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Oneal v. First Tennessee Bank

United States District Court, E.D. Tennessee

March 15, 2018

RAYMOND ONEAL, individually and on behalf of all other similarly situated, Plaintiff,



         This civil action is before the Court on defendant's Motion to Dismiss Plaintiff's First Amended Class Action Complaint [Doc. 15]. Defendant seeks the dismissal of this action on three grounds: (1) under Federal Rule of Civil Procedure 12(b)(1), for plaintiff's alleged failure to plead standing under Article III of the Federal Constitution; (2) under Rule 12(b)(5), for plaintiff's alleged failure to properly serve defendant with process; and (3) under Rule 12(b)(6), for plaintiff's alleged failure to state a plausible claim upon which the Court may grant relief [Doc. 16]. Plaintiff responded to this motion [Doc. 17], and defendant replied [Doc. 18]. Defendant's motion is therefore fully briefed and ready for disposition. See E.D. Tenn. L.R. 7.1(a), 7.2. For the reasons explained below, the Court will grant this motion and dismiss plaintiff's suit without prejudice.

         I. Background

         This case concerns an alleged violation of the federal Fair Credit Reporting Act, 15 U.S.C. §§ 1681-1681x (the “FCRA”). Plaintiff claims defendant negligently and willfully accessed his Equifax credit report for a purpose not authorized by the FCRA [Doc. 14 ¶¶ 82-83]. The Court will first provide limited background on the FCRA, before turning to the particular factual and procedural history of this case.

         A. Statutory Background

         In light of the Court's later discussion of plaintiff's standing to bring suit in federal court, see infra Part III, the Court will first describe the pertinent history of the FCRA. The stated purpose of this statute is “to require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for 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.” § 1681(b). In enacting the FCRA, Congress specifically found “a need to insure that consumer reporting agencies exercise their grave responsibilities with fairness, impartiality, and a respect for the consumer's right to privacy.” § 1681(a)(4). Furthermore, the FCRA's lead sponsor in the Senate, William Proxmire, remarked at the time of enactment that consumers have “a right to see that the information is kept confidential and is used for the purpose for which it is collected, ” as well as “a right to be free from unwarranted invasions of [their] personal privacy.” Fair Credit Reporting: Hearings on S. 823 Before the Subcomm. on Financial Institutions of the Comm. on Banking and Currency, 91st Cong. 2 (1969).

         The FCRA was “[e]nacted long before the advent of the Internet”-specifically, in 1970-but has assumed an even greater significance in the modern era of Internet-based credit reporting. Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1545 (2016). This statute governs the activity of entities that regularly disseminate “consumer reports”-i.e., “information bearing on an individual's ‘credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living, '” in the context of specified transactions such as “credit transactions, insurance, licensing, consumer-initiated business transactions, and employment.” Id. (quoting 15 U.S.C. § 1681a(d)(1)). The FCRA imposes on these entities “a host of requirements concerning the creation and use of consumer reports, ” three of which are particularly relevant here. Id.

         First, the FCRA provides an exclusive list of purposes for which consumer reports may be disseminated and prohibits any person[1] from using or obtaining such information for any other purpose. 15 U.S.C. § 1681b(a), (f). One permissible purpose is furnishing a consumer report to a person who “intends to use the information in connection with a credit transaction involving the consumer . . . and involving the extension of credit to, or review or collection of an account of, the consumer.” § 1681(a)(1)(3)(A). Second, a consumer may recover actual damages, litigation costs, and attorneys' fees from any person who negligently fails to comply with the FCRA's requirements. Id. § 1681o(a). Third, in the event of a “willful” violation, the FRCPA provides for recovery of the greater of actual damages or statutory damages up to $1, 000, along with punitive damages “as the court may allow, ” litigation costs, and attorneys' fees. Id. § 1681n(a).

