Opinion
19 Civ. 11105 (VEC) (GWG)
10-14-2020
DAVID HABER, Plaintiff, v. CREDIT SESAME and CREDIT ONE BANK, N.A., Defendants.
REPORT AND RECOMMENDATION
GABRIEL W. GORENSTEIN, UNITED STATES MAGISTRATE JUDGE
Pro se plaintiff David Haber brings claims against defendants Credit Sesame and Credit One Bank, N.A. (“Credit One”) under the Credit Repair Organizations Act, 15 U.S.C. § 1679 et seq. (“CROA”), and state law. Defendants have moved to dismiss the amended complaint. For the following reasons, the defendants' motions to dismiss should be granted.
See Motion to Dismiss, filed March 13, 2020 (Docket # 21); Memorandum of Law in Support of Motion to Dismiss, filed March 13, 2020 (Docket # 22) (“Credit One Mem.”); Motion to Dismiss, filed April 16, 2020 (Docket # 26); Declaration of Scott Murray in Support of Motion to Dismiss, filed April 16, 2020 (Docket # 27); Memorandum of Law in Support of Motion to Dismiss, filed April 16, 2020 (Docket # 28) (“Credit Sesame Mem.”); Rule 56.1 Statement, filed April 16, 2020 (Docket # 29); Reply Memorandum of Law in Support of Motion to Dismiss, filed May 6, 2020 (Docket # 34); Declaration of John P. Kennedy in Support of Motion to Dismiss, filed May 6, 2020 (Docket # 35); Opposition (Response) to Credit Sesame Motion to Dismiss as Moot, filed July 21, 2020 (Docket # 46) (“Opp. to Credit One”); Opposition (Affirmation of David Haver) Opposition to Credit Sesame Motion to Dismiss as Moot, filed July 21, 2020 (Docket # 47) (“Opp. to Credit Sesame”); Reply Memorandum of Law in Support of Motion to Dismiss, filed July 23, 2020 (Docket # 49); Reply Memorandum of Law in Support of Motion to Dismiss, filed August 6, 2020 (Docket # 54). Haber also filed several letters, all dated August 10, 2020, that attach documents that he asserts show “the corruption and dishonest [sic] of the defendants.” (Docket ## 61-64).
I. BACKGROUND
A. Procedural History
Haber filed a complaint against Credit One in the United States District Court for the Eastern District of New York on June 24, 2019 (Docket # 1). On August 22, 2019, Judge Hall dismissed the complaint for “failure to state a plausible claim for relief” but granted Haber leave to file an amended complaint. (Docket # 4). Haber filed an amended complaint on October 21, 2019 (Docket # 6) (“Am. Compl.”). The amended complaint added factual allegations and added Credit Sesame as a defendant. See id. Judge Hall transferred the case to the Southern District of New York on November 21, 2019. (Docket # 7). Credit One and Credit Sesame later filed the motions to dismiss that are now before this Court.
B. Allegations in the Amended Complaint
For purposes of the motions to dismiss we assume the truth of the allegations in the amended complaint. See, e.g., Meridien Int'l Bank Ltd. v. Gov't of the Republic of Liber., 23 F.Supp.2d 439, 445 (S.D.N.Y. 1998).
Credit Sesame conducts credit counseling and credit repair services. Am. Compl. ¶ 6. Haber signed up for an account with Credit Sesame in early 2019. Id. ¶ 11. “Credit Sesame promised to help [him] improve his credit score.” Id. ¶ 12. “Some time after” Haber created his Credit Sesame account, Credit Sesame signed him up for a Credit One credit card “without [his] specific permission.” Id. ¶ 13. “[A]s consideration for offering credit improvement services to Plaintiff in the form of opening a line of credit for Plaintiff with Credit One, [Credit Sesame] received monetary compensation from Credit One.” Id. ¶ 14. Haber received his Credit One credit card, which had a $300 limit, in February 2019. Id. ¶ 15. Haber used the credit card to make purchases. Id. Around February 27, 2019, Haber received his first credit card statement and learned that the card had a $75 annual fee. Id. ¶ 16.
