Opinion
CIVIL ACTION NO. 1:98CV305-P-B
March 30, 2000
MEMORANDUM OPINION
This cause comes before the Court on motions to dismiss filed by the defendants. The Court has duly considered the motions and the parties' memoranda and is ready to rule.
FACTUAL BACKGROUND
This case involves Patricia Thompson, a citizen of Alabama, and incidents involving various defendants which grew out of Thompson's unfortunate experience of having a box of personal checks stolen out of her mailbox. The thief began writing forged checks at various retail establishments in Alabama; when the checks were presented for payment at Thompson's bank, the bank refused to make payment on them and the checks were returned, with either the notation "insufficient funds" or "account closed."
Certain of the retail establishments subscribed to a check authorization network (known as "SCAN") run by Deluxe Payment Protection Systems, Inc. (DPPS). When the checks were returned unpaid, these retail establishments forwarded information noting Thompson's bank account and drivers license numbers to the SCAN network. This information was apparently keyed into the SCAN system. Thereafter, when plaintiff visited retail establishments which subscribed to SCAN and presented a check as a form of payment for the transaction, the retailer would run the check through the verification system. SCAN then electronically transmitted information stored in its database relative to its subscribers' previous experience with dishonored drafts on that drivers' license number or bank account. This in turn resulted in the merchants' decision to refuse the proffered check. At the time of refusal, plaintiff was provided with a SCAN referral card which provided her with a number to call in order to "clear up" the problem.
Electronic Transaction Corporation (ETS) is also named as a defendant in this suit; ETS and DPPS are one and the same; ETS changed its name to DPPS in August 1996.
Thompson avers that she took all appropriate steps to notify the various retailers of the forgeries. She completed a forgery affidavit, complete with police report, for each merchant in which she stated under oath that the checks written to the venders were unauthorized forgeries. In every case, the merchants assured her that the problem would be remedied and that any adverse information reported to consumer reporting agencies would be deleted. Despite her efforts, Thompson continued to experience problems whenever she visited an establishment which subscribed to SCAN.
According to the Complaint, "the retail defendants and ETC/DPPS had and have an agreement whereby the retail defendants relays [sic] to ETC/DPPS verification that a specific check is a forgery, and that, after such verification by the retailer, ETC/DPPS is supposed to delete any adverse information concerning the affected customer."
In September 1998, plaintiff filed her class action Complaint, asserting a right to recovery pursuant to the Fair Credit Reporting Act, codified at 15 U.S.C. § 1681 et seq., as well as various claims pursuant to state law. Defendants responded with motions to dismiss on various grounds ranging from insufficient service of process to failure to state a claim and lack of personal jurisdiction. The matter has been briefed and the Court is ready to rule.
LEGAL ANALYSIS
In Personam Jurisdiction
Defendant Federated Department Stores, Inc. (Federated) seeks dismissal from this action based on lack of personal jurisdiction. Where a defendant challenges its joinder on the grounds of personal jurisdiction, the plaintiff bears the burden of bringing forward facts which establish prima facie evidence of personal jurisdiction. Wilson v. Belin, 20 F.3d 644, 646-47 (5th Cir. 1994).
Federated is a Delaware Corporation which has its principal place of business in New York. Its subsidiary, Rich's Department Stores, Inc. (Rich's) is incorporated in Ohio and has its principal place of business in Georgia. All of the claims in plaintiff's Complaint pertain to allegedly forged checks tendered as payment for goods purchased at Rich's. The transactions in question occurred at a Rich's location in Alabama. Neither Federated nor Rich's is registered to do business in Mississippi, nor does either company conduct business in the state of Mississippi.
Federated avers in its motion to dismiss and supporting memorandum of authorities that it is not a proper defendant to this action. The proper defendant is apparently Rich's Department Stores, Inc., a subsidiary of Federated.
Federated avers that it cannot be subjected to suit in Mississippi for two reasons: 1) plaintiff cannot satisfy the requirements of Mississippi's long arm statute; and 2) that permitting plaintiff to pursue an action against it under the instant circumstances would defy constitutional requirements of due process. Federated is correct in both regards.
Federal Rule of Civil Procedure 4 authorizes service of process upon nonresident corporations by reference to the forum state's long arm statute. F.R.C.P. 4(e), (h). In this case, Mississippi's long arm statute provides for the exercise of jurisdiction over nonresident defendants in the following circumstances:
Any nonresident person, firm, general or limited partnership, or any foreign or other corporation not qualified under the constitution and laws of this state as to doing business herein, who shall make a contract with a resident of this state to be performed in whole or in part by any party in this state, or who shall commit a tort in whole or in part in this state against a resident or nonresident of this state, or who shall do any business or perform any character of work or service in this state, shall by such act or acts be deemed to be doing business in Mississippi.
