Opinion
Case No. 04-4128-JAR.
March 9, 2005
MEMORANDUM ORDER OPINION DENYING PLAINTIFF'S MOTION TO REMAND AND GRANTING IN PART DEFENDANT'S MOTION TO DISMISS
This matter comes before the Court on defendant Beneficial Kansas, Inc.'s Motion to Dismiss (Doc. 7) plaintiff Ronald D. Cox, Jr.'s Amended Petition for failure to state a claim. Also before the Court is plaintiff's Motion to Remand his case to state court (Doc. 9). For the reasons stated below, the Court denies plaintiff's remand motion and grants in part defendant's request to dismiss the case.
Background
Plaintiff originally brought this case in Shawnee County District Court alleging that defendant violated the Kansas Consumer Protection Act (KCPA), made a negative report to a consumer credit reporting agency, and violated the Federal Truth in Lending Act. Subsequently, defendant filed a Notice of Removal of Action (Doc. 1), removing this case based upon both the federal question jurisdiction statute and the diversity jurisdiction statute. One day after defendant removed the case, plaintiff filed an amended petition in which he abandoned his Federal Truth in Lending Act claim, leaving only his KCPA and consumer reporting agency claims. Defendant then filed a motion to dismiss plaintiff's amended petition for failure to state a claim. In his response to defendant's motion to dismiss, plaintiff asked the Court to remand this action to Shawnee County District Court.
Discussion
In this case, the Court is faced with two motions — one to dismiss the case on the merits and one to remand the case to state court. In such circumstances, the Tenth Circuit has cautioned that the "better practice [is] to rule first on the motion to remand and if granted to . . . sen[d] the motion to dismiss back to the state court." The Court therefore first considers plaintiff's motion to remand. Because the Court concludes that removal was proper, the Court next reaches the merits of defendant's motion to dismiss.
See In re Bear River Drainage Dist., 267 F.2d 849, 861 (10th Cir. 1995).
A. Motion to Remand
A civil action is removable only if plaintiff could have originally brought the action in federal court. The Court is required to remand "if at any time before final judgment it appears that the district court lacks subject matter jurisdiction." Because federal courts are courts of limited jurisdiction, the law imposes a presumption against federal jurisdiction and requires a court to deny its jurisdiction in all cases where such jurisdiction does not affirmatively appear in the record.
Id. § 1447(c).
Frederick Warinner v. Lundgren, 962 F. Supp. 1580, 1582 (D. Kan. 1997) (citing Basso v. Utah Power Light Co., 495 F.2d 906, 909 (10th Cir. 1974)).
Ins. Corp. of Ireland, Ltd. v. Compagnie des Bauxites de Guinee, 456 U.S. 694, 702 (1982).
Defendant maintains that federal jurisdiction is appropriate based on both the federal question statute, 28 U.S.C. § 1331, and the diversity jurisdiction statute, 28 U.S.C. § 1332. The court begins with defendant's allegations of federal question jurisdiction.
1. Federal Question Jurisdiction
The federal question statute confers jurisdiction over cases "arising under" federal law. "The presence or absence of federal question jurisdiction is governed by the 'well-pleaded complaint rule,' which provides that federal jurisdiction exists only when a federal question is presented on the face of the plaintiff's properly pleaded complaint." "The rule makes the plaintiff the master of the claim; he or she may avoid federal jurisdiction by exclusive reliance on state law."
Rice v. Office of Servicemembers' Group Life Ins., 260 F.3d 1240, 1245 (10th Cir. 2001).
Felix v. Lucent Techs., Inc., 387 F.3d 1146, 1154 (10th Cir. 2004) (quoting Caterpillar, Inc. v. Williams, 482 U.S. 386, 392 (1987)).
Id. (quoting Caterpillar, Inc., 482 U.S. at 392).
