Armstead et al v. Summit Funding Inc. et al
Filing
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ORDER denying #6 Motion to Dismiss for Failure to State a Claim; overruling #12 Memorandum and Recommendations. The defendants are instructed to file an Answer within 14 days.. Signed by District Judge Max O. Cogburn, Jr on 2/9/2017. (Pro se litigant served by US Mail.)(chh)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NORTH CAROLINA
CHARLOTTE DIVISION
DOCKET NO. 3:16-cv-00660-MOC-DSC
CONNIE HATCHER
RONALD ARMSTEAD,
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Plaintiffs,
Vs.
TODD SCRIMA
GEORGE VIOLANTE
SUMMIT FUNDING INC.,
Defendants.
ORDER
THIS MATTER is before the court on review of a Memorandum and
Recommendation (#12) issued in this matter. In the Memorandum and Recommendation
(#12), the magistrate judge advised the parties of the right to file objections within 14 days,
all in accordance with 28, United States Code, § 636(b)(1)(c). Objections have been filed
within the time allowed.
The Federal Magistrates Act of 1979, as amended, provides that “a district court
shall make a de novo determination of those portions of the report or specific proposed
findings or recommendations to which objection is made.” 28 U.S.C. § 636(b)(1); Camby
v. Davis, 718 F.2d 198, 200 (4th Cir.1983). However, “when objections to strictly legal
issues are raised and no factual issues are challenged, de novo review of the record may be
dispensed with.” Orpiano v. Johnson, 687 F.2d 44, 47 (4th Cir. 1982). Similarly, de novo
review is not required by the statute “when a party makes general or conclusory objections
that do not direct the court to a specific error in the magistrate judge’s proposed findings
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and recommendations.” Id. Moreover, the statute does not on its face require any review
at all of issues that are not the subject of an objection. Thomas v. Arn, 474 U.S. 140, 149
(1985); Camby v. Davis, 718 F.2d at 200. Nonetheless, a district judge is responsible for
the final determination and outcome of the case, and accordingly the court has conducted
a careful review of the magistrate judge’s recommendation.
Plaintiffs, who are representing themselves, have filed with the court a “Response
to Recommendations” (#13), which the court has deemed to be timely Objections. Reading
their Objections in a light most favorable to them, plaintiffs contend that Judge Cayer’s
recommendation is not supported by applicable law. Specifically, they contend that the
Equal Credit Opportunity Act (“ECOA”) and its implementing regulations require lenders
to retain copies of consumer loan applications, such as the one they submitted in 2014, and
that failure to retain those documents is privately actionable.
While Rule 72(b)(2), Fed. R. Civ. P., allowed defendants 14 days within which to
file a Response to plaintiffs’ Objections, defendants have not filed a response. This lack of
Response leaves the court in a procedurally difficult position. Plaintiffs’ Objections are
nearly identical to issues which were discussed in their Response to defendants’ Motion to
Dismiss and specifically addressed in defendants’ Reply; however, such issues were not
specially addressed in the Memorandum and Recommendation and have not been
addressed in any Response to the Objections.
The court has, therefore, closely read plaintiffs’ Objections, paying particular
attention to their citation to 12 C.F.R. § 1002.16 as well as defendants’ earlier arguments
in their Reply (#11). First, § 1002.16(b)(1) provides, as follows:
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(1) Sections 702(g) and 706(a) and (b) of the Act provide that any creditor
that fails to comply with a requirement imposed by the Act or this part is
subject to civil liability for actual and punitive damages in individual or class
actions. Pursuant to sections 702(g) and 704(b), (c), and (d) of the Act,
violations of the Act or this part also constitute violations of other Federal
laws. Liability for punitive damages can apply only to nongovernmental
entities and is limited to $10,000 in individual actions and the lesser of
$500,000 or 1 percent of the creditor's net worth in class actions. Section
706(c) provides for equitable and declaratory relief and section 706(d)
authorizes the awarding of costs and reasonable attorney's fees to an
aggrieved applicant in a successful action.
12. C.F.R. § 1002.16(b)(1). While both Judge Cayer and defendants concluded that the
document retention requirements of the act are administrative and intended to aid
regulatory enforcement, they are nonetheless “a requirement imposed by the Act or this
part ….” Id.
Thus, read plainly, it appears that the ECOA and the implementing
regulations recognize a cause of action.
Next, the court has considered defendants argument in their Reply that the document
retention provision of the ECOA did not create any creditor duty towards applicants and
that they could not “find a single case finding liability under the theory set forth by
Plaintiffs.” Reply (#11 at 2 & n.1). While the court agrees that there is no case that has
held that violation of the document retention provision is privately actionable, it is equally
true that there is no case that provides that violation of that provision is non-actionable,
making such a claim “novel.” The fact that a claim is novel does not mean that a cause has
not been stated under Rule 12(b)(6): “[c]ase law and legal commentators both encourage
the denial of Rule 12(b)(6) motions where novel or unique theories are presented.”