“Immediately upon learning of the annual fee, Plaintiff attempted to pay off and cancel the Credit One card.” Id. ¶ 18. On March 6, 2019, Haber submitted a payment to Credit One using a $50 personal check drawn on his E-Trade bank account. Id. ¶ 19. Haber's bank account had sufficient funds to cover the check. Id. ¶ 20. On March 8, 2019, Credit One rejected Haber's payment and explained via a letter dated March 10, 2019, that the payment was returned because “No Account/Unable to Locate.” Id. ¶¶ 21-22. Haber attempted to make another payment, this time in the amount of $150, on April 1, 2019. Id. ¶ 23. Credit One rejected this payment on April 3, 2019, again claiming “No Account/Unable to Locate.” Id. ¶ 24. Credit One then closed Haber's account and disabled his credit card. Id. ¶ 25. Haber has never had this issue with checks drawn on his E-Trade bank account. See id. ¶ 26.
Haber contacted Credit One via phone on April 5, 2019, to file a complaint regarding its refusal to accept his payments, but Haber was not satisfied with Credit One's actions. See Id. ¶¶ 28-29. On June 4, 2019, Haber “filed an online customer complaint form with the Office of the Comptroller of the Currency (the ‘OCC').” Id. ¶ 30. In a letter dated June 7, 2019, Credit One provided Haber with instructions on how to reopen his Credit One account. Id. ¶ 31. In a letter dated September 19, 2019, Credit One also informed Haber that his debt, which totaled $577.39, had been sold. Id. ¶ 32. Haber also received a debt-collection letter dated September 18, 2019. Id. ¶ 33.
Haber's amended complaint asserts three causes of action: (1) against Credit Sesame for violating the CROA; (2) against Credit Sesame for “fraud in the inducement;” and (3) against Credit One for “fraud.” Id. ¶¶ 34-57.
As to the CROA allegation against Credit Sesame, Haber alleges that Credit Sesame is a “Credit Repair Organization” within the meaning of 15 U.S.C. § 1679a(3) and did not, “prior to signing up Plaintiff for the Credit One card, perform any service to repair Plaintiff's credit.” Id. ¶¶ 37-38. Haber alleges that once Credit Sesame opened the credit card for him, his credit score suffered and he “has been harmed and continues to be harmed by Credit Sesame's actions.” Id. ¶¶ 39-40.
As to the fraud-in-the-inducement claim against Credit Sesame, Haber alleges “Credit Sesame fraudulently induced Plaintiff to sign up for the Credit One card by withholding material information by not informing Plaintiff they were opening the Credit One card on plaintiff's behalf.” Id. ¶ 43. He also alleges that “Credit Sesame fraudulently induced Plaintiff to sign up for the Credit One card by withholding material information by not informing Plaintiff the Credit One card carried a $75.00 annual fee.” Id. ¶ 44. Haber alleges he relied on Credit Sesame to repair his credit and that Credit Sesame withheld this information knowing that he was relying on it. See id. ¶¶ 45-46. As a result of Credit Sesame opening the credit card, Haber's credit score has suffered and he “has been harmed and continues to be harmed by Credit Sesame's actions.” Id. ¶¶ 47-48.
As for the fraud claim against Credit One, Haber alleges that “Credit One fraudulently refused to accept Plaintiff's valid form of payment on two occasions.” Id. ¶ 50. Haber states that the checks he submitted to Credit One for payment “showed accurate information regarding the bank routing number and account number.” Id. ¶ 54. Haber alleges “Credit One rejected Plaintiff's payments with the intention of increasing Plaintiff's debt to Credit One through the accumulation of late fees and interest” and that he “relied on Credit One to accept his valid payments.” Id. ¶¶ 55-56. Finally, Haber alleges that “Credit One's rejection of Plaintiff s attempted payments has resulted in the accumulation of at least $263.23 in late fees and interest, thus unduly increasing Plaintiff's debt to Credit One.” Id. ¶ 57.