On its face, plaintiff's petition asserts two state law causes of action. Plaintiff brings a claim for violations of the Kansas Consumer Protection Act, K.S.A. 50-617, et seq. In addition, plaintiff brings an action stemming from the improper reporting of the status of a loan to a consumer reporting agency, which caused plaintiff damages. Plaintiff does not invoke any federal statute in his complaint. Thus, pursuant to the well-pleaded complaint rule, no federal question is present.
In his motion to remand, plaintiff states that his claim arises under state common law.
Even though plaintiff's claim does not expressly arise under federal law, defendant urges that the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. §§ 1681 et seq., completely preempts any state law which attempts to regulate furnishers of credit information, including a consumer reporting claim based on common law. "The general rule is that a federal defense, even one relying on the preclusive effect of a federal statute, is not enough to authorize removal to federal court." This is so because, as a defense, federal preemption does not appear on the face of the well-pleaded complaint and, thus, does not authorize removal. Accordingly, the Supreme Court has held that "a case may not be removed to federal court on the basis of a federal defense . . . of pre-emption even if the defense is anticipated in plaintiff's complaint, and even if both parties concede that the federal defense is the only question truly at issue."
Felix, 387 F.3d at 1154 (citing Beneficial Nat'l Bank v. Anderson, 539 U.S. 1, 6 (2003)).
Gully v. First Nat'l Bank, 299 U.S. 109, 113 (1936).
Caterpillar, Inc., 482 U.S. at 393.
However, the Supreme Court has recognized an exception to the well-pleaded complaint rule known as the "complete preemption doctrine." "Under the 'complete preemption doctrine,' federal courts may exercise federal question jurisdiction over complaints that, although not presenting federal questions on their face, nonetheless present state law claims that are preempted by federal law." A "corollary of the well-pleaded complaint rule . . . is that Congress may so completely pre-empt a particular area that any civil complaint raising this select group of claims is necessarily federal in character." Thus, once "an area of state law has been completely pre-empted, any claim purportedly based on that pre-empted state law is considered, from its inception, a federal claim, and therefore arises under federal law." In this case then, the Court must consider whether plaintiff's common law claim is completely preempted by the FCRA.
Felix, 387 F.3d at 1154 (citing Caterpillar, Inc., 482 U.S. at 393).
Garley v. Sandia Corp., 236 F.3d 1200, 1207 (10th Cir. 2001).
Metro. Life Ins. Co. v. Taylor, 481 U.S. 58, 63-64 (1987).
Garley, 236 F.3d at 1207 (citing Caterpillar, Inc., 482 U.S. at 393).
The FCRA was enacted "to require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit . . . in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information." The FCRA places distinct obligations on three types of entities: (1) consumer reporting agencies; (2) users of consumer reports; and (3) furnishers of information. In this case, plaintiff has sued defendant in its capacity as a furnisher of information to a consumer reporting agency. Plaintiff specifically alleges that defendant, after receiving notice of an inaccuracy, furnished inaccurate information to a consumer reporting agency.
Aklagi v. Nationscredit Fin. Servs., 196 F. Supp. 2d 1186, 1192 (D. Kan. 2002) (citing Carney v. Experian Info. Solutions, Inc., 57 F. Supp. 2d 496, 500 (W.D. Tenn. 1999)).
Under the FCRA, the duties of furnishers of information to consumer reporting agencies are set forth in 15 U.S.C. § 1681s-2. This provision identifies two general types of obligations owed by furnishers of information: "those addressing their duty 'to provide accurate information' to credit reporting agencies, as stated in [s]ection 1681s-2(a); and their duty under [s]ection 1681s-2(b), upon receiving notice of consumer disputes from reporting agencies, to investigate said disputes and report the results to consumer reporting agencies." Key to plaintiff's claim is section 1681s-2(a)(1)(B), which prohibits furnishers from providing inaccurate information to consumer reporting agencies after the furnisher has been notified by the consumer of the inaccuracy.
