Opinion
01 CIV. 11475 (DLC)
September 20, 2002
Adam J. Fishbein, Cedarhurst, N.Y., For Plaintiff.
Arthur Winston and Jay Winston: Janice J. DiGennaro, Douglas Tisehier, Rivkin Radler LLP, Uniondale, N.Y., For Defendants Winston Winston, P.C.,
OPINION AND ORDER
Plaintiff Scott R. Redhead ("Redhead") brings this action against defendants the Bank of America, N.A. (the "Bank") and its counsel Winston Winston, P.C., Arthur Winston, and Jay Winston (the "Winston Defendants"), alleging violations of the Fair Debt Collection Practices Act ("FDCPA"), 18 U.S.C. § 1692 et seq., and the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. § 1681 et seq., as well as breach of contract, negligence, fraud, and assault. The Winston Defendants now move to dismiss Redhead's amended complaint as against them for lack of subject matter jurisdiction, failure to state a claim, and failure to plead fraud with sufficient particularity under Rules 12(b)(1), 12(b)(6), and 9(b), Fed.R.Civ.P., respectively. Redhead cross-moves for leave to file a second amended complaint pursuant to Rule 15, Fed.R.Civ.P. For the reasons stated, the Winston Defendants' motion is granted and Redhead's motion is denied.
Background
The following facts are as alleged in Redhead's amended complaint unless otherwise noted. Redhead is a resident of New York. Defendants Arthur and Jay Winston are lawyers at the law firm of Winston Winston, P.C., located in New York. The Bank is a national banking association with its principal place of business in Delaware.
On January 21, 2000, the Winston Defendants filed an action in the Civil Court of the City of New York on behalf of the Bank to collect credit card debt that the Bank alleged was owed to it by Redhead. On May 23, 2000, Redhead and the Bank entered into a Stipulation of Settlement (the "Stipulation of Settlement"), which is attached to the amended complaint, under which the Bank agreed inter alia to reimburse Redhead in the amount of $118.00 for overpayment and to "report to any credit reporting agencies that they have reported to update [ sic] and correct [Redhead's] credit report to reflect a zero `0' balance and `R1' rating." It is not clear from Redhead's amended complaint whether the Winston Defendants were involved in the negotiations leading to the Stipulation of Settlement. In their motion papers, however, the Winston Defendants have stated that they were involved in those negotiations.
By letter dated September 5, 2000, also attached to the amended complaint, the Bank informed Redhead that "as of today's date we are changing our records to show your account closed R1 and zero Balance [ sic] with the local and national credit reporting agencies." Despite this representation and apparently unsatisfied with the Bank's performance under the Stipulation of Settlement, in December 2000, Redhead filed an action in the Civil Court of the City of New York against the Bank and the Winston Defendants, alleging that they had breached the terms of the Stipulation of Settlement by failing to repair his credit rating. When, on December 19, 2000, Redhead and an unidentified friend allegedly attempted to serve the Civil Court complaint on the Winston Defendants at their office, Arthur and Jay Winston and one "Alex" allegedly threatened Redhead and his friend with physical violence. Redhead states that he fled the office. The amended complaint states that Redhead "continued to prevail upon the Winston [D]efendants to cause plaintiff's credit reports to be updated accordingly," but that "Bank of America failed to update plaintiff's credit reports."
According to documents supplied by the Winston Defendants, by Order dated January 23, 2001, the Civil Court dismissed Redhead's complaint without prejudice to repleading in the Supreme Court claims unrelated to the Stipulation of Settlement.
Redhead filed the instant action on December 14, 2001, alleging violations of the FDCPA and assault. Redhead filed an amended complaint on February 7, 2002, adding a claim under the FCRA, as well as breach of contract, negligence, and fraud. The time for the Bank to respond to the plaintiff's pleadings has been extended to a time following the entry of this Opinion.
With respect to Redhead's claims under the FDCPA, paragraph 1.9 of the amended complaint states:
Defendants violated the FDCPA. Defendants' violations include, but are not limited to, the following:
(a) The defendant violated 15 U.S.C. § 1692e(8) by communicating credit information which should be known to be false.
(b) The defendant violated 15 U.S.C. § 1692e(10) by using false deceptive and misleading means in connection with the collection of an alleged debt.
