Opinion
Civil Action No. 05-1771.
December 7, 2005
AMENDED REPORT, RECOMMENDATION AND ORDER
INTRODUCTION
This matter comes before me on the motion of defendants MBNA Corporation, Wolpoff Abramson, LLP, Pressler Pressler and Gerald Felt (collectively "MBNA") to dismiss the Complaint of plaintiffs Eleanor and Ralph Schiano ("Schianos"). The motion was referred to me by Judge Jose L. Linares, U.S.D.J. Also before me is the Schianos' motion to amend their First Amended Complaint. I have considered the papers submitted in support of and in opposition to the motions. There was no oral argument. Rule 78.
This Amended Report, Recommendation and Order has been filed to reflect very minor changes, and in no way affects the analysis or substantive aspects of the original Report, Recommendation and Order filed on December 7, 2005.
BACKGROUND
The relevant facts have been described in the Report and Recommendation I issued on November 6, 2005. Significantly, the arbitration of the dispute between MBNA and the Schianos extended over a period of one and a half years and resulted in a decision awarding damages to MBNA in the amount of $35,000 on June 4, 2004. The Schianos' Complaint was filed on April 4, 2005. The Schianos did not move to vacate or dispute the arbitration award until MBNA moved to dismiss this action.ANALYSIS
A. MBNA's Motion to Dismiss the Complaint
1. Federal Jurisdiction
The Schianos maintain that federal jurisdiction exists on the basis of federal question and diversity of citizenship. The Federal Arbitration Act ("FAA") does not give rise to a question of federal jurisdiction and thus the only plausible basis for asserting federal jurisdiction may be found under the Fair Debt Collection Practices Act (FDCPA) set forth under Count I of the Complaint. MBNA argues that Count I does not satisfy Fed R. Civ. P. 9 pleading requirements. However, the applicable standard for pleading a cause of action based in FDCPA is Rule 8(a); notice pleading. All the rule requires is a "short and plain statement of the claim that gives the defendant fair notice of the plaintiff's claim and the grounds upon which it rests." Rule 8(a)(2); Swierkiewicz v. Sorema N.A., 534 U.S. 506, 512 (2002).
A FDCPA plaintiff need only set forth sufficient factual allegations in violation of the Act. Gorman v. Wolpoff Abramson, 370 F. Supp.2d 1005, 1011 (N.D. Cal. 2005). Subsection (a) of 15 U.S.C. 1681s "imposes a duty upon furnishers of information to provide accurate information. It prohibits the reporting of erroneous information, imposes a duty to correct and update information, and imposes a duty to provide notice of a consumer's dispute." Gorman, 370 F. Supp.2d at 1011. Subsection (b) further imposes a duty "to conduct an investigation, review all relevant information, report results, and modify, delete or block inaccurate or incomplete information. Gorman, 370 F. Supp.2d at 1011.
Count I of the Schianos' Complaint specifies that its claim arose from MBNA's failure to acknowledge receipt of the $29,000 either to them or the reporting agencies. The Schianos state that they attempted to resolve the issue with MBNA and that MBNA took no steps to remedy the erroneous reporting which caused them harm. MBNA states that it was in possession of the monies but does not refute having reported that it did not receive the monies in question. It appears that the Schianos set forth allegations of false reporting in violation of Subsections (a) and (b) of the FDCPA, thus giving adequate notice to MBNA. I find that this Court has federal question jurisdiction and I need not address diversity of citizenship.
2. Preemption
MBNA argues that the FDCPA preempts Counts IV through VIII of the Schianos' Complaint. These assert the following causes of action; False misrepresentation, violation of N.J.S.A. 56:8-2, false advertisement, false credit reporting premised under New Jersey State common law and intentional infliction of emotional distress.
