Skidmore v. Access Group Inc. et al
Filing
63
OPINION and ORDER (1) Granting In Part and Denying In Part Defendant Access Group, Inc.'s 30 Motion to Dismiss or in the Alternative, for Summary Judgment; (2) Denying as Moot Defendant Access Group, Inc.'s 41 Motion to Stay Discovery; and (3) Denying Defendant Access Group, Inc.'s 46 Motion for Rule 11 Sanctions. Signed by District Judge Linda V. Parker. (RLou)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
DANIEL SKIDMORE,
Plaintiff,
v.
Civil Case No. 14-13031
Honorable Linda V. Parker
ACCESS GROUP, INC.,
EXPERIAN, KENTUCKY
HIGHER EDUCATION
STUDENT LOAN CORP., and
MRS BPO, LLC,
Defendants.
__________________________/
OPINION AND ORDER (1) GRANTING IN PART AND DENYING IN
PART DEFENDANT ACCESS GROUP, INC.’S MOTION TO DISMISS OR,
IN THE ALTERNATIVE, FOR SUMMARY JUDGMENT; (2) DENYING
AS MOOT DEFENDANT ACCESS GROUP, INC.’S MOTION TO STAY
DISCOVERY; AND (3) DENYING DEFENDANT ACCESS GROUP, INC.’S
MOTION FOR RULE 11 SANCTIONS
In this action, filed August 4, 2014, Plaintiff Daniel Skidmore (“Plaintiff”)
claims that Defendants violated state and federal law by failing to properly process
payments made toward his student loans and then by reporting the loans as unpaid
to credit reporting agencies. Specifically, in a First Amended Complaint filed
March 11, 2015, Plaintiff alleges the following claims: (1) violations of the federal
Fair Credit Reporting Act (“FCRA”) by Defendant Experian; (2) violations of the
FCRA by Defendant Access Group, Inc. (“AGI”); (3) breach of contract by AGI;
(4) negligence by AGI and Defendant Kentucky Higher Education Student Loan
Corp. (“KHESLC”); (5) defamation by AGI and Experian; (6) invasion of privacy
by AGI and Experian; (7) “injunction” against KHESLC; and, (8) violation of the
Fair Debt Collections Practices Act by Defendant MRS BPO, LLC. Presently
before the Court are the following motions filed by AGI:
(1)
a motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6) or, alternatively, for summary judgment pursuant to
Federal Rule of Civil Procedure 56 (ECF No. 30);
(2)
a motion to stay discovery pending resolution of the above
motion (41); and,
(3)
a motion for sanctions pursuant to Rule 11 of the Federal Rules
of Civil Procedure. (ECF No. 46.)
The motions have been fully briefed. Finding the facts and legal arguments
sufficiently presented in the parties’ pleadings, the Court is dispensing with oral
argument pursuant to Eastern District of Michigan Local Rule 7.1(f). For the
reasons that follow, the Court is granting in part and denying in part AGI’s motion
to dismiss or, alternatively, for summary judgment. The Court therefore is denying
as moot AGI’s motion to stay discovery and denying AGI’s motion for sanctions.
I.
Standards Applicable to AGI’s Motion to Dismiss or, Alternatively, for
Summary Judgment
A motion to dismiss pursuant to Rule 12(b)(6) tests the legal sufficiency of
the complaint. RMI Titanium Co. v. Westinghouse Elec. Corp., 78 F.3d 1125, 1134
(6th Cir. 1996). Under Federal Rule of Civil Procedure 8(a)(2), a pleading must
2
contain a “short and plain statement of the claim showing that the pleader is
entitled to relief.” To survive a motion to dismiss, a complaint need not contain
“detailed factual allegations,” but it must contain more than “labels and
conclusions” or “a formulaic recitation of the elements of a cause of action . . .”
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). A complaint does not
“suffice if it tenders ‘naked assertions’ devoid of ‘further factual enhancement.’ ”
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 557).
As the Supreme Court provided in Iqbal and Twombly, “[t]o 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. (quoting Twombly,
550 U.S. 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. (citing Twombly, 550 U.S. at 556). The
plausibility standard “does not impose a probability requirement at the pleading
stage; it simply calls for enough facts to raise a reasonable expectation that
discovery will reveal evidence of illegal [conduct].” Twombly, 550 U.S. at 556.
