Clifton v. Nationstar Mortgage LLC
Filing
19
ORDER AND OPINION: The court hereby DENIES Defendant's motions to dismiss Plaintiff's claims for breach of contract, conversion, and for violation of the Fair Credit Reporting Act and the South Carolina Unfair Trade Practices Act. Plaintiff's third cause of action for breach of an implied duty of good faith, is dismissed with prejudice for failure to state a claim. granting in part and denying in part 7 Motion to Dismiss for Lack of Jurisdiction; grantin g in part and denying in part 14 Second Motion to Dismiss for Lack of Jurisdiction and 14 First Motion to Dismiss for Failure to State a Claim ; denying 12 Motion to deny as moot Defendant's Rule 12(b)(1) Motion. Signed by Honorable Margaret B Seymour on 3/4/2013.(asni, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
COLUMBIA DIVISION
David C. Clifton,
)
)
Plaintiff,
)
v.
)
)
Nationstar Mortgage, LLC,
)
)
Defendant.
)
______________________________)
Civil Action No. 3:12-02074-MBS
ORDER AND OPINION
Plaintiff David C. Clifton (“Plaintiff”) filed this action against Defendant Nationstar
Mortgage, LLC (“Defendant”), alleging claims under the Fair Credit Reporting Act (“FCRA”),
15 U.S.C. §§ 1681-1681v, for violating the statutory reinvestigation duties of a furnisher of
information. (ECF No. 10.) Plaintiff also asserts state law claims for breach of contract, breach
of the implied duty of good faith, conversion, and for violation of the South Carolina Unfair
Trade Practices Act (“SCUTPA”), S.C. Code Ann. §§ 39-5-10 to 560. (Id.) This matter is
before the court on Defendant’s motion to dismiss the action for lack of subject matter
jurisdiction pursuant to Fed. R. Civ. P. 12(b)(1) (the “Rule 12(b)(1) motion”) and motion to
dismiss the matter for failure to state a claim pursuant to Fed. R. Civ. P. 12(b)(6) (the “Rule
12(b)(6) motion”). (ECF Nos. 7, 14.) Plaintiff opposes Defendant’s motions to dismiss and also
moves to deny as moot Defendant’s Rule 12(b)(1) motion based on the allegations of the
amended complaint.
(ECF Nos. 11, 12, 16.)
For the reasons set forth below, the court
GRANTS in part and DENIES in part Defendant’s motions to dismiss and DENIES Plaintiff’s
motion to deny as moot Defendant’s Rule 12(b)(1) motion.
1
I.
RELEVANT PROCEDURAL BACKGROUND
On January 6, 2011, Plaintiff filed a lawsuit in this court to address allegedly
questionable servicing of the note and mortgage on his home by Defendant. See Clifton v.
Nationstar Mortg., LLC, C/A No. 3:11-0050-MBS (D.S.C. Jan. 6, 2011) (ECF No. 1). On
December 29, 2011, Plaintiff and Defendant entered into a settlement agreement and release (the
“Agreement”) that allegedly required Defendant “to modify the terms of the note and mortgage
and to take certain actions to delete any derogatory credit reporting pertaining to Plaintiff.”
(ECF No. 10, p. 2 ¶ 9.) After receiving notice from the parties that the matter had settled, the
court entered a Rubin order dismissing C/A No. 3:11-0050-MBS on February 7, 2012. (C/A No.
3:11-0050-MBS, ECF No. 51.) On April 9, 2012, Plaintiff filed a motion to reopen C/A No.
3:11-0050-MBS and an amended motion to reopen the case and compel settlement on April 10,
2012. (C/A No. 3:11-0050-MBS, ECF Nos. 52, 53.) On April 26, 2012, the court denied
Plaintiff’s motions to reopen the case and compel settlement. (C/A No. 3:11-0050-MBS, ECF
No. 60.)
On July 24, 2012, Plaintiff commenced this action alleging causes of action against
Defendant for breach of contract, breach of implied duty of good faith, conversion, and for
violation of FCRA and SCUTPA. (ECF No. 1.) On August 16, 2012, Defendant filed a Rule
12(b)(1) motion to dismiss Plaintiff’s complaint. (ECF No. 7.) In response to Defendant’s Rule
12(b)(1) motion, Plaintiff filed both an amended complaint and opposition to the Rule 12(b)(1)
motion on August 30, 2012. (ECF Nos. 10, 11.) Based on the jurisdictional allegations in the
amended complaint, Plaintiff moved the court to deny as moot Defendant’s Rule 12(b)(1)
2
motion on August 31, 2012. (ECF No. 12.1) On September 17, 2012, Defendant moved to
dismiss the amended complaint for lack of subject matter jurisdiction under Fed. R. Civ. P.
