Fitzgerald v. PNC Bank et al

Filing 29

MEMORANDUM DECISION AND ORDER granting 10 Motion to Dismiss. Plaintiff has 30 days from the entry of this Order to file an amended complaint alleging facts establishing that the consumer reporting agency notified PNC that the account was in dispute , rather than just Fitzgerald himself. If Fitzgerald cannot allege such facts, his complaint will be dismissed with prejudice. Signed by Judge B. Lynn Winmill. (caused to be mailed to non Registered Participants at the addresses listed on the Notice of Electronic Filing (NEF) by cjm)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF IDAHO

DOUGLAS JOHN FITZGERALD,
Case No. 1:10-CV-452-BLW
Plaintiff,
MEMORANDUM DECISION AND
ORDER

v.
PNCBANK, PNC MORTGAGE, a
division of PNC BANK, NA, FIRST
AMERICAN TITLE INSURANCE
COMPANY, PIONEER TITLE
COMPANY, AND MERS INC.,
Defendants,

INTRODUCTION
Before the Court is Defendants PNC Bank and PNC Mortgage’s Motion to
Dismiss (Dkt. 10). Plaintiff Douglas John Fitzgerald alleges that Defendants PNC Bank
and PNC Mortgage (collectively, “PNC”) violated the Fair Debt Collection Practices Act,
15 U.S.C § 1692, et seq. and the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq. by
falsely representing that Fitzgerald owes a debt or obligation to Defendants. The Motion
is fully briefed, and the Court has concluded that this matter is appropriate for
determination without oral argument. For the reasons stated below, Defendants’ Motion is

MEMORANDUM DECISION AND ORDER - 1

granted.
BACKGROUND1
On July 26, 2006, Terry Caminiti executed a Deed of Trust on property located in
Kuna, Idaho to secure a $122,0000 loan. National City Bank was the lender and
beneficiary of the Deed of Trust. In December 2008, PNC acquired National City and,
presumably, National City’s interest in Caminiti’s Deed of Trust. In February 2010, PNC
sent Caminiti a Notice of Default notifying her that PNC intended to sell the property to
satisfy the debt because Caminiti had stopped making monthly payments. Notice of
Default, Dkt. 14-2 at 20.
On March 22, 2010, Terri L. Caminiti purported to deed all existing rights, title,
and interest in the Kuna property to Moscow Combined Investments. Assignment, Dkt.
14-2 at 22. According to the Assignment, Plaintiff Douglas John Fitzgerald is affiliated
with Moscow Combined Investments. As the supposed assignee of Ms Caminiti’s
interest in the Kuna property, Fitzgerald seeks “to stand in her shoes.”
Fitzgerald denies that he or Caminiti entered into any sort of loan agreement or
business relationship with PNC.2 Fitzgerald sent a letter disputing the debt on June 21,

1

The Background is based on the allegations contained in Plaintiff’s Complaint, exhibits
attached to the Complaint, and certain facts contained in documents of public record attached to
Plaintiff’s response brief, of which the Court takes judicial notice. See Lyon v. Gila River Indian
Community, 626 F.3d 1059, 1079 (9th Cir.2010) (“Courts may take judicial notice of facts whose
existence is capable of accurate and ready determination by resort to sources whose accuracy
cannot reasonably be questioned.”).
2

Fitzgerald denies having a relationship with any defendant, but only PNC and PNC
Mortgage moved to dismiss. Thus, this decision only pertains to those two entities.
MEMORANDUM DECISION AND ORDER - 2

2010, but PNC failed to “verify” or “validate” the debt. Instead, according to Fitzgerald,
PNC persisted in its “collection” efforts and continued to make false reports to the credit
agencies “alleging delinquent credit payments.” Compl. ¶¶ 6-10. Fitzgerald further
alleges that PNC never informed the major credit report agencies that the debt was in
dispute. Based on this conduct, Fitzgerald argues that PNC violated (1) the Fair Debt
Collections Practices Act by failing to “verify” or “validate” the alleged debt; and (2) the
Fair Credit Report Act by willfully failing to inform the major credit reporting agencies
that the debt is in dispute, even after receiving notice that Fitzgerald disputed the debt.
LEGAL STANDARD
Federal Rule of Civil Procedure 8(a)(2) requires only “a short and plain statement
of the claim showing that the pleader is entitled to relief,” in order to “give the defendant
fair notice of what the . . . claim is and the grounds upon which it rests.” Bell Atlantic
Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 1964 (2007). While a complaint
attacked by a Rule 12(b)(6) motion to dismiss “does not need detailed factual allegations,”
it must set forth “more than labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do.” Id. at 555. To survive a motion to dismiss, a
complaint must contain sufficient factual matter, accepted as true, to “state a claim to relief
that is plausible on its face.” Id. at 570. 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. Id. at 556. The plausibility standard is not
akin to a “probability requirement,” but it asks for more than a sheer possibility that a
MEMORANDUM DECISION AND ORDER - 3