Hasvold v. First Bank, N.A., 194 F. Supp. 2d 1228, 1235 (D. Wyo. 2002).
Section 1681t(b)(1)(F) of the FCRA provides that "[n]o requirement or prohibition may be imposed under the laws of any State . . . with respect to any subject matter regulated under . . . section 1681s-2 of this title, relating to the responsibilities of [furnishers] of information to consumer reporting agencies. . . ." Defendant urges that this section of the FCRA completely preempts plaintiff's common law claim for improper credit reporting.
In Aklagi v. Nationscredit Financial Services, Judge Lungstrum had occasion to consider the preemptive force of section 1681t(b)(1)(F). He concluded that "to the extent that [defendant's] conduct falls within the 'subject matter regulated under . . . section 1681s-2,' [plaintiff's] state law . . . claims against [defendant] are preempted." Judge Lungstrum then broke defendant's conduct down into "two discrete time periods: (1) the time period between when [defendant] made the loan and when it first received notice of [plaintiff's] dispute; and (2) the time period after [defendant] received notice of [plaintiff's] dispute." Because section 1681s-2(a)(1)(B) prohibits a furnisher from providing inaccurate information to a consumer reporting agency after notification of the inaccuracy from the consumer, Judge Lungstrum concluded that only defendant's furnishing of inaccurate information after notification of a dispute was within "the subject matter regulated under . . . section 1681s-2." Hence, Judge Lungstrum held that "any claim predicated on [defendant] furnishing inaccurate information to a consumer reporting agency after receiving notice of [plaintiff's] dispute is completely preempted by § 1681t(b)(1)(F)." Not surprisingly, he concluded that "[o]n the other hand, [defendant] also furnished inaccurate information to a consumer reporting agency after it made the loan but before it received notice of [plaintiff's] dispute. That particular conduct is not regulated under § 1681a-2."
196 F. Supp. 2d 1186 (D. Kan. 2002).
Id. at 1194.
Id.
Id. at 1194-95.
Id. at 1196 (emphasis in original).
Id. at 1195 (emphasis in original). Judge Lungstrum concluded, however, that claims based upon this conduct might be preempted by 15 U.S.C. § 1681h(e), which provides qualified immunity to furnishers of credit information against state law defamation, invasion of privacy and negligence claims, unless the furnisher acted "with malice or willful intent to injure." Id. at 1195-96. As plaintiff has not alleged a defamation, invasion of privacy or negligence claim, the Court does not consider preemption under section 1681h(e).
The Court agrees with the Judge Lungstrum's reasoned analysis in Aklagi. As in Aklagi, here, plaintiff brings suit against a furnisher for providing inaccurate information to a credit reporting agency after receiving notice of such inaccuracy. As such, plaintiff's claim is within "the subject matter regulated under . . . section 1681s-2" and is completely preempted by section 1681t(b)(1)(F). Plaintiff's claim, therefore, arises under federal law. Consequently, plaintiff's motion to remand must be denied.
See Hasvold, 194 F. Supp. 2d at 1239 (concluding that "federal law under the FCRA preempts plaintiff's claims against the defendant relating to it as a furnisher of information," and citing in part the complete preemption of plaintiff's state law claims in its denial of plaintiff's motion to remand its claim).
2. Diversity Jurisdiction
Defendant additionally asserts that the diversity jurisdiction statute, 28 U.S.C. § 1332, provides an independent basis for federal subject matter jurisdiction. To establish diversity jurisdiction, the party asserting jurisdiction, in this instance defendant, must allege facts essential to show jurisdiction, namely that plaintiff and defendant are citizens of different states and that the amount in controversy is greater than $75,000. Because defendant is the party alleging that federal jurisdiction exists, it has the burden of proving facts supporting jurisdiction by a preponderance of the evidence. Thus, "[b]oth the requisite amount in controversy and the existence of diversity must be affirmatively established on the face of either the petition or the removal notice."