The FDCA contains several preemption provisions, some of which are general and some are specific. "Subsection 1681t(b) is a general preemption provision . . . Subsection 1681h(e), by contrast, is a specific provision that preempts, inter alia, certain defamation claims." Gorman, 370 F. Supp.2d at 1009. 15U.S.C. 168h(e) provides qualified immunity to reporting agencies as to state law claims related to the disclosure of information. Stafford v. Cross Country Bank, 262 F. Supp.2d 776, 788 (W.D. Ky 2003). However, this qualified immunity does not extend to false information furnished with malice or with willful intent to injure. Wiggins v. Equifax Services, Inc., 848 F. Supp. 213, 223 (D.D.C. 1993). "Actions showing a `reckless indifference' to plaintiff's rights under the [FDCPA] can also constitute willfulness . . . In that context, a statement is deemed to have been made with malice when the speaker either knew it was false or acted in reckless disregard of its truth or falsity." Veno v. ATT Corp., 297 F. Supp.2d 379, 384 (D. Mass. 2003).
As the New Jersey statutory and common law causes of action arise from MBNA's disclosure of information to reporting agencies these are preempted. Pertaining to the intentional infliction of emotional distress cause of action, the Schianos state that despite their efforts to communicate with MBNA regarding its erroneous reporting of unsatisfied debt, MBNA took no steps to correct its mistake. To the contrary, it confirmed with the reporting agencies that it had not received the monies in question. MBNA's alleged failure to investigate whether it had possession of the monies reported delinquent after the Schianos' inquiry and its subsequent confirmation of false representations, at a minimum, may constitute reckless disregard to the truth or falsity of the information it disseminated to reporting agencies. Accordingly, no qualified immunity attaches to the intentional infliction of emotional distress cause of action.
3. Adequacy of the Pleadings
MBNA argues that the Schianos' pleadings fail to set forth actions based in violation of Fourteenth Amendment rights and the FDCPA as well as intentional infliction of emotional distress. As discussed above under Jurisdiction, the Schianos properly pleaded the FDCPA cause of action. The Second cause of action of the Schianos' Complaint has also been addressed in my previous Report and Recommendation, finding that the NAF is protected from suit pursuant to the arbitral immunity. As for Count IV, the Schianos provide no legal basis to impose Fourteenth Amendment requirements on private actors, and accordingly, they fail to set forth any basis for the relief sought under this cause of action.
As for the Schianos' intentional infliction of emotional distress claim, the court decides as a matter of law whether emotional distress can be found and the jury decides whether in fact it has been proven. Perry v. Gold Laine, P.C., 371 F. Supp.2d 622, 627 (D.N.J. 2005). To establish an intentional infliction fo emotional distress cause of action, the Schianos must show (1) intentional and outrageous conduct that is so severe as to expect no reasonable individual to endure, (2) proximate cause, and (3) severe distress. Perry, 371 F. Supp.2d at 627.
MBNA's actions after the arbitration award was issued will be considered in evaluating outrageousness of its conduct. It appears that MBNA's actions, even if intentional, were not directed at the Schianos. All information was forwarded to reporting agencies. Presuming that the information disseminated was false, the conduct itself is not so outrageous as to render reasonable people unexpected to endure the same. Considering that notwithstanding their "bad" credit, the Schianos were able to refinance their home, albeit on unfavorable terms. The Eighth Count of the Complaint, alleges "mental and emotional anguish." Nowhere in the Complaint did the Schianos set forth factual allegations of severe mental distress. The Schianos' intentional infliction of emotional distress cause of action must fail as a matter of law.
B. The Schianos' Motion to Amend their First Amended Complaint
Rule 15(a) provides in relevant part that, "a party may amend the party's pleading only by leave of court or by written consent of the adverse party; and leave to amend shall be freely given when justice so requires." Leave to amend may be denied for four reasons: 1) undue delay, 2) bad faith or dilatory motive, 3) undue prejudice, or 4) futility of amendment. Foman v. Davis, 371 U.S. 178, 182 (1962); Rolo v. City of Investing Co. Liquidating Trust, 155 F.3d 644, 654 (3d Cir. 1998). An amendment will be considered futile if it "is frivolous or advances a claim that is legally insufficient on its face."Harrison Beverage Co. v. Dribeck Importers, Inc., 133 F.R.D. 463, 468 (D.N.J. 1990). Futility of a proposed amendment is analyzed using the motion to dismiss standard. Massarky v. General Motors Corp., 706 F.2d 111, 125 (3d Cir. 1983), cert. denied, 464 U.S. 937 (1983). Courts look at the proposed amended pleading for factual support of the claims advanced and all allegations made by a plaintiff are to be regarded as true.Kulwicki v. Dawson, 969 F.2d 1454, 1462 (3d Cir. 1992).