The amended complaint does not specify to which "defendant" it is referring in paragraph 1.9. With respect to Redhead's claims under the FCRA, the amended complaint states: "This is an action for damages brought by an individual consumer for defendants' violations of the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq." The amended complaint does not specify which sections of the FCRA the Winston Defendants or the Bank allegedly violated. In alleging fraud against the Winston Defendants, the amended complaint states: "Defendants induced plaintiff to agree to a stipulation whereby defendants would cause plaintiff's credit reports to reflect a zero balance and a top credit rating. Plaintiff relied upon defendants' fraudulent representations and agreed to sign the stipulation."
Discussion
A court may dismiss an action pursuant to Rule 12(b)(6) only if "it appears beyond doubt, even when the complaint is liberally construed, that the plaintiff can prove no set of facts which would entitle him to relief." Jaghory v. New York State Dep't of Educ., 131 F.3d 326, 329 (2d Cir. 1997) (citation omitted). The court must "accept all factual allegations in the complaint as true and draw inferences from those allegations in the light most favorable to the plaintiff." Id. The court is generally prohibited from considering matters outside the pleadings. Tewksbury v. Ottaway Newspapers, 192 F.3d 322, 325 n. 1 (2d Cir. 1999)
I. Redhead's FDCPA Claim
The purpose of the FDCPA is to "eliminate abusive debt collection practices by debt collectors, to insure that those debt collectors who refrain from using abusive debt collection practices are not competitively disadvantaged, and to promote consistent State action to protect consumers against debt collection abuses." 15 U.S.C. § 1692(e). To this end, "[t]he FDCPA establishes certain rights for consumers whose debts are placed in the hands of professional debt collectors for collection, and requires that such debt collectors advise the consumers whose debts they seek to collect of specified rights." Kropelnicki v. Siegel, 290 F.3d 118, 127 (2d Cir. 2002) (citation omitted). The FDCPA sets forth examples of particular practices that debt collectors are forbidden to employ, see 15 U.S.C. § 1692e. Specifically, Section 1692e(8) forbids "[c]ommunicating or threatening to communicate to any person credit information which is known or which should be known to be false, including the failure to communicate that a disputed debt is disputed." 15 U.S.C. § 1692e(8). Section 1692e(10) forbids "[t]he use of any false representation or deceptive means to collect or attempt to collect any debt or to obtain information concerning a consumer." 15 U.S.C. § 1692e(10).
Redhead's claim against the Winston Defendants under the FDCPA appears to be that by acting as counsel for the Bank in a debt collection action that led to a settlement that was subsequently breached by the Bank, the Winston Defendants engaged in conduct in violation of the FDCPA. Specifically, Redhead's amended complaint alleges that the Winston Defendants' conduct violated Sections 1692e(8) and 1692e(10) of the FDCPA. Redhead has failed to allege any facts, however, establishing that the Winston Defendants communicated or threatened to communicate any credit information concerning him. Nor does Redhead allege any facts establishing that the Winston Defendants engaged in any false representation or deception to collect a debt from him. In sum, Redhead has failed to identify and the Court is unaware of any provision of the FDCPA under which the Winston Defendants should be held liable for the Bank's alleged breach of the Stipulation of Settlement as it is described in Redhead's amended complaint.
II. Redhead's FCRA Claim
The FCRA was enacted "to require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce :or 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." 15 U.S.C. § 1681b. The FCRA places distinct obligations on three types of entities: consumer reporting agencies, users of consumer reports, and furnishers of information to consumer reporting agencies. See 15 U.S.C. § 1681, et seq.; Aklaqi v. Nationscredit Financial Services Corp., 196 F. Supp.2d 1186, 1192 (D. Kan. 2002); Thomasson v. Bank One, Louisiana, N.A., 137 F. Supp.2d 721, 722 (E.D. La. 2001).
Redhead has not specified into which of the above three categories the Winston Defendants fall. Even when construed broadly, Redhead's amended complaint fails to allege any facts establishing that the Winston Defendants constitute a "consumer reporting agency" as that term is defined in Section 1681f of the FCRA, 15 U.S.C. § 1681a(f), or "users of consumer reports" as that term is used, but not defined, in Section 1681m of the FCRA, 15 U.S.C. § 1681m. See Northrop v. Hoffman of Simsbury, Inc., 134 F.3d 41, 48-49 (2d Cir. 1997) (noting that the FCRA does not define "users of information" and declining to offer a "categorical definition" of the term because defendant automobile dealership clearly qualified as such a user)
Section 1681a(f) states:
The term "consumer reporting agency" means 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).
