FRANCIS X. CAIAZZA, U.S. Magistrate Judge.
I. RECOMMENDATION
For the reasons stated below, it is recommended that the District Court: sua sponte dismiss under Federal Rule of Civil Procedure 12(b)(6) the Plaintiff's claims against the Defendant KeyBank National Association; and deny as moot the Defendant's Motion to Dismiss (Doc. 25).
Although the Plaintiff's pleadings identify the relevant Defendant as "Key Bank of New York," the parties appear to agree that its correct name is "KeyBank National Association." Compare Mot. to Dismiss (Doc. 25) with Pl.'s Resp. (Doc. 27) (both identifying the Defendant as KeyBank National Association).
II. REPORT BACKGROUND
A. Procedural History
The Plaintiff Lorena M. Fino ("the Plaintiff" or "Ms. Fino") filed this lawsuit on December 6, 2000, alleging violations of the Fair Credit Reporting Act, 15 U.S.C. § 1681, et seq. ("the FCRA" or "the Act"). See generally Compl. (Doc. 1). In her most recent pleadings, Ms. Fino names as Defendants two consumer reporting agencies, Experian Information Solutions, Inc., and Trans Union LLC (collectively "the Reporting Agencies"), along with KeyBank National Association ("Key Bank"), a banking institution and "furnisher of information [regarding the Plaintiff] to consumer reporting agencies." See generally Am. Compl. (Doc. 22) at ¶¶ 2-3, 18; see also generally id. at ¶ 46 (claiming that Key Bank's obligations are governed by 15 U.S.C. § 1681s-2, which addresses "[r]esponsibilities of furnishers of information to consumer reporting agencies").
One other consumer reporting agency, Equifax Credit Information Service ("Equifax"), was named in the original Complaint; that entity was voluntarily dismissed by the Plaintiff on February 1, 2001. See Doc. 9.
On April 9, 2001, and with leave of court, the Plaintiff filed an Amended Complaint. See Doc. 21 (Order granting leave to amend) and Doc. 22 (Am. Compl.). The Amended Complaint properly omits references to Equifax, but it also appears to inadvertently omit a paragraph identifying Trans Union LLC as a Defendant. Compare Compl. at ¶ 5 (paragraph identifying Trans Union LLC as a Defendant) with Am. Compl. (omitting same paragraph). Nevertheless, the Amended Complaint retains the Plaintiff's substantive allegations against Trans Union LLC, see e.g., Am. Compl. at ¶ 69, so her omission of an identifying paragraph is of no consequence.
On May 8, 2001, Key Bank filed a Motion under Federal Rule of Civil Procedure 12(b)(6), seeking dismissal of the claims asserted against it in the Amended Complaint. See Key Bank's Mot. to Dismiss Am. Compl. (Doc. 25). The briefing on that motion has come to a close, and it is now ripe for adjudication.
In reviewing Key Bank's Motion, this magistrate judge has come to conclude that the Plaintiff cannot state claims against that Defendant upon which relief can be granted. This conclusion, however, is based on grounds other than those specifically addressed by Key Bank. Thus, it is recommended that the District Court dismiss the claims against Key Bank, sua sponte, under Rule 12(b)(6).
B. Factual Background and Claims Alleged Against Key Bank
In the Amended Complaint, the Plaintiff alleges the following facts relevant to her claims against Key Bank.
In July 1994, the Plaintiff and her husband Jeffrey J. Fino ("husband") secured a consumer vehicle loan with Key Bank for the purchase of a vehicle. See Am. Compl. at ¶ 4.
In February 1998 Ms. Fino's husband, in his sole capacity, filed for Chapter VII bankruptcy in the United States Bankruptcy Court for Western District of Pennsylvania. He was awarded a discharge from bankruptcy in May of the same year. See id. at ¶¶ 4-5. Under the bankruptcy proceedings, the Plaintiff's husband reaffirmed his debt to Key Bank, and the Finos at all relevant times continued to make payments on their loan with Key Bank. See id. at ¶¶ 7-8.
On May 11, 1998, the Plaintiff learned that a mortgage application she submitted had been denied because a bankruptcy appeared on her credit report. See id. at ¶ 10. This was true despite the fact the she had not filed for bankruptcy and was not a party to her husband's bankruptcy proceedings. See generally id. at ¶ 5.