Miss. Code Ann. § 13-3-57 (1972). A fair reading of the statute and reference to case law reveals that the "tort prong" of the statute is the only one available to non-resident plaintiffs such as Thompson. Herrley v. Volkswagen of America, Inc., 957 F.2d 216, 218 (5th Cir. 1992). See also Smith v. DeWalt Products Corp., 743 F.2d 277 (5th Cir. 1984); Cowart v. Shelby County Health Care Corp., 911 F. Supp. 248, 249-250 (S.D.Miss. 1996); Moore Video Distributors, Inc. v. Quest Entertainment, Inc., 823 F. Supp. 1332, 1337 (S.D.Miss. 1993). Plaintiff's Complaint does not allege the commission of any tortious act in Mississippi, let alone one involving Federated; all of the incidents in the Complaint took place in Alabama.
Hence, plaintiff's response in opposition to Federated's motion to dismiss evades this issue altogether. In view of the fact that a non-resident plaintiff may not avail herself of either the "contract" or "doing business" prongs of Mississippi's long arm statute, plaintiff's arguments concerning any contacts which Fingerhut, as a subsidiary of Federated, may have with Mississippi, are off target.
Plaintiff's failure to satisfy the long arm statute negates the necessity of examining the due process limitations on suits against nonresident defendants.
However, the Court possesses discretionary authority to order transfer to a court in a forum state where all defendants are subject to in personam jurisdiction in lieu of dismissal. Bentz v. Recile, 778 F.2d 1026 (5th Cir. 1985) (relying on 28 U.S.C. § 1404(a) and 1406(a) to support transfer despite lack of personal jurisdiction over certain defendants). Accordingly, the Court declines to dismiss Federated and will instead order a transfer of the instant case to a federal district court as set forth in the venue analysis infra.
Improper Venue
Defendants DPPS, Kmart, J.C. Penney Company, Inc., McRae's, Inc., Parisian, Inc., Goody's Family Clothing, Inc., and Wal-Mart assert a right to dismissal pursuant to F.R.C.P. 12(b)(3) based on improper venue.
Plaintiff's complaint includes a jurisdictional statement indicating that the Court has original federal question jurisdiction and that venue is based on 28 U.S.C. § 1391(c). Plaintiff misconstrues the venue statute. Subsection (c) of the statute does not purport to address the proper venue for actions against corporations; it merely explains the residence provisions of subsections (a) and (b) where the defendant happens to be a corporation.
Since plaintiff's Complaint asserts that subject matter jurisdiction is founded on 28 U.S.C. § 1331, subsection (b) of the venue statute controls the place where venue lies. It provides:
A civil action wherein jurisdiction is not founded solely on diversity of citizenship may, except as otherwise provided by law, be brought only in (1) a judicial district where any defendant resides, if all defendants resident in the same State, (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is the subject of the action is situated, or (3) a judicial district in which any defendant may be found, if there is no district in which the action may otherwise be brought.28 U.S.C. § 1391(b).
Subsection (b)(1) of the statute permits suit to be pursued in a judicial district where any defendant resides, if all defendants reside in the same State. Id. Under § 1391(c), "a defendant that is a corporation shall be deemed to reside in any judicial district in which it is subject to personal jurisdiction at the time the action is commenced." 28 U.S.C. § 1391(c).
Based on the Court's findings relative to Federated's challenge to personal jurisdiction, it is readily apparent that the plaintiff cannot establish the prerequisite for venue in Mississippi under subsection (b)(1) of the venue statute.
Subsection (b)(2) lays venue in a judicial district in which "a substantial part of the events or omissions giving rise to the claim occurred. . . ." In this case, there is no dispute that no events or omissions giving rise to the plaintiff's claims occurred in Mississippi. Instead, it is undisputed that all of the incidents and omissions which form the plaintiff's cause of action transpired in Alabama. Accordingly, the only proper venue for this action under § 1391(b)(2) is a district court in Alabama.
Plaintiff may not rely on subsection (b)(3) of § 1391 in order to establish venue because it is phrased as a fallback provision; that is, it only applies "if there is no district in which the action may otherwise by brought." 28 U.S.C. § 1391 (b)(3). See 15 Charles Alan Wright et al, Federal Practice and Procedure, § 3802.1 (2d ed. 1986 Supp. 1999).