Redhead's amended complaint may, however, allege that the Winston Defendants are "furnishers of information" to consumer reporting agencies as that term is used, but not defined, in the FCRA, and that they have failed to fulfill their duties as furnishers of information under the FCRA. 15 U.S.C. § 1681 et seq. Specifically, the amended complaint states that Redhead "continued to prevail upon the Winston [D]efendants to cause [Redhead's] credit reports to be updated."
The FCRA imposes two duties on furnishers of information, codified at 15 U.S.C. § 1681s-2(a) and (b). The category of duties in subsection (a) relates to the furnishers' duty to report accurate information and their ongoing duty to correct inaccurate information. Section 1681s-2(a) provides in relevant part as follows:
A person shall not furnish any information relating to a consumer to any consumer reporting agency if the person knows or consciously avoids knowing that the information is inaccurate . . .
A person shall not furnish information relating to a consumer to any consumer reporting agency if (i) the person has been notified by the consumer . . . that specific information is inaccurate; and (ii) the information is, in fact, inaccurate . . .
A person who . . . has furnished to a consumer reporting agency information that the person determines is not complete or accurate, shall promptly notify the consumer reporting agency of that determination and provide to the agency any corrections to that information, or any additional information, that is necessary to make the information provided by the person to the agency complete and accurate, and shall not thereafter furnish to the agency any of the information that remains not complete or accurate.15 U.S.C. § 1681s-2(a)(1) and (2).
The category of duties in subsection (b) governs the furnishers' duty once notice is received from a credit reporting agency that there is a dispute as to the completeness or accuracy of the information provided to that reporting agency. Subsection (b) states as follows:
After receiving notice [from a credit reporting agency] 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)(1).
There is no private cause of action under Section 1681s-2(a), for the FCRA limits the enforcement of this subsection to government agencies and officials. 15 U.S.C. § 1681s-2(d); see also Nelson v. Chase Manhattan Mortgage Corp., 282 F.3d 1057, 1059 (9th Cir. 2002); Aklagi v. Nationscredit Financial Services Corp., 196 F. Supp.2d 1186, 1192 (D. Kan. 2002); Hasvold v. First USA Bank, N.A., 194 F. Supp.2d 1228, 1234 (D. Wyo. 2002); Scott v. Amex/Centurion S T, 2001 WL 1645362, at *4 (N.D. Tex. Dec. 18, 2001); Fino v. Key Bank of New York, No. 00 Civ. 375E, 2001 WL 849700, at *4 (W.D. Pa. July 27, 2001); Yelder v. Credit Bureau of Montgomery, L.L.C., 131 F. Supp.2d 1275, 1283 (M.D. Ala. 2001); Ouigley v. Pennsylvania Higher Education Assistance Agency, No. 00 Civ. 1661, 2000 WL 1721069, at *2 (N.D. Cal. Nov. 8, 2000); Olexy v. Interstate Assurance Co., 113 F. Supp.2d 1045, 1047 (S.D. Miss. 2000).
Although there has been some disagreement, the majority of courts who have considered the issue have concluded that consumers may pursue claims for willful or negligent noncompliance with Section 1681s-2(b). See, e.g., Nelson, 282 F.3d at 1058; Aklagi, 196 F. Supp.2d at 1193; Hasvold, 194 F. Supp.2d at 1236; Scott, 2001 WL 1645362, at *4; Fino, 2001 WL 849700, at *5; Wexler v. Banc of America Auto Finance Corp., No. 00 Civ. 865, 2001 WL 428155, at *2 (N.D. Ill. Apr. 26, 2001); Thomasson v. Bank One, Louisiana, N.A., 137 F. Supp.2d 721, 723 (E.D. La. 2001) (collecting cases); Whitesides v. Eguifax Credit Info. Servs., Inc., 125 F. Supp.2d 807, 812 (W.D. La. 2000); McMillan v. Experian Info. Servs., Inc., 119 F. Supp.2d 84, 88 (D. Conn. 2000); Olexy, 113 F. Supp.2d at 1047-48; but see Carney v. Experian Info. Solutions, Inc., 57 F. Supp.2d 496 (W.D. Tenn. 1999). Those courts that have concluded that a private right of action exists under Section 1681s-2(b) have required a plaintiff to show 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., Young v. Equifax Credit Info. Serys., Inc., — F.3d — , 2002 WL 1277584, at *7 (5th Cir. 2002). Since Redhead's amended complaint appears to claim a violation of subsection(a) rather than (b), it is unnecessary for this Court to determine whether a private right of action exists under subsection (b).
