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Pembroke v. Trans Union, LLC

United States District Court, D. Colorado

December 19, 2017




         This matter comes before the Court on three Motions to Dismiss Plaintiff John Pembroke's Complaint-one filed by Defendant Trans Union, LLC (Doc. # 102); another filed by Defendant Select Portfolio Servicing, Inc. (SPS) (Doc. # 103); and a third filed by Defendant JPMorgan Chase Bank, N.A. (Doc. # 105). Also before the Court is Defendant Equifax Information Services, LLC's Renewed Motion for Judgment on the Pleadings. (Doc. # 122.) This Court referred all four motions to United States Magistrate Judge Scott T. Varholak pursuant to 28 U.S.C. § 636 and Fed.R.Civ.P. 72. (Doc # 106, 107, 123.) On October 27, 2017, Magistrate Judge Varholak issued a Recommendation (Doc. # 127), wherein he recommends that this Court grant Defendants Trans Union's and Equifax's Motions (Doc. ## 102, 122) and grant in part and deny in part Defendants SPS' and Chase's Motions (Doc. ## 103, 105). (Id. at 1- 2.) Mr. Pembroke timely filed Objections to select portions of the Recommendation. (Doc. # 128.) For the following reasons, the Court overrules Mr. Pembroke's Objections and affirms and adopts Magistrate Judge Varholak's Recommendation in its entirety.


         Magistrate Judge Varholak's Recommendation provides an extensive recitation of the factual and procedural background in this case. The Recommendation is incorporated herein by reference. See 28 U.S.C. § 636(b)(1)(B); Fed.R.Civ.P. 72(b). Thus, the factual background of this dispute will be reiterated only to the extent necessary to address Mr. Pembroke's Objections.

         This action arises from the allegedly inaccurate reporting of Mr. Pembroke's consumer credit and the purported failure of Consumer Reporting Agencies (CRAs), and the entities that provide relevant information to CRAs (furnishers), to reinvestigate and correct these deficiencies. (Doc. # 95.) Mr. Pembroke specifically claims that Trans Union, Equifax, and Experian (the CRA Defendants)[1] and SPS and Chase (the Furnisher Defendants) improperly reported him as personally liable for debts that instead are solely enforceable against the John J. Pembroke Trust (JJP Trust) and the Linda D. Pembroke Living Trust (collectively, the Pembroke Trusts). (Doc. # 95 at ¶¶ 10, 15.)

         These debts stem from a refinance loan of $1.905 million, which Mr. Pembroke negotiated with Washington Mutual Bank (WaMu) in 2006. John J. Pembroke Living Trust v. U.S. Bank, N.A., 15CA1610 (Colo. Ct. App. June 1, 2017) (COA Judgment) at ¶ 2; see also John J. Pembroke Living Trust v. U.S. Bank Nat'l Assoc., 2014CV30592, Judgment and Decree of Foreclosure (Colo. Dist. Ct. Aug. 7, 2015) (State Court Judgment) at ¶¶ 2-3.[2] As part of the loan transaction, Mr. Pembroke executed and delivered to WaMu a promissory note (Note), and the Pembroke Trusts executed a securing deed of trust. COA Judgment, ¶ 2; State Court Judgment at ¶¶ 3, 16 In 2012, due to a claimed default on the Note, U.S. Bank National Association (U.S. Bank)[3] began foreclosure proceedings. COA Judgment at ¶ 5; (Doc. # 127 at 3.) The Pembroke Trusts contested the foreclosure and sought an injunction against it in Jefferson County District Court. (Doc. # 127 at 4.) The Jefferson County District Court found against the Pembroke Trusts and entered a decree of foreclosure, which the Pembroke Trusts appealed and the Colorado Court of Appeals affirmed. See generally COA Judgment; State Court Judgment at 3-4.

         As pertinent here, Mr. Pembroke was not a party to the state court proceedings. He did, however, testify at trial on behalf of the JJP Trust. (Doc. # 103-3.) There, as he does in this case, Mr. Pembroke contended that he executed the Note as Trustee of the JJP Trust, not in his personal capacity, and he is not, therefore, personally liable on the defaulted Note. (Doc. ## 103-3 at 76-77; 128 at 3-4.)

         The Jefferson County District Court did not resolve the issue of Mr. Pembroke's personal liability on the Note, stating “Mr. Pembroke is not a party to this case, and this judgment and decree of foreclosure does not decide whether Mr. Pembroke is personally liable under the [Note].” State Court Judgment at ¶ 3. The District Court did find, however, that Mr. Pembroke signed and initialed the original Note in his individual capacity, [4] and added that “[U.S. Bank] reserved its right to seek a deficiency judgment, if any, against the maker of the [Note] in a separate action.” Id. at ¶¶ 3, 16. In affirming the District Court's decision, the Colorado Court of Appeals did not disturb these findings.

         While the state court proceedings remained pending, the JJP Trust initiated a federal lawsuit in this Court, wherein it again disputed the validity and enforceability of the Note and attempted to stop the debt collection activities of various entities, including the Furnisher Defendants. John J. Pembroke Living Trust v. U.S. Bank Nat'l Assoc., Civil Action No. 16-cv-00020-CMA-MEH (D. Colo. 2016) (2016 Lawsuit), Doc. ## 57 at 1; 58 at 4. The Furnisher Defendants moved to dismiss JJP Trust's Complaint. 2016 Lawsuit, Doc. ## 32, 33, 37. This Court granted their motions, primarily on grounds that the underlying issues had already been raised and adjudicated in state court and were otherwise barred by the applicable statute of limitations. (Doc. ## 60, 65.)