In deciding whether the plaintiff has set forth a “plausible” claim, the court
must accept the factual allegations in the complaint as true. Erickson v. Pardus,
551 U.S. 89, 94 (2007). This presumption, however, is not applicable to legal
conclusions. Iqbal, 556 U.S. at 668. Therefore, “[t]hreadbare recitals of the
3
elements of a cause of action, supported by mere conclusory statements, do not
suffice.” Id. (citing Twombly, 550 U.S. at 555).
Summary judgment pursuant to Rule 56 is appropriate “if the movant shows
that there is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Fed R. Civ. P. 56(a). The central inquiry is
“whether the evidence presents a sufficient disagreement to require submission to a
jury or whether it is so one-sided that one party must prevail as a matter of law.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986). After adequate time
for discovery and upon motion, Rule 56 mandates summary judgment against a
party who fails to establish the existence of an element essential to that party’s case
and on which that party bears the burden of proof at trial. Celotex Corp. v. Catrett,
477 U.S. 317, 322 (1986).
The movant has the initial burden of showing “the absence of a genuine
issue of material fact.” Id. at 323. Once the movant meets this burden, the
“nonmoving party must come forward with specific facts showing that there is a
genuine issue for trial.” Matsushita Electric Indus. Co. v. Zenith Radio Corp., 475
U.S. 574, 587 (1986) (internal quotation marks and citation omitted). To
demonstrate a genuine issue, the nonmoving party must present sufficient evidence
upon which a jury could reasonably find for that party; a “scintilla of evidence” is
insufficient. See Liberty Lobby, 477 U.S. at 252.
4
A party may move for summary judgment at any time. See Chilingirian v.
Boris, 882 F.2d 200, 203 (6th Cir. 1989) (holding that summary judgment was not
premature even though discovery had not been conducted where “there is no
evidence that discovery would have disclosed disputed material facts in support of
[the plaintiff’s] claim.”). However, if the party opposing a summary judgment
motion believes that discovery is needed to develop the issues raised in the motion
and files an affidavit in compliance with Federal Rule of Civil Procedure 56(d),
“the court may (1) defer considering the motion or deny it; (2) allow time to obtain
affidavits or declarations or to take discovery; or (3) issue any other appropriate
order.” Fed. R. Civ. P. 56(d).
II.
Factual Background
Between August 15, 2003 and April 9, 2004, Plaintiff signed four student
loan agreements with AGI. (Am. Compl. ¶ 8; see also ECF No. 30, Ex. 2.)1 In
approximately September 2006, Plaintiff began repaying the loans as he had
graduated from his educational program. (Id. ¶ 15.) Plaintiff set up automatic
payments from his bank to make the payments to AGI. (Id. ¶ 16.)
Although not attached to Plaintiff’s First Amended Complaint, the Court may
consider the terms of the loan agreements submitted by AGI-- even when deciding
AGI’s motion to dismiss-- as those contracts are referenced in the complaint and
are central to Plaintiff’s claims. See Weiner v. Klais & Co., 108 F.3d 86, 89 (6th
Cir. 1997) (citations omitted)
1
5
At some point in 2006, AGI designated KHESLC as the servicer of
Plaintiff’s student loan payments and AGI instructed Plaintiff to submit his
payments to KHESLC. (Id. ¶¶ 18, 19.) From that point forward, Plaintiff timely
made his student loan payments to KHESLC and communicated with KHESLC
with respect to his account. (Id. ¶¶ 22-24.) In 2010 or 2011, however, AGI
changed the servicer on Plaintiff’s account.2 (Id. ¶ 25.)
Plaintiff nevertheless continued to send his student loan payments to
KHESLC. (Id. ¶ 24.) He claims that KHESLC repeatedly represented to him, in
2011 and 2012, that it would act as AGI’s agent and forward his payments to AGI.
(Id. ¶ 30.) Plaintiff claims that KHESLC directly represented to him, through its
customer service representatives and in a recording on its phone system, that
KHESLC would continue forwarding the payments it received on AGI accounts to
AGI and that it would continue corresponding with the debtors of those accounts.