Haber invokes 15 U.S.C. §§ 1679b(b) and 1679g(a) for his claim against Credit Sesame. Id. at 7. He seeks $1,600,000 in damages against Credit Sesame. See id. He also seeks declaratory relief, costs, and “removal of all information reported to the credit bureau's [sic] by Credit One.” Id. Haber also attaches what appears to be a page from his original complaint whereby he asks “for a judgment for $1,600,000.00 for damages caused to my credit, suffering, mental anguished, [sic] internet fraud, [indecipherable] & false statements made to OCC - by Credit One Bank, N.A. and the removal of information submitted to the credit bureau's [sic]. And for all other relief the court deems just and proper.” Id. at 8 (some capitalization omitted).
In his opposition to the instant motions, Haber asserts that “Credit One & Credit Sesme [sic] conspired to defraud Plaintiff by entering into a secret agreement to send Plaintiff a $75.00 fee based credit card without Plaintiffs [sic] knowledge.” Opp. to Credit One at *7 (some capitalization omitted). While this allegation does not appear in the amended complaint, in light of Haber's pro se status, we will view this allegation in his brief as supplementing the allegations of the amended complaint. See, e.g., Portillo v. Webb, 2017 WL 4570374, at *1 (S.D.N.Y. Oct. 11, 2017) (considering factual allegations from pro se plaintiff's opposition submissions when deciding motion to dismiss) (collecting cases), adopted by 2018 WL 481889 (S.D.N.Y. Jan. 17, 2018); London v. N.Y. State Dep't of Homeless Servs., 2014 WL 3720401, at *1 (S.D.N.Y. July 29, 2014) (same), adopted by 2015 WL 170245 (S.D.N.Y. Jan. 13, 2015); accord Burgess v. Goord, 1999 WL 33458, at *1 n.1 (S.D.N.Y. Jan. 26, 1999) (“In general, a court may not look outside the pleadings when reviewing a Rule 12(b)(6) motion to dismiss. However, the mandate to read the papers of pro se litigants generously makes it appropriate to consider plaintiff's additional materials, such as his opposition memorandum.”) (citations and internal quotation marks omitted).
“*” reflects numbering assigned by the Court's ECF system.
II. STANDARD OF REVIEW UNDER FED. R. CIV. P. 12(B)(6)
A defendant may move to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) where the plaintiff “fail[s] to state a claim upon which relief can be granted.” To survive such a motion, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). As the Supreme Court noted in Iqbal,
[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. . . . The plausibility standard is not akin to a “probability requirement, ” but it asks for more than a sheer possibility that a defendant has acted unlawfully. . . . Where a complaint pleads facts that are “merely consistent with” a defendant's liability, it “stops short of the line between possibility and plausibility of entitlement to relief.”Id. (citations omitted). “[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.” Twombly, 550 U.S. at 555 (quotation marks, alternation, and citation omitted). Thus, “[w]hile legal conclusions can provide the framework of a complaint, they must be supported by factual allegations.” Iqbal, 556 U.S. at 679. “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, ” a complaint is insufficient under Federal Rule of Civil Procedure 8(a)(2) because it has merely “alleged - but it has not ‘shown' - ‘that the pleader is entitled to relief.'” Id. at 679 (alteration omitted) (quoting Fed.R.Civ.P. 8(a)(2)).
Additionally, on a motion to dismiss for failure to state a claim, a court's
consideration is limited to the factual allegations in [the complaint], which are accepted as true, to documents attached to the complaint as an exhibit or incorporated in it by reference, to matters of which judicial notice may be taken, or to documents either in plaintiffs' possession or of which plaintiffs had knowledge and relied on in bringing suit.Brass v. Am. Film Techs., Inc., 987 F.2d 142, 150 (2d Cir. 1993) (citing Cortec Indus., Inc. v. Sum Holding L.P., 949 F.2d 42, 47-48 (2d Cir. 1991)); accord Halebian v. Berv, 644 F.3d 122, 130 n.7 (2d Cir. 2011).
