Fritz v. Duke Energy Carolinas, LLC et al
Filing
21
ORDER granting 12 Motion to Dismiss for Failure to State a Claim. Signed by Chief Judge James C. Dever III on 7/24/2014. (Edwards, S.)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
WESTERN DIVISION
No. 5:13-CV-724-D
ROBERT FRITZ,
Plaintiff,
v.
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)
)
)
)
DUKE ENERGY CAROLINAS, LLC,
and HELVEY & ASSOCIATES INC.,
Defendants.
ORDER
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)
)
)
On September 12, 2013, Robert Fritz ("Fritz" or "plaintiff') filed a complaint in Wake
County Superior Court against Duke Energy Carolinas, LLC ("Duke Energy") and Helvey &
Associates Inc. ("Helvey") (collectively, "defendants") alleging violations of the North Carolina
Debt Collection Act (''NCDCA"), N.C. Gen. Stat.§§ 75-50 to 75-59, the North Carolina Collection
Agency Act (''NCCAA"), N.C. Gen. Stat.§§ 58-70-1 to 58-70-155, and the Fair Debt Collection
Practices Act ("FDCPA"), 15 U.S.C. § 1692-1692p. See [D.E. 1-1]. On October 15,2013, Helvey
removed the case to this court. See [D.E. 1]; 28 U.S.C. §§ 1331, 1441(a). On November 15,2013,
Duke Energy moved to dismiss Fritz's complaint and filed a memorandum in support [D .E. 12, 13].
On December 27, 2013, Fritz responded in opposition [D .E. 15]. On January 10, 2014, Duke Energy
replied [D.E. 16]. As explained below, the court grants Duke Energy's motion to dismiss.
I.
Fritz's complaint alleges the following facts. Fritz has been a customer of Duke Energy for
approximately twenty-five years. Compl. [D.E. 1-1]
~
5. In January 2013, Fritz informed Duke
Energy that he planned to close one of two accounts he had at the time ("Account 1") due to a change
in residence. ld. ~ 6. In February 2013, Fritz received his fmal bill for Account 1: $187.40 due on
March 4, 2013. ld. ~ 7. Fritz did not pay the bill on time. See id.
On March 11, 2013, Duke Energy retained defendant Helvey to collect the amount Fritz owed
on Account 1. Id.
~
8. The next day, Fritz paid his fmal bill for Account 1 by check. ld.
March 15, 2013, Duke Energy received and cashed Fritz's check. Id.
~
~
7. On
9. Instead of applying the
payment to Account 1, Duke Energy erroneously applied it to Fritz's other account ("Account 2").
Id.
On March 18, 2013, Fritz received a letter from Helvey stating that he still owed Duke
Energy $187.40. ld. ~ 10. Fritz disregarded the letter because he knew, through his online banking
services, that Duke Energy had cashed his check three days earlier. ld.
In April 2013, Fritz received a bill for Account 2. ld.
~
11. The bill indicated that Duke
Energy had applied Fritz's payment on Account 1 to Account 2. ld. Upon reviewing the bill, Fritz
contacted Duke Energy. Id. ~ 12. Fritz alleges that although Duke Energy assured him that it would
immediately rectify the situation, it failed to inform Helvey that Fritz had paid his fmal bill on
Account 1. Id. Accordingly, Helvey did not cease its collection efforts.
On or about May 5, 2013, Helvey attempted to collect the amount Fritz purportedly owed on
Account 1 by reporting to the three major credit reporting agencies that Fritz owed an outstanding
debt. Id.
~
14. As a result, Fritz's credit score dropped from 769 to 692, a difference of77 points.
Id. On or about May 18, 2013, Fritz learned that Helvey had reported the purported debt to credit
reporting agencies. See id. ~ 15. Fritz contacted Helvey that day to notify it of Duke Energy's error,
but the damage to his credit score had already been done. See id.
According to Fritz, the timing could not have been worse: Fritz was "diligently seeking out
opportunities to purchase a home," and "[t ]he large drop in his credit score ... prevented [him] from
2
securing a ... mortgage ... at the reasonable and commensurate rate that his real score of769 would
have allowed." Id. ~ 17. Fritz's credit score "has since been rectified," but he contends that because
market interest rates have only continued to rise since the events at issue, he "has forever lost the
opportunity of securing a mortgage at the favorable rate that he would have obtained." Id.
