Roberts v. Carter-Young, Inc.
| Docket Number | 1:22cv1114 |
| Decision Date | 06 July 2023 |
| Parties | SHELBY ROBERTS, Plaintiff, v. CARTER-YOUNG, INC., Defendant. |
| Court | U.S. District Court — Middle District of North Carolina |
This case comes before the undersigned United States Magistrate Judge for a recommendation on Defendant's Motion to Dismiss (Docket Entry 3; see also Docket Entry 3-1 (“Brief in Support”)). For the reasons that follow, the Court should grant the Motion to Dismiss.
According to the Complaint, Plaintiff resided at an apartment complex named Ansley at Roberts Lake (“Ansley”) in Arden, North Carolina, from November 2019 until January 2021. (Docket Entry 1 at 2.) Plaintiff's written lease allegedly expired in November 2020 (see id.), at which point her arrangement with Ansley “became a month-to-month tenancy that could be terminated by either [Plaintiff or Ansley] by providing 30-days written notice” (id.). The Complaint contends that Ansley attempted to lease Plaintiff's apartment to a new tenant (effective December 12, 2020) without providing Plaintiff with the requisite 30-days written notice (see id.); Plaintiff thereafter “exercis[ed] her legal rights” (id. at 3), and informed Ansley “she would vacate [her] apartment on January 10, 2021” (id.).
Because Plaintiff refused to vacate her apartment absent 30-days written notice, the Complaint asserts that “Ansley was forced to breach [its] lease agreement” (id.) with the prospective new tenant and suffered “extreme embarrassment and potential financial liability” (id.). As a result, Ansley reportedly “sought to retaliate against Plaintiff” (id.) after she vacated the apartment in January 2021, by “attempt[ing] to charge [her] for alleged damages that either never occurred, were ordinary wear and tear items, or were grossly overstated” (id.).
Specifically, the Complaint details that Ansley retained Plaintiff's $500 security deposit, and additionally (Id.) According to the Complaint, “the lease agreement, as well as [Ansley]'s obligations under N.C. G.S. § 42-42, [provide that] th[e broken oven] was an ordinary maintenance issue that Ansley could easily fix simply by reattaching the handle to the oven door.” (Id.; see also id. at 4 () The Complaint does not identify any other specific items for which Ansley sought to charge Plaintiff. (See id. at 3-4.)
Plaintiff refused to pay the invoice from Ansley, which resulted in Ansley “referr[ing] th[e] claim to Defendant [] to engage in collection efforts.” (Id. at 4.) The Complaint states further that, when (in March 2021) Defendant first sought to collect the debt which the Complaint labels “fraudulent” (id. at 5), Plaintiff “sent Defendant a letter disputing the Ansley claim and describing the obvious[ly] retaliatory and false nature of the claim” (id.). Some time thereafter, Defendant allegedly “reported the fraudulent and invalid [debt] to the three major C[redit] R[eporting] A[gencies (“CRAs”)].” (Id.)
Plaintiff did not immediately seek to resolve the disputed debt, reportedly because “[she] mistakenly believed it would not substantially impact her credit score or reputation or cause financial harm.” (Id.) But, when seeking to lease a new apartment during the summer of 2022, “Plaintiff [allegedly] became aware that the reporting of the fraudulent Ansley claim would likely prevent her from being able to rent a residential apartment.” (Id.) As a result of this new awareness, “Plaintiff filed a formal dispute” (id. at 6) with the three CRAs, which in turn “promptly reported [the dispute] to Defendant” (id.).
The Complaint contends that “Defendant [then] engaged in a purely perfunctory and biased investigation[ which involved] nothing other than request[ing] its paying client Ansley to recertify the validity of the Ansley claim.” (Id. (internal quotation marks omitted).) Ansley allegedly attested to the debt's validity, which led Defendant to do the same, resulting in “the three major CRAs continu[ing] to report this fraudulent claim.” (Id.) Per the Complaint, if “Defendant [had] engaged in even the most rudimentary investigation, it would have quickly discovered that the Ansley claim was on its face preposterous, fraudulent, and very likely retaliatory.” (Id.; see also id. at 7 ().) In the ensuing months, the Complaint contends that “Plaintiff refiled formal disputes with the major CRAs” (id. at 7), but “Defendant [continued to] recertif[y] . . . the Ansley claim” (id.) after neglecting to “conduct[] any meaningful investigation” (id.).