Title 28, sections 1404 and 1406 afford remedies other than dismissal for instances in which a plaintiff files suit in an inconvenient or improper venue. 28 U.S.C. § 1404, 1406. Section § 1404(a) provides: "For the convenience of parties and witnesses, in the interest of justice, a district court may transfer any civil action to any other district or division where it might have been brought." Similarly, § 1406(a) requires that "[t]he district court of a district in which is filed a case laying venue in the wrong division or district shall dismiss, or if it be in the interest of justice, transfer such case to any district or division in which it could have been brought."
The Court finds that it is in the interests of justice to order the transfer of this case, in lieu of dismissal, to an appropriate federal district court in Alabama. However, review of the pleadings and briefs reveals no consensus on the appropriate district, nor can the Court glean the information necessary to such a finding from the sketchy facts which merely establish the locus of the transactions and occurrences as Alabama. The Court will suspend transfer of the instant case pending the parties' submission of a stipulation or other pleadings informing the Court of the district courts in Alabama having the most substantial connection to the events giving rise to this litigation.
The parties are to submit the appropriate stipulation and/or pleadings within fifteen (15) days from the entry of this Opinion.
Claims Under the Fair Credit Reporting Act and Pendent State Law Claims
Plaintiff's complaint asserts a damages claim and a claim for injunctive relief under the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq. Defendants Kmart, J.C. Penney Company, Inc., McRae's, Inc., Parisian, Inc., Goody's Family Clothing, Inc., and Wal-Mart assert a right to dismissal of plaintiff's claims under the FCRA for failure to state a claim under F.R.C.P. 12(b)(6). These defendants also seek dismissal of plaintiff's state law claims against them for lack of subject matter jurisdiction. The Court will address each of these issues separately.
Compensatory Damages Under the Fair Credit Reporting Act
Dismissal pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure is appropriate if a party fails to state a claim under which relief can be granted. The allegations of the Complaint must be accepted as true when the Court considers whether the plaintiffs have stated a cause of action. See Cramer v. Skinner, 931 F.2d 1020 (5th Cir. 1991); cert. denied 112 S.Ct. 298, 116 L.Ed.2d 242, 60 U.S.L.W. 3057 (1991). Only the Complaint and the allegations contained therein are to be considered in reaching a decision on a defendant's Rule 12(b)(6) motion to dismiss. The Complaint should not be dismissed unless it appears beyond doubt that the Plaintiffs can prove no set of facts in support of his/her claims which would entitle him/her to relief.
The FCRA establishes guideline for the assembly, release and correction of credit information by credit reporting agencies. It imposes certain duties on consumer reporting agencies, users of consumer reports, and those who furnish information to CRAs. The Act extends a private right of action against reporting agencies, users and "furnishers" of information under certain well-delineated circumstances. 15 U.S.C. § 1681h, -m, -n, -o, -s.
Liability as Consumer Reporting Agencies
One avenue of recovery under the FCRA runs against consumer reporting agencies. A consumer reporting agency is defined as any person which, for monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports.
15 U.S.C. § 1681a(f). Assuming that the "retail defendants" fall within the definition of a consumer reporting agency, plaintiff has a more immediate problem with demonstrating a sustainable right to recovery. Subsection (d) of § 1681a provides a broad definition of "consumer report" which has been interpreted to include the type of information relayed by the defendants in this case. Estiverne v. Sak's Fifth Avenue, 9 F.3d 1171 (5th Cir. 1993). See also Greenway v. Information Dynamics, Ltd., 524 F.2d 1145 (9th Cir. 1975). However, § 1681a(d)(2) excludes certain reports from regulation under the Act:
The term "consumer report does not include any
(i) report solely as to transactions or experiences between the consumer and the person making the report. . . .
Id. See Hodge v. Texaco, 975 F.2d 1093 (5th Cir. 1992); DiGianni v. Stern's, 26 F.3d 346 (2d. Cir. 1994); Rush's v. Macy's, 775 F.2d 1554 (11th Cir. 1985). The activities of Kmart, J.C. Penney Company, Inc., McRae's, Inc., Parisian, Inc., Goody's Family Clothing, Inc., and Wal-Mart in reporting to DPPS their experiences with dishonored checks bearing plaintiff's driver's license number and bank account number fall squarely within this exception. As a result, these defendants are not subject to the Act's civil liability provisions as they relate to the acts and/or omissions of consumer reporting agencies.