A pro se litigant is “‘entitled to special solicitude'” and his pleadings should be read “‘to raise the strongest arguments that they suggest.'” Fowlkes v. Ironworkers Local 40, 790 F.3d 378, 387 (2d Cir. 2015) (quoting Triestman v. Fed. Bureau of Prisons, 470 F.3d 471, 477 (2d Cir. 2006)). Accordingly, “‘[a] document filed pro se is to be liberally construed and a pro se complaint, however inartfully pleaded, must be held to less stringent standards than formal pleadings drafted by lawyers.'” Boykin v. KeyCorp, 521 F.3d 202, 214 (2d Cir. 2008) (quoting Erickson v. Pardus, 551 U.S. 89, 94 (2007)). “‘[D]ismissal of a pro se claim as insufficiently pleaded is appropriate only in the most unsustainable of cases.'” Fowlkes, 790 F.3d at 387 (quoting Boykin, 521 F.3d at 216). “At the same time, a pro se complaint must allege ‘enough facts to state a claim to relief that is plausible on its face.'” Id. (quoting Twombly, 550 U.S. At 570).
III. DISCUSSION
Credit Sesame argues that Haber failed to allege a violation of the CROA for two reasons: (1) because he did not allege that Credit Sesame charged or received compensation from him prior to providing services, and (2) Haber opened and closed his account with Credit Sesame prior to the performance of any services. See Credit Sesame Mem. at 10-15. Both Credit Sesame and Credit One argue that Haber failed to allege the necessary elements for fraud in the inducement or fraud. See id. at 16-20; Credit One Mem. at 8-12.
As described below, we agree that the federal claim against Credit Sesame must be dismissed. Additionally, we conclude that the Court should decline to exercise jurisdiction over the state-law claims against both Credit Sesame and Credit One.
Credit Sesame has submitted evidence regarding the allegations in the amended complaint and argues that the Court can consider such information at the motion to dismiss stage or that it should be entitled to summary judgment. See Credit Sesame Mem. at 1 n.2, 9-10, 14-15. Because it is not necessary to rely on this evidence in order to adjudicate the motion to dismiss, we do not address it further.
A. Haber's Federal Claim Against Credit Sesame
Haber's complaint, which was drafted with the help of the City Bar Justice Center's Federal Pro Se Legal Assistance Project, see Am. Compl. at 1 n.1, invokes a specific provision of the CROA as the basis for his claim: 15 U.S.C. § 1679b(b), see id. ¶ 35. That provision states:
No credit repair organization may charge or receive any money or other valuable consideration for the performance of any service which the credit repair
organization has agreed to perform for any consumer before such service is fully performed.15 U.S.C. § 1679b(b). Haber alleges that Credit Sesame did not perform any services for him prior to opening a credit card on his behalf, see Am. Compl. ¶ 38, and that Credit Sesame was paid a fee by Credit One for opening the credit card, see id. ¶ 14; see also Opp. to Credit Sesame at *4. Thus, as expressed in Haber's opposition filing, “Sesame received payment from Credit One Bank without performing any dutis [sic] for plaintiff to assist in helping plaintiff increase his credit score, however, Sesame received a fee from Credit One bank, thats [sic] illegal.” Opp. to Credit Sesame at *4 (some capitalization omitted).
As one case has noted, “[t]he problem with Plaintiff's allegations . . . is that he does not allege that he was charged for or paid for any services that had not been performed.” Reid v. Commonwealth Equity Grp., LLC, 2017 WL 3457109, at *5 (C.D. Ill. Aug. 11, 2017) (emphasis added). That is, Haber's amended complaint is devoid of any assertion that he paid Credit Sesame for services. Instead, he asserts that Credit One allegedly paid Credit Sesame. See Am. Compl. ¶ 14. The structure of the statute, however, makes clear that the “charge” it refers to is a charge to the “consumer” for the “service” being performed. No. such charge is alleged in the amended complaint.
Accordingly, Haber fails to state a claim under the CROA against Credit Sesame.
B. Remaining State-Law Claims
Haber's remaining claims consist of a state-law claim against Credit Sesame for “fraud in the inducement, ” Am Compl. ¶¶ 42-48; a state-law claim for “fraud” against Credit One, id. ¶¶ 49-57; and an apparent claim against both defendants that they “conspired to defraud” him, Opp. to Credit One at *7.