Maryland Restorative Justice Initiative v. Hogan, 2017 WL 467731, at *25 (D. Md. Feb.
3, 2017) (citation and corresponding quotation marks omitted).
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Thus, the court cannot
conclude based on this record that the document retention provisions of the ECOA are nonactionable by an applicant.
Defendants also argued in their earlier Reply (#11) that the Complaint should be
dismissed in any event because an actionable claim requires an allegation of actual
damages and plaintiffs must be able to prove a causal link between the alleged violation
and the alleged damages. Specifically, defendants argued that while plaintiffs allege that
Plaintiff Armstead suffered a stroke during the loan process, he fails to allege “it is because
Plaintiffs’ documents were lost.” Id. at 1. The court finds that defendants have too
narrowly read plaintiffs’ claim for injury, which is as follows:
Plaintiffs have been exposed to tremendous and possibly irreparable harm to
their financial stability in their latter years by this action by the loss and
exposure of their personal financial information. The completeness of this
file and the magnitude of fraudulent or criminal elements having such
information that can be utilized for many years to come against the Plaintiffs,
resulting in total financial ruin, whenever they decide to use this information
for criminal purposes is overwhelming. That all financial account numbers,
social security numbers, retirement entitlement account numbers and
monthly dollar amounts, locations of where these and any investment
accounts are and information to access these account and cause financial ruin
is insurmountable. Plaintiff also, for the stress of this mortgage loan process
with Defendant suffered and endured health issues, including documented
from hospitalization, a series of strokes, as a direct result of needless stress
from this financial transaction.
Complaint (#1) at 4. First, actual damages are defined as: “Real, substantial and just
damages, or the amount awarded to a complainant in compensation for his actual and real
loss or injury, as opposed on the one hand to ‘nominal’ damages, and on the other to
‘exemplary’ or ‘punitive’ damages.” Griesz v. Household Bank, 8 F.Supp. 1031, 1043
(N.D.Ill. 1998) (quoting Black's Law Dictionary 390 (6th Ed.1990)). Indeed, this court’s
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colleague in Maryland has held that actual damages recoverable under ECOA include
mental anquish and other non-monetary injury. Coulibaly v. JP Morgan Chase Bank, N.A.,
2012 WL 3985285, at *6 (D.Md. Sept. 7, 2012) (Chasanow, J.). Second, defendants’
argument that the Complaint lacks an allegation of a causal connection between the injury
and the alleged wrongful act cannot be squared with plaintiffs’ contention that Plaintiff
Armstead suffered “a series of strokes, as a direct result of needless stress from this
financial transaction.” Complaint (#1) at 4.
To survive a motion to dismiss, plaintiffs need not demonstrate that their right to
relief is probable or that alternative explanations are less likely; rather, they must merely
advance their claim “across the line from conceivable to plausible.” Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007). If their explanation is plausible, the complaint
survives a motion to dismiss under Rule 12(b)(6), regardless of whether there is a more
plausible alternative explanation. “[A] well-pleaded complaint may proceed even if it
strikes a savvy judge that actual proof of those facts is improbable, and that a recovery is
very remote and unlikely.” Id. at 556. While the allegations have not been cast with
precision, the court can discern from the totality of the Complaint sufficient plausible
allegations to cover all the bases, even though those bases have not been touched in the
right order. Bass v. E.I. Dupont de Nemours & Co., 324 F.3d 761, 765 (4th Cir. 2003)
(finding that a pro se plaintiff must “allege facts sufficient to state all the elements of [the]
claim.”).
In conducting that analysis, the court has considered the Complaint in its entirety
and in context with plaintiffs’ responsive filings. When liberally read, the pro se Complaint
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(#1) could state a plausible claim. While not directly stating that the defendants lost their
documents intentionally or that such loss was based on their age, plaintiffs have pointed to
lack of retention of documents, that such retention is required by law, that they are elderly,
and that they have suffered damages due to such loss.
Whether plaintiffs will be able to prove that defendants’ alleged loss of their
paperwork had anything to do with their age or actually resulted in any damages is an
entirely different inquiry, one that is best left for summary judgment after defendants and
plaintiffs have had an opportunity for discovery.
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With those concerns in mind, the court has determined that this matter may well be
a good candidate for the Pro Se Settlement Assistance Program and would encourage both
sides to utilize that court-sponsored program to resolve this matter.
ORDER
IT IS, THEREFORE, ORDERED that the plaintiffs’ Objections (#13) are
SUSTAINED,
the
Memorandum
and
Recommendation
(#12)
is
respectfully
OVERRULED, the Motion to Dismiss (#6) is DENIED without prejudice as to reasserting
it at summary judgment after discovery, and defendants are instructed to file an Answer
within 14 days.
Signed: February 9, 2017
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