Opinion
1:22-CV-00207-RAL-SPB
01-12-2023
LAVON C. BARRETT, Plaintiff v. BETHPAGE FCU, GOLDMAN SACHS BANK, USA, LENDING CLUB CORPORATION, USAA SAVINGS BANK, JOHN DOE, JANE DOE, Defendants
RICHARD A. LANZILLO, CHIEF UNITED STATES MAGISTRATE JUDGE
REPORT AND RECOMMENDATION ON USAA SAVINGS BANK'S MOTION TO DISMISS AND MOTION TO SEVER
IN RE: ECF NOS. 7, 9
SUSAN PARADISE BAXTER, UNITED STATES DISTRICT JUDGE
I. Recommendation
It is respectfully recommended that Defendant USAA Savings Bank's Motion to Dismiss (ECF No. 7) Plaintiff's Complaint be GRANTED and that its Motion to Sever (ECF No. 9) be DISMISSED without prejudice.
II. Report
A. Introduction and Procedural History
Plaintiff Lavon C. Barrett (“Barrett”) commenced this action in the Court of Common Pleas of McKean County, Pennsylvania, against six named Defendants, including USAA Savings Bank (“USAA”), and two Doe Defendants. Barrett's complaint alleged that all Defendants violated his rights under “the Fair Credit Reporting Act 15 U.S.C 1681h(e),” “Consumer Protection Act 15 U.S.C 1691,” and “Debt Collection Act,” and demanded relief in the form of compensatory and punitive damages as well as the removal of a contested debt from his credit report. ECF No. 1; ECF No. 1-4, ¶¶ 16, 21-22. The action was removed to this Court pursuant to 28 U.S.C. §1441 based on federal question subject matter jurisdiction conferred by 28 U.S.C. §1331.
USAA moved to dismiss all three claims pursuant to Fed.R.Civ.P. 12(b)(6) (ECF No. 7) and to sever it from the other Defendants (ECF No. 9). Alexander filed a response to the motion to dismiss (ECF No. 35), and USAA subsequently replied (ECF No. 37). For the reasons discussed below, the motion to dismiss should be GRANTED and the motion to sever should then be DISMISSED without prejudice.
B. Factual Background
The following material facts alleged in the complaint are accepted as true for purposes of the instant motion to dismiss. See Victor v. Overmyer, 2020 WL 2220541, at *2 (W.D. Pa. Mar. 16, 2020), report and recommendation adopted, 2020 WL 2220128 (W.D. Pa. May 7, 2020) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)).
Barrett asserts that USAA has reported and continues to report false information concerning his credit history to consumer reporting agencies (“CRAs”) Experian, Equifax, and Transunion. Barrett alleges that he has never done business with USAA, but USAA has nevertheless reported to these CRAs that he owes a debt of $13,130 on USAA credit card account # 427082501350****. Barrett attempted to “dispute[] this fraudulent information by forwarding an identity theft victims complaint and affidavit form to [USAA].” ECF No. 1-4, ¶ 14. On April 30, 2022, USAA responded, confirming that they had received Barrett's correspondence and, after investigating his claims, determined that USAA was in fact accurately reporting the account information. See ECF No. 1-4, p. 13.
C. Standard of Review
A motion to dismiss pursuant to Federal Rule of Civil Procedure 12 (b)(6) tests the legal sufficiency of the complaint. See Kost v. Kozakiewicz, 1 F.3d 176, 183 (3d Cir. 1993). In deciding a Rule 12 (b)(6) motion to dismiss, the court must accept as true all well-pled factual allegations in the complaint and views them in a light most favorable to the plaintiff. See U.S. Express Lines Ltd. v. Higgins, 281 F.3d 383, 388 (3d Cir. 2002). The “court[] generally consider[s] only the allegations in the complaint, exhibits attached to the complaint, matters of public record, and documents that form the basis of a claim” when considering the motion to dismiss. Lum v. Bank of Am., 361 F.3d 217, 222 n.3 (3d Cir. 2004) (citing In re Burlington Coat Factory Sec. Litig., 114 F.3d 1410, 1426 (3d Cir.1997)).
