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Bentley v. Greensky Trade Credit, LLC

United States District Court, D. Connecticut

December 30, 2015

ELISE BENTLEY, Plaintiff,
v.
GREENSKY TRADE CREDIT, LLC, TRI-STATE OF BRANFORD, LLC, BRAD POMPILLI, and DAN ROE, Defendants.

RULING ON PLAINTIFF’S MOTION FOR JOINDER AND DEFENDANT GREENSKY’S MOTION FOR SUMMARY JUDGMENT

VICTOR A. BOLDEN UNITED STATES DISTRICT JUDGE

Plaintiff, Elise Bentley, has brought this action seeking compensatory and punitive damages, attorney’s fees and costs, and injunctive relief against various actors she believes to have been involved in an alleged scheme to defraud her. Compl. at 17, ECF No. 1. Defendants are two entities, GreenSky Trade Credit, LLC (“GreenSky”), Tri-State of Branford, LLC (“Tri-State”), as well as two individuals who were affiliated with Tri-State[1], Brad Pompilli and Dan Roe. Id. ¶¶5-8; GreenSky’s Local Rule 56(a)1 Stmt. ¶1, ECF No. 81. In the currently operative Complaint, Ms. Bentley makes claims against all Defendants under the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. §1681 et seq., the Federal Truth in Lending Act (“TILA”), 15 U.S.C. §1601 et seq., the Connecticut TILA, Conn. Gen. Stat. §§36a-675, 36a-685, and the Connecticut Unfair Trade Practices Act (“CUTPA”), Conn. Gen. Stat. §41-110a et seq. Compl. at Counts Two to Four, ECF No. 1. In Count Five, she also alleges that GreenSky is vicariously liable for the conduct of the other Defendants. Compl. at Count Five, ECF No. 1.[2]

After Ms. Bentley filed her Complaint, Tri-State filed for bankruptcy. Suggestion of Bankruptcy, ECF No. 33. Under 11 U.S.C. §362(a)(1), the Court stayed the case against Tri-State pending the resolution of the bankruptcy proceeding. Order dated 12/16/014, ECF No. 39; 11 U.S.C. §362(a)(1) (noting that a stay must enter in a case against a debtor that “was or could have been commenced” before the bankruptcy petition was filed or in a case seeking to recover “a claim against the debtor that arose before” the bankruptcy case commenced). The stay was entered after the Court entered a default judgment against Tri-State, ECF No. 25[3], for failing to appear or otherwise defend the action, but before a hearing on damages could be held. The stay with respect to Tri-State remains in effect at the time of this ruling. The case has proceeded as to all other parties.[4]

Ms. Bentley has filed a Motion for Joinder, ECF No. 68, which seeks leave to add Union First Market Bank (formerly known as StellarOne Bank) as a Defendant as well as to add claims of negligence, against the bank only, and identity theft, against the bank and the current Defendants. Proposed Am. Compl., ECF No. 68-2. GreenSky has filed a motion for summary judgment, ECF No. 80, which asks the Court to summarily dismiss all claims against GreenSky. The Court has taken up the motions together because they deal with similar legal questions. Order dated 6/30/2015, ECF No. 84.

For the reasons that follow, the Motion for Joinder, ECF No. 68, is DENIED, in that Ms. Bentley may not add Union First Market Bank as a party to this case. However, to the extent the motion seeks to add identity theft claims against Defendants Roe and Pompilli, that request is GRANTED. GreenSky’s Motion for Summary Judgment, ECF No. 80, is also GRANTED in its entirety.

I. Motion for Joinder (ECF No. 68)

Ms. Bentley, asks the Court to add Union First Market Bank as a party to the instant action under Federal Rules of Civil Procedure 20(a)(2) and 15(a)(2). Mot. for Joinder, ECF No. 68. GreenSky concedes that the requirements of Rule 20 are met but objects to the motion because, it argues, the proposed claims against the bank are futile. Opp. Br. 4, ECF No. 74. For the reasons that follow, the Court agrees and denies Ms. Bentley’s request to add Union First Market Bank as a party to the case.