12(b)(1) and for failure to state a claim under Fed. R. Civ. P. 12(b)(6). (ECF No. 14.) Plaintiff
filed opposition to Defendant’s second motion to dismiss on October 4, 2012. (ECF No. 16.)
II.
A.
LEGAL STANDARD
Dismissal for Lack of Jurisdiction Generally
A motion to dismiss for lack of subject matter jurisdiction filed pursuant to Fed. R. Civ.
P. 12(b)(1), raises the fundamental question of whether a court has jurisdiction to adjudicate the
matter before it. Arbaugh v. Y & H Corp., 546 U.S. 500, 514 (2006). It is the plaintiff’s burden
to prove jurisdiction, and the court is to “regard the pleadings’ allegations as mere evidence on
the issue, and may consider evidence outside the pleadings without converting the proceeding to
one for summary judgment.” Richmond, Fredericksburg & Potomac R.R. Co. v. United States,
945 F.2d 765, 768 (4th Cir. 1991). A motion to dismiss for lack of subject matter jurisdiction
can arise in two contexts: (1) when the moving party maintains that the complaint “fails to allege
facts upon which subject matter jurisdiction can be based” or (2) when the moving party asserts
that the “jurisdictional allegations of the complaint [are] not true.” Adams v. Bain, 697 F.2d
1213, 1219 (4th Cir. 1982). In the first situation, where the moving party asserts that the
non-moving party has failed to allege facts establishing subject matter jurisdiction, the court
must assume all the facts alleged in the complaint to be true. Id. In the second situation, where
the moving party disputes the validity of the jurisdictional allegations in the complaint, the court
1
The court acknowledges that ECF Nos. 11 and 12 are the same document and that document was filed as both opposition to Defendant’s Rule
12(b)(1) motion and Plaintiff’s motion to deny as moot Defendant’s Rule 12(b)(1) motion.
3
may look beyond the complaint and consider other evidence, such as affidavits, depositions, and
live testimony. Id. The burden of proof in that situation falls on the plaintiff to demonstrate
subject matter jurisdiction. Id.
B.
Dismissal for Failure to State a Claim Generally
A motion to dismiss pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a claim
should not be granted unless it appears certain that the plaintiff can prove no set of facts that
would support her claim and would entitle her to relief. Mylan Labs., Inc. v. Matkari, 7 F.3d
1130, 1134 (4th Cir. 1993). When considering a motion to dismiss, the court should accept as
true all well-pleaded allegations and should view the complaint in a light most favorable to the
plaintiff. Ostrzenski v. Seigel, 177 F.3d 245, 251 (4th Cir. 1999); Mylan Labs., Inc., 7 F.3d at
1134. “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.’” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The
court must treat factual allegations of the nonmoving party as true. Estate Constr. Co. v. Miller
& Smith Holding Co., 14 F.3d 213, 217-18 (4th Cir. 1994).
C.
Federal Claim for Violating FCRA
Section 1681s-2(b) of FCRA imposes a duty on furnishers of information to investigate
disputed information after receiving notice of a dispute concerning the completeness or accuracy
of information from a credit reporting agency (“CRA”) pursuant to 15 U.S.C. § 1681i(a)(2). If a
consumer notifies a CRA that he disputes the accuracy of an item in his file, FCRA requires the
CRA to notify the furnisher of the dispute. 15 U.S.C. § 1681i(a)(2). Upon receipt of this notice,
a furnisher must: (A) conduct an investigation with respect to the disputed information; (B)
4
review all relevant information provided by the consumer reporting agency pursuant to 15
U.S.C. § 1681i(a)(2); (C) report the results of the investigation to the consumer reporting
agency; and (D) if the investigation finds that the information is incomplete or inaccurate, report
those results to all other consumer reporting agencies to which the person furnished the
information and that compile and maintain files on consumers on a nationwide basis . . . . 15
U.S.C. § 1681s–2(b)(1). Thus, FCRA requires furnishers to determine whether the information
that they previously reported to a CRA is “incomplete or inaccurate.”
15 U.S.C. §
1681s–2(b)(1)(D). A violation of section 1681s-2(b) occurs when a furnisher negligently or
willfully fails to reasonably investigate a properly lodged consumer dispute as required by 15
U.S.C. § 1681s-2(b)(1)(A). See Johnson v. MBNA Am. Bank, N.A., 357 F.3d 426, 431 (4th Cir.
2003).
D.
