Opinion
Case No. 2:07-cv-0777.
February 15, 2008
ORDER
Plaintiffs Yvonne and Bradley Watson filed this action against three defendants asserting claims sounding in breach of contract and arising under the Fair Credit Reporting Act. One of the defendants, Associated Recovery Systems (ARS), has filed a motion under Fed.R.Civ.P. 12(b)(6) to dismiss the claims against it. The Watsons have responded and the motion is thus ripe for decision. For the following reasons, the motion will be granted in part and denied in part.
I.
A motion to dismiss for failure to state a claim "should not be granted unless it appears beyond a doubt that the plaintiff can prove no set of facts in support of his claim that would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957). All well-pleaded allegations must be taken as true and be construed most favorably toward the non-movant. Scheuer v. Rhodes, 416 U.S. 232, 236 (1974).
A 12(b)(6) motion to dismiss is directed solely to the complaint and any exhibits attached to it. Roth Steel Products v. Sharon Steel Corp., 705 F.2d 134, 155 (6th Cir. 1983). The merits of the claims set forth in the complaint are not at issue on a motion to dismiss for failure to state a claim. Consequently, a complaint will be dismissed pursuant to Fed.R.Civ.P. 12(b)(6) only if there is no law to support the claims made, or if the facts alleged are insufficient to state a claim, or if on the face of the complaint there is an insurmountable bar to relief. See Rauch v. Day Night Mfg. Corp., 576 F.2d 857, 858 (6th Cir. 1976). Rule 12(b)(6) must be read in conjunction with Fed.R.Civ.P. 8(a) which provides that a pleading for relief shall contain "a short and plain statement of the claim showing that the pleader is entitled to relief." 5A Wright Miller,Federal Practice and Procedure § 1356 (1990). The moving party is entitled to relief only when the complaint fails to meet this liberal standard. Id.
On the other hand, more than bare assertions of legal conclusions is required to satisfy the notice pleading standard.Scheid v. Fanny Farmer Candy Shops, Inc., 859 F.2d 434, 436 (6th Cir. 1988). "In practice, a complaint must contain either direct or inferential allegations respecting all the material elements to sustain a recovery under some viable legal theory." Id. (emphasis in original, quotes omitted).
"[w]e are not holding the pleader to an impossibly high standard; we recognize the policies behind rule 8 and the concept of notice pleading. A plaintiff will not be thrown out of court for failing to plead facts in support of every arcane element of his claim. But when a complaint omits facts that, if they existed, would clearly dominate the case, it seems fair to assume that those facts do not exist."Id. It is with these standards in mind that the motion to dismiss will be decided.
II. A. The allegations of the complaint.
The Watsons' complaint is centered around a credit card debt incurred by Yvonne Watson. The credit card in question was a MasterCard issued by Citi Corp. According to the complaint, after the account reached a certain balance, Ms. Watson made an offer to Citi Corp., through ARS (described in the complaint as a company which "services the credit accounts of CITI CORP for their clients living in the State of Ohio"), to settle the account by paying a lump sum of $7000.00. She sent a check in that amount to ARS (made payable to ARS) along with a letter stating that by cashing the check, ARS was acknowledging that the account balance was satisfied. Her letter was apparently written in response to an earlier letter from ARS offering to compromise the account balance for a greater amount. ARS cashed the check.
Ms. Watson's letter also stated that, once the check was cashed, she expected ARS to "promptly remove all negative information from all credit agencies. . . ." The complaint alleges, in ¶ 11, that both Citi Corp. and ARS "failed to fulfill their responsibilities under the terms of the settlement agreement" because they did not remove "all negative information regarding this account from Plaintiff Yvonne Watson's records from all credit agencies for more than 2 years. . . ." The next paragraph of the complaint alleges that both ARS and Citi Corp. "have continued to report erroneous and fraudulent information to the credit reporting agencies by reporting incorrect amounts charged off and reporting that there remains a balance due and owing in violation of the Fair Credit Reporting Act." The complaint details a number of adverse consequences flowing from these allegedly unlawful actions, including the fact that "Plaintiffs have had to endure increases in insurance costs and the costs of increased interest rates for borrowing money. . . ." (Complaint, ¶ 15). The Watsons seek both injunctive and monetary relief against ARS.
B. The motion to dismiss.
ARS raises the following issues in its motion to dismiss. First, it contends that the complaint does not plead any facts or legal theories under which ARS could be liable to plaintiff Bradley Watson for breach of contract. ARS notes that he is not alleged to have been a joint account holder on the credit card in question and is also not alleged to have been a party to any settlement agreement that might have been reached with respect to Ms. Watson's credit card debt.
Second, ARS asserts that it acted at all times as a disclosed agent for Citi Corp. If that were so, any contact that arose out of its exchange of letters with Ms. Watson was a contract solely between her and Citi Corp., and ARS could not be held liable for any breach of that contract which may have occurred. ARS makes essentially the same argument concerning the FCRA claim, contending that because Citi Corp. was the entity which reported credit information to Experian and allegedly agreed to remove it, ARS cannot be held liable for the FCRA violations described in the complaint. The Court will address each of these arguments in turn.