Ms. Bentley initially filed a motion seeking to add Union First Market Bank under Rule 19 on February 5, 2015, ECF No. 50. Although the motion was filed after the Court’s deadline to add parties had elapsed, the Court found that Ms. Bentley had shown good cause to amend the schedule and considered her arguments to add the bank on the merits. Ruling on Pl.’s Mot. to Add a Def. 6, ECF No. 61. The Court ultimately denied the February 5 motion, because it determined that adding the bank under Rule 19 was improper. Id. at 9. The Court also noted that Ms. Bentley had failed to file a proposed amended complaint, clarifying the nature of the claims she would allege against Union First Market Bank. Id. at 9-10. The Court provided Ms. Bentley with thirty days to file a revised motion to add Union First Market Bank. Id. at 6.

In this motion, Ms. Bentley has cured these defects by moving to add the bank under Rule 20 and attaching a Proposed Amended Complaint, ECF No. 68-2. In her Proposed Amended Complaint, Ms. Bentley alleges that Union First Market Bank “was in the business of issuing various types of loans, credits and other consumer banking products, services and programs, including the GreenSky Installment Loan Program which is the subject of this action.” Id. ¶9. She makes this claim based on a contract produced by GreenSky during the course of discovery, which shows that Stellar One Bank, Union First Market Bank’s predecessor, was the “actual creditor” on the installment loan issued by GreenSky to Ms. Bentley. Ruling on Pl.’s Mot. to Add a Def. 6, ECF No. 61; Mot. for Joinder Br. 2, ECF No. 68-1.

Since GreenSky concedes that the requirements of Rule 20 are satisfied, the Court need not address them. Opp. Br. 4, ECF No. 74. Instead, the Court must decide whether the claims asserted against Union First Market Bank are futile.

A. Standard

“Once a responsive pleading has been served, ‘a party may amend the party’s pleading only by leave of court or by written consent of the adverse party; and leave shall be freely given when justice so requires.’” Jones v. New York State Div. of Military and Naval Affairs, 166 F.3d 45, 50 (2d Cir. 1999) (quoting Fed.R.Civ.P. 15(a)). Leave to amend is freely given under Rule 15(a) “in the absence of bad faith or prejudice to the nonmoving party.” R&M Jewelry, LLC v. Michael Anthony Jewelers, Inc.¸ 221 F.R.D. 398, 399 (S.D.N.Y. 2004) (citing Block v. First Blood Assocs., 988 F.2d 344, 350 (2d Cir. 1993)). However, a Court may deny leave to amend if the proposed amendment would be futile because it fails to state a claim that would survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). Lucente v. Int’l. Bus. Machs. Corp., 310 F.3d 243, 258 (2d Cir. 2002) (citations omitted).

To survive a motion to dismiss under Rule 12(b)(6), a plaintiff must state a claim for relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). A claim is facially plausible if “the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. Although “detailed factual allegations” are not required, a complaint must offer more than “labels and conclusion, ” or “a formulaic recitation of the elements of a cause of action” or “naked assertion[s]” devoid of “further factual enhancement.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 557 (2007). “The plausibility standard is not akin to a ‘probability requirement, ’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 556). In determining whether the plaintiff has met this standard, the Court must accept the allegations in the complaint as true and draw all reasonable inferences in favor of the non-moving party. See Newman & Schwartz v. Asplundh Tree Expert Co., Inc., 102 F.3d 660, 662 (2d Cir. 1996) (citations omitted).

B. Vicarious Liability (Count Five)

Ms. Bentley has a separate count of “vicarious liability” in the Proposed Amended Complaint. Proposed Am. Compl. ¶¶98-102, ECF No. 68-2. Indeed, the crux of Ms. Bentley’s allegations against Union First Market Bank is that the bank is vicariously liable for the actions of all other named Defendants. Proposed Am. Compl. ¶¶99-100, ECF No. 68-2. The Court finds that Ms. Bentley has failed to allege facts that raise a plausible inference that Union First Market Bank had an agency relationship with any of the current Defendants.