Liability as Users of Consumer Reports
Plaintiff has just as little luck in demonstrating a potential for recovery against the retail defendants as "users" of consumer reports. The FCRA imposes only limited duties on those who avail themselves of consumer reports. Section § 1681m merely requires that "users", who take adverse action against a consumer on the basis of information contained in a consumer report, comply with specified disclosure obligations under the Act. 15 U.S.C. § 1681m. Nowhere in plaintiff's Complaint does she allege a failure to comply with this disclosure obligations. Instead, the facts as plead in the Complaint reveal that at the time each retail merchant declined to accept her check, Thompson was provided a "SCAN referral card with a number to call to 'clear up' the problem." Complaint at 8. Based on the information contained in the Complaint, the Court is not able to conclude that the plaintiff has stated a viable claim against the retail defendants for their failure to comply with the disclosure obligations set forth in § 1681m. See also 15 U.S.C. § 1681n, -o.
Although Courts have recognized a private right of action against "users" who employ false pretenses in obtaining consumer reports, review of plaintiff's Complaint reveals no allegation that the retail defendants were guilty of such conduct. See Northrop v. Hoffman of Simsbury, Inc., 134 F.3d 41 (2d. Cir. 1997); Zamora v. Valley Federal Sav. Loan Ass'n. of Grand Junction, 811 F.2d 1368 (10th Cir. 1987);Kennedy v. Border City Sav. Loan Ass'n., 747 F.2d 367 (6th Cir. 1984); Hansen v. Morgan, 582 F.2d 1214 (9th Cir. 1978).
Liability as Furnishers of Information to CRAs
Those who furnish information to consumer reporting agencies are also potentially liable under the FCRA for any breach of duties imposed under § 1681s-2. Nonetheless, the Act imposes severe constraints on the situations in which a furnisher of information may be subject to suit. Section § 1681s-2, subsection (c) states: "Sections 1681n and 1681o of this title [the Act's civil liability provisions] do not apply to any failure to comply with subsection (a) of this section, except as provided in section 1681s(c)(1)(B) of this title." Reference to § 1681s(c)(1)(B) clearly reveals that an action for damages for a violation of subsection (a) of § 1681s-2 may only be brought by state officials. Therefore, plaintiff is not entitled to pursue a cause of action against the retail defendants in their capacities as furnishers of information so long as the basis for liability is a breach of duties under § 1681s-2(a).
However, the limitation provisions of § 1681s-2 do not extend to actions based on a breach of the duties outlined in subsection (b) of § 1681s-2. That portion of the statute provides:
(b) Duties of furnishers of information upon notice of dispute
(1) In general
After receiving notice pursuant to section 1681i(a)(2) of this title of a dispute with regard to the completeness or accuracy of any information provided by a person to a consumer reporting agency, the person shall
(A) conduct an investigation with respect to the disputed information;
(B) review all relevant information provided by the consumer reporting agency pursuant to section 1681i(a)(2) of this title;
(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).
Subsection (b) of this section provides a narrow window for recovery by plaintiffs against those who furnish information. In the event a furnisher of information is afforded notice by a consumer reporting agency pursuant to § 1681i(a)(2) of a consumer dispute concerning information 1) contained in the consumer's file and 2) reported by that individual or entity, § 1681s-2(b) imposes a duty to investigate the disputed information and to report the findings of the investigation to the consumer reporting agency.
Plaintiff's Complaint however, reveals no allegations to the effect that she herself ever contacted DPPS to advise that she disputed the information contained in her consumer file. As a result, the Court concludes that plaintiff has failed to plead an actionable claim against the retail defendants for a violation of duties under § 1681s-2. The defendants' motion to dismiss is well-taken in this regard.
Injunctive Relief Under the FCRA
Plaintiff's Complaint also includes a claim for injunctive relief against both DPPS and the retail defendants. Complaint at 14-15. None of the parties addressed this aspect of the Complaint and, accordingly, the Court declines on whether the plaintiff has stated an actionable claim for injunctive relief under the FCRA against one or more of the defendants. The parties remain free to address this issue in a subsequent dispositive motion.
Supplemental Jurisdiction Over Pendent State Law Claims
The retail defendants also seek dismissal of plaintiff's state law claims against them. They point out that the Complaint asserts federal question jurisdiction as the basis for the Court's subject matter jurisdiction. They then go on to argue that, because the Complaint states no actionable federal claim against them, they are thus entitled to dismissal of plaintiff's pendent state law claims under the authority of United Mine Workers of America v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966).