(Id. ¶¶ 32-34.) However, beginning with Plaintiff’s February 15, 2012 loan
payment, KHESLC has rejected and returned Plaintiff’s payments to his bank. (Id.
38.) Plaintiff nevertheless continued to make payments to KHESLC. He claims
that he repeatedly contacted KHESLC and AGI over the course of several months,
Although not alleged in his First Amended Complaint, Plaintiff states in an
affidavit submitted in response to AGI’s motion that AGI did not inform him of the
servicer change and that he “do[es] not recall receiving notice in 2009 that
KHESLC was going to cease operating as AGI’s servicer.” (ECF No. 35 ¶¶ 8, 19.)
2
6
but was never given a clear answer as to why his payments were rejected. (Id.
¶ 41.)
Plaintiff alleges that he has received calls from collection agents with respect
to the outstanding balance on his student loan accounts and that the purported
delinquency has been reported to credit reporting agencies (“CRAs”), like
Experian and TransUnion. (Id. ¶¶ 42-52.) On or about October 7, 2012, Plaintiff
formally disputed the delinquency with the CRAs. (Id. ¶ 56.) He alleges that
Experian provided notice of his dispute to AGI. (Id. ¶ 59.)
When AGI claimed that it never received notification of a credit dispute on
Plaintiff’s account from a CRA, Plaintiff re-disputed the AGI accounts with all
three major CRAs in February 2015. (Id. ¶¶ 82-85.) He claims that “AGI has thus
been notified of the credit dispute five times (once by Equifax, twice by Experian,
and twice by TransUnion). (Id. ¶ 86.)
Plaintiff claims that Experian and AGI never investigated his dispute. (Id.
¶¶ 60-68.) The negative delinquency reporting remained on Plaintiff’s credit
report, causing his credit score to fall. (Id. ¶¶ 72-73.) According to Plaintiff, this
has caused him damage, including the inability to obtain financing to purchase a
home and emotional distress. (Id. ¶¶ 76-79.)
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III.
Applicable Law and Analysis of Plaintiff’s Claims
A.
FCRA
In its pending motion to dismiss or for summary judgment, AGI first argues
that Plaintiff’s FCRA claim fails because AGI never received notice of a dispute
from a CRA. AGI contends that Plaintiff alleges only that it was “aware[]” of his
dispute, not that AGI received “notice.” (ECF No. 30 at Pg ID 276, citing Am.
Compl. ¶¶ 87, 123, 183.) To support its claim that it never received notice of the
dispute, AGI offers the affidavit of the records custodian from Xerox Education
Services, LLC, d/b/a ACS (“ASC”)-- the entity AGI assigned to service Plaintiff’s
loans beginning in March 2012-- who states that “[i]n September 2012, ACS
received notice of a dispute from a CRA regarding the Student Loans.” (ECF No.
30-2 ¶¶ 1, 5.) In its reply brief, AGI further argues that once it assigns loans to a
servicer, the servicer, not AGI, reports borrower status updates to the CRAs and
receives and investigates notices from a CRA of any dispute made by a borrower.
(ECF No. 44 at Pg ID 463-64.) AGI submits an affidavit from Melissa N. Scott, its
Director of Loan Servicing Oversight, in support of these factual assertions. (See
ECF No. 44-1.)
AGI ignores the paragraphs in Plaintiff’s First Amended Complaint where
he expressly alleges that Experian provided “notice” of his credit dispute to AGI.
(See Am. Compl. ¶¶ 59, 86.) This allegation must be presumed true to the extent
AGI seeks dismissal of Plaintiff’s FCRA claim under Rule 12(b)(6). As such, AGI
fails to demonstrate that it is entitled to dismissal of Plaintiff’s FCRA claim under
this rule.
The Court declines to consider AGI’s request for dismissal of the claim
under Rule 56, as Plaintiff provides an affidavit in response to AGI’s motion
indicating that discovery is needed for him to address such issues as whether AGI
received notice of his credit dispute. (ECF No. 35 ¶ 17.) Without discovery, it
seems that Plaintiff has no way of determining whether or not the CRAs notified
AGI of his dispute, in addition to ACS.3 The Court therefore is denying summary
judgment to AGI on Plaintiff’s FCRA claim, at this stage of the proceedings.