In making its determination under Rule 12 (b)(6), the court is not opining on whether the plaintiff is likely to prevail on the merits; rather, the plaintiff must only present factual allegations sufficient “to raise a right to relief above the speculative level.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 556 (2007) (citing 5 C. Wright & A. Miller, Federal Practice and Procedure § 1216, pp. 235-36 (3d ed. 2004)). See also Iqbal, 556 U.S. 662. Furthermore, a complaint should only be dismissed pursuant to Rule 12 (b)(6) if it fails to allege “enough facts to state a claim to relief that is plausible on its face.” Twombly, 550 U.S. at 570 (rejecting the traditional Rule 12 (b)(6) standard established in Conley v. Gibson, 355 U.S. 41, 78 (1957)).
While a complaint does not need detailed factual allegations to survive a motion to dismiss, a complaint must provide more than labels and conclusions. See Twombly, 550 U.S. at 555. A “formulaic recitation of the elements of a cause of action will not do.” Id. (citing Papasan v. Allain, 478 U.S. 265, 286 (1986)). Moreover, a court need not accept inferences drawn by a plaintiff if they are unsupported by the facts as explained in the complaint. See California Pub. Employee Ret. Sys. v. The Chubb Corp., 394 F.3d 126, 143 (3d Cir. 2004) (citing Morse v. Lower Merion Sch. Dist., 132 F.3d 902, 906 (3d Cir. 1997)). Nor must the court accept legal conclusions disguised as factual allegations. See Twombly, 550 U.S. at 555; McTernan v. City of York, Pennsylvania, 577 F.3d 521, 531 (3d Cir. 2009) (“The tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.”).
Expounding on the Twombly/Iqbal line of cases, the Third Circuit has articulated the following three-step approach:
First, the court must ‘tak[e] note of the elements a plaintiff must plead to state a claim.' Second, the court should identify allegations that, ‘because they are no more than conclusions, are not entitled to the assumption of truth.' Finally, ‘where there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement for relief.'Burtch v. Milberg Factors, Inc., 662 F.3d 212, 221 (3d Cir. 2011) (emphasis added) (quoting Santiago v. Warminster Twp., 629 F.3d 121, 130 (3d Cir. 2010)). This determination is “a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679.
Finally, because Plaintiff is proceeding pro se, the allegations in the complaint must be held to “less stringent standards than formal pleadings drafted by lawyers.” Haines v. Kerner, 404 U.S. 519, 520-521 (1972). If the court can reasonably read a pro se litigant's pleadings to state a valid claim upon which relief could be granted, it should do so despite the litigant's failure to cite proper legal authority, confusion of legal theories, poor syntax and sentence construction, or unfamiliarity with pleading requirements. See Boag v. MacDougall, 454 U.S. 364 (1982); United States ex rel. Montgomery v. Bierley, 141 F.2d 552, 555 (3d Cir. 1969) (petition prepared by a prisoner may be inartfully drawn and should be read “with a measure of tolerance”).
D. Analysis
Barrett alleges that USAA has “reported inaccurate information against [Barrett] fraudulently showing account number #427082501350**** in the amount of $13,130.” ECF No. 1-4, ¶¶ 14, 16. Barrett argues that “this information was sent to Transunion Credit Reporting Agency as accurate and verified,” as well as to Experian and Equifax, even though he has never opened any type of account with USAA SB. ECF No. 1-4, ¶¶ 9, 14; ECF No. 35, ¶ 4. He asserts that this conduct violates his federal rights under “the Fair Credit Reporting Act 15 USC 1681h(e),” “Consumer Protection Act 15 USC 1691,” and “Debt Collection Act.” USAA argues that the complaint does not plead facts sufficient to support any of Barrett's claims. The Court agrees and will address each claim in turn.
i. Barrett has not alleged facts sufficient to establish USAA as a debt collector under the Federal Debt Collector Protection Act.
