A California federal judge has found that Equifax, Experian and TransUnion must face key parts of a rejiggered proposed antitrust class action from medical practices and collection agencies targeting the credit reporting agencies' decision to exclude medical debt under $500 from consumer credit reports.

U.S. District Judge Daniel J. Calabretta on Wednesday preserved the medical provider plaintiffs' state law contract interference claims pegged to patient billing and permitted the proposed collection agency class to move forward on antitrust claims under California and federal law that alleged the agreement to exclude some medical debt made it harder to collect. The judge, however, found that the medical provider plaintiffs, or MPPs, lack standing for the antitrust allegation because they are too far removed from debt collection performed by others.

Equifax, Experian and TransUnion made the changes at the behest of the Biden-era Consumer Financial Protection Bureau, which had been raising concerns about including medical debt on credit reports since at least 2022 and formalized a rule barring the practice just two weeks before President Donald Trump reentered the White House. They convinced Judge Calabretta to dismiss an earlier version of the suit late last year because of the disconnect between MPPs and collection agencies, with the court concluding they don't participate in the same market as the credit reporting agencies and can't be harmed by an agreement to reduce competition within.

Judge Calabretta came to a similar conclusion Wednesday, holding that the MPPs, headlined by named plaintiffs Derrick Adams and Cape Emergency Physicians, can't assert the collectors are their "agents" because of the level of autonomy for collection agencies to perform their work and the ability of medical practices to switch agencies. But this time around, the second amended complaint added debt collectors headlined by AmeriFinancial Solutions, and Judge Calabretta said that those agencies have adequately linked alleged harm to the reporting policy.

"Unlike the MPPs, the collection agencies appear to have a direct relationship with the defendants," Judge Calabretta said. "Specifically, the SAC alleges that the collection agency plaintiff has personally furnished medical-debt information to defendants, … and that to provide medical data to a credit reporting agency the furnishing entity executes a contract and takes on an obligation to furnish 'full files on a monthly basis' to the credit reporting agency."

The judge also rejected credit bureau assertions that the claimed injuries are too speculative and dependent on a variety of factors.

"Plaintiffs contend that due to the devalued service by the defendants, the incentive for patients to pay their medical bills has been removed. As a result, there are increased costs that the plaintiffs experience," he said. "Although the exact amount is speculative, the injury itself does not appear to be — it is plausible that there is a devalued service for suppliers of medical debt information where defendants are alleged to have agreed to stop reporting certain types of information."

The suit contends the policy made it more difficult to collect on unpaid bills by removing an incentive for patients to make payments. The suit also claims the agreement reduced the quality of the credit reports by excluding information.

The tortious interference with existing contract claims, under California and New Jersey law, are also new to the latest complaint. Judge Calabretta preserved both for the MPPs, concluding their contracts with patients are valid while rejecting credit bureau arguments that the complaint would have to identify specific contracts. Instead, the judge said it's enough that the credit bureaus received data on specific billing between patients and providers, noting the bureaus referred to the data in a news release that revealed the new policy would take off nearly 70% of medical collection debt from consumer credit reports. He also found that the plaintiffs sufficiently accuse the bureaus of knowingly interfering.

"This is supported by allegations that defendant's advertisements explain that reporting debts cause more payment and quicker payment. … Accordingly, the court finds it plausible that defendants had some understanding that by eliminating certain aspects of debt-reporting, there may be a decrease in payment to plaintiff," the judge said in preserving the California law claim.

Judge Calabretta said the analysis was virtually the same under New Jersey law, which requires a showing of "malice."

"Plaintiff argues that malice exists because the alleged conspiracies are unlawful. Here, the SAC appears to acknowledge a justification for the defendants' conduct in an effort to improve the financial well-being of patients who take on medical debt unexpectedly," the judge said. "However, even where a valid justification exists, such conduct cannot be employed through fraudulent, dishonest or illegal methods. Plaintiff contends that the defendants' conduct is an unlawful horizontal conspiracy. At this stage, these allegations appear sufficient to state a claim for tortious interference."

An attorney for the plaintiffs hailed the decision on Thursday.

"The court's ruling is a significant validation of this case against the credit reporting agencies' anticompetitive agreement to reduce the quality of reporting medical debt on consumers' credit reports," Hilgers Graben PLLC's Bennett Rawicki said in a statement. "The court has allowed to continue the medical provider plaintiffs' claims for tortious interference with their contracts with patients, and the nationwide antitrust claim brought by the collection agency plaintiff. We look forward to pursuing these claims on behalf of our clients and the classes."

Counsel for the defendants did not immediately respond Thursday to requests for comment.

The medical providers and AmeriFinancial are represented by Michael L. Merriman and Bennett J. Rawicki of Hilgers Graben PLLC.

TransUnion is represented by Ian Simmons, Elizabeth L. McKeen and Danielle N. Morris of O'Melveny & Myers LLP.

Experian is represented by Jeremy Ostrander, Robert Milne, Jack E. Pace III and Bryan Gant of White & Case LLP.

Equifax is represented by Jeffrey S. Spigel, McGregor W. Scott, Christopher C. Yook, Emily Marsteller, Zoe Beiner and Adriana Dunn of King & Spalding LLP.

The case is Adams v. Experian Information Solutions Inc. et al., case number 2:23-cv-01773, in the U.S. District Court for the Eastern District of California.