In its reply brief in support of its motion to dismiss or for summary judgment,
AGI contends that it did not furnish credit information about Plaintiff’s student
loan accounts to the CRAs, only ACS did. (See ECF No. 44 at Pg ID 462-64.)
Whether AGI furnished the credit information to the CRAs and, if not, whether
AGI had any duty to correct the information, are issues not previously raised by
AGI. Therefore, the Court declines to consider these issues for purposes of
deciding AGI’s present motion. United States v. Jerkins, 871 F.2d 598, 602 n.3
(6th Cir. 1989) (“Court decisions have made it clear that the [movant] cannot raise
new issues in a reply brief; he can only respond to arguments raised for the first
time in [the non-movant’s] brief.”) (internal quotation marks and citation omitted).
Moreover, Plaintiff alleges in his First Amended Complaint that AGI furnished the
information to the CRAs. (See, e.g., Am. Compl. ¶ 48.) The Court would have to
look beyond the four corners of Plaintiff’s pleading to determine which entity
furnished the alleged misinformation to the CRAs. Having received Plaintiff’s
Rule 56(d) affidavit, the Court declines to do so at this time.
3
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In short, the Court is denying AGI’s motion to dismiss Plaintiff’s FCRA
claim and finds it premature to decide whether AGI is entitled to summary
judgment with respect to the claim.
B.
Preemption
AGI argues that Plaintiff’s state law claims are preempted by the FCRA.
The FCRA contains two preemption provisions which have garnered much
discussion by courts struggling to reconcile what they view to be overlapping and
potentially contradictory provisions. First, the Court offers a little background
with respect to the FCRA.
The FCRA was enacted “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) (internal citations omitted). To this
end, the FCRA imposes duties on CRAs and furnishers of information to CRAs.
With respect to the latter, the statute imposes two sets of duties: one under 15
U.S.C. § 1681s-2(a) and one under 15 U.S.C. § 1681s-2(b).
The first “prohibits any person from furnishing information to a CRA that
the person knows is inaccurate,” and provides that “any person who ‘regularly and
in the ordinary course of business furnishes information to one or more [CRAs]’
must correct and update the information provided so that it is ‘complete and
accurate.’ ” Saunders v. Branch Banking and Trust Co. of Va., 526 F.3d 142, 148
10
(4th Cir. 2008) (quoting 15 U.S.C. § 1681s-2(a)). There is no private right of
action if a furnisher fails to comply with these requirements. 15 U.S.C. § 1681s2(d). Enforcement of subsection (a) falls in the hands of state and federal agencies
under §§ 1681s and 1681s-2(d). See Purcell v. Bank of Am., 659 F.3d 622, 623
(7th Cir. 2011)
The second set of duties is triggered only once a furnisher of information
receives notice from a CRA of a consumer’s dispute with respect to the
information the furnisher has provided. 15 U.S.C. § 1681s-2(b). When such
notice has been given, the furnisher must (1) conduct an investigation, (2) review
any information provided by the CRA, (3) report the results of the investigation to
the CRA, (4) report any inaccuracies to all CRAs which may have received the
inaccurate information, and (5) correct any inaccuracies in the information
provided. Id. Again, these obligations arise only once a furnisher receives
notification from a CRA of a dispute; they are not triggered by the consumer
contacting the furnisher directly. See 15 U.S.C. §§ 1681i(a)(2), 1681s-2(b)(1);
Downs v. Clayton Homes, Inc., 88 F. App’x 851, 853 (6th Cir. 2004). If the
furnisher fails to comply with the requirements of subsection (b), a consumer can
maintain a private cause of action. 15 U.S.C. § 1681s-2(c)(2).
