Kruckow v. Merchants Bank et al

BRIEF re MOTION to Dismiss/General Plaintiff's Amended Complaint

D. Minn.December 21, 2016

UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA Dana D. Kruckow, Plaintiff, V. Merchants Bank, Rushford State Bank, Craig Schroeder, individually, and Paul A. Kruckow, individually, Defendants. Civil File No. 16-02418 REPLY BRIEF OF DEFENDANT RUSHFORD STATE BANK INTRODUCTION Plaintiff Dana D. Kruckow pled claims against Rushford State Bank ("RSB"), arising out of two credit reports it obtained on her- one dated November 8, 2013, and the other October 31, 2014. She alleged that by pulling these reports, RSB violated the Fair Credit Reporting Act, 15 U.S.C. § 1681 et. seq. ("FCRA"), invaded her privacy, and committed common law negligence. She also alleged that RSB should be liable for the acts of its loan officer, Defendant Craig Schroeder ("Schroeder") -- under theories of respondent superior and civil conspiracy -- for his alleged role in the credit pulls. In response to Plaintiff's Amended Complaint, RSB filed a Motion to Dismiss. It argued that Plaintiff failed to demonstrate she suffered a concrete injury-in-fact sufficient to confer upon her Article III standing. Moreover, because RSB had a good faith reason for pulling the credit reports, it did not violate the FCRA. In addition, RSB argued that 3436383v2 CASE 0:16-cv-02418-DWF-TNL Document 71 Filed 12/21/16 Page 1 of 10 Plaintiffs heavy reliance on speculation and conclusion was not enough for her to meet her burden to allege plausible, cognizable state claims. Accordingly, because Plaintiff lacks Article III standing and sets forth no concrete facts to support any of the presumptions and conclusions she asks the Court to adopt, RSB respectfully asks the Court to dismiss her claims against it. LEGAL ARGUMENT I. PLAINTIFF MADE NO SHOWING THAT SHE SUFFERED ANYTHING MORE THAN A BARE PROCEDURAL VIOLATION. On the standing issue, RSB argued that Plaintiff alleged only a bare procedural violation, one that was divorced from any concrete harm. In response, Plaintiff cited to post-Spokeo decisions for the proposition that unauthorized access to, or the dissemination of one's personal information, is enough to confer standing to sue, without any showing of actual damages. Plaintiff offered the case of Thomas v. FTS as the authoritative holding concerning injury-in-fact resulting from an allegedly-improper credit pull. But Plaintiff omits case law contrary to her position. For example, in Smith v. The Ohio State University, No. 2: 15-cv-3030 (S.D. Ohio Memo. Op. & Order dated June 8, 2016), the plaintiff alleged that the defendant improperly disclosed her FCRA rights and impermissibly accessed her credit report in connection with an employment application. The Smith court found that the alleged impermissible pull was not a concrete injury-in-fact. Id. Indeed, the plaintiffs mere allegation that her privacy was invaded by the alleged improper pull was not sufficient to confer her with Article III standing. Id. Because the plaintiff did not 2 3436383v2 CASE 0:16-cv-02418-DWF-TNL Document 71 Filed 12/21/16 Page 2 of 10 allege that she suffered "concrete consequential damage" as a result of the alleged FCRA violations, the court dismissed her complaint for want of standing. Id. Other courts have reached the same conclusion in the context of alleged invasions of privacy. See Khan v. Children's Nat'! Health Sys., _F. Supp. 3d_, 2016 WL 2946165, at *6 (D. Md. May 19, 2016) (plaintiff failed to establish concrete injury-in-fact based on alleged "loss of privacy" resulting from a data breach without identifying "any potential damages arising from such a loss .... "); In re Zappos.com, Inc., 108 F. Supp. 3d 949, 962 n. 5 (D. Nev. 2015) ("Even if Plaintiffs adequately allege a loss of privacy, they have failed to show how that loss amounts to a concrete and particularized injury."). Plaintiff also misrepresents the holding in In re Nickelodeon Consumer Privacy Litigation, 827 F .3d 262, 269- 70 (3d Cir. 2016). There, a putative class of children alleged that a website not only gathered information about them, such as their age, birthdate, and gender, but it impermissibly disclosed that information to third parties. The Third Circuit held that "[t]he purported injury here is clearly particularized, as each plaintiff complains about the disclosure of information relating to his or her online behavior." Id. at 274 (emphasis added). Nothing in Nickelodeon (which did not involve a FCRA claim) supports Plaintiffs assertion that an alleged invasion of privacy, without some attendant concrete harm, is sufficient to confer Article III standing. 