Islam v. Option One Mortgage Corp., Civil Action No. 05-12175-WGY.

• Decision Date: 05 May 2006
• Docket Number: Civil Action No. 05-12175-WGY.
• Parties: Nurul ISLAM and Nilufa Islam, Plaintiffs, v. OPTION ONE MORTGAGE CORP., Defendant.
• Court: U.S. District Court — District of Massachusetts

432 F.Supp.2d 181

Nurul ISLAM and Nilufa Islam, Plaintiffs, v. OPTION ONE MORTGAGE CORP., Defendant.

Civil Action No. 05-12175-WGY.

United States District Court, D. Massachusetts.

May 5, 2006.

COPYRIGHT MATERIAL OMITTED

Jeffrey S. Beeler, Heinlein & Beeler, PC, South Natick, MA, for Plaintiffs.

Lisa A. Tenerowicz, Michael L. Chinitz, Rose & Associates, Boston, MA, for Defendant.

MEMORANDUM AND ORDER

YOUNG, District Judge.

I. INTRODUCTION

This action, brought by the plaintiffs Nurul and Nilufa Islam (collectively, "the Islams") against the defendant Option One Mortgage Corp. ("Option One"), arises in the aftermath of the Islams' refinancing of their home and paying-off the mortgage held by Option One. According to the Complaint, Notice of Removal [Doc. No. 1], Ex. 1 ("Compl."), the final payment to Option One was untimely credited and, as a result, Option One undertook aggressive collection efforts and made false reports to credit reporting agencies.

A. Procedural Posture

The Islams originally filed their eleven-count complaint in the Massachusetts Superior Court sitting in and for the County of Essex on August 25, 2005. See Compl. at 1. Option One removed the case to this Court on October 31, 2005, see Notice of Removal at 1, and immediately moved to dismiss the complaint for failure to state a claim, pursuant to Federal Rule of Civil Procedure 12(b)(6). See Mot. to Dismiss [Doc. No. 2]. The motion also requested that certain allegations be stricken from the complaint pursuant to Rule 12(f). Id.

B. Standard of Review

A court may grant a motion to dismiss for failure to state a claim "only if it appears that upon any set of facts which may be inferred from the complaint[,] the plaintiff will be unable to recover." Gibbs v. SLM Corp., 336 F.Supp.2d 1, 7 (D.Mass. 2004) (Saris, J.). "The complaint will survive as long as it pleads sufficient facts to warrant recovery on any cognizable theory of the case." Tompkins v. United Healthcare of New England, Inc., 203 F.3d 90, 93 (1st Cir.2000). In construing the complaint, "all reasonable inferences from properly pleaded facts are to be drawn in the plaintiff's] favor." Roma Constr. Co. v. aRusso, 96 F.3d 566, 568 (1st Cir.1996).

C. Federal Jurisdiction

This Court has jurisdiction under Title 28, Sections 1332 and 1441 of the United States Code (diversity and removal, respectively). The Islams are citizens of Massachusetts and Option One is a California corporation with its principal place of business in Irvine. Compl. ¶¶ 1-3. The Islams claim $2,000,000 in damages. Notice of Removal, Ex. 2.

D. Facts¹

The Islams are residents of Andover, Massachusetts. Compl. ¶¶ 1-2. In 2003, Option One held the mortgage on the Islams' property in Andover. Compl. ¶ 5. In December of 2003 the Islams refinanced their mortgage with a different company. Compl. ¶ 6. That agreement was closed on December 24, 2003, and Option One received the full payoff amount on the original mortgage on December 31, 2003. Compl. ¶¶ 7-8.

By January 13, 2004—two weeks later— Option One had not yet credited the Islams' account or updated their credit report. Compl. ¶ 9. Mr. Islam contacted Option One about the problem and was told that it would be rectified within the next few days. Compl. ¶ 10. He told Option One to ensure that the payment was posted by January 16, the next due date. Compl. ¶ 11.

Nearly a week later, on January 21, 2004, a representative of Option One contacted Mr. Islam and demanded the January mortgage payment. Compl. ¶ 12. There apparently was no record of Mr. Islam's previous phone call. Compl. ¶ 13. The next day, Mr. Islam contacted Option One and spoke with two representatives who "were quite rude . . . while continuing to demand payment for January." Compl. ¶¶ 14-15. Both representatives threatened to foreclose on the Islams' home. Compl. ¶ 16.

Thereafter, Option One "continued to harass Mr. Islam by refusing to investigate" whether the payoff had been received and insisted that anything that was sent "must have been empty." Compl. ¶ 17. Mr. Islam contacted Option One once again before the payoff amount was credited. Compl. ¶¶ 18-19. Mr. Islam did not know that it finally had been credited, however, until several weeks—and several phone calls—later. Compl. ¶ 20. He requested written explanation as to what had gone wrong and what had been done to resolve it, but never received any response. Compl. ¶¶ 21-22. Mr. Islam then exchanged several letters and phone calls with Option One's senior counsel, Robert C. Chaffin. Compl. ¶ 23. During one of these conversations, Mr. Chaffin "made inappropriate and discriminatory remarks relative to Mr. Islam's national origin." Compl. ¶ 24.