         Today, the “standard measure of consumer credit risk in the United States” is an individual's FICO Score, a “three-digit number summarizing a consumer's credit risk of likelihood to repay a loan” [Doc. 14 ¶¶ 31-32]. The higher an individual's FICO Score, the lower her estimated credit risk and likelihood of default [Id. ¶ 33]. An individual's FICO Score is based primarily on the consumer report databases maintained by the three largest American credit reporting agencies-Equifax, TransUnion, and Experian [Id. ¶¶ 36-37]. Furthermore, an individual's FICO Score is calculated using five factors, each weighted differently: (1) payment history, accounting for 35% of the FICO Score; (2) amount of debt, accounting for 30%; (3) length of credit history, accounting for 15%; (4) new credit information, accounting for 10%; and (5) credit mix, accounting for 10% [Id. ¶ 41]. Credit inquiries from potential lenders and others fall under the fourth factor and come in two varieties: “soft pulls, ” or inquiries that do not affect an individual's FICO Score and that cannot be seen by other lenders, and “hard pulls, ” or requests for copies of an individual's credit report that may affect her FICO Score. Banga v. First USA, NA, 29 F.Supp.3d 1270, 1274 n.2 (N.D. Cal. 2014); Middleton v. CCB Credit Servs., Inc., 2:12-cv-2012, 2014 WL 3513386, at *2 (D. Nev. July 14, 2014).

         B. Factual History

         The relevant facts here are not in dispute.[2] Plaintiff is a resident of Clark County, Nevada, while defendant is a bank headquartered in Memphis, Tennessee [Doc. 14 ¶¶ 17- 18]. The parties agree that, sometime before 2008, plaintiff incurred financial obligations to defendant [Id. ¶ 47; Doc. 16 p. 2]. Then, in September 2008, plaintiff filed for Chapter 13 bankruptcy in the United States Bankruptcy Court for the District of Nevada [Doc. 14 ¶ 48]. During those proceedings, defendant did not seek to have its indebtedness declared nondischargeable under 11 U.S.C. § 523; nor did defendant seek relief from the automatic stay provided for in 11 U.S.C. § 362 [Id. ¶¶ 50-51]. Plaintiff received a discharge in his bankruptcy case on May 6, 2015 [Id. ¶ 49]. The parties seem to agree that this resulted in a discharge of plaintiff's debt to defendant [Id. ¶ 52; see Doc. 16 p. 2].

         Plaintiff alleges that, on February 15, 2016, he reviewed his Equifax credit report and discovered an unauthorized inquiry by defendant [Doc. 14 ¶ 53]. According to the report, defendant accessed plaintiff's Equifax credit report on November 30, 2015, for “Account Review” purposes [Id. ¶¶ 53-54]. Plaintiff asserts that, on that date, he did not have any account, debt, or other financial relationship with defendant, all his business with defendant having ended with the bankruptcy discharge [Id. ¶¶ 56-57]. Plaintiff thus alleges that this inquiry constituted impermissible use of or access to a consumer report under the FCRA [Id. ¶¶ 58-59 (citing § 1681b)]. Plaintiff further claims that defendant's conduct was willful under § 1681n, because defendant “was aware of the FCRA's prohibitions on impermissibly pulling consumers' credit reports” [Id. ¶ 61].

         Plaintiff alleges that he suffered an invasion of his legally protected privacy interests because of defendant's credit report inquiry, as well as corresponding mental and emotional distress [Id. ¶¶ 62-64]. Plaintiff further asserts that defendant's conduct increased the risk that he will “be injured if there is a data breach on [d]efendant's computer systems, ” as a result of defendant “acquiring additional highly sensitive information about [p]laintiff . . . and saving that information on its computer systems” [Id. ¶ 66]. Plaintiff notes that such breaches “are increasingly common, and financial institutions like [d]efendant are frequent targets of cybercriminals” [Id. (citations omitted)].