On approximately May 12, 1998, Ms. Fino contacted Key Bank by telephone to complain of the incorrect information appearing on her credit report. See id. at ¶ 11. She followed this verbal complaint with written complaints. See id.
In response, Key Bank conducted an investigation and on July 1, 1998 issued a letter to the Plaintiff and the Reporting Agencies stating that any references to the bankruptcy should be removed from Ms. Fino's credit reports. See id. at ¶ 12. The letter incorrectly stated, however, that her Key Bank account should be listed as a "charge off," i.e., that the account had been "charged off as bad debt." See id. at ¶¶ 12-14; see also, e.g., Trans Union LLC credit report attached as Ex. G to Original Compl.
Shortly thereafter, the Plaintiff contacted Key Bank to complain of the "charge off" reference in its letter. See Am. Compl. at 14. On July 13, 1998, within two weeks of its first letter, Key Bank sent a second letter to the Plaintiff and the Reporting Agencies clarifying that "all references to charge offs and bankruptcies should be deleted from [Ms. Fino's] credit report and that [her] account was active." See id. at ¶ 15.
In approximately November 1998, the Plaintiff came to learn that certain of her credit reports continued to show bankruptcy, charge off, and/or inactive account designations. See id. at ¶ 18. The Plaintiff alleges that, "[i]n response to the[se] erroneous reports, [she] sent each [Reporting Agency] a copy of Key Bank's letter stating that the [b]ankruptcy and charge off information was erroneous, and asked that they update her account." See id. at ¶ 20. Thereafter, she "received confirming statements from each of the [Reporting Agencies] . . . stating that the bankruptcy and charge off information had been removed" from her credit reports. See id.
The Plaintiff alleges that, nevertheless, certain of her credit reports issued thereafter continued to contain the incorrect information. See id. at ¶ 22. Accordingly, she telephoned Key Bank to complain of "the persistent misinformation being reported on her credit reports." See id. ¶ 23. She alleges that, in response, Key Bank stated on January 29, 1999 that "it would continue to report the Plaintiff's credit information as it was currently being reported and would not make any changes." See id. at ¶ 24.
On February 1, 1999, the Plaintiff filed a complaint regarding Key Bank with the Comptroller of Currency for the Administrator of National Banks. See id. at ¶ 26. Ms. Fino alleges that "[t]he Comptroller's investigation ended when Key Bank issued a letter dated May 5, 1999 to both the Plaintiff and the [Reporting Agencies] that correctly stated the status of the Fino's [sic] account." See id. at ¶ 29.
Still, the Plaintiff alleges, she continued to have problems with her credit reports. For example, Ms. Fino was allegedly denied a credit card in October 2000 because one of the Reporting Agency's reports "include[d] a bankruptcy." See id. at ¶ 34. This allegedly was true despite the fact that, in August 1999, the loan held by Key Bank had been paid by the Finos in full. See id. at ¶ 30.
In her claims against Key Bank, the Plaintiff alleges that the institution "[n]egligent[ly]" and/or "[w]illful[ly]" misreported credit information regarding her, in violation of 15 U.S.C. § 1681s-2(b), 1681n, and 1681o. See generally id. at ¶¶ 38-66. In the Counts asserted against Key Bank, the Plaintiff states that:
"the Plaintiff [repeatedly] notified Key Bank of the improper reporting of a bankruptcy or a bad debt charge off on her credit report";
in July 1998, Key Bank notified each of the Reporting Agencies "that all references to charge-offs and bankruptcies should be deleted from her credit report[s]";
upon the Plaintiff's learning that her credit reports continued to state the inaccurate information, she "sent each [Reporting Agency] a copy of Key Bank's letter stating" that the information was inaccurate and requesting that it be updated;
upon their receipt of the Plaintiff's correspondences enclosing Key Bank's letter, the Reporting Agencies were obligated under the FCRA to notify Key Bank "of the dispute";
"[t]he Plaintiff believes, and therefore avers, that the [Reporting Agencies] met" the notification requirement stated immediately above in October or November of 1998;
upon receiving such notice from the Reporting Agencies, Key Bank was required under the FCRA to "conduct an investigation and report the results of [it] to the [Reporting Agencies]"; and
"[e]ven after the Plaintiff complained to Key Bank about the misinformation appearing on her credit reports, th[e inaccurate] information continued to appear . . . as recently as October . . . 2000."
