Consumer Data Indus. Ass'n v. State through Paxton

564 F.Supp.3d 506

CONSUMER DATA INDUSTRY ASSOCIATION, Plaintiff,

v.State of TEXAS, THROUGH Ken PAXTON, in his official capacity as Attorney General of the State of Texas, Defendant.

1:19-CV-876-RP

United States District Court, W.D. Texas, Austin Division.

Signed September 28, 2021

Nanette K. Beaird, Edward D. Burbach, Foley & Lardner LLP, Austin, TX, Rebecca E. Kuehn, Hudson Cook, LLP, Washington, DC, for Plaintiff.

Caroline Alyssa Merideth, Office of the Attorney General, Austin, TX, for Defendant State of Texas.

ORDER

ROBERT PITMAN, UNITED STATES DISTRICT JUDGE

Before the Court are Defendant's Motion to Dismiss Plaintiff's Amended Complaint, filed January 4, 2021 (Dkt. 41); Consumer Data Industry Association's Response to Defendant's Motion to Dismiss Amended Complaint, filed February 2, 2021 (Dkt. 44); and Defendant's Reply in Support of Motion to Dismiss Plaintiff's Amended Complaint, filed February 23, 2021 (Dkt. 47).¹

I. Background

On May 31, 2019, the State of Texas amended the Texas Fair Credit Reporting Act by enacting Texas Business & Commerce Code § 20.05(a)(5) (the "Statute"). Section 20.05(a)(5) limits the information credit reporting agencies may include in an individual's credit report. Dkt. 36 ¶¶ 11-12. Specifically, § 20.05(a)(5) states:

(a) Except as provided by Subsection (b), a consumer reporting agency may not furnish a consumer report containing information related to:

* * *

(5) a collection account with a medical industry code, if the consumer was covered by a health benefit plan at the time of the event giving rise to the collection and the collection is for an outstanding balance, after copayments, deductibles, and coinsurance, owed to an emergency care provider or a facility-based provider for an out-of-network benefit claim ....

Plaintiff Consumer Data Industry Association ("CDIA") is an international trade association that represents the three nationwide credit reporting agencies – Experian, Equifax, and Trans Union – and other credit reporting agencies that furnish information concerning Texas consumers. Dkt. 36 ¶ 1. CDIA filed this lawsuit on September 9, 2019, asserting that § 20.05(a)(5) is preempted by the Federal Fair Credit Reporting Act ("FCRA"), 15 U.S.C. § 1681 et seq. CDIA seeks declaratory and injunctive relief. Dkt. 36 ¶¶ 36-44.

The State moves to dismiss CDIA's First Amended Complaint under Rules 12(b)(1) and 12(b)(6).

II. Legal Standards

A party seeking to challenge the court's subject matter jurisdiction to hear a case may file a motion under Rule 12(b)(1). Home Builders Ass'n of Miss., Inc. v. City of Madison , 143 F.3d 1006, 1010 (5th Cir. 1998). When a Rule 12(b)(1) motion is filed in conjunction with other motions under Rule 12, the court should consider the Rule 12(b)(1) jurisdictional attack before addressing any attack on the merits. Ramming v. United States , 281 F.3d 158, 161 (5th Cir. 2001).

A. Rule 12(b)(1) Lack of Subject Matter Jurisdiction

The party claiming federal subject matter jurisdiction must show that the court indeed has that jurisdiction. Willoughby v. U.S. ex rel. U.S. Dep't of the Army , 730 F.3d 476, 479 (5th Cir. 2013). A federal court properly dismisses a case or claim for lack of subject matter jurisdiction when it lacks the statutory or constitutional power to adjudicate the claims. Home Builders Ass'n of Miss. , 143 F.3d at 1010. In ruling on a Rule 12(b)(1) motion, the court may consider: (1) the complaint alone; (2) the complaint supplemented by undisputed facts evidenced in the record; or (3) the complaint, undisputed facts, and the court's resolution of disputed facts. Spotts v. United States , 613 F.3d 559, 566 (5th Cir. 2010). The trial court is "free to weigh the evidence and satisfy itself" that subject matter jurisdiction exists. MDPhysicians & Assocs., Inc. v. State Bd. of Ins. , 957 F.2d 178, 181 (5th Cir. 1992) (quoting Williamson v. Tucker , 645 F.2d 404, 413 (5th Cir. 1981) ).

B. Rule 12(b)(6) Failure to State a Claim

Rule 12(b)(6) allows a party to move to dismiss an action for failure to state a claim on which relief can be granted. In deciding a Rule 12(b)(6) motion to dismiss for failure to state a claim, the court accepts "all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff."