Broadly construed, Redhead's allegations in the amended complaint better fit Section 1681s-2(a). Redhead alleges that the Winston Defendants failed to "cause" his credit reports to be corrected. Because there is no private right of action under subsection (a), Redhead's claims pursuant to the FCRA must be dismissed.
III. Redhead's State Law Claims
A. Redhead's Breach of Contract Claim
Redhead alleges that the Winston Defendants breached the Stipulation of Settlement by failing to update his credit informatioxn. The Winston Defendants, however, were not a party to the Stipulation of Settlement. In essence, Redhead seeks to hold them liable for an alleged breach of contract by their client. Under New York law, however, the Winston Defendants cannot be held personally liable under a contract negotiated for a client unless they personally assumed liability. See Four Finger Art Factory, Inc. v. Dinicola, 99 Civ. 1259, 2001 WL 21248, at *4 (S.D.N.Y. Jan 9, 2001); Sefi Fabricators, Inc. v. Tillim, 360 N.Y.S.2d 146, 147 (App. Term 1973) (per curiam); see also Aetna Casualty and Surety Co. v. Hambly Constr. Co., 409 N.Y.S.2d 552, 553 (2d Dep't 1978). Having failed to allege any facts establishing that the Winston Defendants personally assumed liability under the Stipulation of Settlement, Redhead's breach of contract claim against the Winston Defendants must be dismissed.
B. Redhead's Negligence Claim
Redhead alleges that the Winston Defendants were negligent for failing to update his credit reports. Under New York law, however, it is well settled that "before a party may recover in tort for pecuniary loss sustained as a result of [a legal professional's] negligent misrepresentations there must be a showing that there was either actual privity of contract between the parties or a relationship so close as to approach that of privity. . . . Such a requirement is necessary in order to provide fair and manageable bounds to what otherwise could prove to be limitless liability." Parrott v. Coopers Lybrand, L.L.P., 95 N.Y.2d 479, 483 (2000) (citation omitted). See also National Westminster Bank USA v. Weksel, 511 N.Y.S.2d 626, 628 (1st Dep't 1987) ("[I]t is well settled that an attorney may not be held liable for negligence in the provision of professional services adversely affecting one with whom the attorney is not in contractual privity."). Because Redhead has failed to allege any facts establishing an attorney-client relationship between him and the Winston Defendants, his negligence claim against them must be dismissed.
C. Redhead's Fraud Claim
Rule 9(b), Fed.R.Civ.P., requires that when alleging fraud "the circumstances constituting fraud . . . must be stated with particularity," although "[m]alice, intent, knowledge, and other condition of mind of a person may be averred generally." Id. "To satisfy this requirement, a plaintiff should specify the time, place, speaker, and content of the alleged misrepresentations. In addition, the complaint should explain how the misrepresentations were fraudulent and plead those events which give rise to a strong inference that the defendant had an intent to defraud, knowledge of the falsity, or a reckless disregard for the truth." Caputo v. Pfizer, Inc., 267 F.3d 181, 191 (2d Cir. 2001) (citations and alteration omitted)
Redhead's amended complaint fails to allege any particularities with respect to its allegations of fraud. It merely states that "[d]efendants induced plaintiff to agree" to the Stipulation of Settlement and that Redhead "relied upon defendants' fraudulent misrepresentations and agreed to sign the stipulation." The amended complaint does not explain who caused the inducement, when and where they did so, what they said, why their statements should be taken as fraudulent, or how he was harmed by the alleged misrepresentations. Redhead's claim of fraud against the Winston Defendants is dismissed.