Rice, 260 F.3d at 1245 (citing 28 U.S.C. § 1332(a)).
Martin v. Franklin Capital Corp., 251 F.3d 1284, 1290 (10th Cir. 2001).
Laughlin v. Kmart Corp., 50 F.3d 871, 873 (10th Cir. 1995).
Plaintiff's petition states that the amount in controversy is greater than $75,000 and that he resides in Kansas. The petition also states that defendant "is a Kansas corporation and may be served with process by serving its resident agent, Corporation Company at 515 S. Kansas Ave., Topeka, KS 66603." While the petition indicates that defendant is a corporation registered to do business in Kansas, it does not mention the state in which defendant is incorporated nor the state where defendant has its principal place of business, and therefore does not disclose defendant's citizenship for diversity purposes. In its notice of removal, defendant states that it "is incorporated in Delaware and its principal place of business is located in Prospect Heights, Illinois." The court concludes that defendant's removal notice adequately demonstrates diversity of citizenship by demonstrating that, as a citizen of Delaware and Illinois, it is completely diverse from plaintiff, a Kansas citizen.
See 28 U.S.C. § 1332(c) (providing that a corporation is treated as a citizen of the state where it is incorporated and the state where it has its principal place of business).
B. Motion to Dismiss
Defendant seeks dismissal of plaintiff's case for failure to state a claim, pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. A court may dismiss a claim for failure to state a claim upon which relief can be granted. Dismissal is appropriate only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations. The purpose of Federal Rule of Civil Procedure 12(b)(6) is to allow a defendant to test whether, as a matter of law, the plaintiff is entitled to legal relief even if everything alleged in the complaint is true.
Hishon v. King Spalding, 467 U.S. 69, 73 (1984) (citation omitted).
Mounkes v. Conklin, 922 F. Supp. 1501, 1506 (D. Kan. 1996) (quotation omitted).
On a 12(b)(6) motion, a court judges the sufficiency of the complaint, accepting as true the well-pleaded factual allegations and drawing all reasonable inferences in favor of the plaintiff. The court construes the allegations in the light most favorable to the plaintiff. These deferential rules, however, do not allow the court to assume that a plaintiff can prove facts that it has not alleged nor that the defendants have violated the laws in ways that have not been alleged. If the facts narrated by the plaintiff "do not at least outline or adumbrate" a viable claim, the complaint cannot pass Rule 12(b)(6) muster. Dismissal is a harsh remedy to be used cautiously so as to promote the liberal rules of pleading while protecting the interest of justice.
1. Fair Credit Reporting Act Claim
Shaw v. Valdez, 819 F.2d 965, 968 (10th Cir. 1987).
Hall v. Bellmon, 935 F.2d 1106, 1109 (10th Cir. 1991).
Associated Gen. Contractors v. Cal. State Council of Carpenters, 459 U.S. 519, 526 (1983).
Mounkes, 922 F. Supp. at 1506 (D. Kan. 1996) (citing Gooley v. Mobil Oil Corp., 851 F.2d 513, 515 (1st Cir. 1988) (quotation omitted)).
Id.
As mentioned previously, plaintiff brings a claim against defendant for furnishing inaccurate information to a consumer reporting agency. Plaintiff specifically alleges that "[a]fter receiving notice of the forgery and the fact that the plaintiff had signed the document without any figure as to the alleged loan, the defendant made a credit report to the credit reporting agency which was a negative report which caused the plaintiff time delay in obtaining a loan." As such, plaintiff's claim arises under section 1681s-2(a)(B) which provides, inter alia, that "a [furnisher] shall not furnish any information relating to a consumer 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."
However, a private cause of action does not exist for violations of section 1681s-2(a). Indeed, the FCRA eliminates remedies to consumers for violations of subsection 1681-2(a). In addition, the FCRA provides that section 1681s-2(a) "shall be enforced exclusively . . . by Federal agencies and State officials." Accordingly, plaintiff's claim stemming from the furnishing of inaccurate information to a consumer reporting agency in violation of section 1681s-2(a), must be dismissed for failure to state a claim.