In support of her claim that the bank is vicariously liable for the actions of the other Defendants, Ms. Bentley identifies the bank as “the principal or master of its servants or agents or Sales Consultants/Associates, ” which she identifies as the other named Defendants. Id. ¶9. She also claims that the other named Defendants are “third party administrators/servicers” of the bank under 12 U.S.C. §1867(c), a statute that regulates the extent to which activities outsourced to third parties by a “depository institution” are monitored and examined by the “appropriate Federal banking agency.” 12 U.S.C. §1867(c); Proposed Am. Compl. ¶¶5-9, ECF No. 68-2. She alleges that, under this statute, “the services related to the GreenSky Installment Loan transaction are deemed to have been performed by the Bank itself on the Bank’s own premises.” Proposed Am. Compl. ¶100, ECF No. 68-2. Other than these allegations, and the fact that the word “Defendants” now includes the bank, Ms. Bentley’s Complaint contains no more information about the relationship of the bank to the other Defendants in this case.

The Court finds that 12 U.S.C. §1867 does not create an agency relationship between the bank and the current Defendants. Ms. Bentley has not cited a single case applying this statute to find an agency relationship, nor has the Court been able to find any. Indeed, this statute applies to government regulation of banks and does not provide any private right of action. See Sobernais v. Mortg. Elec. Registration Sys., Inc., No. 13- CV-1296-H (KSC), 2013 WL 4046458, at *6-7 (S.D. Cal. Aug. 8, 2013). References to this statute are, therefore, irrelevant to alleging an agency relationship between the bank and the other Defendants in this case.

Other than the reference to this statute, Ms. Bentley provides nothing more than conclusory allegations of an agency relationship between the bank and the other Defendants. Such allegations are insufficient to state a plausible claim for vicarious liability. See Caro v. Fid. Brokerage Servs., No. 3:14-CV-01028 (CSH), 2015 WL 1975463, at *11 (D. Conn. Apr. 30, 2015) (citation omitted) (“A conclusory assertion that an agency relationship exists between co-defendants will not be accepted as true; rather, that assertion will be afford the assumption of truth only if it is accompanied by well-pleaded allegations in support of each common law element of agency.”). Because Ms. Bentley has failed to sufficiently plead facts in support of an agency relationship, all of her claims against the bank based on a theory of vicarious liability are futile.

C. FCRA (Count Two)

Ms. Bentley alleges that the bank violated the FCRA. The FCRA imposes various requirements on consumer reporting agencies[5] to ensure that they adopt “‘reasonable procedures for meeting the needs of commerce for consumer credit, personnel, insurance, and other information in a manner which is fair and equitable to the consumer, with regard to the confidentiality, accuracy, relevancy, and proper utilization of such information.’” See Trikas v. Universal Card Servs. Corp., 351 F.Supp.2d 37, 41 (E.D.N.Y. 2005) (quoting 15 U.S.C. §1681(b)). The FCRA establishes civil liability for both willful and negligent noncompliance with the statute. 15 U.S.C. §§1681n-1681o.[6]It also provides criminal liability for “knowingly and willfully obtain[ing] information on a consumer from a consumer reporting agency under false pretenses.” 15 U.S.C. §1681q. Ms. Bentley alleges that the bank has violated the FCRA because it obtained her credit report for an impermissible purpose and did so either negligently, willfully, and/or under false pretenses. Proposed Am. Compl. ¶¶73-74, ECF No. 68-2.

Section 1681b(f) prohibits the use of a consumer report unless it is obtained in accordance with the purposes or circumstances listed in the statute, and “the purpose is certified in accordance with section 1681e [ ] by a prospective user of the report.” 15 U.S.C. § 1681b(f). “To state a claim for civil liability based on Section 1681b, a plaintiff must allege both that the defendant used or obtained the plaintiff’s credit report for an impermissible purpose, and that the violation was willful or negligent.” Braun v. United Recovery Sys., LP, 14 F.Supp.3d 159, 166 (S.D.N.Y. 2014) (collecting cases setting forth the standard) (citations omitted).