defendant has acted unlawfully. Id. 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. at 557.
In a more recent case, the Supreme Court identified two “working principles” that
underlie Twombly. See Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009). First, the tenet that
a court must accept as true all of the allegations contained in a complaint is inapplicable to
legal conclusions. Id. “Rule 8 marks a notable and generous departure from the
hyper-technical, code-pleading regime of a prior era, but it does not unlock the doors of
discovery for a plaintiff armed with nothing more than conclusions.” Id. at 1950. Second,
only a complaint that states a plausible claim for relief survives a motion to dismiss. Id.
“Determining whether a complaint states a plausible claim for relief will . . . be a
context-specific task that requires the reviewing court to draw on its judicial experience
and common sense.” Id.
Providing too much in the complaint may also be fatal to a plaintiff. Dismissal may
be appropriate when the plaintiff has included sufficient allegations disclosing some
absolute defense or bar to recovery. See Weisbuch v. County of L.A., 119 F.3d 778, 783, n.
1 (9th Cir. 1997) (stating that “[i]f the pleadings establish facts compelling a decision one
way, that is as good as if depositions and other . . . evidence on summary judgment
establishes the identical facts”).
A dismissal without leave to amend is improper unless it is beyond doubt that the
complaint “could not be saved by any amendment.” Harris v. Amgen, Inc., 573 F.3d 728,
MEMORANDUM DECISION AND ORDER - 4

737 (9th Cir. 2009)(issued 2 months after Iqbal).3 The Ninth Circuit has held that “in
dismissals for failure to state a claim, a district court should grant leave to amend even if
no request to amend the pleading was made, unless it determines that the pleading could
not possibly be cured by the allegation of other facts.” Cook, Perkiss and Liehe, Inc. v.
Northern California Collection Service, Inc., 911 F.2d 242, 247 (9th Cir. 1990). The issue
is not whether plaintiff will prevail but whether he “is entitled to offer evidence to support
the claims.” Diaz v. Int’l Longshore and Warehouse Union, Local 13, 474 F.3d 1202,
1205 (9th Cir. 2007)(citations omitted).
Under Rule 12(b)(6), the Court may consider matters that are subject to judicial
notice. Mullis v. United States Bank, 828 F.2d 1385, 1388 (9th Cir. 1987). The Court may
take judicial notice “of the records of state agencies and other undisputed matters of public
record” without transforming the motions to dismiss into motions for summary judgment.
Disabled Rights Action Comm. v. Las Vegas Events, Inc., 375 F.3d 861, 866 (9th Cir.
2004). The Court may also examine documents referred to in the complaint, although not
attached thereto, without transforming the motion to dismiss into a motion for summary
judgment. See Knievel v. ESPN, 393 F.3d 1068, 1076 (9th Cir. 2005).

3

The Court has some concern about the continued vitality of the liberal amendment policy
adopted in Harris v. Amgen, based as it is on language in Conley v. Gibson, 355 U.S. 41, 45-46 (1957),
suggesting that “a complaint should not be dismissed for failure to state a claim unless it appears beyond
doubt that the plaintiff can prove no set of facts in support of his claim. . ..” Given Twombly and Iqbal’s
rejection of the liberal pleading standards adopted by Conley, a question arises whether the liberal
amendment policy of Harris v Amgen still exists. Nevertheless, the Circuit has continued to apply the
liberal amendment policy even after dismissing claims for violating Iqbal and Twombly. See Market
Trading, Inc. v. AT&T Mobility, LLC, 2010 WL 2836092 (9th Cir. July 20, 2010) (not for publication).
Accordingly, the Court will continue to employ the liberal amendment policy.
MEMORANDUM DECISION AND ORDER - 5

ANALYSIS
1.

Fair Debt Collection Practices Act
Congress enacted the Fair Debt Collection Practices Act (FDCPA) “to eliminate

abusive debt collection practices by debt collectors, to insure that those debt collectors
who refrain from using abusive debt collection practices are not competitively
disadvantaged, and to promote consistent State action to protect consumers against debt
collection abuses.” 15 U.S.C.A. § 1692. In furtherance of this goal, the FDCPA requires
and prohibits certain activities by “debt collectors” that are done “in connection with the
collection of any debt.” 15 U.S.C. § § 1692c (prohibits certain communications), 1692d
(prohibits harassment or abuse), 1692e (prohibits false or misleading representations),
1692f (prohibits unfair practices) & 1692g (requiring validation of debts). Also, under
the FDCPA, if a consumer notifies a debt collector in writing that a debt is disputed, the
collector must cease collection of that debt until the debt collector verifies the debt and
mails a copy of the verification to the consumer. Id. § 1692g(b).
PNC argues that Fitzgerald’s FDCPA claim must fail because PNC does not fit
the statutory definition of “debt collector.” The FDCPA defines a “debt collector” as a
person who uses an instrumentality of interstate commerce or the mails in a business
which has the principal purpose of collecting debts, or who regularly collects debts owed
to another. Id. § 1692a(6). The definition of debt collector does not include “any person
collecting or attempting to collect any debt owed or due or asserted to be owed or due
MEMORANDUM DECISION AND ORDER - 6