At the outset, USAA rightly asserts that Barrett's “Debt Collection Act” claim fails as a matter of law because no such Act exists. See ECF No. 8, ¶¶ 2-4. Given Barrett's pro se status, however, the Court will construe his complaint liberally as asserting a claim under the Fair Debt Collection Practices Act, 15 U.S.C. § 1692, et seq. (“FDCPA). See Haines, 404 U.S. 519, 520 (requiring that a pro se litigant's complaint be “liberally construed” and held to “less stringent standards than formal pleadings drafted by lawyers”); Lewis, 2022 WL 17364641, at *5 (the Court “look[ed] beyond Plaintiff's inaccurate categorization of Defendant as a ‘consumer reporting agency,' and” instead “assess[ed] whether an otherwise viable claim [wa]s stated against a ‘furnisher'” because Plaintiff was pro se).
In the opening paragraph of his response in opposition to USAA's motion to dismiss, Barrett states that he is only asserting “the Fair Credit Reporting Act” and “Consumer Protection Act” claims against USAA, but then later writes that he is only asserting a “violation of the Fair Credit Reporting Act” and “Debt Collection Act.” ECF No. 35. Thus, it is unclear which two claims Barrett intended to assert against USAA. To the extent he seeks to abandon one of his three claims, the proper procedural tool to dismiss fewer than all claims against a defendant is by amendment pursuant to Fed.R.Civ.P. 15. See Chan v. Cnty. of Lancaster, 2013 WL 2412168, at *16 (E.D. Pa. June 4, 2013) (“In an action with multiple defendants, voluntary dismissal of all claims against a single defendant is permitted under Rule 41(a); however, voluntary dismissal of some, but not all claims, against a single defendant is not permitted under Rule 41(a)”); Rosario v. Strawn, 2020 WL 5810009, at *3-4 (W.D. Pa. Sept. 30, 2020).
The FDCPA was established to target abusive practices used by debt collectors and, consistent with that purpose, imposes liability on “any debt collector who fails to comply with” the FDCPA. 15 U.S.C. §§ 1692(e),1692k. USAA argues that Barrett's FDCPA claim against it fails as a matter of law because it is a “creditor” under the FDCPA, not a “debt collector.” ECF No. 8, pp. 3-4. The statute defines a “debt collector” as, inter alia, “any person . . . in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” 15 U.S.C. § 1692a(6). A “creditor” is defined as “any person who offers or extends credit creating a debt or to whom a debt is owed,” but not “any person to the extent that he receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another.” 15 U.S.C. § 1692a(4). “Through this distinction between creditors and debt collectors, the FDCPA ‘exempts entities engaged in no more than the enforcement of security interests from the lion's share of its prohibitions.'” Belfi v. USAA Fed. Sav. Bank, 2022 WL 4097325, at *4 (E.D. Pa. Sept. 7, 2022) (quoting Obduskey v. McCarthy & Holthus LLP, 139 S.Ct. 1029, 1040 (2019)) (internal quotation marks omitted).
Here, the complaint alleges no facts to support that USAA is a debt collector within the meaning of the FDCPA. Indeed, Barrett's allegations make it clear that it is a creditor. Barrett contends that USAA falsely reported to multiple CRAs that he owes a balance on a USAA credit card account, which, if true, would establish USAA as a company “to whom a debt is owed.” Barrett does not allege that USAA acquired this debt from an assignment or transfer, or that USAA has attempted to collect this debt from him. Thus, the complaint does not support a plausible inference that USAA is a “business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect . . . debts owed or due . . . another.” 15 U.S.C. § 1692a(6). See also Henson v. Santander Consumer USA Inc., 137 S.Ct. 1718, 1721 (2017). It therefore fails to state a FDCPA claim against USAA.
ii. Barrett has not alleged facts to support a plausible inference that USAA discriminated against him in connection with any application for credit in violation of the Equal Credit Opportunity Act.
