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Smith v. First Century Bank

March 30, 2007

BOYD SMITH, NANCY SMITH, JOEY SMITH, JEFFREY SMITH, JILL SMITH, BESSIE HACKNEY, WILLIAM GRAY, PEGGY GRAY, GREGORY HOUSTON, ERNEST J. NICELY, AND PATRICIA NICELY, PLAINTIFFS
v.
FIRST CENTURY BANK, DEFENDANT AND FIRST CENTURY BANK, COUNTER-PLAINTIFF
v.
BOYD SMITH, NANCY SMITH, JOEY SMITH, JEFFREY SMITH, ERNEST NICELY AND PATRICIA NICELY, COUNTER-DEFENDANTS



The opinion of the court was delivered by: James H. Jarvis United States District Judge

MEMORANDUM OPINION

This matter is presently before the court on the motion to dismiss filed by defendant First Century Bank (FCB) [Doc. 56] with respect to the following two causes of action brought by plaintiffs:*fn1

(1) Violation of the federal Consumer Credit Protection Act, 15 U.S.C. § 1681s-2 (Counts II); and

(2) Violation of federal statutes and regulations to protect the confidentiality of consumer information [Counts III).

The issues raised have been well briefed by the parties [see Docs. 57, 73, and 77], and oral argument was heard on July 31, 2006 [see Doc. 184].*fn2 For the reasons that follow, FCB's motion to dismiss will be granted, whereby Counts II and III of the [corrected] consolidated amended complaints (amended complaints) will be dismissed.*fn3

I. Motion to Dismiss Pursuant to Rule 12(b)(6)

FCB contends that Counts II and III of the amended complaints should be dismissed against it pursuant to Fed. R. Civ. P. 12(b)(6). Technically, a Rule 12(b)(6) motion does not attack the merits of the case -- it merely challenges the pleader's failure to state a claim properly. 5 C. Wright, A. Miller & M. Kane, Federal Practice & Procedure, § 1364 at 340 (Supp. 1987). In deciding a Rule 12(b)(6) motion, the court must determine whether the complaint sets forth sufficient allegations to establish a claim for relief. In conducting its review, the court "must construe the complaint in the light most favorable to the plaintiff, accept all of the complaint's factual allegations as true, and determine whether plaintiff undoubtedly can prove no set of facts in support of his claim that would entitle him to relief." Powell v. Jacor Communications Corporate, 320 F.3d 599, 601-02 (6th Cir. 2003) (quoting Ziegler v. IBP Hog Mkt., Inc., 249 F.3d 509, 512 (6th Cir. 2001)).

The complaint must in essence set forth enough information to outline the elements of a claim or to permit inferences to be drawn that these elements exist. Jenkins v. McKeithen, 395 U.S. 411 (1969). Conclusory allegations are not acceptable, however, where no facts are alleged to support the conclusion or where the allegations are contradicted by the facts themselves. Vermilion Foam Products Co. v. General Electric Co., 386 F. Supp. 255 (E.D. Mich. 1974). The court cannot dismiss plaintiff's complaint unless "it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief." Conley v. Gibson, 355 U.S. 41, 45-46 (1957).

II. Violations of the Federal Consumer Credit Protection Act

Paragraphs 50 through 56 of the amended complaint filed by plaintiffs Boyd Smith, Nancy Smith, Joey Smith, Jeffrey Smith, Jill Smith, Bessie Hackney, William Gray, Peggy Gray, and Gregory Houston (the Smith complaint) and Paragraphs 38 through 43 of the amended complaint filed by plaintiffs Ernest and Patricia Nicely (the Nicely complaint) allege that FCB violated 15 U.S.C. § 1681s-2 by continuing to provide negative information concerning plaintiffs to consumer reporting agencies after receiving notice that the information was inaccurate. More specifically, plaintiffs allege that FCB "received information from Plaintiffs and from other sources from which it knew or had reasonable cause to believe that negative information that it provided about Plaintiffs to consumer reporting agencies was inaccurate" [Smith complaint, ¶ 51; Nicely complaint, ¶ 39], and that FCB continued to report such inaccurate information without first determining whether it was correct and without notifying the reporting agencies that it was incorrect [Smith complaint, ¶¶ 53-54; Nicely complaint, ¶¶ 40-41].

15 U.S.C. § 1681s-2 imposes two separate sets of duties upon furnishers of information to consumer credit reporting agencies. Section 1681s-2(a) imposes a duty to provide accurate information; section 1681s-2(b) imposes a duty to undertake an investigation upon receipt of notice from a credit reporting agency that a consumer is disputing the credit information that the furnisher has provided. It must be noted that subsections (c) and (d) limit the remedies available for violations of subsection (a). In particular, subsection (c) eliminates the availability of direct remedies to consumers by making §§ 1681n and 1681o inapplicable to violations of subsection (a).*fn4 Subsection (d) provides that the requirements imposed by subsection (a) are only enforceable by government officials.*fn5

Thus, no private right of action exists for a violation of 1681s-2(a). See Nelson v. Chase Manhattan Mortgage Corp., 282 F.3d 1057, 1060 (9th Cir. 2002); Carney v. Experian Information Solutions, Inc., 57 F.Supp.2d 496, 502 (W.D. Tenn. 1999). Plaintiffs, in fact, virtually concede that point in their reply brief [see Doc. 73, p.29]. Consequently, to the extent that plaintiffs have filed a cause of action under 15 U.S.C. § 1681s-2(a), defendant's motion must be granted and this cause of action dismissed.

The law is not so well settled, however, as to whether a consumer has a private cause of action under 15 U.S.C. § 1681s-2(b), which imposes on FCB a duty to undertake an investigation upon receipt of notice from a credit reporting agency that a consumer is disputing credit information that FCB provided. Nevertheless, it will not be necessary for the court to decide whether a private cause of action exists under that subsection because plaintiffs' amended complaint nowhere alleges that FCB received any such notice from a credit reporting agency. Nor do plaintiffs allege that they gave the credit reporting agencies notice of any dispute, which notice is a vital requirement for imposition of liability under the statute.

15 U.S.C. § 1681s-2(b); § 1681i(a)(1) and (2). Plaintiffs have therefore failed to properly state a claim under that subsection of the statute. Accordingly, Counts II ...


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