D. Redhead's Assault Claim
To establish a claim for assault under New York law, Redhead must show "an intentional placing of another person in fear of imminent harmful or offensive contact." Girden v. Sandals Int'l, 262 F.3d 195, 203 (2d Cir. 2001) (citation omitted) The Amended Complaint alleges that on December 19, 2000, when Redhead attempted to serve the Winston Defendants with a summons and complaint, Arthur and Jay Winston and "Alex" made "threatening physical gestures . . . to attempt to persuade [him] from serving the defendants." This led Redhead to "fear that there would be an imminent battery upon his person."
Although Redhead's amended complaint may allege sufficient facts to establish an assault claim against the Winston Defendants, this is Redhead's only remaining claim in the instant action and is entirely distinct from the claims he has asserted against the Bank. Pursuant to 28 U.S.C. § 1367(c)(3), a district court "may decline to exercise supplemental jurisdiction" over supplemental claims if it "has dismissed all claims over which it has original jurisdiction." "[T]he discretion implicit in the word `may' in subdivision (c) of § 1367 permits the district court to weigh and balance several factors, including considerations of judicial economy, convenience, and fairness to litigants." Purgess v. Sharrock, 33 F.3d 134, 138 (2d Cir. 1994). Here, Redhead's assault claim bears little if any relation to his dispute with the Bank, and since this litigation is in its initial stages, the Court declines to exercise supplemental jurisdiction over it.
IV. Redhead's Cross-Motion for Leave to Amend
Rule 15, Fed.R.Civ.P., governs the amendment of pleadings. Rule 15(a) instructs that leave to amend should be "freely given." Advanced Magnetics, Inc. v. Bayfront Partners, Inc., 106 F.3d 11, 18 (2d Cir. 1997) (citation omitted). Leave to amend should be denied, however, where the proposed amendment would be futile, if defendants have demonstrated undue delay, bad faith, or dilatory motive, or where defendants would suffer undue prejudice. Dluhos v. Floating and Abandoned Vessel, 162 F.3d 63, 69 (2d Cir. 1998). Where, as here, "a cross-motion for leave to file an amended complaint is made in response to a motion to dismiss under Fed.R.Civ.P. 12(b)(6), leave to amend will be denied as futile only if the proposed new claim cannot withstand a 12(b)(6) motion to dismiss for failure to state a claim, i.e., if it appears beyond doubt that the plaintiff can plead no set of facts that would entitle him to relief." Milanese v. Rust-Oleum Corp., 244 F.3d 104, 110 (2d Cir. 2001).
Nothing in Redhead's proposed second amended complaint, even when broadly construed, will enable his FDCPA, FCRA, breach of contract, fraud, or negligence claims to survive dismissal. With respect to his FDCPA claim, Redhead's proposed second amended complaint alleges that sometime after May 2000, a company named "Total Debt Management" attempted to collect from him the debt that was released by the Stipulation of Settlement. Total Debt Management is not a party to this action and Redhead does not allege that it is associated in any way with the Winston Defendants. This new allegation fails to make the Winston Defendants liable under the FDCPA.
With respect to his FCRA claim, Redhead's proposed second amended complaint alleges that, "[u]pon information and belief, the Winston [D]efendants are users of consumer credit information." This, however, is a legal conclusion unsupported by any alleged facts and cannot prevent dismissal. Smith v. Local 819 I.B.T. Pension Plan, 291 F.3d 236, 240 (2d Cir. 2002) ("Conclusory allegations or legal conclusions masquerading as factual conclusions will not suffice to prevent a motion to dismiss." (citation and alteration omitted)). At any rate, even if the Winston Defendants were users of consumer credit information for purposes of FCRA analysis, Redhead is still not entitled to bring a private cause of action against them under the FCRA.
With respect to his breach of contract and fraud claims, in his proposed second amended complaint, Redhead merely merges his fraud allegations into those appearing under his breach of contract claim. This saves neither cause of action.
The proposed second amended complaint amends the negligence claim to include details concerning certain credit cards which were denied to Redhead. This does not revive the claim.
Conclusion
For the reasons stated, the Winston Defendants' motion is granted and Redhead's motion is denied. Redhead's assault claim is dismissed without prejudice to its refiling in state court.
SO ORDERED: