2018

NELNET LOAN SERVICES, et al., Defendants.



         Pending before the Court in this dispute under the Fair Credit Reporting Act, 15 U.S.C. §§ 1681 et seq. (the “FCRA” or “Act”)), are multiple motions to dismiss Plaintiff Ashley Reeves's First Amended Complaint and Demand for Jury Trial (the “Amended Complaint”) [Doc. # 5]. Defendant Oklahoma Student Loan Authority (“OSLA”) has moved to dismiss the Amended Complaint in its entirety on the basis of lack of subject matter jurisdiction due to sovereign immunity.[1]Defendants Capital One Bank (USA), N.A. (“Cap One”), [2] Phoenix Financial Services LLC (“Phoenix”), and Nelnet Servicing, LLC (“Nelnet”)[3] each have moved to dismiss the Amended Complaint in its entirety on the grounds that the allegations therein fail to state a claim upon which relief can be granted.[4] Plaintiff filed a single response that only addressed the Initial 12(b)(6) Motions, [5] to which Cap One, Phoenix, and Nelnet have replied.[6] Without seeking leave of Court, Plaintiff filed a sur-reply to Cap One's reply.[7]

         After Plaintiff filed her Response, Defendant Navient Solutions, LLC (“Navient”)[8] also moved to dismiss the Amended Complaint in its entirety pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.[9] Plaintiff filed a response to the Navient Motion after the deadline to do so expired.[10] However, in the interest of justice, the Court has accepted and considered Plaintiff's response to the Navient Motion.[11] The OSLA Motion and the 12(b)(6) Motions are now ripe for decision. Having considered the parties' briefing, the applicable legal authorities, and all pertinent matters of record, the Court concludes that the OSLA Motion and each of the 12(b)(6) Motions should be granted.

         I. BACKGROUND

         In February 2016, Plaintiff applied for and was denied a mortgage. In response, Plaintiff obtained a copy of her credit report. Each Defendant furnished “trade lines” on her report, which, according to Plaintiff, are “inaccurate, false and unverifiable.” Amended Complaint, ¶ 18.[12]

         After reviewing her credit report, Plaintiff sent a dispute letter to consumer reporting agencies Experian, Transunion, and Equifax (the “CRAs”), each a non-party to this lawsuit. Pursuant to their obligations under the FCRA, the CRAs notified each Defendant that Plaintiff disputed the information they had furnished to them for inclusion in her credit report. The CRAs also requested that each Defendant investigate the merits of Plaintiff's dispute.

         Experian, one of the CRAs, subsequently provided Plaintiff with the results of Defendants' investigations. Plaintiff alleges that as a result of their respective investigations, each Defendant “verified the disputed accounts, but unreasonably failed to disclose that the accounts were being disputed by Plaintiff.” Id. ¶ 24. Plaintiff alleges that Defendants' failure to disclose to the CRAs that her accounts with them were being disputed created a “negative material misleading impression” on her credit report. Id. ¶ 26.

         On December 9, 2017, Plaintiff filed her original complaint in this lawsuit. On February 6, 2018, Cap One moved to dismiss Plaintiff's original complaint in its entirety. Defendant Cap One's Motion to Dismiss Plaintiff's Original Complaint [Doc. # 4]. In response, Plaintiff amended her pleading and filed the Amended Complaint. Defendants thereafter filed the currently pending OSLA Motion and the 12(b)(6) Motions, which raise the same or very similar issues identified in Cap One's original motion to dismiss.

         II. ANALYSIS

         A. OSLA Motion

         OLSA argues Plaintiff's FCRA claims are barred by the Eleventh Amendment of the United States Constitution and moves to dismiss these claims under Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction. “‘A case is properly dismissed for lack of subject matter jurisdiction when the court lacks the statutory or constitutional power to adjudicate the case.'” Smith v. Reg'l Transit Auth., 756 F.3d 340, 347 (5th Cir. 2014) (quoting Krim v., Inc., 402 F.3d 489, 494 (5th Cir. 2005)). When there is a challenge to the court's subject matter jurisdiction, the party asserting jurisdiction bears the burden of establishing jurisdiction exists. Alabama-Coushatta Tribe of Tex. v. United States, 757 F.3d 484, 487 (5th Cir. 2014); Gilbert v. Donahoe, 751 F.3d 303, 307 (5th Cir. 2014).

         In the OSLA Motion, OSLA asserts that it is an “arm of the State of Oklahoma, ” that it has not consented to the jurisdiction of this (or any) Court for the adjudication of Plaintiff's FCRA claims, and that Congress has not abrogated the states' Eleventh Amendment immunity with respect to FCRA claims.[13] See generally OSLA Motion [Doc. # 16]. The arguments and authorities presented in the OSLA Motion constitute a strong challenge to this Court's subject matter jurisdiction over Plaintiff's claims against OSLA. Plaintiff has not responded, directly or indirectly, to that Motion. The Court therefore deems the OSLA Motion unopposed.[14] Having neither opposed the OSLA Motion nor otherwise addressing the arguments and authorities discussed therein, Plaintiff has failed to carry her burden of establishing that jurisdiction exists over her claims against OSLA. Accordingly, the OSLA Motion is granted.

         B. The 12(b)(6) Motions

         In her Amended Complaint, Plaintiff asserts the same five causes of action against each Defendant: violation of the each of the duties set forth in FCRA §§ 1681s-2(b)(1)(A)-(E) applicable to “furnishers” of information. With the exception of the credit line and balance figures each Defendant reported to the CRAs, Plaintiff alleges identical causes of action against each Defendant based on the exact same allegations. See Amended Complaint, ¶¶ 34-303. There is no dispute that Defendants are “furnishers” of information within the meaning of FCRA. However, Defendants argue that Plaintiff has failed to allege facts that state a plausible claim for relief. The Court addresses seriatim Defendants' FCRA duties in issue.

         1. Applicable Legal Standard

         A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure is viewed with disfavor and is rarely granted. Turner v. Pleasant, 663 F.3d 770, 775 (5th Cir. 2011) (citing Harrington v. State Farm Fire & Cas. Co., 563 F.3d 141, 147 (5th Cir. 2009)). The complaint must be liberally construed in favor of the plaintiff, and all facts pleaded in the complaint must be taken as true. Harrington, 563 F.3d at 147. The complaint must, however, contain sufficient factual allegations, as opposed to legal conclusions, to state a claim for relief that is “plausible on its face.” See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Patrick v. Wal-Mart, Inc., 681 F.3d 614, 617 (5th Cir. 2012). When there are well-pleaded factual allegations, a court should presume they are true, even if doubtful, and then determine whether they plausibly give rise to an entitlement to relief. Iqbal, 556 U.S. at 679. Additionally, regardless of how well-pleaded the factual allegations may be, they must demonstrate that the plaintiff is entitled to relief under a valid legal theory. See Neitzke v. Williams, 490 U.S. 319, 327 (1989); McCormick v. Stalder, 105 F.3d 1059, 1061 (5th Cir. 1997).

         2. FCRA § 1681s-2(b)(1)(A)

         Under FCRA § 1681s-2(b)(1)(A), a furnisher of information is required to “conduct an investigation with respect to the disputed information” after receiving notice of a dispute from a consumer reporting agency. 15 U.S.C. § 1681s-2(b)(1)(A). According to Plaintiff's own allegations, after being notified by the CRAs of her dispute, each Defendant conducted an investigation, verified the disputed accounts, and reported the investigation results to the CRAs. Amended Complaint, ¶ 24. Plaintiff also acknowledges that a CRA ...

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