See id. at ¶¶ 39-40, 42-47 (stating these averments in support of negligent misreporting claim);
see also id. at ¶¶ 54-55, 57-59, 62 (same for willful misreporting claim).
Based on these allegations, Ms. Fino alleges that "Key Bank has been negligent in not ensuring that the misinformation it supplied to the [Reporting Agencies] has been adequately corrected." See id. at ¶ 43. She states the same allegations in support her willful misreporting claims, adding that in January 1999 "Key Bank willful[ly] refus[ed] to correct the misinformation in the Plaintiff's credit report" and stated it "would continue to report her credit information as it was currently being reported. . . ." See id. at ¶¶ 60-61.
The aforementioned allegations form the only bases for the Plaintiff's claims against Key Bank. ANALYSIS
The Plaintiff also alleges FCRA claims against the Reporting Agencies, see Counts III and IV of Am. Compl., but those allegations are not implicated by Key Bank's request for dismissal.
1. Key Bank's Arguments for Dismissal Under Rule 12(b)(6)
In moving for dismissal under Rule 12(b)(6), Key Bank asserts three arguments: a) that the Plaintiff's claims against it are time barred under the limitations period provisions of the FCRA; b) that Key Bank may not be liable under 15 U.S.C. § 1681s-2 (b) ("Section 1681s-2(b)") "because a credit reporting agency never notified [it] that a potential error existed in [the] Plaintiff's credit report[s]"; and c) that the Plaintiff's claims fall under 15 U.S.C. § 1681s-2(a) ("Section 1681s-2(a)"), a section for which there is no private right of action.
Having reviewed the specific arguments presented by Defense counsel in support of dismissal, this magistrate judge finds them less than entirely convincing. For reasons other that those articulated by Key Bank, however, this magistrate judge agrees that the Plaintiff's claims fall under Section 1681s-2(a), a section for which no private right of action exists. Thus, the District Court should sua sponte dismiss the Plaintiff's claims against Key Bank under Rule 12(b)(6) and deny as moot the Defendant's other, less convincing arguments for dismissal.
2. The FCRA Provisions Governing the Duties of "[F]urnishers of [I]nformation to [C]onsumer
[R]eporting [A]gencies"
On September 30, 1997, well before the incidents giving rise to this litigation, new provisions of the FCRA went into effect governing the "[r]esponsibilities of furnishers of information to consumer reporting agencies." See § 1681s-2; see also Ryan v. Trans Union Corp., 2001 WL 185182, *3 (N.D.Ill. Feb. 26, 2001) (unpublished opinion) (noting that same provisions went into effect on September 30, 1997). These provisions, codified under Section 1681s-2, identify two general types of obligations owed by furnishers: those addressing their duty "to provide accurate information" to credit reporting agencies, as stated in Section 1681s-2(a); and their duty under Section 1681s-2(b), upon receiving notice of consumer disputes from reporting agencies, to investigate said disputes and report the results to consumer reporting agencies.
Regarding the first class of duties, Section 1681s-2(a) provides in relevant part:
A [furnisher] shall not furnish information . . . to any consumer reporting agency if . . . the [furnisher] has been notified by the consumer . . . that [the] specific information is inaccurate . . . and . . . the information is, in fact, inaccurate.
. . . .
A [furnisher] who . . . has furnished to a consumer reporting agency information that the [furnisher] determines is not complete or accurate[, moreover,] . . . shall promptly notify the consumer reporting agency of that determination . . . and shall not thereafter furnish to the agency any of the information that remains not complete or accurate.
See §§ 1681s-2(a)(1)(B), 1681s-2(a)(2).
The FCRA dictates that these and the other provisions of Section 1681s-2(a) are to be "enforced exclusively . . . by the Federal agencies and officials and [certain] State officials. . . ." See § 1681s-2(d). Under this provision, the Act "grants the FTC exclusive enforcement power over" Section 1681s-2(a), and "there is no private right of action for a violation of" the Section. See Olexy v. Interstate Assurance Co., 113 F. Supp.2d 1045, 1047 (S.D.Miss. 2000) (citations and internal quotations omitted, emphasis added); Quigley v. Pennsylvania Higher Educ. Assistance Agency, 2000 WL 1721069, *2 (N.D.Cal. Nov. 08, 2000) (unpublished opinion) (same).