~
18.
On September 12, 2013, Fritz sued Duke Energy and Helvey. Fritz alleges that Duke Energy
wrongfully attempted to collect debt by "falsely represent[ing] that payment was due" after Fritz had
paid his final bill on Account 1 and by "failing to adequately report the status of the debt" to Helvey,
in violation ofN.C. Gen. Stat. § 75-54. Id. ~ 23. Fritz also alleges that, as a result ofDuke Energy's
unlawful debt-collection tactics, he "sustained actual damages, including, but not limited to, a
reduction in his credit score and inability to purchase a home with favorable interest rates." Id. ~ 24.
In response, Duke Energy moved to dismiss Fritz's complaint for failure to state a claim upon which
relief can be granted. See [D.E. 12]; Fed. R. Civ. P. 12(b)(6).
A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure for "failure
to state a claim upon which relief can be granted" tests whether the complaint is legally and factually
sufficient. See Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009); Bell Atl. Cotp. v. Twombly, 550
U.S. 544,562-63,570 (2007); Coleman v. Md. Court of Appeals, 626 F.3d 187, 190 (4th Cir. 2010),
affd, 132 S. Ct. 1327 (2012); Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008); accord
Erickson v. Pardus, 551 U.S. 89,93-94 (2007) (per curiam). In considering a motion to dismiss, a
court need not accept a complaint's legal conclusions drawn from the facts. See,~. Iqbal, 556
U.S. at 678. Similarly, a court "need not accept as true unwarranted inferences, unreasonable
conclusions, or arguments." Giarratano, 521 F.3d at 302 (quotation omitted); see Iqbal, 556 U.S.
at 677-79.
3
Duke Energy contends that 15 U.S.C. § 1681 t(b)(1 )(F) preempts Fritz's NCDCA claim. See
Mem. Supp. Mot. Dismiss [D.E. 13] 4-6. 1 Section 1681 t(b)(1 )(F) provides, with some exceptions
not applicable here, that "[n]o requirement or prohibition may be imposed under the laws of any
State ... with respect to any subject matter regulated under ... [15 U.S.C. § 1681s-2], relating to
the responsibilities of persons who furnish information to consumer reporting agencies." 15 U.S. C.
§ 1681t(b)(l)(F). Section 168ls-2, in turn, describes the responsibilities of those who report credit
information to consumer reporting agencies ("CRA.s"). Specifically, subsection 1681 s-2(a) obligates
furnishers of information to provide CRAs with accurate information and to correct any errors in
reporting. Subsection 1681s-2(b) obligates a furnisher of information who receives notice of a
consumer's dispute to investigate the disputed information and to promptly take action to correct any
inaccuracy. See id. § 1681s-2(a)-(b); see also Ross v. FDIC, 625 F.3d 808, 813 (4th Cir. 2010).
Duke Energy's argument fails. Section 1681t(b)(1)(F) preempts causes of action against
furnishers of credit information under state laws that overtly regulate credit reporting. It also
preempts causes of action against furnishers of credit information under state laws that do not
overtly regulate credit reporting-such as debt collection acts-if those laws have the effect of
regulating credit reporting in certain circumstances.
See,~.
Ross, 625 F.3d at 813-17; Glenn v.
FNF Servicing. Inc., No. 5:12-CV-703-D, 2013 WL 4095524, at *3 (E.D.N.C. Aug. 13, 2013)
(unpublished);
Edwards v. Santander Consumer USA. Inc., No. 5:10-CV-424-D, 2011 WL
2457498, at *3 (E.D.N.C. June 15, 2011) (unpublished); Misel v. Green Tree Servicing. LLC, 782
1
Generally, the existence of an affirmative defense such as preemption will not support a
motion to dismiss under Rule 12(b)(6). However, the court may dismiss a complaint under Rule
12(b)(6) where "all facts necessary to the affirmative defense [of preemption] clearly appear on the
face of the complaint." Goodman v. Praxair. Inc., 494 F.3d 458, 464 (4th Cir. 2007) (en bane)
(alteration, emphasis, and quotation omitted); see Quiller v. Barclays Am./Credit. Inc., 727 F.2d
1067, 1069 (11thCir. 1984); Edwardsv. Santander Consumer USA. Inc., No. 5:10-CV-424-D, 2011
WL 2457498, at *3-4 (E.D.N.C. June 15, 2011) (unpublished).