The Schianos seek to amend their Complaint to include a vacation of the arbitration award provision. It is well-settled law that absent a statutory basis for vacating an arbitration award, the award is considered proper. Jereddi Prasad, M.D., Inc. V. Investors Associates, Inc., 82 F. Supp.2d 365, 367 (D.N.J. 2000); Landers Co v. MMP Invs., Inc., 107 F.3d 476, 478 (7th Cir. 1997) and Florasynth, Inc. v. Pickholz, 750 F.2d 171, 177 (2d Cir. 1984). Section 12 of the FAA provides for a three months period during which a party may move to vacate, modify or otherwise dispute an arbitration award. "[I]f a defendant has important defenses to an arbitration award, he should raise them within the period prescribed for actions to vacate [otherwise they will be considered waived]." Pitcairn Enterprises, Inc. v. Universal Computer Consulting, Inc., 45 Fed.Appx. 183, 186 (3d Cir. 2002); and Serv. Employees Int'l Union Local 36, AFL-CIO v. City of Cleaning Co., 982 F.2d 89, 93 (3d Cir. 1992). Even in the case that the party's motion to vacate or otherwise modify the award was timely, this court has extremely limited authority in reviewing the award. United Transp. Union Local 1589 v. Suburban Transit Corp., 51 F.3d 376, 379 (3d Cir. 1995).
[T]he mere `appearance' of bias is grounds for an arbitrator's removal during the arbitration proceedings, it is an insufficient basis for this court to upset the panel's determination. Instead Wood's apparent conflict — if found to exist — must rise to the level of `evident partiality,' which is demonstrated through proof of circumstances `powerfully suggestive of bias.'Jereddi Prasad, 82 F. Supp.2d at 370.
The arbitration award against the Schianos was issued almost one year prior to the filing of their Complaint. Clearly, the period in which they could have raised any defenses contesting the award has lapsed. The Schianos did not provide any explanation for the delay to justify the exercise of any discretion which this Court may have to expand the three month period in contradiction of the congressional intent to limit the same. Furthermore, no reasonable basis for setting the arbitration award aside has been set forth in the Complaint or in their moving papers. Accordingly, the amendment sought by the Schianos fails to state legal basis for the remedy sought and thus cannot be granted.
C. MBNA's Motion to Compel Arbitration
In the alternative, MBNA moves this Court to compel arbitration of any issues that remain open pursuant to the arbitration agreement. The Schianos raise post-arbitration issues necessarily relevant to the underlying arbitration; "where did plaintiff's $29,000 [paid in satisfaction of the debt] go?." Further they did not advance any argument in opposition to MBNA's demand for arbitration. Pursuant to 9 U.S.C. 2., arbitration provisions are "valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract."See Citizens Bank v. Alafabco, Inc., 539 U.S. 52, 56 (2003). "[U]nder the [FAA] courts must enforce private agreements to arbitrate just as they would ordinary contract: in accordance with their terms." Howsam v. Dean Witter Reynolds, Inc., 537 U.S. 79, (2002) (concurrence). Moreover, a substantially related issue was previously submitted to arbitration and was arbitrated for a period of a year and one half. Therefore, arbitration is the more appropriate manner to resolve the pending FDCPA claim.
CONCLUSION
For the reasons set forth above, I recommend that MBNA's motion to dismiss Count II through VIII of the Schianos Complaint be GRANTED with prejudice;
It is further recommended that the parties submit Count I of the Complaint to arbitration;
It is further Ordered that the Schianos' motion to Amend their First Amended Complaint is DENIED; and
It is further ordered, that pursuant to Local Civil Rule 72.1(c)(2), the parties shall have ten (10) days from receipt of this Report and Recommendation to file and serve objections thereto.