         C. Procedural History

         On January 18, 2017, plaintiff filed a class action complaint against defendant, seeking class certification, actual and FCRA statutory damages, declaratory and injunctive relief, litigation costs, and attorneys' fees [Doc. 1]. In lieu of filing an answer, defendant filed a first motion to dismiss under Rules 12(b)(1), 12(b)(5), and 12(b)(6) [Docs. 12-13]. Then, on April 21, Plaintiff filed an amended complaint, as permitted by Rule 15(a)(1)(B) [Doc. 14]. Plaintiff's amended complaint does not add any new claims or parties, but does provide further background on the FCRA and the credit reporting industry, as well as an additional proposed class [Doc. 14]. As amended, plaintiff's complaint proposes the following two class definitions:

All persons whose consumer credit report from any of the three major credit reporting agencies (Transunion, Equifax, and Experian) reflects an unauthorized consumer credit report inquiry by Defendant after a bankruptcy discharge within the past 2 years (“Class One”).
All persons whose consumer credit report from any of the three major credit reporting agencies (Transunion, Equifax, and Experian) reflects an unauthorized consumer credit report inquiry by Defendant after a bankruptcy discharge within the past 5 years (“Class Two”).

[Id. ¶ 69].

         In response, defendant filed a second motion to dismiss on May 3, arguing that the amended complaint fails to resolve the deficiencies of the original complaint [Doc. 15 ¶ 1]. Plaintiff then filed a response to this motion [Doc. 17], to which defendant replied [Doc. 18]. The Court further notes that defendant's second motion to dismiss is substantively identical to the first [See Docs. 12-13, 15-16]. Thus, the Court will deny the first motion as moot and will proceed to consider the merits of the second motion.

         II. Standard of Review

         Although defendant moves for dismissal under Federal Rules of Civil Procedure 12(b)(1), 12(b)(5), and 12(b)(6), as explained in Part III below, the Court need only address the first of these three grounds-lack of subject-matter jurisdiction.

         “Federal courts are courts of limited jurisdiction.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). In other words, federal courts “have only the power that is authorized by Article III of the Constitution and the statutes enacted by Congress pursuant thereto.” Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541 (1986). As such, subject-matter jurisdiction is a threshold issue that the Court must address and resolve prior to reaching the merits of the case. Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 94-95 (1998); see also Fed. R. Civ. P. 12(h)(3) (providing that, “[i]f the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action”). Unlike a motion to dismiss for failure to state a claim under Rule 12(b)(6), “where subject matter jurisdiction is challenged under Rule 12(b)(1)[, ] . . . the plaintiff has the burden of proving jurisdiction in order to survive the motion.” RMI Titanium Co. v. Westinghouse Elec. Corp., 78 F.3d 1125, 1134 (6th Cir. 1996) (quoting Rogers v. Stratton Indus., 798 F.2d 913, 915 (6th Cir. 1986)).

         Rule 12(b)(1) motions fall into two categories: “facial attacks and factual attacks.” United States v. Ritchie, 15 F.3d 592, 598 (6th Cir. 1994). “A facial attack is a challenge to the sufficiency of the pleading itself.” Id. In considering whether jurisdiction has been established on the face of the pleading, “the court must take the material allegations of the [pleading] as true and construed in the light most favorable to the nonmoving party.” Id. (citing Scheuer v. Rhodes, 416 U.S. 232, 235-37 (1974)). “A factual attack, on the other hand, is not a challenge to the sufficiency of the pleading's allegations, but a challenge to the factual existence of subject matter jurisdiction.” Id. In considering whether jurisdiction has been proved as a matter of fact, “a trial court has wide discretion to allow affidavits, documents, and even a limited evidentiary hearing to resolve disputed jurisdictional facts.” Ohio Nat'l Life Ins. Co. v. United States, 922 F.2d 320, 325 (6th Cir. 1990). In evaluating a factual attack, “no presumptive truthfulness applies to the factual allegations, and the court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case.” Ritchie, 15 F.3d at 598 (internal citation omitted).

         Here, the parties do not expressly address whether defendant's Rule 12(b)(1) motion is a facial or factual attack on subject-matter jurisdiction. Plaintiff, however, seems to assume the former [See Doc. 17 pp. 13-14]. The Court agrees with this assessment, as defendant's stated argument for dismissal under Rule 12(b)(1) is that “[p]laintiff has failed to plead standing as required by Article III of the U.S. Constitution” [Doc. 15 ¶ 2 (emphasis added)]. The Court will thus analyze ...

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