4
F. Supp. 2d 171, 175-76 (E.D.N.C. 2011); see also Menashi v. Am. Home Mortg. Servicing. Inc.,
No. 8:11-cv-1346-T-23EAJ, 2011 WL 4599816, at *2 (M.D. Fla. Oct. 4, 2011) (unpublished)
(collecting cases). Section 1681t(b)(1)(F) does not, however, preempt a state cause of action solely
because it involves allegations about inaccurate credit reporting. See,~. Ross, 625 F .3d at 812-17
Rex v. Chase Home Fin. LLC, 905 F. Supp. 2d 1111, 1148-1154 (C.D. Cal. 2012). Preemption
under section 1681 t(b )(1 )(F) is not "a highly[] contagious and fatal disease" such that "a few stray
allegations about inaccurate credit reporting ... contaminate[] ... claims." Rex, 905 F. Supp. 2d
at 1150.
Section 1681 t(b)(1)(F) does not preempt Fritz's claim against Duke Energy. After all, Fritz
alleges that Helvey furnished information to CRAs. He does not allege that Duke Energy did.
Although Fritz alleges that he suffered damages stemming from inaccurate credit reporting, his claim
against Duke Energy concerns its debt-collection tactics. Duke Energy's alleged conduct does not
fall within the "subject matter regulated under ... section 1681s-2." 15 U.S.C. § 1681t(b)(1)(F); see
Ross, 625 F.3d at 817; Menashi, 2011 WL 4599816, at *3.
Ross bolsters the court's conclusion. In Ross, the plaintiff asserted two wrongs against one
defendant: an unlawful tactic to collect a debt and a report of inaccurate credit information. See
Ross, 625 F.3d at 817. The Fourth Circuit separated the two wrongs for preemption purposes. See
id. Here, Fritz asserts two wrongs by two defendants: unlawful tactics to collect a debt by Duke
Energy and a report of inaccurate credit information by Helvey. See Compl.
~~
10, 13-14, 23,
29-30, 36. In Ross, the court separated for preemption purposes the two alleged wrongs by one
defendant. Here, this court separates for preemption purposes the two alleged wrongs by two
defendants.
5
Next, the court addresses Fritz's NCDCA claim against Duke Energy. To state a claim under
the NCDCA, a plaintiff must plausibly allege, as a threshold matter, that "(1) the alleged obligation
is a 'debt,' (2) the claimant owing the obligation is a 'consumer,' and (3) the party attempting to
collect the obligation is a 'debt collector."' DIRECTV. Inc. v. Cephas, 294 F. Supp. 2d 760, 763
(M.D.N.C. 2003); Reid v. Ayers, 138 N.C. App. 261, 263, 531 S.E.2d 231, 233 (2000). Once the
plaintiff satisfies these threshold requirements, he must plausibly allege the general elements of all
unfair or deceptive trade practice claims in North Carolina: an unfair act, in or affecting commerce,
proximately causing injury. See Ross, 625 F.3d at 817; Davis Lake Cmty. Ass'n. Inc. v. Feldmann,
138 N.C. App. 292, 296, 530 S.E.2d 865, 868 (2000); Reid, 138 N.C. App. at 265-66, 531 S.E.2d
at 234-3 5. An act "is unfair when it offends public policy and when the [act] is immoral, unethical,
oppressive, unscrupulous, or substantially injurious to consumers." Walker v. Branch Banking &
Trust Co., 133 N.C. App. 580, 583, 515 S.E.2d 727,729 (1999) (quotation omitted). In the context
of debt collection, "unfair acts" include the use of threats, coercion, harassment, unreasonable
publications ofthe consumer's debt, deceptive representations, and unconscionable means. See N.C.
Gen. Stat.§§ 75-51 to -55; Davis Lake Cmty. Ass'n. Inc., 138 N.C. App. at 296,530 S.E.2d at 868.
Fritz alleges that Duke Energy committed an "unfair act" by using deceptive representations
to attempt to collect a debt, in violation ofN.C. Gen. Stat. § 75-54. See Compl. ,, 19-24. To state
a claim under section 75-54, a plaintiff need not cite a specific subsection of the statute, which
provides eight nonexclusive examples of deceptive representations.
See,~.
Wilkes Nat'l Bank
v. Halvorsen, 126 N.C. App. 179, 183, 484 S.E.2d 582, 584 (1997). Nor must a plaintiff allege
"deliberate acts of deceit or bad faith." Forsyth Mem'l Hosp .. Inc. v. Contreras, 107 N.C. App. 611,
614,421 S.E.2d 167, 169-70 (1992). Nonetheless, a plaintiff must plausibly allege that ''the act
complained of possessed the tendency or capacity to mislead, or created the likelihood of deception."
6
Id.,421 S.E.2dat 170; see,~,InreMcClendon,Bankr. No. 10-04226-8-RDD,2012 WL5387677,
at *9 (Bankr. E.D.N.C. Nov. 2, 2012) (unpublished).
Fritz does not plausibly allege that Duke Energy violated N.C. Gen. Stat. § 75-54. Section
75-54 concerns communications between a debt collector and a debtor, not communications between
a creditor and a debt collector. Thus, even if Duke Energy "fail[ed] to adequately report the status
of the debt" to Helvey, such conduct falls outside section 75-54. Compl. ~ 23; see N.C. Gen. Stat.
§ 75-54(1)-{8) (listing examples of deceptive representations made by debt collector to debtor to
induce payment); cf. Johnson v. Brock & Scott. PLLC, No. 5:11-CV-474-F, 2013 WL 6058199, at
*5 (E.D .N.C. Nov. 15, 20 13) (unpublished) (concluding that communications between debt collector
and debtor can violate 15 U.S.C. § 1692(e), an analogous provision under the Fair Debt Collection
Practices Act, where the purpose of the communications is to induce payment by debtor). Moreover,
none of Duke Energy's alleged communications with Fritz "possessed the tendency or capacity to
mislead" him into paying a debt. Furthermore, Fritz does not allege that there was anything
deceptive or misleading about the bill he received in February 2013. As for the bill he received in
April2013, Fritz understood it to show exactly what it said: that Duke Energy mistakenly credited
his payment of$187 .40 on Account 1 to Account 2, thereby reducing the amount he owed that month
from $225.59 to $38.19. Reply [D.E. 16] 6; see,~' Wilkes Nat'l Bank, 126N.C. App. at 183-84,
484 S.E.2d at 584-85. 2 Because Fritz does not plausibly allege that Duke Energy used deceptive
representations to attempt to collect a debt, he fails to state a claim against Duke Energy under the
NCDCA.
2
The court may consider Fritz's April2013 bill without converting Duke Energy's motion
to dismiss into a motion for summary judgment. See,~, Suntrust Mortg .. Inc. v. Busby, 651 F.
Supp. 2d 472, 479-80 (W.D.N.C. 2009).
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Alternatively, even if Duke Energy's failure to inform Helvey of its mistake constitutes an
"unfair act" under the NCDCA, Fritz does not plausibly allege that such conduct proximately caused
the injury ofwhich he complains. Fritz contends that he "has forever lost the opportunity of securing
a mortgage at the favorable rate that he would have obtained" if Duke Energy had informed Helvey
of its mistake, if Helvey had not reported that Fritz owed an outstanding debt, if Fritz's credit score
had not dropped, and if Fritz had purchased a home before interest rates rose too sharply. Compl.
, 18; see id. ,, 12, 14, 17. Fritz does not allege sufficient facts to nudge this attenuated, multi-step
causal theory across the line from possible to plausible. See Iqbal, 556 U.S. at 677-78; Adams v.
Mills, 312 N.C. 181, 192-93, 322 S.E.2d 164, 172 (1984) (defining proximate cause as "a cause
which in natural and continuous sequence, unbroken by any new and independent cause, produced
the plaintiff's injuries, and without which the injuries would not have occurred, and one from which
a person of ordinary prudence could have reasonably foreseen that such a result or consequence of
a generally injurious nature, was probable under all the facts as they existed") (quotation omitted);
see also Ross, 625 F.3d at 817. Accordingly, Fritz fails to state a claim against Duke Energy under
theNCDCA.
II.
In sum, the court GRANTS Duke Energy's motion to dismiss [D.E. 12]. Duke Energy is
DISMISSED as a defendant.
SO ORDERED. This it_ day of July 2014.
Chief United States District Judge
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