Spencer v. Nat'l City Mortg.

831 F.Supp.2d 1353

Mary John SPENCER, Plaintiff,

v.NATIONAL CITY MORTGAGE, d/b/a PNC Mortgage, Defendant.

Civil Action File No. 1:10–cv–3532–TCB–JFK.

United States District Court,

N.D. Georgia,

Atlanta Division.

Aug. 8, 2011.

Holly Geerdes, Geerdes & Kim, Roswell, GA, for Plaintiff.

Gary C. Tepper, Jonathan C. Lippert, Ballard Spahr Andrews & Ingersoll, Washington, DC, Charley Floyd Brown, Ballard Spahr LLP, Atlanta, GA, for Defendant.

ORDER

TIMOTHY C. BATTEN, SR., District Judge.

Before the Court is Magistrate Judge King's report and recommendation (the “R & R”) [16], which recommends granting in part and denying in part Defendant's partial motion to dismiss [8]. For the reasons that follow, the Court will adopt the R & R.

I. BackgroundA. Factual Background

In April 2007, Plaintiff Mary John Spencer obtained a home-improvement loan of $117,000 from Defendant National City Mortgage, d/b/a PNC Mortgage (“PNC”). After closing, PNC notified Spencer that the original executed loan documents had been lost. Although Spencer made and continued to make timely monthly mortgage payments on the loan, PNC sent Spencer late notices beginning in May or June 2007 and continuing thereafter. Spencer gave PNC information (such as the dates of her payments and the check numbers of her checks that were cashed by PNC) indicating that her account was not delinquent. Nevertheless, PNC stated that it was holding her account in suspense “until her account was properly set up due to loss of the loan documents and despite cashing each and every monthly payment made by Plaintiff.”

In the fall of 2007, Spencer was notified by her bank and by American Express that PNC was reporting to the credit reporting agencies (“CRAs”) that her account was delinquent. Spencer again sent PNC copies of the checks evidencing her timely mortgage payments, and she notified PNC of the false reporting to the CRAs and demanded correction. PNC refused to acknowledge its mistake and refused to correct its erroneous credit reporting.

In February 2008, Spencer filed suit against PNC for, among other things, false reporting to the CRAs. In exchange for dismissal of Spencer's lawsuit, PNC agreed to a loan modification, which was executed in September 2008. Once again, however, PNC lost the original loan modification documents, and it continued to hold Spencer's account in suspense and to report to the CRAs that Spencer was delinquent in her payments. Spencer repeatedly contacted PNC and demanded that it stop its false negative reporting, noting that her business depended on her credit rating. PNC did not correct its previous false negative reports to the CRAs, and its false reporting continued.

As a result of PNC's false reports to the CRAs, American Express declined Spencer's business credit card in December 2008,¹ and it thereafter reduced her line of credit from $120,000 to $10,000. In January 2009, PNC sent an apology letter to Spencer, but again failed to correct its mistakes with the CRAs. Over the next four months, Spencer continued to send proof of mortgage payments to PNC and to American Express, but American Express would not reinstate the original line of credit because PNC never corrected its false credit reports.

In 2009, Spencer sought another loan modification in lieu of suing PNC, and in September 2009, PNC, through Sarah Greggerson, entered into a forbearance agreement with Spencer for both loans with an agreed upon amount to be paid monthly on the mortgage beginning in November 2009 and continuing for five months pending finalization of the refinancing agreement. Spencer alleges that she paid the amount agreed upon but that PNC continued to report delinquent payments on the loan. She contacted Greggerson, who stated that she corrected the error and sent Spencer an apology letter, but the letter listed only one loan even though the forbearance agreement covered both loans. PNC apologized again in December 2009, but its false negative reporting continued. In March 2010, PNC requested an additional month on the forbearance to finalize the refinancing, to which Spencer agreed after being assured that there would be no other problems with the refinancing. In April, however, PNC notified Spencer that it would not give her the agreed-upon refinancing.

B. Procedural Background

1. The Lawsuit and PNC's Motion to Dismiss

Spencer filed suit against PNC on October 29, 2010. In her amended complaint, which she filed on January 18, 2011, Spencer asserts claims against PNC for violation of the federal Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681s–2(b) (count I),² as well as state-law claims for breach of contract (count II), defamation (count III), and intentional infliction of emotional distress (count IV). Spencer alleges that she suffered approximately $116,997 in damages as a result of PNC's false negative reporting to the CRAs and that her damages continue to accrue. She also alleges that she has virtually lost her business as a result of PNC's conduct, causing her to suffer severe anxiety, emotional distress and depression. She seeks compensatory damages, punitive damages, plus attorneys' fees and costs.