Regarding the second type of duties owed by furnishers, those regarding the duty to investigate consumer disputes, Section 1681s-2(b) provides in relevant part:
After receiving notice pursuant to section 1681i(a)(2)[, which requires a consumer reporting agency to notify the furnisher regarding customer disputes within five days of the reporting agency's receiving notification from the consumer of the same,] . . . the [furnisher] shall —
(A) conduct an investigation with respect to the disputed information;
(B) review all relevant information provided by the consumer reporting agency . . .;
(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 [furnisher has] furnished the information. . . .
See § 1681s-2(b)(1).
Most of the courts considering the issue have concluded that Section 1681s-2(b), unlike Section 1681s-2(a), may form the basis for a private cause of action, so long as the plaintiff shows that the furnisher "received notice from a consumer reporting agency," as opposed to the plaintiff alone, "that the credit information is disputed." See, e.g.,Dornhecker v. Ameritech Corp., 99 F. Supp. d 918, 928-29 (N.D.Ill. 2000) (emphasis in original) (dismissing without prejudice the plaintiff's claim under 1681s-2(b) because his pleadings alleged that he, not a consumer reporting agency, notified the furnisher of the dispute).
Although Key Bank argues that Section 1681s-2(b) does not apply "because a credit reporting agency never notified [it] that a potential error existed in [the] Plaintiff's credit report[s]," see discussion supra at 8, the Plaintiff states upon information and belief that the Reporting Agencies provided such notice. See id. at 7. In addition, she claims to have notified the Reporting Agencies of the continued errors when she "sent each [of them] a copy of Key Bank's [previously issued] letter stating" that the information in question was inaccurate. See id. at 6. If the Plaintiff could otherwise state a claim under Section 1681s-2(b), her statements on information and belief that the Reporting Agencies notified Key Bank of a dispute would suffice at this stage in the litigation. See, e.g., Jaramillo v. Experian Info. Solutions, Inc., 2001 WL 568988, *6 (E.D.Pa. May 21, 2001) (unpublished opinion) (holding same and stating: "When [the plaintiff] filed this complaint, [he] could not have known whether [reporting agencies] had forwarded the inaccurate information to [the furnisher]. . . . When this information is provided to [the] plaintiff in discovery, it will become clear whether [he] has a cause of action against [the furnisher under Section 1681s-2(b)], or solely against the credit reporting agencies."). Nevertheless, the Plaintiff's claims against Key Bank fall squarely within provisions stated in Section 1681s-2(a), and therefore they should be dismissed.
The District Court need not reach the issue of whether a private claim can be stated under Section 1681s-2(b). This is true because, based on the facts described in the Amended Complaint, the Plaintiff's claims undeniably fall within provisions stated in Section 1681s-2(a).
As noted above, the Plaintiff alleges that she first contacted Key Bank directly in May 1998 to complain of the inaccurate information being communicated in the Reporting Agencies' reports. See discussion supra at 4. She also expressly alleges that, within approximately two months of her first complaint to Key Bank, the Defendant had conducted an investigation of the matter and issued a letter to the Reporting Agencies stating that "all references to charge-offs and bankruptcies should be deleted from her credit report[s]. . . ." See id. (emphasis added). The remainder of her allegations, then, address either: (a) Key Bank's failure thereafter to "ensur[e] that the misinformation it supplied . . . ha[d] been adequately corrected," see id.; or (b) the Defendant's having continued to report the inaccurate information to the Reporting Agencies, despite its previously having detected and reported the error. See Am. Compl. at ¶ 60 ("On January 29, 1999, the Plaintiff was informed by . . . Key Bank . . . that [it] would continue to report her credit information as it was currently being reported and would not make any changes.").