The district court has jurisdiction over Haber's federal claim pursuant to 28 U.S.C. § 1331. However, the district court's jurisdiction to hear Haber's state-law claims is premised only on the supplemental jurisdiction provided in 28 U.S.C. § 1367(a) - or what has sometimes been called “pendent” jurisdiction - as Haber himself recognizes. See Am. Compl. ¶¶ 1, 9 (referring to the state-law claims as “arising out of pend[e]nt state law”).
Section 1367(a) provides that
in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution. Such supplemental jurisdiction shall include claims that involve the joinder or intervention of additional parties.28 U.S.C. § 1367(c) provides that a district court may “decline to exercise supplemental jurisdiction over a claim under subsection (a) if . . . the district court has dismissed all claims over which it has original jurisdiction.” This includes claims against defendants against whom only state-law claims were brought when the ancillary federal claims against other defendants are dismissed. See, e.g., Boustany v. Xylem Inc., 235 F.Supp.3d 486, 496 (S.D.N.Y. 2017) (declining to exercise supplemental jurisdiction over all state-law claims after dismissing the federal claim that was only applicable to one defendant).
The Supreme Court has noted that
in the usual case in which all federal-law claims are eliminated before trial, the balance of factors to be considered under the pendent jurisdiction doctrine - judicial economy, convenience, fairness, and comity - will point toward declining to exercise jurisdiction over the remaining state-law claims.Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 n.7 (1988); accord Valencia ex rel. Franco v. Lee, 316 F.3d 299, 305 (2d Cir. 2003). Given the early stage of this case, the Court should decline to exercise jurisdiction over Haber's state-law claims. See Valencia, 316 F.3d at 306-07 (noting that because of the “relatively early stage of the case, ” there were “judicial economies to be achieved by declining to exercise supplemental jurisdiction” over state-law claims that remained after the dismissal of all federal-law claims).
IV. CONCLUSION
For the foregoing reasons, defendants' motions to dismiss (Docket ## 21, 26) should be granted. Because Haber has already had one opportunity to amend his complaint, because we have considered additional allegations made in his opposition papers, and because there is no reason to believe he could cure the defects in the amended complaint, leave to file a third complaint should not be granted. See, e.g., Cuoco v. Moritsugu, 222 F.3d 99, 112 (2d Cir. 2000) (leave to amend need not be granted where the defects in the complaint are “substantive” and not the result of “inartful[ ]” pleading); Concepcion v. Dana, 2019 WL 548639, at *4 n.3 (N.D.N.Y. Feb. 12, 2019) (“an opportunity to amend is not required where the plaintiff has already been afforded the opportunity to amend”) (citing cases).
The Clerk of the Court is requested to mail a copy of this Report and Recommendation to
David Haber at the address listed on the docket sheet.
PROCEDURE FOR FILING OBJECTIONS TO THIS REPORT AND RECOMMENDATION
Pursuant to 28 U.S.C. § 636(b)(1) and Rule 72(b) of the Federal Rules of Civil Procedure, the parties have fourteen (14) days (including weekends and holidays) from service of this Report and Recommendation to file any objections. See also Fed.R.Civ.P. 6(a), (b), (d). A party may respond to any objections within 14 days after being served. Any objections and responses shall be filed with the Clerk of the Court. Any request for an extension of time to file objections or responses must be directed to Judge Caproni. If a party fails to file timely objections, that party will not be permitted to raise any objections to this Report and Recommendation on appeal. See Thomas v. Arn, 474 U.S. 140 (1985); Wagner & Wagner, LLP v. Atkinson, Haskins, Nellis, Brittingham, Gladd & Carwile, P.C., 596 F.3d 84, 92 (2d Cir. 2010).
Haber may file his response by email by sending it in pdf form to TemporaryProSeFiling@nysd.uscourts.gov. In the alternative, the response may be mailed to Pro Se Docketing, 500 Pearl Street, New York, NY 10007.