3 3436383v2 CASE 0:16-cv-02418-DWF-TNL Document 71 Filed 12/21/16 Page 3 of 10 The Eight Circuit's decision in Braitberg1-controlling in this matter-also supports the proposition that Article III requires Plaintiff to plead a concrete injury in addition to the alleged invasion of privacy. Braitberg v. Charter Comm., Inc., 836 F. 3d 925, 930 (8th Cir. 2016) (rejecting plaintiffs argument "that there is no need for him to allege or show any 'actual injury' arising from Charter's retention of his personal information."). II. PLAINTIFF HAS NOT SHOWN A PLAUSIBLE BASIS FOR HER FCRA CLAIMS. Plaintiff contends that RSB knew Plaintiff did not intend to be a co-borrower on the loans it issued. (Pltf.'s Mem. at 26.) She further alleges that "Plaintiff had never applied for credit with Rushford Bank and Schroeder knew it." (Id. at 20.) She also claims that Schroeder obtained Plaintiffs credit report "for the purpose of providing it to Defendant Kruckow [sic] his illegal use in his anticipated divorce proceedings." (Id.) But Plaintiff offers no concrete facts to establish that these allegations have any plausible basis in fact. Instead, Plaintiff simply points to the fact that the check RSB issued to pay off the loan with Merchants Bank was made out to both Merchants Bank and Plaintiffs husband, Paul A. Kruckow ("Kruckow"). She suggests that this should have tipped off RSB that something was remiss with the loan. But Plaintiff ignores the fact that, because the check was co-payable to Kruckow and Merchants Bank, the check, by necessity, would be used 1 The Braitberg court also acknowledged that the Supreme Court altered the Article III standing analysis in Spokeo. 836 F.3d at 930 ("With the benefit of Spokeo 's guidance, we conclude that Braitberg has not alleged an injury in fact as required by Article III.") 4 3436383v2 CASE 0:16-cv-02418-DWF-TNL Document 71 Filed 12/21/16 Page 4 of 10 to satisfy the outstanding loan at Merchants Bank. Indeed, the check clearly reflects that it was negotiated by Merchants Bank. (ECF No. 48-1 at p. 32.) Furthermore, Plaintiff avoids the fact that as soon as she raised questions with RSB about the loans, RSB immediately investigated her allegations that she did not know of the loans. Upon completing its investigation, RSB notified Plaintiff that it was indemnifying her from any and all liability on the loans and that the loans would not affect her credit score. This is not the conduct of a bank which purportedly knew, as Plaintiff alleges, that it never should have listed Plaintiff as a co-borrower in the first place. Indeed, the inference of alleged wrongdoing which Plaintiff asks the Court to adopt actually runs counter to the facts that were pled. Plaintiff also alleged that RSB improperly conducted "hard pulls" of her credit reports, rather than "soft pulls." In response, RSB cited precedent holding that the law does not distinguish between "hard" pulls and "soft" pulls. In response, Plaintiff conceded that "this is an issue the Court doesn't even need to address at this time." (Pltf.'s Mem. at 27-28.) Plaintiff also alleged that her husband submitted "signed Personal Financial Statements," which served as applications for the loans issued by Merchants Bank and RSB, and those documents contained her forged signature. (Am. Compl. § 22.) Even though Plaintiff acknowledged that the documents displayed what appeared to be her signature, she nevertheless contends that RSB lacked a reasonable good faith belief that it 5 3436383v2 CASE 0:16-cv-02418-DWF-TNL Document 71 Filed 12/21/16 Page 5 of 10 had a permissible purpose for obtaining her credit reports.' Again, Plaintiff offers no concrete facts to support this claim. III. PLAINTIFF HAS NOT ESTABLISHED A PLAUSIBLE BASIS FOR HER ST ATE CLAIMS. A. Plaintiff