Barrett also asserts that USAA's actions violate the Equal Credit Opportunity Act, 15 U.S.C. § 1691, et seq. (“ECOA”). The ECOA makes it
Although Barrett refers to the “Consumer Protection Act,” no such federal law exists and, in any case, his citations are to the ECOA.
unlawful for any creditor to discriminate against any applicant, with respect to any aspect of a credit transaction - (1) on the basis of race, color, religion, national origin, sex or marital status, or age; (2) because all or part of the applicant's income derives from any public assistance program; or (3) because the applicant has in good faith exercised any right under this chapter.
To state a prima facie case under the ECOA, a plaintiff must allege facts to show that he (1) “is a member of a protected class;” (2) “applied for credit from defendants;” (3) “was qualified for the credit; and (4) despite qualification, plaintiff was denied credit.” Anderson v. Wachovia Mortg. Corp., 621 F.3d 261, 268 n.5 (3d Cir. 2010) (quoting Chiang v. Veneman, 385 F.3d 256, 259 (3d Cir.2004)).
Barrett has alleged no facts discriminating against him in any way with respect to a credit transaction. The complaint does not allege that Barrett is a member of a protected class or that USAA discriminated against him regarding any application for credit. Indeed, and as USAA notes, “the entire basis of Plaintiff's credit reporting claim is that he has not done ‘any form of business' with USAA.” ECF No. 8, pp. 4-5. As such, Barrett's complaint fails to state an ECOA claim against USAA as a matter of law.
iii. Barrett has not alleged facts to support a plausible claim under the Fair Credit Reporting Act.
Lastly, Barrett argues that USAA's actions violate the Fair Credit Reporting Act, 15 U.S.C. § 1681. Congress passed the FCRA “to ensure fair and accurate credit reporting, promote efficiency in the banking system, and protect consumer privacy.” Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 52 (2007). See 15 U.S. Code § 1681(b). “[T]o satisfy the ‘consumer oriented objectives'” of the FCRA, the Third Circuit construes the Act liberally. Lewis v. Cap. One Bank, 2022 WL 17364641, at *4 (E.D. Pa. Dec. 1, 2022) (quoting Harris v. Pa. Higher Educ. Assistance Agency/Am. Educ. Servs., 2016 WL 3473347, at *4 (E.D. Pa. June 24, 2016), aff'd by Harris v. Pa. Higher Educ. Assistance Agency/Am. Educ. Servs., 696 Fed.Appx. 87, 90 (3d Cir. 2017) (citing S.Rep. No. 91-517, at 3 (1969))). The FRCA places varying obligations on three types of entities: “(1) consumer reporting agencies,(2) users of consumer reports, and (3) furnishers of information to consumer reporting agencies.” Id. (citing 15 U.S.C. § 1681, et seq.). Barrett's claims against USAA concern its alleged fraudulent reporting of information to consumer reporting agencies. Barrett is therefore alleging that USAA SB acted as a “furnisher.” See id. (citing Donohue v. C. Blosenski Disposal Co., 2006 WL 3423888, at *3 (E.D. Pa. Nov. 28, 2006)) (“A ‘furnisher' is an entity which transmits information about a particular debt owed by a particular consumer to a consumer reporting agency.”).
“Among other things, the FCRA requires consumer reporting agencies to ‘follow reasonable procedures to assure maximum possible accuracy of' consumer reports, § 1681e(b); to notify providers and users of consumer information of their responsibilities under the FCRA, § 1681e(d); and to limit the circumstances in which such agencies provide consumer reports ‘for employment purposes, § 1681b(b)(1).'” Ebrahimzadeh v. Sharestates Invs., LLC, No. CV 181659, 2018 WL 6065419, at *8 (E.D. Pa. Nov. 20, 2018).