Aklagi, 196 F. Supp. at 1192.
15 U.S.C. § 1681s-2(c); Aklagi, 196 F. Supp. at 1192.
2. Kansas Consumer Protection Act Claims
Plaintiff also alleges that defendant violated the KCPA by committing "unconscionable acts and practices in violation of K.S.A. 50-627," and "deceptive acts and practices in violation of K.S.A. 50-626." Both violations are based upon plaintiff signing a revolving loan agreement, allegedly with no credit amount listed. Plaintiff alleges that the credit limit was completed after he signed the agreement, in an amount in excess of his oral agreement with defendant. Defendant argues that plaintiff has failed to state a claim because plaintiff has failed to allege any facts to show that the transaction is governed by the KCPA; that is, plaintiff has failed to allege that the loan is a "consumer transaction;" that defendant is a "supplier;" or that plaintiff is a "consumer." In addition, defendant asserts that the exhibits attached to plaintiff's petition do not support his claim, as they indicate that plaintiff knew the credit limit when he signed the agreement.
At the outset, the Court notes that plaintiff attached the loan agreement to his petition to demonstrate that the loan amount was completed as $8,600, not the $2,000, to which he allegedly agreed. It is impossible to discern from the loan agreement when the credit limit amount was completed. It could have been completed before plaintiff signed the agreement, and it could, as plaintiff claims, have only been completed after he signed it. In the context of a 12(b)(6) motion, the court must accept as true the well-pleaded factual allegations and draw all reasonable inferences in favor of the plaintiff. Thus, for the purposes of this motion, the Court accepts as true that the credit limit amount was not completed when plaintiff signed the agreement.
See Shaw, 819 F.2d at 968.
The Court concludes that plaintiff has adequately pled his KCPA claims. Although KCPA claims are governed by Rule 9(b) of the Federal Rules of Civil Procedure and therefore, like fraud claims, must be pled with specificity, defendant has directed the Court to no authority that a plaintiff must plead that a given transaction is a "consumer transaction," or that a plaintiff is a "consumer," while a defendant is a "supplier," under the KCPA. The federal "notice pleading" rubric requires only "'a short and plain statement of the claim' that will give the defendant fair notice of what the plaintiff's claim is and the grounds upon which it rests." The Tenth Circuit has interpreted this requirement to mean that "factual pleading is required only insofar as it is necessary to place a defendant on notice as to the type of claim alleged and the grounds upon which it rests, thereby enabling a defendant to prepare a responsive pleading."
In re Universal Serv. Fund Tel. Billing Practices Litig., 300 F. Supp. 2d 1107, 1150 (D. Kan. 2003). Notably, defendant does not seek dismissal pursuant to Rule 9(b).
Conley v. Gibson, 355 U.S. 41, 47 (1957) (quoting Fed.R.Civ.P. 8(a)(2)).
Mountain View Pharm. v. Abbott Labs., 630 F.2d 1383, 1388 (10th Cir. 1980).
In this case, defendant is clearly on notice that plaintiff asserts that he is a "consumer," that defendant is a "supplier," and that the loan at issue is a "consumer transaction." This is evident from defendant's motion to dismiss. Thus, the Court concludes that plaintiff's failure to explicitly allege that he, as a consumer, brings claims under the KCPA against a supplier for violations involving a consumer transaction is not a basis for dismissal pursuant to Rule 12(b)(6).
IT IS THEREFORE ORDERED BY THE COURT that Plaintiff's Motion to Remand (Doc. 9) is DENIED.
IT IS FURTHER ORDERED BY THE COURT that Defendant's Motion to Dismiss (Doc. 7) is GRANTED IN PART.
IT IS SO ORDERED.