Has Failed to Show That RSB's Pulling Two Credit Reports Constituted "Highly Offensive" Conduct. In challenging the legal sufficiency of Plaintiffs intrusion upon seclusion claim, RSB emphasized that, under applicable law, the alleged conduct must be "highly offensive" to be actionable. RSB argued that the fact it twice pulled credit reports on Plaintiff, related to loans the bank actually originated and administered, could not possibly be regarded as constituting "highly offensive" behavior. The cases upon which Plaintiff relied in her response are of no avail. In Dunnigan v. Federal Home Loan Mortgage Company, the court considered, sua sponte, whether the FCRA preempted the plaintiffs pendent state law claims. _F.3d_, 2016 WL 1698280, at *8 (D. Minn. Apr. 27, 2016). The court did not consider an invasion of 2 Plaintiff notes that a Regulation B Notice of Intent to Apply for Joint Credit, dated and signed November 15, 2106, the same date as the RSB loans were issued, was executed a week after RSB conducted its first credit pull on Plaintiff. She suggests that because of this, RSB had no proper motive to do a credit check. But the date of the signing of the Regulation B Notice has no bearing on whether RSB had a permissible purpose for obtaining the credit report. By Plaintiffs own admission, other documents were filed as applications for the loan, and RSB was within its legal rights to determine the credit worthiness of a person it considered in good faith desired to be a co-borrower. Plaintiff attached to the Amended Complaint a copy of one of the loan documents, dated November 15, 2013, which displays Plaintiffs purported signature. (ECF No. 35-1.) Moreover, the Regulation B Notice has nothing to do with the timing of when a lender may pull a credit report in conjunction with a requested loan. See generally Official Staff Commentary for Regulation B, Comment 202.7 and 12 C.F.R. § 202.7. 6 3436383v2 CASE 0:16-cv-02418-DWF-TNL Document 71 Filed 12/21/16 Page 6 of 10 privacy claim in that case, let alone hold that such claim could not be decided on a Rule 12 motion. Id. Plaintiff also attempts to stretch Judge Davis' narrow holding in Barton v. Ocwen Loan Servicing LLC into a statement of broad applicability. No. 12-cv-162 (MJD/JJG), 2013 WL 5781324 (D. Minn. Oct. 25, 2013). However, Judge Davis actually limited his holding to the facts of that case. ("On these facts, it is for the jury to decide whether a reasonable person would be highly offended by Ocwen's access to private information such as her current credit status, her employment status, address and other information within such report." Id. at *7 (emphasis added). B. Plaintiff Has Failed to Establish That a Special Relationship Existed Between Her and RSB Which Would Give Rise to a Negligence Claim. Plaintiff alleges that even in the absence of a special relationship between her and RSB, she nevertheless possesses a negligence claim against RSB. But, such is not the law, and the cases upon which Plaintiff relies are distinguishable. Indeed, in Dunnigan, the Court held that, "[i]n Minnesota, lenders owe no fiduciary duty to a borrower unless the bank knows or has reason to know that the customer is placing his trust and confidence in the bank and is relying on the bank so to counsel and inform him." 2016 WL 1698280, at *9 (internal brackets, quotation marks, and citations omitted). Judge Nelson, in that case, explicitly held that "lenders owe no general duty of care to borrowers." Id. (emphasis added). In Zayed v. Associated Bank, NA., 779 F.3d 727 (8th Cir. 2015), the plaintiff did not allege that the defendant bank breached a fiduciary duty or owed the borrower a duty. 7 3436383v2 CASE 0:16-cv-02418-DWF-TNL Document 71 Filed 12/21/16 Page 7 of 10 Rather, the plaintiff alleged only that the bank aided and abetted another in breaching a fiduciary duty. Thus, the court noted that for the claim to be actionable, the plaintiff must establish that the bank knew the primary tortfeasor owed a duty of care to the victim and further, the bank knowingly assisted the primary tortfeasor in breaching that duty. C. Plaintiff Has Presented No Concrete Facts to Support a Conspiracy Claim. Plaintiff failed to offer any