Section 1681s-2(b) of the FCRA “imposes certain duties on a furnisher/creditor who has been notified by a consumer credit reporting agency that a consumer has disputed information furnished by that furnisher/creditor.” See Harris v. Pa. Higher Educ. Assistance Agency/Am. Educ. Servs., 696 Fed.Appx. 87, 90 (3d Cir. 2017).
Section 1681s-2 of the FRCA imposes two categories of legal obligations on furnishers: (1) liability under § 1681s-2(a) arises following a consumer's notice directly to the furnisher of inaccurate information, and (2) liability under § 1681s-2(b) arising upon a consumer's notice to the CRA of inaccurate information, and the CRA's subsequent notice to the furnisher of the inaccurate information. See 15 U.S.C. §§ 1681s-2(a)(1),(b)(1). But a private individual cannot “assert a claim for a violation of § 1681s-2(a), as such claims are available only to the Government.” SimmsParris v. Countrywide Fin. Corp., 652 F.3d 355, 358 (3d Cir. 2011) (citing 15 U.S.C. § 1681s-2(c) (“[S]ections 1681n and 1681o of this title do not apply to any violation of-(1) subsection (a) of this section....”); id. § 1681s-2(d) (“The provisions of law described in paragraphs (1) through (3) of subsection (c) of this section ... shall be enforced exclusively ... by the Federal agencies and officials and the State officials identified in section 1681s of this title.”)). Accordingly, 15 U.S.C. § 1681s-2(b) is “the only section that can be enforced by a private citizen seeking to recover damages caused by a furnisher of information.” Id. (citing Chiang v. Verizon New England Inc., 595 F.3d 26, 35 (1st Cir. 2010); Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147, 1154 (9th Cir. 2009); Saunders v. Branch Banking & Trust Co. of Va., 526 F.3d 142, 149 (4th Cir. 2008)).
Here, Barrett asserts that USAA's actions violated section 1681(h)(e). Yet, as Defendants correctly explain, “this section merely sets forth the standard for federal preemption of state law claims.” ECF No. 8, p. 5 n.3. Nevertheless, the Court, drawing all inferences in favor of the pro se litigant and liberally construing his complaint, will look beyond this erroneous citation and assess whether Barrett has pled facts sufficient to state a claim under, 15 U.S.C. § 1681s-2(b), the only FCRA provision potentially available to him. See Haines, 404 U.S. 519, 520; Lewis, 2022 WL 17364641, at *5.
USAA also argues that any claim brought by Barrett under § 1681b(e) is legally invalid. See ECF No. 8, pp. 4-5. Barrett's filings make it clear, however, that he is asserting a cause of action under § 1681h(e), not § 1681b(e). Moreover, § 1681b(e) does not provide Barrett with a proper cause of action based on the allegations he asserts against USAA. Therefore, further analysis of 15 U.S.C. § 1681b(e) is unnecessary.
A viable § 1681s-2(b)(1) claim requires a consumer to allege facts to plausibly support that he: “[1] filed a notice of dispute with a consumer reporting agency; [2] the consumer reporting agency notified the furnisher of information of the dispute; and [3] the furnisher of information failed to investigate and modify the inaccurate information.” Lewis, 2022 WL 17364641, at *5 (alteration in original) (quoting Harris, 2016 WL 3473347, at *6) (citing 15 U.S.C. §§ 1681s-2(b), 1681n & § 1681o). Barrett asserts that USAA violated the FCRA when it reported that Barrett owed $13,130 on USAA SB credit card account # 427082501350**** to CRAs Transunion, Equifax, and Experian even though Barrett had “forward[ed] an identity theft victim's complaint and affidavit form to [USAA]” disputing this account information. ECF No. 1-4, ¶¶ 9, 14. See also ECF No. 35, ¶ 4. Additionally, Barrett pleads that he “continuously asserted and reasserted” to the CRAs that this was not his account “and that he has never done business with [USAA].” Id., ¶ 9. These allegations fall short of stating a claim under 15 U.S.C. § 1681s-2(b).