The FCRA contains two provisions which address the relationship between
the statute and any state law claims the consumer might also assert in a private
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cause of action: 15 U.S.C. §§ 1681h(e) and 1681t(B)(1)(F). Section 1681h(e)
reads:
Except as provided in sections 1681n and 1681o of this title, no
consumer may bring any action or proceeding in the nature of
defamation, invasion of privacy, or negligence with respect to the
reporting of information against any consumer reporting agency, any
user of information, or any person who furnishes information to a
consumer reporting agency, based on information disclosed pursuant
to section 1681g, 1681h, or 1681m of this title, or based on
information disclosed by a user of a consumer report to or for a
consumer against whom the user has taken adverse action, based in
whole or in part on the report except as to false information furnished
with malice or willful intent to injure such consumer.
15 U.S.C. § 1681h(e) (footnote omitted). This provision was included when the
FCRA was enacted in 1970. Id.; see also Purcell, 659 F.3d at 625. The second
preemption provision, added in 1996 when Congress also added § 1681s-2, reads:
No requirement or prohibition may be imposed under the laws of any
State with respect to any subject matter regulated under section 1681s2 of this title, relating to the responsibilities of persons who furnish
information to consumer reporting agencies, except that this
paragraph shall not apply (i) with respect to section 54A(a) of chapter
93 of the Massachusetts Annotated Laws (as in effect on September
30, 1996); or (ii) with respect to section 1785.25(a) of the California
Civil Code (as in effect on September 30, 1996).
15 U.S.C. § 1681t(b)(1)(F).
Many district courts have seen a conflict in these two preemption provisions
and, lacking any circuit court authority on how to reconcile the apparent conflict,
have developed four distinct approaches to do so. See Wolfe v. MBNA Am. Bank,
485 F. Supp. 2d 874, 883-86 (W.D. Tenn. 2007) (summarizing the four
12
approaches) Himmelstein v. Comcast of the District, LLC, 931 F. Supp. 2d 48, 5759 (D.D.C. 2013) (recognizing three approaches). Three of the approaches are
commonly referred to as (1) the “temporal approach,” (2) the “statutory approach”,
and (3) the “total approach.” Id. A fourth approach-- which does not appear to
have garnered a title-- was adopted by a magistrate judge in the District Court for
the Middle District of Tennessee in Westbrooks v. Fifth Third Bank, No. 3:050664, 2005 WL 3240614 (Nov. 30, 2005).
In a nutshell, the “temporal approach” views § 1681t(b)(1)(F) as preempting
only state claims related to conduct by the furnisher after it receives notice of a
dispute; and § 1681h(e) as applying only to claims arising from the conduct of the
furnisher before that notice. See, e.g., Wolfe, 485 F. Supp. 2d at 884 (citing
Stafford v. Cross Country Bank, 262 F. Supp. 2d 776, 787 (W.D. Ky. 2003)).
Under the “statutory approach,” § 1681t(b)(1)(F) bars all state law claims based on
statutory schemes, only, while § 1681h(e) is viewed as applying to common law
claims. Id. (citing McCloud v. Homeside Lending, 309 F. Supp. 2d 1335, 1341
(N.D. Ala. 2004)). The “total approach” views the 1996 amendments as repealing
§ 1681h(e) and thus concludes that § 1681t(b)(1)(F) “preempt[s] all state causes of
action relating to the furnishing of credit information.” Id. at 883 (emphasis in
original) (citing Jaramillo v. Experian Info. Solutions, Inc., 155 F. Supp. 2d 356,
361-62 (E.D. Pa. 2001)). Under the approach adopted by the magistrate judge in
13
Westbrooks, “[a]ll state law claims that do not allege willfulness are preempted by
§ 1681h(e), and any surviving claims alleging willfulness are preempted under §
1681t(b)(1)(F) if they involve a subject-matter regulated under § 1681s-2.” 2005
WL 3240614, at *6 (emphasis added).
Since the adoption of these four approaches, however, two circuit courts
have addressed the FCRA’s preemption provisions and concluded that no approach
is needed to reconcile the provisions because they do not in conflict. Purcell v.
Bank of Am., 659 F.3d at 625; see also Macpherson v. JPMorgan Chase Bank,
N.A., 665 F.3d 45, 47-48 (2d. Cir. 2011) (agreeing with the Seventh Circuit’s
decision in Purcell). As the Seventh Circuit explained in Purcell:
Unlike these judges [who have adopted the approaches described
above], we do not perceive any inconsistency between the two
statutes. Section 1681h(e) preempts some state claims that could arise
out of reports to credit agencies; § 1681t(b)(1)(F) preempts more of
these claims. Section 1681h(e) does not create a right to recover for
willfully false reports; it just says that a particular paragraph does not
preempt claims of that stripe. Section 1681h(e) was enacted in 1970.
