Barrepski v. Capital One Bank

Not for Publication in West's Federal Reporter
United States Court of Appeals
For the First Circuit
No. 10-2249
FRANK M. BARREPSKI, JR., ET AL.,
Plaintiffs, Appellants,
v.
CAPITAL ONE BANK,
Defendant, Appellee.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Michael A. Ponsor, U.S. District Judge]
Before
Torruella, Boudin and Thompson,
Circuit Judges.
Frank M. Barrepski, Jr. and Carrie M. Barrepski on brief pro
se.
Robert C. Brady and Timothy J. Duva on brief for appellee.
September 23, 2011
Per Curiam. In this pending appeal, the Massachusetts
district court (1) removed the entry of a default that had been
entered against appellee Capital One Bank and (2) dismissed the
complaint filed by appellants Frank Barrepski and his wife, Carrie.
This complaint, in turn, was based on Capital One’s failure to have
corrected allegedly inaccurate information contained in Frank
Barrepski’s credit report -- i.e., that he owed money to Capital
One for charges that had been made to his credit card. Appellants
claimed that this conduct violated the Fair Credit Reporting Act
(FCRA), 15 U.S.C. § 1681s-2(b). We find no abuse of discretion in
the removal of the default but disagree with the district court’s
conclusion that appellants have failed to state a claim for a
violation of § 1681s-2(b). For purposes of the following, we
assume familiarity with the facts.
1. As for the removal of the entry of default, we begin
by emphasizing our “philosophy that actions should ordinarily be
resolved on their merits.” Coon v. Grenier, 867 F.2d 73, 76 (1st
Cir. 1989). In light of this preference, it is dispositive (1)
that Capital One missed the deadline for responding to the
complaint by less than two weeks (assuming, without deciding, that
service had been properly effected on July 30, 2009) and (2) that
appellants have shown no prejudice attributable to this very brief
delay. As a result, the district court plainly did not abuse its
discretion in vacating the default. See KPS & Associates, Inc. v.
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Designs By FMC, Inc., 318 F.3d 1, 12 (1st Cir. 2003) (a district
court's decision to vacate an entry of default will not be
overturned unless it is “clearly wrong”; internal quotation marks
and citation omitted). Appellants also have not proffered any
viable reasons why the lower court abused its discretion in denying
their motion for reconsideration.
2. Section 1681s-2(b) sets forth the duties of those who
furnish consumer information to credit reporting agencies (CRAs),
such as Experian, the agency that prepared Barrepski's credit
report. Under that statute, after a furnisher, such a Capital One,
receives notice from a CRA that a consumer disputes the accuracy of
information that the furnisher has provided to the CRA, the
furnisher must conduct a reasonable investigation, take appropriate
action, and report the results of the investigation back to the
CRA. See Chiang v. Verizon New England Inc., 595 F.3d 26, 35-36
(1st Cir. 2010).
Prior to invoking this right, however, the consumer must
notify the pertinent CRA of the dispute. Id. at 35. Once notice
has been given, the CRA then is required to advise the furnisher of
the dispute and to provide the furnisher with the relevant
information. Id. The furnisher's obligation to conduct an
investigation, and its period of liability, begins ONLY upon the
furnisher’s receipt of notice FROM THE CRA; notice directly from
the consumer is not enough. Id. at 35 n.8. Here, appellants
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allege that they notified Experian, the pertinent CRA, of their
dispute on June 11, 2009, and, although they did not allege the
date that Experian provided the required notice to Capital One,
Capital One does not claim that it did not receive such notice.
In evaluating whether appellants' complaint states a
claim under § 1681s-2(b), we begin with Fed. R. Civ. P. 8(a)(2).
Under this Rule, a plaintiff is required to provide “only a short
and plain statement of the claim showing that the pleader is
entitled to relief, in order to give the defendant fair notice of
what the claim is and the grounds upon which it rests.”
Sepulveda-Villarini v. Department of Educ. of Puerto Rico, 628 F.3d
25, 28-29 (1st Cir. 2010) (internal punctuation and citations
omitted). As we have explained, [t]he make-or-break standard . .
. is that the combined allegations, taken as true, must state a
plausible, not a merely conceivable, case for relief.” Id. at 29.