PNC has moved to dismiss counts II through IV, arguing that § 1681t(b)(1)(F) of the FCRA preempts all state-law claims against furnishers. Spencer argues that there is a conflict between § 1681t(b)(1)(F) and another provision of the FCRA, § 1681h(e), and she asks the Court to resolve the conflict by holding that § 1681t(b)(1)(F) preempts only statutory causes of action against furnishers and that state common-law claims are not preempted if they meet the pleading requirements of § 1681h(e).

2. The Magistrate Judge's R & R

PNC's motion to dismiss was referred to Magistrate Judge King, who issued a non-final R & R recommending that the motion be granted in part and denied in part.

Magistrate Judge King recognized that other courts, including some in the Northern District of Georgia, have recognized the conflict between § 1681t(b)(1)(F) and § 1681h(e) and have attempted to resolve that conflict in one of three ways. First, some courts have concluded that the newer language of § 1681t(b)(1)(F) supersedes the older language of § 1681h(e), so that all state-law claims are preempted. A second group of courts has read § 1681h(e) as applying to claims that arise before a furnisher receives notice of a dispute from a CRA, while claims arising after a furnisher receives such notice are governed by § 1681t(b)(1)(F). Third, other courts have held that § 1681t(b)(1)(F) applies only to statutory causes of action while § 1681h(e) applies to common law claims.

Magistrate Judge King ultimately did not adopt any of these three approaches. Rather, she concluded that because § 1681h(e) does not apply to this case, there is no conflict to be resolved and that § 1681t(b)(1)(F) governs. She went on to explain that under the plain language of § 1681t(b)(1)(F), count III (defamation) is preempted in its entirety, and count II (breach of contract) and count IV (intentional infliction of emotional distress) are preempted to the extent that they are based on duties or obligations arising solely out of conduct allegedly violating the FCRA. However, she held that count II is not preempted to the extent it is based on the breach of an express agreement between the parties and that count IV is not preempted to the extent that it is based on the non-preempted breach-of-contract claim. Finally, Magistrate Judge King ordered that if the R & R is adopted by this Court, Spencer must file an amended complaint removing her defamation claim and restating her remaining state-law causes of action to allege only non-preempted conduct. Both Spencer and PNC filed objections to the R & R.

II. Analysis

After conducting a careful and complete review of a magistrate judge's findings and recommendations, a district judge may accept, reject, or modify a magistrate judge's report and recommendation. 28 U.S.C. § 636(b)(1)(C); Williams v. Wainwright, 681 F.2d 732, 732 (11th Cir.1982), cert. denied,459 U.S. 1112, 103 S.Ct. 744, 74 L.Ed.2d 964 (1983). A district judge “shall make a de novo determination of those portions of the report or specified proposed findings or recommendations to which objection is made.” 28 U.S.C. § 636(b)(1)(C). The district judge must “give fresh consideration to those issues to which specific objection has been made by a party.” Jeffrey S. v. State Bd. of Educ., 896 F.2d 507, 512 (11th Cir.1990). Those portions of a report and recommendation to which an objection is not asserted are reviewed for plain error. United States v. Slay, 714 F.2d 1093, 1095 (11th Cir.1983).

The Court has conducted a careful review of the report and recommendation and both parties' objections thereto. Having done so, and as explained below in greater detail, the Court finds that Magistrate Judge King's factual and legal conclusions are correct and that neither party's objections have merit.

A. History of, and Amendments to, the FCRA

“The FCRA is a comprehensive statutory scheme designed to regulate the consumer reporting industry.” Ross v. FDIC, 625 F.3d 808, 812 (4th Cir.2010). A brief discussion of the FCRA, as originally enacted and as amended by the Consumer Credit Reporting Reform Act of 1996 (“CCRRA”), is useful to understand the issues raised by PNC's motion, specifically as it relates to (1) obligations imposed on furnishers of information to CRAs; (2) the “limitation of liability” provision contained in § 1681h(e); and (3) the FCRA's preemption provisions.

1. Furnishers' Obligations Under the FCRA

When enacted in 1970, the FCRA did not impose any duties on furnishers of information to CRAs.³ The CCRRA, however, expanded the scope of the FCRA and imposed two distinct obligations on furnishers of information to CRAs. See15 U.S.C. § 1681s–2. First, under § 1681s–2(a), furnishers have a duty to provide accurate information to CRAs. Second, under § 1681s–2(b), furnishers must...