         Meanwhile, in early 2016, Mr. Pembroke requested a copy of his credit report from the CRA Defendants. (Doc. # 95 at ¶ 14.) He received credit reports that reflected a delinquency on the Note and a home equity line of credit as personal liabilities against him. (Id.) Mr. Pembroke disputed those reports through the CRA Defendants' online dispute request system. He also raised his concerns in letters to the CRA and Furnisher Defendants. (Id. at ¶ 16.) In so doing, Mr. Pembroke alerted the CRA and Furnisher Defendants to the state court proceedings as proof that he was not personally liable on the Note and requested that the debt be removed from his credit report. (Id. at ¶ 17.) The CRA Defendants did not correct the information. (Id. at ¶ 18) As a result, Mr. Pembroke alleges that he sustained significant financial losses, including over $665, 000.00 in lost business income. (Id. at ¶¶ 21, 23-24, 27-28.)

         Mr. Pembroke's Second Amended Complaint subsequently raises seven claims for relief: Claims One and Two seek relief under the Fair Credit Reporting Act (FCRA), against the CRA Defendants; Claim Three seeks relief under the FCRA against the Furnisher Defendants; Claim Four contends that all Defendants were negligent in their reporting; Claim Five raises defamation allegations against all Defendants; Claim Six seeks relief against all Defendants for the intentional infliction of emotional distress; and Claim Seven alleges that the Furnisher Defendants violated the Fair Debt Collections Practices Act (FDCPA).

         Collectively, Defendants' Motions to Dismiss seek to dismiss all of Mr. Pembroke's claims under Federal Rules of Civil Procedure 12(b)(1), 12(b)(6), and 12(c). (See ## 102, 103, 105, 122). With regard to those motions, Magistrate Judge Varholak recommends as follows: First, he recommends that Plaintiff's Claims One and Two be dismissed entirely because, among other reasons, they amount an improper collateral attack on the underlying debt. Second, he recommends that Claims Four, Five, and Six be dismissed as against the CRS Defendants but allowed to proceed as against the Furnisher Defendants. Third, he recommends that Claim Seven against the Furnisher Defendants be dismissed as barred by claim preclusion but that Claim Three against the Furnisher Defendants be allowed to proceed.


         No party has objected to Magistrate Judge Varholak's Recommendation with respect to Claims Three, Four, Five, and Six. “[T]he district court is accorded considerable discretion with respect to the treatment of unchallenged magistrate reports. In the absence of timely objection, the district court may review a magistrate's report under any standard it deems appropriate.” Summers v. State of Utah, 927 F.2d 1165, 1167 (10th Cir. 1991). After reviewing the Recommendation of Magistrate Judge Varholak, in addition to applicable portions of the record and relevant legal authority, the Court is satisfied that the conclusions in the Recommendation that were not objected to are sound and not clearly erroneous or contrary to law. See Fed. R. Civ. P. 72(a). The Court there affirms and adopts Magistrate Judge Varholak's Recommendation that Claims Three, Four, Five, and Six be allowed to proceed against the Furnisher Defendants; and Claims Four, Five, and Six be dismissed as against the CRS Defendants.

         Mr. Pembroke, however, objects to Magistrate Judge Varholak's Recommendation with respect to Claims One, Two, and Seven. He specifically “objects to the Recommendations determinations that his FCRA claims against [the CRA Defendants] be dismissed”[5] and “that his FDCPA claim against [the Furnisher Defendants] be dismissed.” Because Fed.R.Civ.P. 72(b)(3) requires that the district judge conduct a de novo review of any part of the Recommendation that has been properly objected to, the Court reviews de novo Magistrate Judge Varholak's Recommendation with respect to Claims One, Two, and Seven.

         In conducting the review, a “district judge may accept, reject, or modify the recommended disposition; receive further evidence; or return the matter to the magistrate judge with instructions.” Id. Any arguments raised for the first time in objections are deemed waivable and need not be considered by the district court. Marshall v. Chater, 75 F.3d 1421, 1426 (10th Cir. 1996).

         III. LAW

         “To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. (citing Twombly, 550 U.S. at 556). The scope of the allegations may not be “so general that they encompass a wide swath of conduct, much of it innocent” or else the plaintiff has ‘not nudged [his] claims across the line from conceivable to plausible.'” Robbins v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008) (quoting Twombly, 550 U.S. at 570). A plaintiff may not rely on mere labels or conclusions, “and a formulaic recitation of the elements of a cause of action will not do.” Twombly, 550 U.S. at 555. The ultimate duty of the court is to “determine whether the complaint sufficiently alleges facts supporting all the elements necessary to establish an entitlement to relief under the legal theory proposed.” Forest Guardians v. Forsgren, 478 F.3d 1149, 1160 (10th Cir. 2007). “A motion for judgment on the pleadings under Rule 12(c) is treated as a motion to dismiss under Rule 12(b)(6).” Atl. Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138, 1160 (10th Cir. 2000).

         IV. ...

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