Twenty-six years later, in 1996, Congress added § 1681t(b)(1)(F) to
the United States Code. The same legislation also added § 1681s-2.
The extra federal remedy in § 1681s-2 was accompanied by extra
preemption in § 1681t(b)(1)(F), in order to implement the new plan
under which reporting to credit agencies would be supervised by state
and federal administrative agencies rather than judges. Reading the
earlier statute, § 1681h(e), to defeat the later enacted system in
§ 1681s-2 and § 1681t(b)(1)(F), would contradict fundamental norms
of statutory interpretation.
Id. at 625. The Seventh Circuit therefore held that the plaintiff’s state law claims
for defamation, invasion of privacy, and negligence in reporting information to
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CRAs-- which related to the furnisher’s obligations under § 1681s-2-- were
preempted regardless of whether willfulness or malice is alleged. Id . at 626. In
Macpherson, the Second Circuit agreed with the Purcell court’s reasoning and
likewise concluded that the FCRA preempted the plaintiff’s defamation and
intentional infliction of emotional distress claims related to the furnishing of false
information to a CRA. 665 F.3d at 46, 48. A number of district courts have found
the reasoning set forth in Purcell and Macpherson persuasive. See, e.g.,
Himmelstein, 931 F. Supp. 2d at 60; Morgan v. HSBC Mortg. Servs., Inc., 930 F.
Supp. 2d 833, 839 (E.D. Ky. 2013); Williams v. Student Loan Guarantee Found. of
Ark., No. 5:12-cv-02940, 2015 WL 241428, at *13 (N.D. Ala. Jan. 20, 2015);
Schneider v. Regions Bank, No. 12-cv-0574, 2012 WL 3646270, at *4 (S.D. Ill.
Aug. 23, 2012); Subhani v. JPMorgan Chase Bank, No. C 12-01857, 2012 WL
1980416, at *6 (N.D. Cal. June 1, 2012).
This Court finds the reasoning in Purcell and Macpherson persuasive, as
well. Therefore, the Court must ask whether Plaintiff’s state law claims are
premised on conduct that § 1681s-2 regulates. To the extent that any claim is
premised on such conduct, it is preempted by the FCRA pursuant to
§ 1681t(b)(1)(F). But even if Plaintiff’s negligence, defamation, or invasion of
privacy claims are not premised on conduct regulated by § 1681s-2, they are
15
preempted under § 1681h(e) to the extent Plaintiff fails to allege that false
information was furnished with malice or willful intent to injure him.
Plaintiff’s breach of contract claim is premised on AGI’s refusal of his
“properly made payments.” (Am. Compl. ¶ 149.) Plaintiff alleges:
Insofar as AGI did not properly handle the application of payments
appropriately submitted to it, it did breach an express or implied term
of the [p]arties’ agreement that it would accept payments submitted by
Plaintiff under the original instructions provided by Defendant AGI.
(Id. ¶ 153.) This claim, therefore, is not preempted under the FCRA.
Plaintiff’s negligence claim is similarly premised on AGI’s handling of his
loan payments, rather than the reporting of information to any CRA. (See Am.
Compl. ¶¶ 163-176.) Plaintiff in fact precisely states in this claim that “this cause
of action is completely independent of and not related in any way to whether or
how AGI acted with relation to investigation or handling of credit disputes.” (Id.
at ¶ 170.) As such, the claim also is not preempted by the FCRA.4
Plaintiff’s defamation and invasion of privacy claims, in comparison, are
premised on AGI’s alleged reporting of information to CRAs. For example, in his
defamation claim, Plaintiff alleges that AGI and Experian “published
The plain language of the FCRA’s earlier preemption provision, § 1681h(e), only
applies to “action[s] or proceeding[s] in the nature of defamation, invasion of
privacy, or negligence with respect to reporting of information against . . . any
person who furnishes information to a consumer reporting agency . . .. 15 U.S.C.