The Plaintiff's allegation that Key Bank represented it "would continue to report her credit information as it was currently being reported" is ambiguous, at best. The Plaintiff alleges that, in July 1998, Key Bank recognized and reported to the Reporting Agencies that references to bankruptcy or charge offs were erroneous and should be removed from Ms. Fino's credit reports. See discussion supra at 4. Thus, if this was how the Plaintiff's credit was "currently being reported," then Key Bank acted properly in continuing to make such reports. Nevertheless, the court is obligated to read all reasonable inferences in favor of the Plaintiff, and other averments may be read to infer that Key Bank continued to mis-report the information that was previously investigated and learned to be incorrect. See, e.g., Am. Compl. at ¶ 47 ("Even after the Plaintiff complained about the misinformation appearing on her credit reports, this information continued to appear for more than two years. . . ."). Indeed, the Plaintiff's briefing in opposition to dismissal relies on such an inference. See Pl.'s Br. in Opp'n to Key Bank's Mot. to Dismiss (Doc. 28, hereinafter cited as "Pl.'s Opp'n Br.") at 12 ("it is likely that . . . Key Bank . . . continued to issue false information regarding the loan to which [the Plaintiff] was a party").
These claims, as well as the alleged facts leading up to them, fall squarely within the provisions of Section 1681s-2(a). As noted above Section 1681s-2(a) provides that, if a furnisher "has been notified by the consumer" that information regarding the consumer "is inaccurate" and "the information is, in fact, inaccurate," the furnisher shall not provide it to any credit reporting agency. See id., § 1681s-2(a)(1)(B)(i)-(ii) (emphasis added). This provision describes exactly what happened in the instant case. The Plaintiff's own pleadings assert that, when she first learned that Key Bank was reporting incorrect information, she notified the institution of the same. See Am. Compl. at ¶ 11. Within two months of her first contact, Key Bank issued a letter to the Reporting Agencies "stating that all references to charge-offs and bankruptcies should be deleted from her credit report[s]." See id. at ¶ 15.
What happened thereafter is also governed by Section 1681s-2(a). The Section contains provisions specifically addressing a furnisher's "[d]uty to correct and update information," which state:
A [furnisher] who . . . has furnished to a consumer reporting agency
information that the [furnisher] determines is not complete or accurate . . .
shall promptly notify the consumer reporting agency of that determination . . . and
shall not thereafter furnish to the agency any of the information that remains not complete or accurate.
See § 1681s-2(a)(2) (emphasis and double-emphasis added).
Key Bank's duties to correct information it determined to be inaccurate, and to refrain from continuing to report such known, inaccurate information, are expressly addressed by the above-quoted provisions. See id. Unfortunately for the Plaintiff, though, the enforcement of these provisions is exclusively reserved to the FTC; there is no private right of action. See Olexy, 113 F. Supp.2d at 1047.
Recognizing that a private claim under Section 1681s-2(a) fails, the Plaintiff attempts to "shoehorn" her claims against Key Bank into Section 1681s-2(b). See Am. Compl., Counts I II (alleging violations of Section 1681s-2(b)). Specifically, Plaintiff's counsel looks to the provisions in Section 1681s-2(b) that require a furnisher, upon notice from a reporting agency, to investigate consumer disputes and report the results to reporting agencies. See generally, e.g., Am. Compl. at ¶¶ 43-46.
Although the Plaintiff's Amended Complaint also makes reference to Sections 1681n and 1681o, those provisions do not provide an inroad to liability for Key Bank. Section 1681s-2(c) specifically states that, except under circumstances not presented here, "Sections 1681n and 1681o . . . do not apply to any failure to comply with" Section 1681s-2(a). See § 1681s-2(c) ( citing Section 1681(c)(1)(B) as only exception to non-applicability of Sections 1681n and 1681o); see also § 1681(c)(1)(B) (addressing "State action[s] for violations" of the FCRA) (emphasis added).
In this magistrate judge's opinion, the Plaintiff's attempt to massage her averments into Section 1681s-2(b) tortures the plain language of the Act. Plaintiff's counsel would have the court view her alleged complaints to the Reporting Agencies, regarding inaccuracies already detected and reported by Key Bank, as implicating a new duty to investigate. What precisely Key Bank was to investigate, when it had already reviewed the Plaintiff's information in July 1998 and notified the Reporting Agencies it was inaccurate, is beyond the court's comprehension.
