Pone v. Messerli & Kramer P.A.

KEVIN PONE, Plaintiff, v. MESSERLI & KRAMER P.A. and CAPITAL ONE BANK USA, N.A., Defendants.

Case No. 19-CV-2149 (NEB/LIB)

UNITED STATES DISTRICT COURT DISTRICT OF MINNESOTA

September 29, 2020

ORDER ON MOTION TO DISMISS AND MOTION FOR JUDGMENT ON THE PLEADINGS

Plaintiff Kevin Pone had an account with Capital One Bank USA, N.A. ("Capital One") that Capital One later determined to be the result of identity theft. After Defendants Capital One and Messerli & Kramer P.A. ("Messerli") attempted to collect on the account, Pone sued them for violations of state and federal law. Capital One and Messerli each seek dismissal of the claims asserted against them. For the reasons that follow, the Court grants in part and denies in part Capital One's motion to dismiss and grants Messerli's motion for judgment on the pleadings.

BACKGROUND

The Court draws the following background from the operative complaint, accepting as true all factual allegations in the complaint and drawing all reasonable inferences in favor of Pone. See Topchian v. JPMorgan Chase Bank, N.A., 760 F.3d 843, 848 (8th Cir. 2014) (explaining standard that applies to a motion under Rule 12(b)(6) of the Federal Rules of Civil Procedure); Ashley Cty., Ark. v. Pfizer, Inc., 552 F.3d 659, 665 (8th Cir. 2009) (applying the same standard to a Rule 12(c) motion).

In 2011, someone unknown to Pone opened two credit card accounts with Capital One in his name (the "Accounts"). (See ECF No. 47 ("Am. Compl.") ¶¶ 8, 13.) Pone was thus the victim of identity theft. Debts incurred in connection with the Accounts were put into collection. In 2012, Capital One hired Messerli, a law firm specializing in consumer debt collection, to collect on the Accounts. (Id. ¶¶ 11, 17.) On August 22, 2013, Defendants obtained a $6,923.68 default judgment against Pone in Minnesota state court in connection with the debt owed on one of the Accounts. (Id. ¶ 26.) Public records vendors notified the national credit reporting agencies—that is, Trans Union, Experian, and Equifax (together, the "CRAs")—of the existence of the default judgment against Pone. (Id. ¶ 27.) The CRAs began listing information about the August 2013 default judgment against Pone on his credit reports. (Id.) At the same time, Capital One also reported the Accounts tradelines to the CRAs as charged-off debts (Id. ¶ 28), which negatively impacted Pone's credit profile and credit score. (Id.) Messerli closed its administrative files concerning the Accounts in March 2015. (Id. ¶ 31.)

Then in 2016, Capital One wrote to Pone, informing him that it had determined Account x9399 was fraudulent and that it had instructed the CRAs to delete the Account from Pone's credit file. (Am. Compl. ¶ 33, Ex. 3.) Indeed, in July 2016 Capital One sent instructions to the CRAs to remove references to both Accounts from Pone's credithistory. (Am. Compl. ¶¶ 34-35.) It also requested that Messerli vacate the August 2013 default judgment against Pone as early as 2016. (Id. ¶ 32.) Messerli did not do so. (Id.)

It was not until May 2019 that Messerli sought to vacate the August 2013 judgment against Pone. (Id. ¶ 42.) In its motion to vacate filed in Minnesota state court, Messerli requested that "the matter [be] dismissed without prejudice" because Pone was "experiencing a hardship"—not because the account was fraudulent. (Am. Compl. ¶¶ 42-43, Ex. 5.) The Minnesota state court vacated the judgment without prejudice. (Am. Compl. ¶ 46.)

Meanwhile, the CRAs had not fulfilled Capital One's 2016 request to remove references to the Accounts, so in 2019, Capital One made the request again. (Id. ¶ 38.) In 2017 and 2019, Capital One also pulled Pone's credit report several times, even though it knew by July 2016 that the Accounts were the result of identity theft. (Id. ¶¶ 33, 48.) Pone alleges that the default judgment and the charged-off debts reported to the CRAs caused serious harm to Pone's credit profile and credit score, and that he suffered distress and was denied credit. (Id. ¶¶ 57, 58, 61.)

Pone's Amended Complaint asserts claims for alleged FCRA violations and common law credit defamation against Capital One and claims for common law invasion of privacy and negligence against both Capital One and Messerli. (Am. Compl. ¶¶ 63-84.) The arguments for dismissal are now before the Court.

