Raley v. Bank of America NA et al
MEMORANDUM OPINION Signed by Judge William M Acker, Jr on 11/25/14. (SAC )
2014 Nov-25 PM 03:00
U.S. DISTRICT COURT
N.D. OF ALABAMA
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
FREDDIE S. RALEY,
BANK OF AMERICA, N.A., and
FIA CARD SERVICES, N.A.,
CIVIL ACTION NO.
Before the court are two motions filed by defendants Bank of
America, N.A., and FIA Card Services, N.A. (“the Bank”),1 seeking
dismissal of the above-entitled action: (1) a motion for judgment
on the pleadings filed on August 27, 2014 (Doc. 10); and (2) a
September 29, 2014 (Doc. 19). In Raley’s latest response, he seeks
leave to amend his complaint, and for a remand of the case to the
state court. (Doc. 21). This court will construe both of Raley’s
such requests as motions. For the reasons articulated below,
Raley’s quasi-motion for leave to amend will be granted, the Bank’s
motion for judgment on the pleadings will be denied as moot, the
Bank’s motion to strike will be denied, the Bank’s motion to
dismiss will be granted in part and denied in part, and Raley’s
quasi-motion for remand will be granted.
The defendants assert in their supplemental disclosure statement that
FIA Card Services, N.A., has merged into Bank of America, N.A. (Doc. 26).
Therefore, the court will characterize the defendants as one entity.
Raley is an 83-year-old disabled military veteran, and a
resident of Jefferson County, Alabama. (Doc. 12 at 1, ¶ 1).
Beginning in 2010, the Bank began contacting Raley regarding two
credit card accounts that he claims never to have opened. (Doc. 12
at 2, ¶¶ 5-6). Raley hired an attorney, who wrote to the Bank
saying unequivocally that Raley never opened the subject accounts
accounts be directed to the attorney and not to Raley. (Doc. 12 at
directly, threatening referral of the matter to a collection agency
and litigation if Raley did not pay. (Doc. 12 at 3, ¶¶ 12-13).
Various threats and responses ensued through late 2013, directed
either to Raley or his attorney. (Doc. 12 at 4-5, ¶¶ 14-23).
In January 2014, Raley received a Form 1099-C from the Bank,
stating that it had reported to the IRS
and to the Alabama
Department of Revenue a forgiveness of the debt owed by Raley in
the amount of $7,454.07, potentially resulting in a significant
increase in Raley’s income tax liability. (Doc. 12 at 5, ¶ 24).
Raley’s attorney once again contacted the Bank, to which the Bank
replied, “If you believe there was fraud associated with this
account, please call our Fraud Department . . . .” (Doc. 12 at 5-6,
Because of the standard of review for motions brought under Fed. R.
Civ. P. 12(b)(6) and 12(c), all facts alleged by Raley are accepted as true.
Raley commenced this action in the Circuit Court of Jefferson
County, Alabama, on April 2, 2014. The original complaint presents
four causes of action: (1) violation of the federal Fair Debt
Collection Practices Act; (2) state-law negligence; (3) state-law
private nuisance; and (4) state-law wantonness. The Bank removed
the action to this court on May 7, 2014, invoking the court’s
federal question jurisdiction pursuant to 28 U.S.C. § 1331, as well
as its supplemental jurisdiction under 28 U.S.C. § 1367. The Bank
response, Raley filed an amendment to his complaint without seeking
leave. Subject to his belated motion to remand, Raley now seeks to
advance five causes of action: (1) violation of 26 U.S.C. § 7434;
(2) state-law negligence; (3) state-law wantonness; (4) state-law
various federal statutes).
improperly filed, or in the alternative, to dismiss the action. In
Raley’s response, he seeks leave to amend the complaint, as well as
for an order remanding the action to the state court.