This is not to say that Key Bank's actions, as alleged by the Plaintiff, were in full compliance with the FCRA. Ms. Fino expressly avers that the Defendant was negligent in "not ensuring that the misinformation it supplied to the [Reporting Agencies] ha[d] beenadequately corrected," and she implicitly asserts that Key Bank willfully "continued to issue false information" after learning of its errors. See Am. Compl. at ¶ 43 (emphasis added) and Pl.'s Opp'n Br. at 12 (emphasis added). But the FRCA provisions addressing Key Bank's "[d]uty to correct and update information" and to "not [continue] . . .furnish[ing] . . . information that remain[ed] not complete or accurate" fall under Section 1681s-2(a), a section for which there is no private right of action. See §§ 1681s-2(a)(1)(B), 1681s-2(a)(2) (emphasis added); see also § 1681s-2(d).
Plaintiff's counsel also appears to urge that, under the circumstances presented here, equity compels the recognition of Ms. Fino's right to a private action. See generally Pl.'s Opp'n Br. at 15 (stating that Key Bank's "attempt to claim that it should not be held responsible for subsequent false reports would" result in "manifest injustice"); see also id. at 16-18 (arguing that Key Bank should be equitably estopped from denying liability under the Act). Regardless of the equities, however, the court is not at liberty to rewrite the statute to manufacture a private right of action against this Defendant. To ignore the provisions in Section 1681s-2(a) expressly addressing the duties allegedly breached by Key Bank would be to disregard the "well-settled canon of statutory construction that courts should disfavor interpretations of statutes that render language superfluous." See U.S. v. Voigt, 89 F.3d 1050, 1087 (3d Cir. 1996) (citation and internal quotations omitted, emphasis added).
Simply stated, under any possible reading of the Amended Complaint, Section 1681s-2(a) squarely addresses the duties allegedly breached by Key Bank. The enforcement of that Section is reserved exclusively to an agency of the federal government. Thus, the Plaintiff's claims against Key Bank should be dismissed.
3. A
Sua Sponte Dismissal of the Plaintiff's Claims Against Key Bank Is Permissible Because this Report and Recommendation Provides Her Notice of the Potential
Dismissal and an Adequate Opportunity to Respond.
As noted above, the basis for this magistrate judge's recommendation of dismissal differs from those specifically identified by Key Bank. Accordingly the recommended dismissal, if adopted, should be made sua sponte.
The Court of Appeals for the Third Circuit has recognized that "there are times when a court may sua sponte raise the issue of the deficiency of a pleading under Rule 12(b)(6)," provided the litigant is afforded "notice and an opportunity to respond." See Roman v. Jeffes, 904 F.2d 192, 196 (3d Cir. 1990) (citations omitted); cf. also Otis Elevator Co. v. George Washington Hotel Corp., 27 F.3d 903, 910 (3d Cir. 1994) (district court must "give notice and an opportunity to oppose summary judgment" before entering summary judgment sua sponte). This is one of those times, as the Plaintiff cannot state claims against Key Bank upon which relief may be granted.
Regarding notice, this Report and Recommendation undoubtedly notifies Plaintiff's counsel of the District Court's potential sua sponte dismissal. With respect to the Plaintiff's opportunity to respond, this magistrate judge will extend the period for filing objections to the Report and Recommendation. Accordingly, the court is satisfied that the requisite notice and opportunity to respond have been provided. CONCLUSION
This magistrate judge notes that other federal courts have sanctioned use of the report and recommendation procedures to fulfill the notice and response requirements in connection with sua sponte rulings. See, e.g., United States v. Lee, 145 F.3d 1347, 1998 WL 292388, *2 (10th Cir. May 28, 1998) (unpublished opinion) (finding that objections to report and recommendation provided party "ample opportunity to respond" to potential sua sponte ruling).
For the reasons stated above, it is recommended that the District Court sua sponte dismiss the Plaintiff's claims against the Defendant KeyBank National Association under Federal Rule of Civil Procedure 12(b)(6), and deny as moot that Defendant's Motion to Dismiss (Doc. 25).
Under the Magistrates Act, 28 U.S.C. § 636(b)(1)(B) and (C), and Rule 72.1.4(B) of the Local Rules for Magistrates, objections to this Report and Recommendation would be due by August 13, 2001.
Because this magistrate judge has recommended a sua sponte dismissal, however, the deadline for filing objections is hereby extended until August 22, 2001. Responses to objections are due by September 3, 2001.