ANALYSIS

I. Capital One's Motion to Dismiss and Messerli's Motion for Judgment on the Pleadings

To survive a Rule 12(b)(6) motion, "a complaint must contain sufficient factual allegations to state a claim for relief that is plausible on its face." Smithrud v. City of St. Paul, 746 F.3d 391, 397 (8th Cir. 2014) (citation and quotation marks omitted). To assess the sufficiency of the complaint, courts accept as true all factual allegations and draw all reasonable inferences in favor of the non-moving party. See Topchian, 760 F.3d at 848. A Rule 12(c) motion for judgment on the pleadings is generally assessed under the same standards as a Rule 12(b)(6) motion. See In re Pre-Filled Propane Tank Antitrust Litig., 893 F.3d 1047, 1056 (8th Cir 2018).

A. The Sufficiency of The FCRA Allegations

Capital One contends that Count One of the Amended Complaint—which alleges that Capital One violated the FCRA—must be dismissed because it contains insufficient factual allegations to state a plausible claim for relief. Under Rule 8(a)(2), "[a] pleading that states a claim for relief must contain . . . a short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a). To satisfy Rule 8, a complaint must plead facts sufficient to "raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2008). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556U.S. 662, 678 (2009). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. Courts therefore disregard legal conclusions couched as factual allegations to assess the sufficiency of the pleadings. See id.

1. Does the Amended Complaint adequately plead that Capital One lacked a permissible purpose to obtain Pone's credit report?

Capital One argues that Count One must be dismissed because the Amended Complaint fails to plead that Capital One obtained Pone's credit report for an impermissible purpose. The Court disagrees. Section 1681b(a) of the FCRA provides an exclusive list of permissible purposes for which a CRA may supply consumer reports. See Breese v. TRIADvantage Credit Servs., Inc., 393 F. Supp. 2d 819, 821 (D. Minn. 2005); see also 15 U.S.C. § 1681b(a). To succeed on an FCRA claim, a plaintiff must therefore establish that the defendant lacked a permissible purpose for obtaining her consumer reports. See Breese, 393 F. Supp. 2d at 821.

The Amended Complaint pleads a cogent theory of impermissible purpose. It asserts that by July 2016, Capital One was aware that the Accounts were the result of identity theft. (Am. Compl. ¶¶ 33, 48.) But after it sent letters to Pone explaining the fraud, Capital One still obtained Pone's credit report on multiple occasions. (Id. ¶ 48.)

A permissible purpose for Capital One to obtain Pone's credit report would most likely relate to a credit transaction or application for credit involving Pone, employment purposes, a business transaction initiated by Pone, or Capital One's extension of a firmoffer of credit to Pone. See 15 U.S.C. § 1681b(a), (c). At the time Capital One made these inquiries, none of these applied. (See id. ¶ 50.) In the context of the relationship between Pone and Capital One, it is unlikely other permissible purposes (for example, determining Pone's "eligibility for a license or other benefit granted by a governmental instrumentality required by law to consider an applicant's financial responsibility or status") would apply. Id. § 1681b(a)(3)(D).The Court finds these factual allegations, when construed in the light most favorable to Pone, sufficient to nudge the likelihood that Capital One had no permissible purpose to obtain Pone's credit reports across the line from conceivable to plausible. See Twombly, 550 U.S. at 570.

The Court is not persuaded by Capital One's cited authority. In the vast majority of cases cited by Capital One, the defendants appear to be debt collectors. See, e.g., Pyle v. First Nat'l Collection Bureau, No. 1:12-CV-00288-AW, 2012 WL 1413970, at *3 (E.D. Cal. Apr. 23, 2012) ("Based on [d]efendant's name, [d]efendant appears to be a collection agency."); Davis v. Schwab, No. 4:12-CV-740-A, 2013 WL 704332, at *3 (N.D. Tex. Feb. 26, 2013) (noting complaint alleged that defendants told the plaintiff they "were reviewing an alleged medical debt owed by plaintiff"). As even Capital One's cited authority acknowledges, "[c]ourts have been especially skeptical of claims brought against debt collection agencies, given that debt collection agencies typically request credit reports for the permissible purpose of seeking the information in connection with the consumer's debt." Thomas v. Fin. Recovery Servs., No. EDCV 12-1339 PSG OPX, 2013 WL 387968, at *4(C.D. Cal. Jan. 31, 2013). Capital One is not a debt collection agency, and the Court has no reason to suppose that it acted with the permissible purpose of using the information to help collect a debt. See 15 U.S.C. § 1681b(a)(3)(A).

Unsurprisingly, several of the cases Capital One cites concluded that the complaints at issue failed to adequately allege that the defendants had no permissible purpose because on the face of the complaint it was plain that the defendants sought credit reports in connection with their debt collection activities. See, e.g., Davis, 2013 WL 704332, at *3 ("[P]laintiff also alleges within his cause of action that defendants' counsel had responded to a letter written by plaintiff and explained that defendant...