A. The Bank’s Motion to Strike and Raley’s Motion for Leave to
pleadings, Raley filed an amendment to his complaint on September
9 (Doc. 12), although he did not request leave from the court to do
so. With narrow exceptions not here present, all amendments, even
if within the time period to amend pleadings set out in the
scheduling order, may only occur with the opposing party’s consent
or with the court’s leave. Fed. R. Civ. P. 15(a)(2); see also
Hoover v. Blue Cross & Blue Shield of Ala., 855 F.2d 1538, 1544
(11th Cir. 1988) (“In general, if an amendment that cannot be made
as of right is served without obtaining the court’s leave or the
opposing party’s consent, it is without legal effect and any new
matter it contains will not be considered unless the amendment is
resubmitted for the court’s approval.”) (quoting 6 Charles Alan
Wright & Arthur R. Miller, Federal Practice and Procedure § 1485
Without having sought and having obtained leave to amend,
Raley’s purported amended complaint should not be considered, and
the Bank’s motion to strike would be well taken. Raley, however,
now seeks leave to amend in his response filed on October 9, which
this court will construe as a motion for leave to amend his
complaint. (Doc. 21). Fed. R. Civ. P. 15(a)(2) states that “[t]he
court should freely give leave when justice so requires.” The Bank
argues that this court should not grant leave because it would be
futile to do so. “Denial of leave to amend is justified by futility
when the ‘complaint as amended is still subject to dismissal.’”
Burger King Corp. v. Weaver, 169 F.3d 1310, 1320 (11th Cir. 1999)
(quoting Halliburton & Assocs. v. Henderson, Few & Co., 774 F.2d
441, 444 (11th Cir. 1985)). “In other words, denial on grounds of
complaint fails to state a claim upon which relief can be granted
. . . .” SFM Holdings, Ltd. v. Banc of America Securities LLC, 764
F.3d 1327, 1344 (11th Cir. 2014). Because the motion to strike
essentially employs the same standard as the Bank’s motion to
dismiss, the court will deny the motion to strike and will grant
Raley’s motion for leave to amend.
B. The Bank’s Motion for Judgment on the Pleadings
“As a general matter, ‘[a]n amended pleading supersedes the
amendment, and is no longer a part of the pleader's averments
against his adversary.’” Pintando v. Miami-Dade Hous. Agency, 501
F.3d 1241, 1243 (11th Cir. 2007) (quoting Dresdner Bank AG v. M/V
Olympia Voyager, 463 F.3d 1210, 1215 (11th Cir. 2006)). Because
Raley's claims in his original complaint have now been abandoned or
superseded, the Bank’s motion for judgment on the pleadings is due
to be denied as moot, because it relates only to Raley’s original
complaint. See Washington v. Potter, No. 1:09–CV–1774–JOF–RGV, 2010
WL 2635647, *1 n.1 (N.D. Ga. Apr. 16, 2010) (“Since plaintiff has
abandoned the claims asserted in her original complaint, it is
RECOMMENDED that defendant's motion to dismiss plaintiff's original
complaint, [Doc. 7], be DENIED as moot.”).
C. The Bank’s Motion to Dismiss
When reviewing a motion to dismiss under Fed. R. Civ. P.
complaint as true and constru[e] them in the light most favorable
to the plaintiff.’” M.T.V. v. DeKalb Cnty. Sch. Dist., 446 F.3d
1153, 1156 (11th Cir. 2006) (quoting Hill v. White, 321 F.3d 1334,
1335 (11th Cir. 2003)). A complaint must, however, “state a claim
to relief that is plausible on its face” to survive such a motion.
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). The Supreme
Court has identified two working principles for district courts to
apply in ruling on motions to dismiss. “First, the tenet that a
court must accept as true all of the allegations contained in a
complaint is inapplicable to legal conclusions. Threadbare recitals
of the elements of a cause of action, supported by mere conclusory
statements, do not suffice.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009). “Second, only a complaint that states a plausible claim for
relief survives a motion to dismiss.” Id. at 679. “A claim has
facial plausibility when the plaintiff pleads factual content that
defendant is liable for the misconduct alleged.” Id. at 678. “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.” Id.
