Castillo v. Convergent Outsourcing, Inc., 3:17-cv-00919

Background

Plaintiff Sergio Castillo alleged Convergent Outsourcing reported his T‑Mobile debt to credit agencies but failed to mark it as “disputed” after Castillo sent a dispute letter.
Castillo filed suit under the FDCPA (15 U.S.C. §§ 1692 et seq.) and California’s Rosenthal Act alleging violation of 15 U.S.C. § 1692e(8).
Convergent moved for judgment on the pleadings, arguing Castillo lacks Article III standing because he pleaded only a statutory violation without a concrete injury post‑Spokeo.
In his opposition, Castillo explained (and asked to be allowed to plead) that the re‑reporting without the “disputed” notation lowered his credit score, creating a concrete injury or at least a risk of real harm.
The court treated the motion as a motion to dismiss, found Castillo’s proposed factual allegations could cure the standing defect, and dismissed the complaint with leave to amend.
The court also rejected Convergent’s argument that Castillo’s claim is substantively improper because it implicates FCRA, noting § 1692e(8) independently prohibits failing to communicate that a debt is disputed and that Castillo can state an FDCPA claim.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Castillo has Article III standing (injury in fact) after Spokeo	Risk of harm from inaccurate credit report and lowered credit score from failure to mark debt as disputed suffices as concrete injury	Complaint pleads only a statutory violation without showing concrete, particularized harm	Complaint dismissed with leave to amend so Castillo may add facts (e.g., lowered credit score) that would establish concrete injury
Whether § 1692e(8) FDCPA claim is substantively flawed because conduct is governed by FCRA	§ 1692e(8) prohibits failing to communicate that a debt is disputed; that is an independent FDCPA violation	Defendant contends the conduct is governed by FCRA and not actionable under FDCPA	Court held Castillo can plausibly state a claim under § 1692e(8); substantive attack denied at this stage
Whether a bare procedural violation of FDCPA suffices for standing	A statutory violation that creates a risk of real harm (e.g., inaccurate credit reporting) can be concrete	A bare procedural violation divorced from harm is insufficient post‑Spokeo	Court required factual allegations of concrete harm or risk; granted leave to amend to plead such facts
Proper procedural remedy for defects raised by motion for judgment on the pleadings	Plaintiff sought to rely on facts asserted in opposition to cure pleading defects	Defendant sought dismissal on pleading as filed	Court treated motion as Rule 12(b)(6) dismissal, granted leave to amend rather than dismissal with prejudice

Key Cases Cited

Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (2016) (injury‑in‑fact requires concrete and particularized harm; mere procedural violations may be insufficient)
Lujan v. Defenders of Wildlife, 504 U.S. 555 (1992) (Article III standing requirements and definition of injury in fact)
Ashcroft v. Iqbal, 556 U.S. 662 (2009) (plausibility standard for pleadings)
Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) (complaint must state plausible claim above speculative level)
Turner v. Cook, 362 F.3d 1219 (9th Cir. 2004) (elements required to state an FDCPA claim)
Cafasso v. Gen. Dynamics C4 Sys., Inc., 637 F.3d 1047 (9th Cir. 2011) (12(c) standard mirrors 12(b)(6))
Chavez v. United States, 683 F.3d 1102 (9th Cir. 2012) (court accepts pleaded facts as true on dismissal motions)
Tourgeman v. Collins Fin. Servs., Inc., 197 F. Supp. 3d 1205 (S.D. Cal. 2016) (discusses Spokeo’s effect; risk‑of‑harm scenarios can support standing)
McGlinchy v. Shull Chem. Co., 845 F.2d 802 (9th Cir. 1988) (dismissal appropriate where no relief available under any provable facts)
Robertson v. Dean Witter Reynolds, Inc., 749 F.2d 530 (9th Cir. 1984) (grounds for dismissal include lack of cognizable legal theory)