The Complaint next recites that “Plaintiff [thereafter] filed a [state court] lawsuit against Ansley” (id.), in which she “hoped to invalidate through legal process the Ansley claim” (id. at 8). Ultimately, Plaintiff and Ansley allegedly settled the state court lawsuit in October 2022. (See id. at 10.) As part of the state court settlement, the Complaint alleges that “Ansley [] instruct[ed] Defendant to report the Ansley claim to the CRAs as invalid” (id.), and Defendant did so, on October 7, 2022 (id.).
The Complaint contends that Defendant's alleged failure to reasonably investigate the validity of Plaintiff's disputed debt to Ansley constitutes a violation of the Fair Credit Reporting Act (“FCRA”). (See id. at 11-15.) Even with the eventual removal of the allegedly fraudulent debt from her credit report, Plaintiff reportedly suffered from “an extended inability to be approved for residential rental housing, increased out-of-pocket expenses and costs, damage to her reputation and credit, and emotional distress.” (Id. at 14, 15.) As a result, the Complaint demands actual and punitive damages, costs, and attorneys fees. (See id.)
Defendant moved to dismiss the Complaint. (Docket Entry 3.) As the basis for dismissal, the Brief in Support argues that Plaintiff's “dispute [with Ansley wa]s a legal dispute instead of a factual inaccuracy” (Docket Entry 3-1 at 4), and that “[t]he FCRA['s mandate that certain entities conduct reasonable investigation of debt disputes] only applies to factual inaccuracies, not disputed legal questions” (id. at 6). In that regard, the Brief in Support notes that “[t]he basis of [Plaintiff's] [] disputes [with Ansley] was that she was being retaliated against and the claims were fraudulent.” (Id. at 8.) In Defendant's view, the nature of those disputes “would have [required Defendant] to make legal conclusions that Ansley retaliated against Plaintiff or committed fraud” (id.), a function not required by the FCRA, and in fact one that would constitute an impermissible “collateral attack on the validity of the debt” (id.). The Brief in Support continues by asserting that, “[t]o the extent that [Plaintiff] contends that her dispute was that the debt wasn't owed because neither the lease nor North Carolina law allows for such recovery, that too is a legal dispute.” (Id.) Because either scenario (evaluating retaliation/fraud or the lease/state law) would involve Defendant “mak[ing] a legal determination” (id. at 9), and because the FCRA does not require entities like Defendant to undertake legal evaluations, the Brief in Support maintains that “[Plaintiff] has failed to state a [FCRA] claim” (id.).
In response, Plaintiff first posits that the Complaint plainly sets forth the three elements of a FCRA claim. (See Docket Entry 5 at 6-10.) As for the distinction between legal and factual disputes, Plaintiff counters that any such distinction only applies to investigations by CRAs, not entities that act as furnishers of information to CRAs, such as Defendant. (See id. at 10-14 ).) Finally, Plaintiff characterizes her dispute with Ansley as one based in fact, not law. (See id. at 1620; see also id. at 18 (further contending that, to the extent the debt dispute with Ansley qualified as legal in nature, “[n]o court . . . has ever held that a CRA or a furnisher is entitled to be willfully ignorant of basic legal principles or of the terms of any legal documents upon which the alleged debt is based”).)
Defendant's Reply rejoins that Saunders does not apply, given the facts of this case. (See Docket Entry 6 at 1 (“[Plaintiff's] reliance on Saunders is misplaced”).) In that regard, Defendant notes that the court in Saunders required a furnisher of information to report that the consumer disputed the debt, a more limited step than Plaintiff proposes and something that Defendant did include in its report. (See id. at 2.) The Reply concludes by asserting that “Saunders does not apply as broadly as [Plaintiff] contends” (id.), because that case “only applies to creditor data furnishers, not third-party data furnishers” (id. at 3), such as Defendant (see id.).
“A motion to dismiss pursuant to [Federal] Rule [of Civil Procedure] 12(b)(6) tests the sufficiency of the claims pled in a complaint.” ACA Fin. Guar. Corp. v. City of Buena Vista, Va., 917 F.3d 206, 211 (4th Cir. 2019)....
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