III.
The Court agrees that the complaint does not state a claim for breach of contract upon which Bradley Watson could recover. He does not allege that he had a contract with either ARS or Citi Corp. Where there is no contract, there is no liability for breach of contract. Nothing in the correspondence attached to the complaint suggests that he was an intended third-party beneficiary of any contract which might have arisen between Yvonne Watson and either ARS or Citi Corp. The assertion in the Watsons' memorandum in opposition to the motion to dismiss that "Bradley Watson was unwillingly made a party to the contract through the Defendants' egregious conduct" is not supported by any legal authority suggesting that a contract may arise by implication under Ohio law because one party committed an egregious breach of the contract. The Court is unaware of any such legal theory ever having been endorsed by an Ohio court. Rather, "[o]nly a party to a contract or an intended third-party beneficiary of a contract may bring an action on a contract in Ohio." Grant Thornton v. Windsor House, Inc., 57 Ohio St. 3d 158, 161 (1991). Because Mr. Watson is neither, he cannot maintain a breach of contract action against ARS.
IV.
Next, the Court addresses ARS's argument that even if the complaint adequately pleads the existence of a contract to which Yvonne Watson was a party, it cannot be held liable under that contract. The Court could accept such an argument only if it were beyond doubt that, based on the reasonable inferences to be drawn from the face of the complaint, Ms. Watson could prove no set of facts which would make ARS liable to her for breach of contract. At this stage of the case, the Court simply cannot reach that conclusion.It is true that the complaint, in various places, describes ARS as an "agent" for Citi Corp. On the other hand, it also alleges that the contract obligated the defendants to remove negative information from Ms. Watson's credit report and that ARS breached that obligation. Additionally, it alleges that ARS had an agreement with Citi under which it "serviced" Citi accounts in Ohio. It is conceivable that Ms. Watson could prove that Citi had either assigned accounts such as hers to ARS for collection, in which case ARS would have been acting as a principal rather than an agent, or that part of ARS's service contract required it to provide credit information to credit reporting agencies with respect to certain Citi accounts. She has alleged that the "settlement check" was made payable to ARS and cashed by that company, an action that is consistent with an assignment of the account. Without more information about the nature of the relationship between ARS and Citi, the Court cannot conclude that ARS acted solely as the agent for a disclosed principal with respect to every obligation contained in the alleged contract created by its correspondence with Ms. Watson. Once evidence is presented to the Court, that may turn out to be the case, but the complaint is pleaded broadly enough to allow for other reasonable inferences, and that is enough to allow the contract claim against ARS to survive a Rule 12(b)(6) motion.
V.
Finally, the Court must determine whether the complaint states a claim under the Fair Credit Reporting Act, 15 U.S.C. § 1681. ARS's argument on this point is short and straightforward. It asserts that since it had no contractual duty to report any information to Experian concerning Ms. Watson's account, it cannot be held liable under the FCRA for failing to do so.
It is somewhat difficult to analyze Ms. Watson's FCRA claim because neither the complaint nor her responsive memorandum identifies the particular provisions of the Act which ARS allegedly violated. However, the FCRA imposes obligations on several classes of persons. One such class is a "furnisher of information." Such furnishers are required by § 1681s-2 not only to provide correct information to credit reporting agencies but to correct or supplement such information if it is determined no longer to be accurate. It may be that Ms. Watson is attempting to state a claim for a violation of this statutory duty.
The Court has already concluded that the contract claim brought by Ms. Watson against ARS can survive a motion to dismiss. For essentially the same reasons, the Court declines to dismiss the FCRA claim for the reasons advanced by ARS. Apart from relying on the absence of a contractual duty to correct negative information on Ms. Watson's credit report, ARS argues only that the exhibits to the complaint show that Citi was the company that provided information about the account in the first instance. While that may be true, it does not necessarily mean that ARS is not a routine provider of information to credit reporting companies or that it had no obligations to report on developments with Ms. Watson's account. Again, it may be that the duties it undertook to perform for Citi did not include such actions, but that contractual agreement is not before the Court, and the complaint does not affirmatively plead the absence of such duties.
The Court adds a final note. The motion to dismiss does not appear to differentiate the FCRA claims of both plaintiffs or argue that, even if Ms. Watson has stated a claim under that statute, Mr. Watson has not. The only attack on Mr. Watson's status as a plaintiff was directed at his contract claim. Thus, the Court has not been asked to decide if he is a proper plaintiff on the FCRA claim, and this order expresses no view on that subject.
VI.
For the foregoing reasons, ARS National Services, Inc.'s motion to dismiss (#16) is granted in part and denied in part. The contract claim asserted against ARS by plaintiff Bradley Watson is dismissed. All other claims addressed in the motion to dismiss remain pending. ARS shall file its answer to the complaint within ten days.