The Bank challenges the sufficiency of each of Raley’s five
counts in his amended complaint, and each will be discussed in
1. Violation of 26 U.S.C. § 7434
In his amended complaint, Raley alleges that the Bank violated
26 U.S.C. § 7434, “by willfully filing a fraudulent 1099-C with the
Internal Revenue Service and the State of Alabama Department of
Revenue.” (Doc. 12 at 8, ¶ 19). Raley, however, expressly and
understandably has abandoned this claim in his response to the
Bank’s motion to dismiss (Doc. 21 at 3-4). Such abandonment is well
taken. 26 U.S.C. § 7434(a) imposes liability on a person who
“willfully files a fraudulent information return with respect to
payments to be made to any other person.” Nine types of statements
are considered to be information returns under the statute, but a
Form 1099-C is not one of them. 26 U.S.C. §§ 6724(d)(1)(A), 7434(f)
(2012). Thus, even if the Bank filed the Form 1099-C fraudulently,
such an act would not constitute a violation of § 7434. For this
reason Raley has acknowledged that he fails to state a claim in
Count I. See Cavoto v. Hayes, 634 F.3d 921 (7th Cir. 2011). At this
point the only federal law claim in his complaint disappeared.
2. Common Law Negligence
In Count II of the amended complaint, Raley asserts a claim
for (state-law) common law negligence. “To establish negligence,
the plaintiff must prove: (1) a duty to a foreseeable plaintiff;
(2) a breach of that duty; (3) proximate causation; and (4) damage
or injury.” Martin v. Arnold, 643 So. 2d 564, 567 (Ala. 1994). The
Bank claims that Raley has not sufficiently identified a duty owed
to him by the Bank, negating liability. “The existence of a duty is
a question of law to be decided by the court.” Franklin v. City of
Athens, 938 So. 2d 950, 953 (Ala. Civ. App. 2005).
In his amended complaint, Raley alleges that the Bank “owed a
common law duty to Plaintiff not to negligently report to the
Internal Revenue Service and the State of Alabama Department of
Revenue the forgiveness of a debt that Plaintiff did not owe.”
(Doc. 12 at 9-10, ¶ 37). “In general, ‘every person owes every
other person a duty imposed by law to be careful not to hurt him.’”
Smitherman v. McCafferty, 622 So. 2d 322, 324 (Ala. 1993) (quoting
Southeastern Greyhound Lines v. Callahan, 13 So. 2d 660, 663 (Ala.
1943)). “To determine whether a [specific] duty existed, this court
should consider a number of factors, including public policy,
social considerations, and whether the injury was foreseeable to
[the Bank].” Carrio v. Denson, 689 So. 2d 121, 124 (Ala. Civ. App.
1996). “The key factor is whether the injury was foreseeable by the
defendant.” Smitherman, 622 So. 2d at 324.
If this court was not remanding the case to state court it
would find that Raley plausibly states a claim for common law
negligence. Raley alleges that his attorney repeatedly informed the
Bank that Raley did not open the credit card accounts and does not
owe the debt, yet the Bank still issued the 1099-C. The Bank
apparently did not refer the matter to its fraud department, or
even inform Raley or his attorney that such a department existed,
until February 2014. (Doc. 12 at 6, ¶ 26). The foreseeability of
harm to Raley in this situation is evident, since
liability would almost certainly increase. While these facts must
all subsequently be proven, Raley has plausibly alleged a duty owed
by the Bank to Raley, so his claim for common law negligence would
be sufficient to survive the Bank’s motion under Twombly and Iqbal.
The Bank also challenges Raley’s wantonness claim. Wantonness
is defined as “[c]onduct which is carried on with a reckless or
conscious disregard of the rights or safety of others.” Ala. Code
§ 6-11-20 (1975). A wantonness cause of action imposes similar
culpability requirement that the conduct be done recklessly or in
conscious disregard of others’ rights. See Edmonson v. Cooper
Cameron Corp., 374 F. Supp. 2d 1103, 1106 (M.D. Ala. 2005).
