Faircloth v. AR Resources, Inc.

Background

James Faircloth sued AR Resources, Inc., alleging violations of the federal Fair Debt Collection Practices Act and California’s Rosenthal Fair Debt Collection Practices Act. He alleged that AR Resources reported a $50.20 medical debt to credit agencies on June 21, 2018, before sending him a debt-collection letter dated July 2, 2018, which he received on July 14. The letter stated that his credit report might be negatively affected if the company did not hear from him. Faircloth alleged that the reported information was misleading or false, including the age of the debt, the account’s status as “Open,” and the date of the last payment.

Faircloth also alleged that AR Resources continued providing inaccurate or derogatory information about him to Trans Union. His first amended complaint referred to a claim under the California Consumer Credit Reporting Agencies Act, but did not actually include that claim. Faircloth acknowledged the omission and stated in his opposition brief that he intended to add it.

Motion to Dismiss

AR Resources moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not state a legally sufficient claim. It argued that Faircloth’s federal and state debt-collection claims were untimely and that the first amended complaint did not allege facts supporting those claims.

The court held that the federal Act’s one-year filing period runs from the date of the violation, not the date the violation is discovered, relying on the Supreme Court’s decision in Rotkiske v. Klemm. The court applied the same rule to the California Act because its limitations language is similar and the California Act generally operates as a state counterpart to the federal Act. Accepting the latest possible violation date alleged by Faircloth—July 14, 2018, when he received the letter—the court concluded that he had to file by July 14, 2019. He filed the original complaint on August 15, 2019.

The court also rejected Faircloth’s argument for equitable tolling, a doctrine that can extend a filing deadline in limited circumstances. The court stated that Faircloth had not shown that he pursued his rights diligently. It identified steps he could have taken before September 2018, such as obtaining his credit report or contacting an AR Resources representative by telephone.

Failure to State a Claim

The court separately held that the first amended complaint did not state a claim under the federal statute’s prohibition on falsely representing the “character, amount, or legal status” of a debt, or under the parallel California provision. Faircloth admitted that he received medical services and incurred a $50.20 debt, but did not allege facts showing that the reported debt information was false. His assertion that the debt was “fabricated” was therefore conclusory.

The court further held that the alleged implication in the letter—that AR Resources had not yet reported the debt—was not a misrepresentation about the debt’s character, amount, or legal status. This provided an additional basis for dismissal. The court stated that these deficiencies might be cured by amendment.

Disposition

The court GRANTED AR Resources’ motion to dismiss Faircloth’s first amended complaint with leave to amend. The court did not dismiss the case at that time. It stated that Faircloth could potentially allege facts supporting tolling, identify a separate violation within the limitations period, or add facts supporting his claims. The court also stated that he could include his California credit-reporting claim in a second amended complaint because that claim was not included in the first amended complaint.

Separately, the court ORDERED Faircloth to show cause on February 28, 2020, at 2:00 p.m., why the case should not be dismissed for failure to prosecute and failure to appear at the hearing. The order explained that Faircloth’s counsel had been allowed to appear by telephone but did not do so. The court vacated the continued hearing on the motion to dismiss, while leaving the case management conference on calendar.