In concluding that appellants had not met this standard,
the magistrate judge to whom the matter had been referred, and
whose report the district judge adopted, gave three reasons, all of
which we find unpersuasive. First, appellants do not dispute that
the operative date for purposes of § 1681s-2(b) is the June 11th
notice to Experian, and they do not argue that their contacts
directly with Capital One prior to that date were sufficient,
standing alone, to invoke the statute.
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Second, we do not think that holding Capital One liable
for damages as the result of the denial of appellants' mortgage
application would impermissibly turn subsection (b) into a "strict
liability scheme." That is, in Ruffin-Thompkins v. Experian Info.
Solutions, Inc., 422 F.3d 603 (7th Cir. 2005), the case upon which
the magistrate judge relied, the Seventh Circuit granted summary
judgment to the defendant because it had not received the
statutorily required notice until AFTER the plaintiff had sustained
her damages (the denials of credit). As a result, the plaintiff
simply could not show a causal relationship between the allegedly
erroneous information in her credit report and the damages -- i.e.,
since the alleged violation of the statute could not have occurred
until AFTER the defendant's receipt of notice, such violation could
not have caused the prior loss of credit. Id. at 609.
Ruffin-Thomkins, however, is distinguishable. In the
case at hand, the harm for which appellants seek damages -- the
denial of their mortgage application -- occurred either on June 30,
2009, when Carrie Barrepski spoke with the credit union, or on July
2, 2009, the date that appellants received the letter denying the
mortgage. It therefore is clear that, unlike in Ruffin-Thompkins,
appellants' June 11th notice PRECEDED their damages, and, although
this notice was provided to Experian, not Capital One, we note that
Capital One, at least at this early stage in the proceedings, has
not asserted that it received notice from Experian after July 2nd.
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Thus, holding Capital One liable for damages does NOT impermissibly
turn § 1681s-2(b) into a strict liability statute.
Finally, we turn to the the magistrate judge's statement
that appellants' failure to have disputed the Capital One debt on
Barrepski's credit report was "fatal" to any claim under subsection
(b). Although not entirely clear, we assume that the magistrate
judge was relying on Capital One's argument that because appellants
had never disputed that Barrepski ORIGINALLY had owed Capital One
the roughly $540 charged to his credit card, the entry on the
Experian credit report was not invalid. The problem is that
appellants are NOT contending that Barrepski's credit report is
inaccurate because he never owed the money in the first place.
Rather, they are arguing that the SETTLEMENT between Capital One
and Barrepski -- i.e., the WITH PREJUDICE dismissal of Capital
One's earlier action for the collection of the debt -- operated as
an adjudication on the merits of Capital One's entitlement to the
money and precluded it from continuing to report the $540 in
charges as a debt. Capital One does not argue that claims based on
settlements such as this are not cognizable under § 1681s-2(b),
and, in fact, Ruffin-Thompkins itself involved a similar
settlement. See 422 F.3d at 605-06.
Since the reasons for the district court's dismissal do
not withstand scrutiny, we look to the allegations in the complaint
in order to determine if they are sufficient to state a claim. In
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this regard, appellants alleged (1) that they had given notice to
Experian that Capital One had furnished incorrect information, (2)
that Capital One, after learning of the error, had refused to
correct it, and (3) that appellants had been denied a mortgage as
a result of Capital One’s violation of the FCRA. Significantly,
Capital One has never argued that these allegations were
insufficient to provide it with fair notice of appellants’ claim.
We therefore conclude that the purpose of the Rule 8(a)(2) pleading
standard has been satisfied in this case and that appellants have
stated a plausible, not merely speculative, claim for relief.
We only add that Capital One’s arguments for why the
complaint failed to state a claim – (1) that it had 30 days in
which to conduct an investigation and (2) that the terms of the
settlement itself did not obligate it to void the debt – are not
persuasive. That is, it is clear that what Capital One really is
arguing is that, for these reasons, it is not liable on the MERITS.
However, even if this turns out to be the case, such arguments are
more appropriate for summary judgment.
3. As for appellants' state claims, they specifically
waived these claims below, and, as a result, such claims are not
now before us.
Based on the foregoing, we (1) affirm the order of the
district court vacating the entry of default and (2) reverse the
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judgment of dismissal and remand for further proceedings. No costs
are awarded.
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