The Bank contends that, as in the negligence claim, Raley
fails to show a duty. For the reasons stated above, such argument
fails. The Bank also claims that Raley did not plausibly allege
that the Bank acted with reckless indifference to the consequences
of its actions. The amended complaint states that the Bank acted
“wantonly and with malice,” and again that the action was “wanton”
and done with “intentional malice.” (Doc. 12 at 12-13, ¶¶ 42, 45).
These statements are legal conclusions, due to be ignored under
Twombly and Iqbal; what is important is whether the alleged facts
support the claim.
While this court would find that Raley has plausibly alleged
a claim for wantonness, the state court to which the case will be
returned is not bound by Twombly or Iqbal. Raley alleges that the
Bank repeatedly contacted him and threatened collection actions
against him even though he claimed to have never opened the
accounts and instructed that all contact be made through his
attorney. The Bank then, apparently without ever referring the
matter to its Fraud Department, submitted a Form 1099-C, stating
allegations, they are sufficient at this stage to plausibly allege
that the Bank acted with a reckless or conscious disregard of
Raley’s rights, especially considering the repeated denials of
liability and lack of a sufficient investigation into the validity
of the debt. Consequently, the wantonness claim would pass muster
Raley asserts a claim in Count IV for defamation.
The elements of a cause of action for defamation are: 1)
a false and defamatory statement concerning the
plaintiff; 2) an unprivileged communication of that
statement to a third party; 3) fault amounting at least
to negligence; and 4) either actionability of the
statement irrespective of special harm [(per se)] or the
existence of special harm caused by the publication of
the statement [(per quod)].
Dudley v. Bass Anglers Sportsman Soc., 777 So. 2d 135, 140 (Ala.
Civ. App. 2000) (quoting Drill Parts & Serv. Co. v. Joy Mfg. Co.,
619 So. 2d 1280, 1289 (Ala. 1993)).
The Bank challenges this claim on two grounds. First, the Bank
argues that Raley does not sufficiently allege an injury to his
reputation. For a statement to be defamatory (under the first
element of the cause of action), the statement must “‘ten[d] so to
harm the reputation of another as to lower him in the estimation of
the community or to deter third persons from associating or dealing
with him.’” Id. (quoting Harris v. Sch. Annual Publ’g Co., 466 So.
2d 963, 964 (Ala. 1985)). The statement must “‘subjec[t] the person
to disgrace, ridicule, odium, or contempt in the estimation of his
friends and acquaintances, or the public, with resulting damage to
his reputation.” Id. (quoting Marion v. Davis, 114 So. 357, 359
(Ala. 1927)). The Bank claims that, because the 1099-C was only
sent to the IRS and ADR, and because Raley does not allege that the
submission caused either of those organizations to think less of
him, he has not alleged a sufficient reputational injury, since
“[h]aving one’s taxes increased is not reputational injury.” (Doc.
19 at 22).
Raley, however, also alleges that “[i]t was made to appear to
others that Raley did not pay his debts and [the Bank was] required
to write off said debts.” (Doc. 12 at 14, ¶ 48). The Bank contends
that this allegation is insufficient, since Raley does not identify
the alleged “others” who now think less of him, but the Bank cites
no authority for the proposition that such identification is
reputation was harmed, and this is precisely what he alleges. While
the allegation may be in general terms and will require specific
proof in the future, it would be sufficient at this stage to
proceed if the case should proceed in this court.
The Bank also seeks dismissal of Raley’s defamation claim
because the Bank acted under a qualified privilege. Under Alabama
law, “[w]here a party makes a communication and that communication
is prompted by a duty owed either to the public or to a third party
. . . the communication is privileged, if it is made in good faith
and without actual malice.” Hoover v. Tuttle, 611 So. 2d 290, 293
(Ala. 1992). “A plaintiff cannot prevail against an established
defense of qualified privilege unless he has pleaded and proved
defamation committed with actual malice.” Ex parte Blue Cross &
Blue Shield of Ala., 773 So. 2d 475, 479 (Ala. 2000). Actual malice
“may be shown, not only by ‘evidence of hostility, rivalry, the
violence of the language, the mode and extent of publication,’ but,
also, by proof of ‘the recklessness of the publication and prior
information regarding its falsity.’” Wiggins v. Mallard, 905 So. 2d
776, 788 (Ala. 2004) (quoting Johnson Publ’g Co. v. Davis, 124 So.