However, defendant retailers completely ignore the fact that the Complaint does support a colorable claim against DPPS as a consumer reporting agency under the FCRA. That being true, plaintiff has satisfied the prerequisite of federal question jurisdiction. And, pursuant to 28 U.S.C. § 1367, this Court has the authority to exercise supplemental jurisdiction over plaintiff's pendent state law claims. The subsection (a) of the supplemental jurisdiction statute reads as follows:
Except as provided in subsections (b) and (c) or as expressly provided otherwise by Federal statute, in any civil action of which the district court have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution. Such supplemental jurisdiction shall include claims that involve the joinder or intervention of additional parties.28 U.S.C. § 1367 (emphasis added).
Certainly plaintiff's claims against various defendants arise out of the same "nucleus of operative facts" such that plaintiff would be expected to resolve all of her claims against DPPS and the retail defendants in the same suit. As a result, the exercise of supplemental jurisdiction is appropriate unless otherwise proscribed by subsections (b) and (c) of the statute.
Subsection (b) is inapplicable in the instant case; according to its own terms, it only applies in cases in which the sole basis for the Court's jurisdiction is diversity of citizenship under 28 U.S.C. § 1332. Ms. Thompson brought her Complaint under § 1331 as one "arising under the Constitution, laws or treaties of the United States. 28 U.S.C. § 1331.
Title 28, section 1367(c) permits a district court to decline to exercise supplemental jurisdiction over a claim under subsection (a) if
(1) the claim raises a novel or complex issue of State law,
(2) the claim substantially predominates over the claim or claims over which the district court has original jurisdiction;
(3) the district court has dismissed all claims over which it has original jurisdiction, or
(4) in exceptional circumstances, there are other compelling reasons for declining jurisdiction.
Id. The Court is not satisfied that any of the above conditions has been satisfied in this case. Accordingly, the retail defendants' motion to dismiss plaintiff's pendent state law claims for lack of subject matter jurisdiction is not well-taken and should be denied.
Insufficiency of Service of Process
Goody's and Wal-Mart also assert a right to dismissal of the claims against them based on insufficient service of process. Having reviewed the parties' submissions on this issue, the Court is of the considered opinion that they are not well-taken.
Goody's was served with process a mere sixteen (16) days beyond the 120 limit prescribed by F.R.C.P. 4(m). Plaintiff filed a motion to extend the period for service of process in response to Goody's earlier motion to dismiss on this ground. On April 9, 1999 District Judge Glen Davidson entered an order granting plaintiff an additional sixty (60) days for service of process, said extension commencing immediately upon the expiration of the original one hundred twenty (120) day period for service. The Court's order further denied Goody's motion to dismiss as moot. Goody's now seeks dismissal based on the plaintiff's purported failure to "properly" effect service during the 60 day extension. The Court does not construe Judge Davidson's order to require that plaintiff "re-serve" Goody's with the Complaint. The Court's entry of an order granting the extension sought by plaintiff automatically made plaintiff's service of process timely as to Goody's.
Wal-Mart seeks dismissal based on an order entered by the Magistrate Judge on July 7, 1999. That order required that the plaintiff effect service of process on "named defendants which have not been served" within ten (10) days. Wal-Mart avers that it was not served until July 19, 1999, two (2) days after the expiration of court imposed deadline. However, F.R.C.P. 6(a) dealing with the computation of time states:
In computing any period of time prescribed or allowed . . . by order of court, . . . The day of the act, event, or default from which the designated period of time begins to run shall not be included. . . . When the period of time prescribed or allowed is less than 11 days, intermediate Saturdays, Sundays, and legal holidays shall be excluded in the computation.
Id. That is, plaintiff had ten (10) working days in order to effect service of process, which would have given plaintiff a deadline of July 21, 1999 to effect service. Wal-Mart was timely served.
CONCLUSION
For the reasons outlined above, this Court declines to dismiss the Complaint for lack of personal jurisdiction; instead, the Court determines that a transfer to a federal district court in Alabama is in order. The parties have fifteen (15) days in which to apprise the Court of the district court in Alabama in which venue is most proper. The other retail defendants are entitled to dismissal of the Complaint against them insofar as the plaintiff asserts a claim for civil liability against them under 15 U.S.C. § 1681o of the Fair Credit Reporting Act. The Court declines to pass on the question of whether the plaintiff has fairly presented a claim for injunctive relief under the FCRA against these same defendants, inasmuch as the issue has not been addressed by the parties. In any event, the Court determines that the exercise of supplemental jurisdiction over pending state law claims against the retail defendants is appropriate pursuant to the provisions of 28 U.S.C. § 1367(a). Finally, the motion by Wal-Mart and Goody's to dismiss for insufficient service of process is not well-taken and should be denied. A separate order will issue forthwith.