§ 1681h(e) (emphasis added).
4
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statements . . . to various creditors, prospective credit grantors, other credit
reporting agencies, and other entities that the above-referenced derogatory
inaccurate information belongs to the Plaintiff.” (Am. Compl. ¶ 178.) In his
invasion of privacy claim, Plaintiff alleges that “[b]y such unauthorized invasion,
publication and circulation of Plaintiff’s name and the inaccurate information,
[AGI and Experian] invaded Plaintiff’s right to privacy . . ..” (Am. Compl. ¶ 194.)
Plaintiff alleges that AGI and Experian “acted with malice or willful intent to
injure [him].” (Am. Compl. ¶¶ 185, 193.) Nevertheless, because the claims relate
to a subject matter regulated under § 1681s-2, they are preempted by
§ 1681t(b)(1)(F).
In short, the Court concludes that Plaintiff’s defamation and invasion of
privacy claims (Counts 5 and 6), only, are preempted by the FCRA. Those claims
therefore are being dismissed pursuant to Rule 12(b)(6).
D.
Breach of Contract
Although the Court finds that Plaintiff’s breach of contract claim is not
preempted by the FCRA, AGI also argues that the claim must be dismissed
because Plaintiff fails to state a claim on which relief may be granted.
Specifically, AGI argues that Plaintiff alleges breach of implied duties and
Michigan law does not recognize an independent cause of action arising from the
breach of an implied duty. (ECF No. 30 at Pg ID 279-80, citing Vitti-Carlesimo v.
17
Bank of Am., N.A., No. 12-14902, 2013 WL 3837169 (E.D. Mich. July 25, 2013).)
AGI also argues that Plaintiff’s claim fails because he was the first party to breach
the loan agreements by not paying AGI’s new servicer, ACS, “as directed by
AGI.” (Id. at Pg ID 281, citing Ex. 2.)
As an initial matter, although AGI relies on Michigan law in support of its
first argument, the loan agreements (as Plaintiff points out) contain choice of law
provisions stating that the agreements are governed by the laws of Ohio.5 (See
ECF No. 30-3 ¶ M.3.) In any event, as Plaintiff also points out, in arguing for the
dismissal of Plaintiff’s negligence claim, AGI concedes that “[its] paymenthandling” is “a duty well within the scope of the contracts between AGI and
Plaintiff regarding the Student Loan Debts.” (See ECF No. 30 at Pg ID 282.) AGI
does not address this inconsistency in its reply brief, focusing instead on a new
argument: that Plaintiff’s claim is premised on a letter from KHESLC which is not
part of his contract with AGI. (ECF No. 44 at Pg ID 467.)
Plaintiff alleges in his Amended Complaint that AGI breached an “express”
term of the parties’ agreements concerning the handling of his payments. (See,
This does not mean that Ohio law necessarily controls. To determine whether a
contractual choice of law provision should be enforced, a federal court with
diversity jurisdiction applies the forum state’s conflict of law rules. Johnson v.
Ventra Grp., Inc., 191 F.3d 732, 738 (6th Cir. 1999) (citing Klaxon Co. v. Stentor
Elec. Mfg. Co., 313 U.S. 487 (1941)). For the reasons discussed, the Court finds it
unnecessary to engage in this analysis to decide AGI’s motion.
5
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e.g., Am. Compl. ¶¶ 148, 153.) In light of AGI’s statement in its pleadings that
“payment-handling” is a duty within the scope of the agreement, the Court sees no
reason to review the terms of the loan agreements to assess that statement,
although it can for purposes of deciding AGI’s motion to dismiss. See supra at
n.2. In any event, even if the Court were inclined to analyze the terms of the
parties’ agreement, it is not convinced that it has all of the terms before it. Plaintiff
indicates in his Amended Complaint that while he possesses many documents
related to the parties’ contract, he is unsure whether he possesses all terms. (Am.
Compl. ¶ 146.) AGI asserts in its reply brief that “Plaintiff’s contract with AGI is
entirely contained within the loan documents attached as Exhibit 2 to [its] motion.”
