OLIVER v. BANK ONE, (N.D.Miss. 2000)

NEAL B. BIGGERS, JR., Chief Judge.

This cause comes before the court on the defendant's motion to dismiss. Upon due consideration of the parties' memoranda and exhibits, the court is ready to rule.

Plaintiffs bought a home cable satellite system from a door-to-door salesman. The purchase was financed by the issuance of a "credit card" by the defendant in May 1995. The limit on this credit card was slightly greater than the purchase price, and no business would accept this credit card except the satellite company. The defendant furnished disclosures pursuant to the Truth in Lending Act ("TILA") as though the credit transaction was an open-end credit transaction. The plaintiffs allege that the credit transaction should have been treated as a closed-end credit transaction, and the failure to do so violated the disclosure requirements of TILA. The plaintiffs have discontinued payments on the satellite system and, as a result, the defendant posted a negative credit report on behalf of the plaintiffs regarding the sale of the satellite system. The plaintiffs seek the removal of the negative credit notation from their credit report through a defensive use of TILA or, in the alternative, the plaintiffs seek defensive recoupment. The defendant brings this motion to dismiss based on two theories, that the court lacks subject matter jurisdiction to hear the cause and that the relevant statute of limitations bars this cause.

A motion to dismiss pursuant to Rule 12 of the Federal Rules of Civil Procedure is generally disfavored, and is rarely granted. Clark v. Amoco Prod. Co., 794 F.2d 967, 970 (5th Cir. 1986); Sosa v. Coleman, 646 F.2d 991, 993 (5th Cir. 1981). In deciding a motion to dismiss under Rule 12, the district court accepts as true the well-pleaded factual allegations contained in the plaintiff's complaint. C.C. Port, Ltd. v. Davis-Penn Mortgage Co., 61 F.3d 288, 289 (5th Cir. 1995). "Taking the facts alleged in the complaint as true, if it appears certain that the plaintiff cannot prove any set of facts that would entitle it to the relief it seeks," dismissal is proper. C.C. Port, Ltd., 61 F.3d at 289. It must appear beyond any doubt that the plaintiff "can prove no set of facts in support of his claim which would entitle him to relief." Campbell v. City of San Antonio, 43 F.3d 973, 975 (5th Cir. 1995). Even if it appears an almost certainty that the facts as alleged in the complaint cannot be proved to support the claim, the complaint cannot be dismissed so long as a claim is stated. Boudeloche v. Grow Chem. Coatings Corp., 728 F.2d 759, 762 (5th Cir. 1984). If a required element, a prerequisite to obtaining the requested relief, is lacking in the complaint, dismissal is proper, and "conclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a motion to dismiss." Blackburn v. City of Marshall, 42 F.3d 925, 931 (5th Cir. 1995).

While dismissal under Rule 12(b)(6) ordinarily is determined by whether the facts alleged, if true, give rise to a cause of action, a claim may also be dismissed if a successful affirmative defense appears clearly on the face of the pleadings. Clark, 794 F.2d at 970; Kaiser Aluminum Chem. Sales, Inc. v. Avondale Shipyards, Inc., 677 F.2d 1045, 1050 (5th Cir.), cert. denied, 459 U.S. 1105, 103 S.Ct. 729, 74 L.Ed.2d 953 (1983). This type of dismissal is not widely favored because it precludes consideration of the merits of plaintiff's claim. Moch v. East Baton Rouge Parish Sch. Bd., 548 F.2d 594, 596 n. 3 (5th Cir.), cert. denied, 434 U.S. 859, 98 S.Ct. 183, 54 L.Ed.2d 132 (1977).

The purpose of the TILA is to protect the consumer from inaccurate and unfair credit practices, and "to assure a meaningful disclosure of credit terms so that the consumer will be able to compare more readily the various credit terms available to him and avoid the uninformed use of credit." 15 U.S.C. § 1640(a). Claims arising under the TILA are subject to a one year statute of limitations:

Any action under this section may be brought in any United States district court, or in any other court of competent jurisdiction, within one year from the date of the occurrence of the violation. This subsection does not bar a person from asserting a violation of this subchapter in an action to collect the debt which was brought more than one year from the date of the occurrence of the violation as a matter of defense by recoupment or set-off in such action, except as otherwise provided by state law.

TILA may be used defensively against a creditor in an action to collect a debt. Matter of Coxson, 43 F.3d 189, 193-94 (5th Cir. 1995). The mere fact that the plaintiffs initiated this cause does not preclude the use of the TILA defensively. Coxson, 43 F.3d at 194. "Under the express language of § 1640(e) a recoupment or set-off claim will be exempted from the one-year statute of limitations only when the debtor's claim is raised as a defense or a counter claim to a creditor's `action to collect the debt.'" Moor v. Travelers Ins. Co., 784 F.2d 632, 634 (5th Cir. 1986).

The plaintiffs assert that an "action to collect the debt" as described in section 1640 includes acts not amounting to the actual filing of a lawsuit by the creditor and that the defendant's posting of a negative credit report on the plaintiffs equates to such an "action." Through this "action to collect the debt" by the defendant, the plaintiffs are attempting to provide an exemption from the one-year statute of limitations. The plaintiffs seek to illustrate this action to collect the debt through a comparison with the Coxson case; however, the creditor in Coxson filed a proof of claim in the bankruptcy proceeding, and this filing constituted an "action to collect the debt" thereby allowing the defensive use of the TILA. Coxson, 43 F.3d at 194. In the present cause, the plaintiffs contend that the defendant's negative credit report constitutes an "action to collect the debt." This contention fails because merely providing a negative credit report does not constitute an action attempting to collect the debt under the TILA. Therefore, the plaintiffs cannot use the TILA defensively in this cause against the defendant and thus, the TILA claim is time barred by the statute of limitations.

It is also noted by the court that the United States District Court for the Southern District of Mississippi ruled "the one-year period indicated in section 1640(e) is jurisdictional." Baldwin v. Laurel Ford Lincoln-Mercury, Inc., 32 F. Supp.2d 894, 902 (S.D.Miss. 1998). The defendant provided open-ended credit disclosures to the plaintiffs in connection with their purchase of a satellite dish system in May 1995, and the plaintiffs filed this cause in February 1999, nearly four years after the date of the alleged violation. As such, the dismissal of this action is further appropriate in that the court lacks subject matter jurisdiction because of the plaintiffs' failure to file the cause within the time prescribed by section 1640.

Since the plaintiffs have no remedy available under TILA, the complaint should be dismissed for failing to state a claim upon which relief may be granted. See Fed.R.Civ.P. 12(b)(6).

For the foregoing reasons, the court finds that the defendant's motion to dismiss should be granted. An order will issue accordingly.

THIS, the ___ day of January, 2000.

NEAL B. BIGGERS, JR., CHIEF JUDGE