In re Katrina Canal Breaches Litig. , 495 F.3d 191, 205 (5th Cir. 2007) (citation omitted). The Supreme Court has explained that a complaint must contain sufficient factual matter "to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal , 556 U.S. at 678, 129 S.Ct. 1937.

While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do. Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).

Twombly , 550 U.S. at 555, 127 S.Ct. 1955 (cleaned up). The court's review is limited to the complaint, any documents attached to the complaint, and any documents attached to the motion to dismiss that are central to the claim and referenced by the complaint. Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC , 594 F.3d 383, 387 (5th Cir. 2010).

III. Analysis

The State argues that the Court lacks subject matter jurisdiction because (1) CDIA lacks standing, (2) CDIA's claim is not ripe for review, and (3) the State is entitled to Eleventh Amendment immunity from suit. The State further argues that, even if CDIA can show subject matter jurisdiction, its complaint fails to state a claim under Rule 12(b)(6) because the FCRA does not expressly preempt the Statute. The Court addresses the jurisdictional challenge first. Ramming , 281 F.3d at 161.

A. Subject Matter Jurisdiction

1. Standing

The State contends that CDIA lacks standing because it has not alleged an injury in fact. CDIA asserts that its allegations regarding the costs to comply with the Statute and threatened enforcement are sufficient to confer Article III standing.

Standing is a component of subject matter jurisdiction, and it is properly raised by a motion to dismiss under Rule 12(b)(1). Cobb v. Cent. States , 461 F.3d 632, 635 (5th Cir. 2006) ; Lee v. Verizon Commc'ns, Inc. , 837 F.3d 523, 533 (5th Cir. 2016). The requirement of standing has three elements: (1) injury in fact, (2) causation, and (3) redressability. Bennett v. Spear , 520 U.S. 154, 167, 117 S.Ct. 1154, 137 L.Ed.2d 281 (1997). The injury cannot be merely "conjectural or hypothetical." Summers v. Earth Island Inst. , 555 U.S. 488, 493, 129 S.Ct. 1142, 173 L.Ed.2d 1 (2009). Causation requires that the injury "fairly can be traced to the challenged action of the defendant," rather than to "the independent action of some third party not before the court." Simon v. E. Ky. Welfare Rights Org. , 426 U.S. 26, 41-42, 96 S.Ct. 1917, 48 L.Ed.2d 450 (1976). Redressability requires that it is likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision. Lujan v. Defenders of Wildlife , 504 U.S. 555, 561, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992). The party invoking federal subject matter jurisdiction bears the burden of establishing each element. Ramming , 281 F.3d at 161.

A plaintiff can establish standing under the Declaratory Judgment Act if it shows actual present harm or a significant possibility of future harm even though the injury in fact has not yet been completed. Bauer v. Texas , 341 F.3d 352, 357-58 (5th Cir. 2003). An allegation of future injury may establish standing if the threatened injury is "certainly impending or there is a substantial risk that the harm will occur." Susan B. Anthony List v. Driehaus , 573 U.S. 149, 158, 134 S.Ct. 2334, 189 L.Ed.2d 246 (2014) (quoting Clapper v. Amnesty Int'l USA , 568 U.S. 398, 414 n.5, 133 S.Ct. 1138, 185 L.Ed.2d 264 (2013) ).

An association has standing to sue on behalf of its members when "(a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the organization's purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit." Hunt v. Wash. State Apple Advert. Comm'n , 432 U.S. 333, 343, 97 S.Ct. 2434, 53 L.Ed.2d 383 (1977). Participation of individual members generally is not required when the association seeks prospective or injunctive relief, as opposed to damages. United Food & Commercial Workers Union Local 751 v. Brown Grp., Inc. , 517 U.S. 544, 546, 116 S.Ct. 1529, 134 L.Ed.2d 758 (1996).

In its Amended Complaint, CDIA alleges that:

• Some CDIA members currently include in their reports Medical Account Information that the Statute now prohibits. Dkt. 36 ¶ 18.

• The State has the authority to enforce the Statute and has never agreed not to enforce it against CDIA members. Id. ¶¶ 5-6, 8.

• Absent a declaration that the Statute is preempted by the FCRA, CDIA members will be forced to make material changes to their day-to-day business operations to comply with the Statute, including making changes to products currently provided in Texas. Id. ¶¶ 10, 20, 28.

• CDIA members which maintain Medical Account Information will have to undertake significant efforts and adopt processes to: (i) identify any information that would be implicated by the Statute; (ii) take steps to assure the removal of such data from their files or otherwise prevent such data from being

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