another to the extent such activity...(iii) concerns a debt which was not in default at the
time it was obtained by such person.” 15 U.S.C. § 1692(a)(6)(F)(iii).
The allegations in the Complaint establish that PNC acquired the note and deed of
trust in December 2008 – when it acquired National City Bank. But Fitzgerald did not
stop making payments on the note until July 2009, and PNC did not notify Caminiti that
her account was in arrears until February 2010 – more than a year after PNC acquired
National City Bank. Under these circumstances, PNC does not fall under the general
definition of a “debt collector” because the debt was not in default at the time PNC
acquired an interest in the note and deed of trust. 15 U.S.C. § 1692(a)(6)(F)(iii). This
finding is further bolstered by the legislative history of the FDCPA, which suggests that a
mortgagee and its assignee, including mortgage servicing companies, are not debt
collectors under the FDCPA when the debt is not in default at the time the
mortgage-holder acquires the debt. Perry v. Stewart Title Co., 756 F.2d 1197, 1208 (5th
Cir. 1985) (citing S.Rep. No. 95-382, 3-4 (1977)).
On the facts of this case and for the foregoing reasons, this Court finds that PNC is
exempt from the coverage of the FDCPA as it falls within the “debt not in default”
exception set forth at 15 U.S.C. § 1692a(6)(F)(iii). PNC is not, therefore, a “debt
collector” under the FDCPA.
2.

Federal Credit Reporting Act
Fitzgerald alleges that PNC violated the Fair Credit Report Act by willfully failing

to inform the major credit reporting agencies that the debt is in dispute, even after
MEMORANDUM DECISION AND ORDER - 7

receiving notice that Fitzgerald disputed the debt.
To ensure that credit reports are accurate, the FCRA imposes some duties on the
sources that provide credit information to consumer reporting agencies, called “furnishers”
in the statute. 15 U.S.C. § 1681s-2. Section 1681s-2 sets forth responsibilities of
furnishers of information to consumer reporting agencies.” Subsection (a) details the duty
“to provide accurate information,” and includes the following duty: “If the completeness
or accuracy of any information furnished by any person to any consumer reporting agency
is disputed to such person by a consumer, the person may not furnish the information to
any consumer reporting agency without notice that such information is disputed by the
consumer.” Id. § 1681s-2(a)(3). The statute, however, “expressly provides that a claim
for violation of this requirement can be pursued only by federal or state officials, and not
by a private party.” Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147, 1162 (9th Cir.
2009) (citing § 1681s-2(c)(1)). Fitzgerald therefore has no private right of action to
challenge PNC’s purported failure to inform the credit reporting agencies that he disputed
the debt. Id.
The second component of § 1681s-2, found in subsection (b), does create a private
cause of action by a consumer against a furnisher of credit information. Nelson v. Chase
Manhattan Mortgage Corp., 282 F.3d 1057, 1059-60 (9th Cir. 2002). It requires that a
furnisher,“[a]fter receiving notice pursuant to section 1681i(a)(2) of this title of a dispute,”
id.§ 1681s-2(b)(1) (emphasis added), “conduct an investigation with respect to the
disputed information,” id. § 1681s-2(b)(1)(A), and “report the results of the investigation
MEMORANDUM DECISION AND ORDER - 8

to the consumer reporting agency, id. § 1681s-2(b)(1)(C). Section 1681i(a)(2) requires a
consumer reporting agency to provide a furnisher of credit information with prompt notice
of a dispute from any consumer. Therefore, the duty of a furnisher of credit information to
investigate a credit dispute is triggered only after the furnisher receives notice of the
dispute from a consumer reporting agency, not just the consumer. See, e.g., Gorman, 584
F.3d at 1154.
In this case, Fitzgerald has failed to allege any facts to suggest that a consumer
reporting agency notified PNC that Fitzgerald was disputing the account. In fact,
Fitzgerald alleges that PNC “never informed the Major Credit Reporting agencies that the
alleged account is in dispute.” This allegation compels the Court to conclude that PNC did
not receive notice of a dispute from any consumer reporting agency. And therefore,
PNC’s obligation to conduct an investigation of the disputed information was never
triggered. Unless Fitzgerald can allege that a consumer reporting agency reported the
dispute to PNC, the FCRA does not apply to Fitzgerald claims, and Counts 2 and 3 must
be dismissed.

ORDER
IT IS ORDERED that Defendants PNC Bank and PNC Mortgage’s Motion to
Dismiss (Dkt. 10) is GRANTED. Fitzgerald has 30 days from the entry of this order to
file an amended complaint alleging facts establishing that the consumer reporting agency
notified PNC that the account was in dispute, rather than just Fitzgerald himself. If
MEMORANDUM DECISION AND ORDER - 9

Fitzgerald cannot allege such facts, his complaint will be dismissed with prejudice.
DATED: April 21, 2011

B. LYNN WINMILL
Chief Judge U.S. District Court

MEMORANDUM DECISION AND ORDER - 10