2d 441, 450 (Ala. 1960)) (emphasis omitted).
The Bank is correct in asserting that the information it
privilege. 26 U.S.C. § 6050P requires a Form 1099-C to be issued
whenever a person discharges a debt, and this is what the Bank did.
The communication was therefore “prompted by a duty,” Hoover, 611
So. 2d at 293, so it is protected by a qualified privilege.
This is not an absolute privilege, however; it only protects
the Bank to the extent that the statement was made without actual
malice, which may be shown “by proof of ‘the recklessness of the
publication and prior information regarding its falsity.’” Wiggins,
905 So. 2d at 788 (quoting Davis, 124 So. 2d at 450). Consequently,
the court suggests that Raley has sufficiently pled actual malice;
the facts, as alleged, can lead to the plausible inference that the
Bank was at least reckless as to the falsity of the statement,
since it was repeatedly put on notice that the debt may not be
valid yet did not sufficiently investigate. Therefore, in what
turns out to be a matter of academic intent, Raley has sufficiently
alleged that the Bank acted with actual malice in defaming him, so
the defamation claim would not be dismissed if the case remained
5. Statutory Negligence
In addition to the claim for common law negligence, Raley adds
a claim for statutory negligence under Alabama law, more commonly
known as negligence per se.
To establish negligence per se, a plaintiff must prove:
(1) that the statute the defendant is charged with
violating was enacted to protect a class of persons to
which the plaintiff belonged; (2) that the plaintiff's
injury was the kind of injury contemplated by the
statute; (3) that the defendant violated the statute; and
(4) that the defendant's violation of the statute
proximately caused the plaintiff's injury.
Cook’s Pest Control, Inc. v. Rebat, 28 So. 3d 716 (Ala. 2009)
(quoting Dickinson v. Land Developers Constr. Co., 882 So. 2d 291,
3012 (Ala. 2003)).
Raley identifies three statutes that he claims the Bank to
have violated. The first is 26 U.S.C. § 6050P(a), which requires
any entity that discharges the indebtedness of another to issue a
essential elements of negligence per se. The statute only requires
that a Form 1099-C be issued when indebtedness is discharged; it
imposes no duty of care in doing so, so even an improper issuance
of the form does not violate the statute. Further, the statute is
discharged; the direct effect is to increase those individuals’ tax
liability. Any injury resulting from the filing of a false 1099-C
is not contemplated by this statute, as it imposes no duty of care
and no penalty for a false filing. Therefore, Raley has not alleged
any of the necessary elements for negligence per se under § 6050P.
establishing a basis for negligence per se. This statute prohibits
any person from submitting information to a credit reporting agency
concerning another person who has submitted an identity theft
report to the first person, unless the first person “subsequently
knows or is informed by the consumer that the information is
correct.” Once again, the Bank is not in violation of this statute.
Raley only alleges that the Bank submitted the information to the
IRS and the ADR, but under the definition contained in 16 U.S.C. §
1681a(f), these entities are not consumer reporting agencies, so
the Bank did not violate the statute. While the statute may have
been enacted to protect victims of identify theft, as Raley claims
to have been the Congressional intent, this idea, standing alone,
does not establish negligence per se.
Raley further contends that negligence per se is established
through the Bank’s violation of 26 U.S.C. § 7434, but, as decided
above, the Bank did not violate this statute because issuance of a
Form 1099-C is plainly outside the scope of the statute. Without
violation of the statute, Raley cannot establish negligence per se.
In his opposition to the Bank’s motion to dismiss, Raley
mentions other statutes and regulations as possible bases for
negligence per se. However, because these allegations do not appear
in Raley’s complaint, this court need not address them. See Ford v.
Strange, No. 2:13–CV–214–WKW, 2013 WL 6804191, *18 (M.D. Ala. Dec.
23, 2013). Raley’s claim of statutory negligence fails in its
entirety and is due to be dismissed.
D. Raley’s Belated Motion for Remand
Finally, Raley requests this court to remand the action to
state court because he has voluntarily abandoned his claim under 26
U.S.C. § 7434 (and, without his saying so, because this court has
statutes), so “a substantial Federal question is no longer at
issue.” (Doc. 21 at 2). At the time the action was removed, this
court possessed original jurisdiction over Raley’s federal claims
under 28 U.S.C. § 1331, as well as supplemental jurisdiction over
Raley’s related state-law claims under 28 U.S.C. § 1367(a); see
United Mine Workers v. Gibbs, 383 U.S. 715, 725 (1966). Raley now
contends that subsequent events have divested the court of § 1331
jurisdiction. “[T]he district court must look at the case at the
jurisdiction.” Pintando v. Miami-Dade Housing Agency, 501 F.3d
1241, 1243 n.2 (11th Cir. 2007). “[I]f a district court has subject
matter jurisdiction over a[n] . . . action at the time of removal,
subsequent acts do not divest the court of its jurisdiction over
the action.” Behlen v. Merrill Lynch, 311 F.3d 1087, 1095 (11th
Cir. 2002). Therefore, because Raley asserted a claim under the
FDCPA in his original complaint, and his related state-law claims
“form part of the same case or controversy,” 28 U.S.C. § 1367(a)
(2012), this court could retain subject-matter jurisdiction over
the entire action, even after Raley’s amendment and abandonment and
the dismissal of his statutory negligence claim.
28 U.S.C. § 1367(c)(3), however, provides the court with
discretion to decline to exercise its supplemental jurisdiction
eliminated. In exercising this discretion, district courts are
instructed to consider “the circumstances of the particular case,
the nature of the state law claims, the character of the governing
state law, and the relationship between the state and federal
claims,” as well as “‘the values of judicial economy, convenience,
Surgeons, 522 U.S. 156, 173 (1997) (quoting Carnegie-Mellon Univ.
v. Cohill, 484 U.S. 343, 350 (1988)). Albeit in the context of an
action originally filed in federal court instead of one being
removed to federal court, the Eleventh Circuit has “encouraged
district courts to dismiss [without prejudice] any remaining state
law claims when . . . the federal claims have been dismissed prior
to trial.” Raney v. Allstate Ins. Co., 370 F.3d 1086, 1089 (11th
After consideration of all relevant factors, the court finds
that remand of the action is appropriate. Only state-law torts
and under principles of comity, “[s]tate courts, not
federal courts, should be the final arbiters of state law,” Baggett
v. First Nat. Bank of Gainesville, 117 F.3d 1342, 1352 (11th Cir.
1997). This is particularly true in this case when Twombly and
implicated, inasmuch as the Circuit Court of Jefferson County sits
merely a few blocks from this court. Neither is fairness a concern,
since there is no indication whatsoever that Raley is guilty of
forum shopping. Therefore, in light of the Eleventh Circuit’s
encouragement, and because none of the listed factors meaningfully
support retention of jurisdiction by this court, Raley’s motion for
remand will be granted. This will, of course, render meaningless
this court’s musings on state law claims.
For the reasons stated above, Raley’s motion for leave to
amend will be granted, the Bank’s motion for judgment on the
pleadings will be denied as moot, the Bank’s motion to strike will
be denied, the Bank’s motion to dismiss will be granted in part and
carried with the case in part, and Raley’s motion for remand will
be granted. A separate appropriate order will be entered.
DONE this 25th day of November, 2014.
WILLIAM M. ACKER, JR.
UNITED STATES DISTRICT JUDGE
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