Barrett's allegations relate only to the first element of the claim - whether Barrett filed notices of dispute with Transunion, Equifax, and/or Experian. The complaint alleges no facts to support either the second or third element of the claim: that Transunion notified USAA of Barrett's dispute, and that USAA subsequently “failed to investigate and modify the inaccurate information.” Harris, 2016 WL 3473347, at *6. See Franchino v. J.P. Morgan Chase Bank, N.A., 2020 WL 3046318, at *4 (D.N.J. June 8, 2020) (citing Henderson v. Equable Ascent Fin., 2011 WL 5429631, at *3 (E.N.J. Nov. 4, 2011) (“even if Plaintiff properly alleged that he provided notice, he has not pled sufficient facts to meet the remaining two pleading requirements . . . that a consumer reporting agency notified Defendant of his dispute, or that Defendant did not in fact investigate it.”). Because Barrett has not alleged that a CRA notified USAA of his dispute or that, upon receipt of such notice, USAA failed to investigate the dispute, his complaint fails to state a FCRA claim against USAA.
The Court notes that Barrett appended to his complaint a letter from USAA confirming that “[it] received correspondence from [Barrett] disputing information shown on [his] consumer report for USAA account ending in 1403,” investigated his dispute, and concluded that the information was accurate. ECF No. 1-4, p. 13. But this investigation responds to Barrett's direct notification to USAA, and thus does not support his claim pursuant to15 U.S.C. § 1681s-2(b). See SimmsParris, 652 F.3d 355, 358 (3d Cir. 2011) (internal citation omitted) (“The duties that are placed on furnishers of information by this subsection are implicated only ‘[a]fter receiving notice pursuant to section 1681i(a)(2) of this title of a dispute with regard to the completeness or accuracy of any information provided by a person to a consumer reporting agency.' Notice under § 1681i(a)(2) must be given by a credit reporting agency, and cannot come directly from the consumer.”).
E. Leave to Amend
The Third Circuit has instructed that if a civil rights complaint is vulnerable to dismissal for failure to state a claim, the Court should permit a curative amendment unless an amendment would be inequitable or futile. Grayson v. Mayview State Hosp., 293 F.3d 103, 108 (3d Cir. 2002). This instruction is equally applicable to pro se litigants and those represented by counsel. Alston v. Parker, 363 F.3d 229, 235 (3d Cir. 2004). In this case, Barrett may be able to amend his complaint to allege facts sufficient to cure certain of its deficiencies, particularly with respect to his FCRA claim. Accordingly, it is recommended that the Court grant USAA's motion to dismiss Barrett's complaint against it and dismiss his claims without prejudice and with leave to file an amended complaint within twenty days. If Barrett fails to file an amended complaint within this time, the Court should enter an order dismissing his claims against USAA with prejudice.
III. Conclusion
For the foregoing reasons, USAA's motion to dismiss (ECF No. 7) Barrett's complaint should be granted. USAA's motion to sever (ECF No. 9) should be dismissed without prejudice to reassert if Barrett files an amended complaint.
IV. Notice
In accordance with 28 U.S.C. § 636(b)(1) and Fed.R.Civ.P. 72, the parties may seek review by the district court by filing Objections to the Report and Recommendation within fourteen (14) days of the filing of this Report and Recommendation. Any party opposing the objections shall have fourteen (14) days from the date of service of objections to respond thereto. See Fed.R.Civ.P. 72(b)(2). Failure to file timely objections may waive appellate rights. See Brightwell v. Lehman, 637 F.3d 187, 194 n.7 (3d Cir. 2011); Nara v. Frank, 488 F.3d 187 (3d Cir. 2007).