concrete facts to plead that a conspiracy ever existed between or among the Defendants. All that Plaintiff offered were her own conclusions, predicated on sheer speculation. She presented no facts showing what conspiratorial agreement was reached, how it was reached, when it was reached, or by whom it was reached. Civil conspiracy does not constitute a stand-alone claim. Rather, one must conspire with others and actively join in the commission of a tort in order for a civil conspiracy claim to be actionable. Here, as a matter of simple logic, RSB cannot have conspired to commit a tort, unless it joined with its alleged co-conspirators in actually committing an underlying tort. Plaintiff has provided no facts to offer a plausible basis to establish the existence of any conspiracy. Nor has she established the existence of an independent tort which RSB allegedly jointly conspired to commit. IV. Schroeder Acted Outside the Scope of His Employment with RSB. Plaintiff alleges, without offering any supporting facts, that Schroeder pulled the October 2014 credit report in order to give it to Kruckow for use in the marital 8 3436383v2 CASE 0:16-cv-02418-DWF-TNL Document 71 Filed 12/21/16 Page 8 of 10 dissolution action he initiated weeks later. Again Plaintiff offers no concrete facts to assign this motive to Schroeder. The allegation is offered solely as a conclusory statement and reflects nothing more than sheer speculation. Assuming, for arguments sake, that Plaintiff had alleged facts which sufficiently demonstrated this particular outcome was Schroeder's motive, the conduct would have fallen outside the scope of his employment with RSB. The alleged act would have been for an improper personal motive and not for a business purpose. Accordingly, RSB would not be liable for this unauthorized and unforeseeable act of its employee. CONCLUSION Plaintiff has failed to demonstrate a sufficient concrete injury-in-fact to support a basis for Article III standing. Moreover, she has failed to offer actual facts to provide a plausible basis for an actionable FCRA claim or to support her pendent state claims. As a result, RSB respectfully asks the Court to dismiss Plaintiffs claims against it with prejudice. Dated: December 21, 2016 MOSS & BARNETT Bys/ John P. Boyle John P. Boyle, #186946 Sarah E. Doerr, #338679 / Patrick D. Newman, #0395864 150 South Fifth Street, Suite 1200 Minneapolis, MN 5 5402 Phone: (612) 877-5000 Fax: (612) 877-5999 E-Mail: John.Boyle@lawmoss.com Sarah.Doerr@lawmoss.com Patrick.Newman@lawmoss.com Attorneys for Defendant Rushford State Bank 9 3436383v2 CASE 0:16-cv-02418-DWF-TNL Document 71 Filed 12/21/16 Page 9 of 10 10 3436383v2 CASE 0:16-cv-02418-DWF-TNL Document 71 Filed 12/21/16 Page 10 of 10 UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA Dana D. Kruckow, Plaintiff, v. Merchants Bank, Rushford State Bank, Craig Schroeder, individually, and Paul A. Kruckow, individually, Defendants. Civil File No. 16-02418 DEFENDANT RUSHFORD STATE BANK CERTIFICATE OF COMPLIANCE WITH WORD COUNT LIMIT The undersigned hereby certifies that Defendant Rushford State Bank's Reply Brief in Support of its Motion to Dismiss, filed concurrently with this Certificate, complies with the length and type size requirements set forth in Local Rule 7 .1. The memorandum was prepared using Microsoft Word 2010 and is rendered in Times New Roman 13 point font. According to the word processing system's word count, the Reply Brief contains no more than 2,242 words including all text, headings, footnotes and quotations, and excluding the caption and signature block. Defendant's principal brief contained no more than 9,665 words, for a cumulative total of no more than 11,907 words. 3444138vl CASE 0:16-cv-02418-DWF-TNL Document 71-1 Filed 12/21/16 Page 1 of 2 MOSS & BARNETT Dated: December 21, 2016 Bys/ Patrick D. Newman John P. Boyle, # 186946 Sarah E. Doerr, #338679 Patrick D. Newman, #0395864 150 South Fifth Street, Suite 1200 Minneapolis, MN 55402 Phone: (612) 877-5000 Fax: (612) 877-5999 E-Mail: John.Boyle@lawmoss.com Sarah.Doerr@lawmoss.com Patrick.Newman@lawrnoss.com Attorneys for Defendant Rushford State Bank 3444138vl CASE 0:16-cv-02418-DWF-TNL Document 71-1 Filed 12/21/16 Page 2 of 2