State Law Claim for Breach of Contract
In order to prevail on a claim of breach of contract, the plaintiff bears the burden of
establishing the existence and terms of the contract, defendant’s breach of one or more of the
contractual terms, and damages resulting from the breach. Fuller v. E. Fire & Cas. Ins. Co., 124
S.E.2d 602, 610 (S.C. 1962). An action for damages for breach of contract is thus predicated on
the existence of the contract. Tidewater Supply Co. v. Indus. Elec. Co., 171 S.E.2d 607, 608
(S.C. 1969). The essential elements of a contract are an offer, an acceptance, and valuable
consideration. Carolina Amusement Co. v. Connecticut Nat’l Life Ins. Co., 437 S.E.2d 122, 125
(S.C. App. 1993). “It is elemental . . . that before a party can recover for the breach of a
contract, he must allege and prove by competent, relevant testimony each one of the material
elements of the contract sued on.” Rabon v. State Fin. Corp., 26 S.E.2d 501, 502 (S.C. 1943).
5
E.
State Law Claim for Breach of Implied Duty of Good Faith
The implied covenant of good faith and fair dealing is present in all contracts. Gans &
Pugh Assocs., Inc. v. Technical Commc’ns Corp., Nos. 93-1215, 93-1313, 1993 WL 513850, at
*2 (4th Cir. Dec. 9, 1993) (citations omitted); Greenville Cnty. Sch. Dist. v. U.S. Gypsum Co.,
Nos. 85-2169, 86-3534 & 86-3541, 1987 WL 38165, at *4 (4th Cir. Oct. 5, 1987) (citation
omitted). However, the implied covenant of good faith and fair dealing is not an independent
cause of action separate from the claim for breach of contract. RoTec Servs., Inc. v. Encompass
Servs., Inc., 597 S.E.2d 881, 883-84 (S.C. Ct. App. 2004) (citing Stuart Enters. Int’l, Inc. v.
Peykan, Inc., 555 S.E.2d 881, 884 (Ga. 2001) (“The implied covenant of good faith modifies,
and becomes part of, the provisions of the contract itself. As such, the covenant is not
independent of the contract.”)).
F.
State Law Claim for Conversion
“Conversion is the unauthorized assumption and exercise of the right of ownership over
goods or personal chattels belonging to another, to the alteration of the condition or the
exclusion of the owner’s rights.” Crane v. Citicorp Nat’l Servs., Inc., 437 S.E.2d 50, 52 (S.C.
1993). “Conversion may arise by some illegal use or misuse, or by illegal detention of another’s
personal property.” Regions Bank v. Schmauch, 582 S.E.2d 432, 442 (S.C. Ct. App. 2003).
Conversion is a wrongful act which emanates by either a wrongful taking or wrongful detention.
Id. It is well settled that a conversion action does not lie when alleging the exercise of dominion
or control over real property. See 18 Am. Jur. 2d Conversion § 7 (1998) (commenting that “an
action for conversion ordinarily lies only for personal property which is tangible, or at least
represented by or connected with something tangible” and “will not lie for such indefinite,
6
intangible, and incorporeal species of property as a . . . leasehold estate or interest”).
G.
State Law Claim for Unfair Trade Practices
SCUTPA broadly prohibits any “[u]nfair methods of competition and unfair or deceptive
acts or practices in the conduct of any trade or commerce.” S.C. Code Ann. § 39-5-20. To
maintain a private cause of action under SCUTPA, a plaintiff must establish: (1) the defendant
engaged in an unlawful trade practice; (2) the plaintiff suffered actual, ascertainable damages as
a result of the defendant's use of the unlawful trade practice; and (3) the unlawful trade practice
engaged in by the defendant had an adverse impact on the public interest.
Havird Oil Co. v.
Marathon Oil Co., 149 F.3d 283, 291 (4th Cir. 1998) (citing S.C. Code Ann. § 39–5–140; Daisy
Outdoor Adver. Co. v. Abbott, 473 S.E.2d 47, 49 (S.C. 1996)).
III.
ANALYSIS
Defendant moves to dismiss the amended complaint for lack of subject matter
jurisdiction and for failure to state a claim. Plaintiff opposes Defendant’s motions.
A.
Arguments of the Parties
Defendant argues that the allegations of the amended complaint do not establish the
court’s subject matter jurisdiction over the matter. District courts generally have subject matter
jurisdiction over civil actions involving federal questions and over civil actions between citizens
of different states where the amount in controversy is greater than $75,000. See 28 U.S.C. §§
1331, 1332. Defendant asserts that federal question jurisdiction does not exist in this matter
because Plaintiff’s amended complaint alleges insufficient facts to support a violation of FCRA.
(ECF No. 7, p. 3.) In this regard, Defendant asserts that Plaintiff is unable to show that the
information Defendant provided to the CRAs was inaccurate because (1) Plaintiff was in default
7
when he filed C/A No. 3:11-0050-MBS; (2) Plaintiff failed to make monthly escrow payments
for taxes and insurance; (3) Plaintiff failed to execute a proposed modification of the note and
mortgage; and (4) Plaintiff initiated this action before “Defendant could resolve any delinquency
report to any credit bureau.” (Id. at 4.) Defendant further asserts that diversity jurisdiction does
not exist because Plaintiff fails to meet the amount in controversy requirement for diversity
jurisdiction because his interest in issues relevant to this dispute (i.e., the equity in the house, the
mortgage, the Agreement) is worth less than $75,000. (ECF No. 14, p. 2.) Based on the
foregoing, Defendant requests that the court dismiss the matter pursuant to Fed. R. Civ. P.
12(b)(1).
Defendant also argues that the action should be dismissed for failure to state a claim upon
which relief can be granted under Fed. R. Civ. P. 12(b)(6). In support of this argument,
Defendant asserts that “[i]n order for a breach of contract to warrant rescission, the breach must
be so fundamental and substantial as to defeat the purpose of the contract.” (Id. at 3 (citing Ellie,
Inc. v. Miccichi, 594 S.E.2d 485, 494 (S.C. Ct. App. 2004)).) In this regard, Defendant asserts
that dismissal is appropriate because its “alleged breach of contract was not so material as to
rescind the entire contract.” (Id. at 4.) Defendant further asserts that Plaintiff repudiated the
Agreement when he stopped making monthly escrow payments for taxes and insurance and,
therefore, Defendant was not required to continue performing under the Agreement. (Id.)
Accordingly, Defendant requests that the Court dismiss the amended complaint pursuant to Fed.
R. Civ. P. 12(b)(6).
Plaintiff argues that he has adequately asserted a claim under federal law for violating
FCRA by alleging that (1) he disputed a reporting to an agency; (2) Defendant received the
8
report of Plaintiff’s dispute; and (3) Defendant failed to reinvestigate Plaintiff’s dispute. (ECF
No. 16, pp. 5-6.) Plaintiff further argues that the amended complaint establishes diversity
jurisdiction even if the court finds federal question jurisdiction lacking. (ECF Nos. 12 at 1-2; 16
at 5-6.)
In this regard, Plaintiff contends that diversity jurisdiction is established by (1)
Defendant’s admissions in its responses to Local Rule 26.01 DSC interrogatories, ECF No. 8,
that establish diversity of citizenship between the parties; and (2) Plaintiff’s pleading of an
amount in controversy greater than $75,000 and the inability of Defendant to show to a legal
certainty that the jurisdictional amount cannot be recovered. (ECF No. 16 at 6 (citing 28 U.S.C.
§ 1446(c) (“[T]he sum demanded in good faith in the initial pleading shall be deemed to be the
amount in controversy,” except in certain circumstances.)).) Based on the foregoing, Plaintiff
requests that the court deny Defendant’s Rule 12(b)(1) motion either as moot or on the merits .
Plaintiff further argues that the court should deny Defendant’s Rule 12(b)(6) motion
because Defendant’s argument requires an assessment of (1) the materiality of Defendant’s
alleged breach of the Agreement and (2) the evidence establishing Plaintiff’s contract
repudiation; both of which involve questions of fact that are not ripe for the court’s
consideration. (Id. at 7.)
B.
The Court’s Review
Defendant, a furnisher of information to CRAs, has two duties under the FCRA.
Saunders v. Branch Banking & Trust Co., 526 F.3d 142, 149 (4th Cir. 2008). First, it has a
general obligation to report only accurate information to CRAs. 15 U.S.C. § 1681s–2(a).
Second, it has a duty to reinvestigate the sufficiency and accuracy of reported information upon
receipt of notice of a dispute from a CRA. 15 U.S.C. § 1681s–2(b). In its Rule 12(b)(1) motion,
9
Defendant argues that Plaintiff has failed to allege sufficient facts to support a claim for
violating the reinvestigation requirements of § 1681s-2(b) of FCRA.
Plaintiff opposes
Defendant’s Rule 12(b)(1) motion, asserting that the amended complaint sufficiently alleges the
occurrence of a violation of § 1681s-2(b) of FCRA when (1) he disputed the completeness
and/or accuracy of information provided to CRAs by Defendant, a furnisher of information; (2)
Defendant received notice of Plaintiff’s dispute from the CRAs; and (3) after receiving notice of
the dispute, Defendant failed to conduct a timely and/or proper investigation of disputed
information and re-reported the inaccurate information to CRAs. (See ECF No. 10 at 4-5.)
Upon consideration, the court finds that Plaintiff’s factual allegations sufficiently state a
plausible federal claim for violating § 1681s-2(b) of FCRA. Freeman v. Equifax, Inc., C.A. No.
6:12–845–HMH, 2012 WL 2502693, at *2 (D.S.C. June 28, 2012) (“[P]laintiff states a plausible
claim for relief under § 1681s–2(b) by alleging (1) that the plaintiff notified a CRA that the
defendant furnished false information; (2) that the defendant-furnisher refused to investigate or
correct the false report after learning of the alleged error; and (3) that it thereby violated the
FCRA.”) (citing Lang v. TCF Nat’l Bank, No. 07–1415, 2007 WL 2752360, at *2 (7th Cir.
Sept.21, 2007).
Therefore, federal question jurisdiction exists under 28 U.S.C. § 1331.
Accordingly, the court denies Defendant’s Rule 12(b)(1) motion, asserting the nonexistence of
federal question jurisdiction.
Defendant also argues that the court’s subject matter jurisdiction over this matter is
lacking because the amount in controversy for diversity jurisdiction does not exceed $75,000.
To establish Plaintiff’s failure to meet the $75,000 amount in controversy requirement for
diversity jurisdiction, Defendant must show to a legal certainty that the jurisdictional amount
10
cannot be met to establish that the court lacks subject matter jurisdiction. St. Paul Mercury
Indem. Co. v. Red Cab Co., 303 U.S. 283, 289 (1938) (“It must appear to a legal certainty that
the claim is really for less than the jurisdictional amount to justify dismissal.”). In support of
dismissal, Defendant asserts that Plaintiff’s interest in the issues relevant to this dispute (i.e., the
house, the mortgage, the Agreement) is worth less than $75,000. Plaintiff opposes dismissal,
asserting that the amount in controversy is greater than $75,000.
Upon consideration of the foregoing, the court finds that it is entitled to rely on Plaintiff’s
assessment of his damages because Defendant does not contend that Plaintiff’s alleged amount
in controversy was made in bad faith. St. Paul Mercury, 303 U.S. at 288 (“The rule governing
dismissal for want of jurisdiction in cases brought in the federal court is that, unless the law
gives a different rule, the sum claimed by the plaintiff controls if the claim is apparently made in
good faith.”) Therefore, diversity jurisdiction exists under 28 U.S.C. § 1332. Accordingly, the
court denies Defendant’s Rule 12(b)(1) motion, asserting the nonexistence of diversity
jurisdiction.
In addition to its Rule 12(b)(1) motion, Defendant argues that the amended complaint
should be dismissed for failure to state a claim. After accepting all well-pleaded allegations in
Plaintiff's amended complaint as true and viewing the amended complaint in a light most
favorable to Plaintiff, the court cannot conclude with certainty that Plaintiff fails to state
plausible claims for breach of contract, conversion, and violation of FCRA or SCUTPA upon
which relief could be granted. However, upon the court’s further review, Plaintiff’s claim for
breach of the implied duty of good faith should be dismissed because this claim does not exist
independent from the breach of contract cause of action. RoTec Servs., 597 S.E.2d at 883-84.
11
Accordingly, Defendant’s Rule 12(b)(6) motion to dismiss is granted in part and denied in part.
IV.
CONCLUSION
For the reasons set forth above, Defendant’s motions to dismiss are GRANTED in part
and DENIED in part. (ECF Nos. 7, 14.) The court hereby DENIES Defendant’s motions to
dismiss (pursuant to Rules 12(b)(1) and (6) of the Federal Rules of Civil Procedure) Plaintiff’s
claims for breach of contract, conversion, and for violation of the Fair Credit Reporting Act and
the South Carolina Unfair Trade Practices Act. Plaintiff’s third cause of action for breach of an
implied duty of good faith, ECF No. 10 at 5-6, is dismissed with prejudice pursuant to Fed. R.
Civ. P. 12(b)(6) for failure to state a claim upon which relief could be granted. The court
DENIES Plaintiff’s motion to deny as moot Defendant’s Rule 12(b)(1) motion. (ECF No. 12.)
IT IS SO ORDERED.
/s/Margaret B. Seymour___________________
MARGARET B. SEYMOUR
SENIOR UNITED STATES DISTRICT JUDGE
March 4, 2013
Columbia, South Carolina
12
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?