(ECF No. 44 at Pg ID 466.) However, at this stage of the proceedings, before any
discovery has been conducted, neither Plaintiff nor this Court is bound to accept
this assertion.
Turning to AGI’s second argument-- that Plaintiff was the first to breach the
parties’ agreement-- Plaintiff does not admit in paragraph twenty-six of his
Amended Complaint (as AGI asserts) that he failed to make payments as AGI
directed. Instead, in that paragraph, Plaintiff asserts only that AGI changed the
primary servicer on his account in 2010 or 2011. (Am. Compl. ¶ 25.) Nowhere in
Plaintiff’s pleading does he admit to receiving notice of this change and at this
stage, there is no evidence from which the Court could conclude that such notice
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was properly sent to Plaintiff. Moreover, AGI does not identify, and this Court did
not find, a term within the provided loan documents addressing how payments
were to be made by Plaintiff. Thus the Court cannot conclude that Plaintiff was
the first to breach any actual term of those agreements.
In short, the Court cannot conclude that Plaintiff fails to state a breach of
contract claim on which relief may be granted. Plaintiff indicates in his response
brief that, if the Court reaches such a conclusion, his negligence claim (Count 4)
should be dismissed. (ECF No. 34 at Pg ID 345.) As such, the Court is dismissing
his negligence claim as to AGI, only.
IV.
Conclusion
In summary, the Court concludes that Plaintiff alleges sufficient facts in his
Amended Complaint to survive AGI’s motion to dismiss his FCRA claim under
Rule 12(b)(6). In light of Plaintiff’s Rule 56(d) affidavit, the Court denies without
prejudice AGI’s motion for summary judgment with respect to this claim. The
Court holds that Plaintiff’s state law defamation and invasion of privacy claims
(Counts 5 and 6), only, are preempted by the FCRA. Plaintiff alleges sufficient
facts to state a viable breach of contract claim. He has conceded to the dismissal of
his negligence claim (Count 4) as to AGI, only.
AGI seeks Rule 11 sanctions against Plaintiff for filing claims against it that
“lack any reasonable basis in law or fact.” (ECF No. 46 at Pg ID 505.) Based on
20
the conclusions set forth above, the Court holds that Rule 11 sanctions are not
warranted.6
Accordingly,
IT IS ORDERED that AGI’s Motion to Dismiss Pursuant to Federal Rule
of Civil Procedure 12(b)(6) or, in the Alternative, for Summary Judgment Pursuant
to Federal Rule of Civil Procedure 56 (ECF No. 30) is GRANTED IN PART
AND DENIED IN PART in that only Plaintiff’s defamation and invasion of
privacy claims (Counts 5 and 6) are DISMISSED WITH PREJUDICE and
Plaintiff’s negligence claim (Count 4) is DISMISSED AS TO AGI;
IT IS FURTHER ORDERED that AGI’s Motion to Stay Discovery
Pending Resolution of AGI’s Motion to Dismiss (ECF No. 41) is DENIED AS
MOOT;
AGI’s assertion that Plaintiff’s claims are frivolous is based on its belief that this
case is about an individual who, despite being told that a new servicer had been
assigned to his loans, insisted on continuing to send his payments to the old
servicer and then complained when his payments were not properly processed. If
AGI’s version of the facts proves to be accurate, the Court’s view of Plaintiff’s
lawsuit might change. Plaintiff, however, asserts that AGI never informed him that
it changed the servicer of his loans from KHESLC to ACS and that when he
contacted KHESLC, he was repeatedly assured that it would process his payments.
(See ECF No. 35 ¶¶ 5-9.) There is no evidence before the Court at this time to
contradict Plaintiff’s assertions.
6
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IT IS FURTHER ORDERED that AGI’s Motion for Sanctions Pursuant to
Federal Rule of Civil Procedure 11 (ECF No. 46) is DENIED.
s/ Linda V. Parker
LINDA V. PARKER
U.S. DISTRICT JUDGE
Dated: November 4, 2015
I hereby certify that a copy of the foregoing document was mailed to counsel of
record and/or pro se parties on this date, November 4, 2015, by electronic and/or
U.S. First Class mail.
s/ Richard Loury
Case Manager
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