Option One failed to inform the credit reporting agencies until April of 2005— over one year later—that the Islams' mortgage had been paid in full. Compl. ¶ 25. As a result, the Islams were denied credit on two occasions. Compl. ¶ 26. Moreover, the Islams "suffered emotional and psychological harm, incurred medical expenses, lost enjoyment of life, and [caused] economic harm." Compl. ¶¶ 30, 42, 51.

II. DISCUSSION

The Islams have brought a total of eleven causes of action related to the events alleged above. Ten of these are twinned claims, one for each of the Islams individually. The Islams allege violation of Massachusetts General Laws Chapter 93, Section 54A; negligence; negligent infliction of emotional distress; violation of Massachusetts General Laws Chapter 93, Section 49; violation of Title 940, Section 7.07(2) of the Code of Massachusetts Regulations; and violation of Massachusetts General Laws Chapter 93A. Each claim will be addressed in turn.

A. Massachusetts General Laws Chapter 93, Section 54A

Chapter 93, Section 54A of the Massachusetts General Laws provides that

(a) Every person who furnishes information to a consumer reporting agency shall follow reasonable procedures to ensure that the information reported to a consumer reporting agency is accurate and complete. No person may provide information to a consumer reporting agency if such person knows or has reasonable cause to believe such information is not accurate or complete ...

(g) A person who furnishes information to a consumer reporting agency shall be liable for failure to comply with the provisions of this section....

The Islams allege that Option One violated this statute by incorrectly informing credit agencies that their mortgage had not been paid when, in fact, it had been, and also by failing to correct the reported delinquency upon notice that the report was incorrect. Compl. ¶¶ 37-39, 58-60 (Counts IV and X). This allegation would be quite sufficient to allow these claims to survive a routine motion to dismiss.

Option One argues, however, that these claims are preempted by the federal Fair Credit Reporting Act (the "FCRA"). 15 U.S.C. § 1681 et seq. The FCRA establishes an elaborate regulatory structure governing credit reporting. Most relevant here, it imposes duties upon the commercial furnishers of information to credit reporting agencies. These duties are set out in Section 1681s-2 and are divided into two subsections. Subsection (a) establishes the general duty to "provide accurate information", id. § 1681s-2(a)—including a duty to correct and update information, id. § 1681s-2(a)(2); to provide notice of a dispute, id. § 1681s-2(a)(3); to provide notice of closed accounts, id. § 1681s-2(a)(4); and to investigate and report on any disputed information, id. § 1681s-2 (a)(8)(E). Subsection (b) sets out the duties "upon notice of [a] dispute" from a credit reporting agency, including the duty to investigate and to report the result.² Id. § 1681s-2(b).

Enforcement of these provisions is somewhat complicated. The FCRA provides two individual rights of action: willful noncompliance, id. § 1681n, and negligent noncompliance, id. § 1681o. These private rights of action, however, are limited to violations of Subsection (b) (post-notice duties) and are explicitly precluded from use in enforcing Subsection (a) (general duties). Id. § 1681s-2(c). Instead, Subsection (a) is to be enforced by federal and state officials. Id. § 1681s-2(d); Gordon v. Greenpoint Credit, 266 F.Supp.2d 1007, 1009-10 (S.D.Iowa 2003) (Pratt, J.).³

So far, so good. But the Islams do not bring a claim under the FCRA. Instead they bring only state-law claims, including ones based on Section 54A. Not to fear. The FCRA has much to say on this as well. Section 1681t begins by stating that

[e]xcept as provided ..., this subchapter does not annul, alter, affect, or exempt any person subject to the provisions of this subchapter[, including 1681s-2,] from complying with the laws of any State with respect to the collection, distribution, or use of any information to consumers, ... except to the extent that those laws are inconsistent with any provision of this subchapter, and then only to the extent of the inconsistency.

15 U.S.C. § 1681t(a) (emphasis added). The Section goes on, however, explicitly to preempt all state laws in the areas covered by Section 1681s-2:

No requirement or prohibition may be imposed under the laws of any State—

(1) with respect to any subject matter regulated under—

...

(F) section 1681s-2 of this title, relating to the responsibilities of persons who furnish information to consumer reporting agencies....

Id. § 1681t(b). Finally, though, the statute concludes in relevant part that

this paragraph [15 U.S.C. § 1681t(b)(1)(F)] shall not apply—

(i) with respect to section 54A(a) of chapter 93 of the Massachusetts Annotated Laws....

Id. § 1681t(b)(1)(F).⁴ Thus, on the face of it, it would appear that the Islams' 54A claims are saved from preemption: The statute begins with a general presumption of non-preemption, then provides an exception to the general rule by preempting state laws regarding the duties of furnishers of credit information, and finishes with an exception to the exception for Massachusetts General...