One permissible purpose for pulling a credit report is when the user “has reason to believe” that a person “intends to use the information in connection with a credit transaction involving the consumer on whom the information is to be furnished and involving the extension of credit to [ ] the consumer.” 15 U.S.C. §1681b(a)(3)(A). In assessing the “reason to know” aspect of this authorized purpose, the Court’s focus is on the intent of the party obtaining the credit report. Trikas, 351 F.Supp.2d at 42 (“the plain language of the statute [ ] focuses on the intent of the party obtaining the consumer report”) (emphasis in original).

Ms. Bentley fails to plead any specific facts that enable an inference that StellarOne Bank knew or had reason to know that it was using the credit report for an impermissible purpose under the statute. Ms. Bentley alleges that Mr. Roe completed a GE Capital Loan application on her behalf and that subsequently, she received a letter from GreenSky approving her loan. Proposed Am. Compl. ¶¶14, 48, ECF No. 68-2. She further alleges that StellarOne “was in the business of issuing various types of loans, credits and other consumer banking products, services and programs, including the GreenSky Installment Loan Program.” Id. ¶9. None of these allegations indicate that StellarOne Bank knew or should have known that it was obtaining a consumer report for an improper purpose. See Wells v. Craig & Landreth Cars, Inc., CIVIL ACTION NO. 3:10-CV-00376, 2010 U.S. Dist. LEXIS 123332, at 6-7 (W.D. Ky. Nov. 18, 2010) (granting a motion to dismiss a section 1681b claim against a lender for failure to allege facts “that would raise the inference that [the lender] should have doubted [a car dealer’s] intentions when it submitted [an] application [on the borrower’s or consumer’s behalf]”).

Second, Ms. Bentley alleges no facts from which anyone could plausibly infer Stellar One Bank’s state of mind. Merely stating the violation was “willful” or “negligent” is insufficient; instead, Ms. Bentley must have pled specific facts regarding StellarOne’s state of mind or plausibly raising an inference that the bank acted carelessly. See Braun, 14 F.Supp.3d at 167, 172-74 (noting that “various courts have held that, in order to survive a motion to dismiss, the plaintiff’s complaint must allege specific facts as to the defendant’s mental state when the defendant accessed the plaintiff’s credit report” and granting a motion to dismiss a complaint of a willful violation of section 1681b because it failed to make such factual allegations); see also Harms v. BAC Home Loans Servicing, LP, No. C 11-02757 CW, 2011 WL 5884137, at *4 (N.D. Cal. Nov. 23, 2011) (holding that plaintiff’s FCRA claims failed because they were “wholly conclusory”). She makes conclusory allegations that the bank’s actions were willful or negligent, but does not otherwise plead facts supporting those conclusory statements.

Ms. Bentley also claims that the bank violated section 1681q, which provides that any person who “knowingly and willfully obtains information on a consumer from a consumer reporting agency under false pretenses shall be fined [ ], imprisoned for not more than 2 years, or both.” 15 U.S.C. §1681q; Proposed Am. Compl. ¶74, ECF No. 68-2. The Second Circuit has held that a violation of this provision triggers civil liability under subsection n of TILA. See Northrop v. Hoffman of Simsbury, Inc., 134 F.3d 41, 47 (2d Cir. 1997), abrogated on other grounds by Swierkiewicz v. Sorema N.A., 534 U.S. 506 (2002); see also Ali v. Vikar Mgmt. Ltd., 994 F.Supp. 492, 498 (S.D.N.Y. 1998) (“Obtaining a consumer report for an impermissible purpose under the FCRA, without disclosing that impermissible purpose, constitutes obtaining the report under false pretenses.”) (citation omitted). Because this subsection requires that the user obtain consumer information “knowingly and willfully, ” Ms. Bentley’s claim under section 1681q fails for the same reasons discussed above.

Accordingly, all of Ms. Bentley’s FCRA claims against the bank are futile.

D. TILA (Count Three)

Ms. Bentley alleges that “Greensky and or [sic] the Bank, as a creditor” provided Ms. Bentley with a loan that she did not apply for at an “unconscionable interest rate” and misrepresented the interest rate as 3.9%, when it was in fact higher. Proposed Am. Compl. ¶¶77, 79, ECF No. 68-2. She alleges that “GreenSky and its brokers and or [sic] agents” failed to disclose the terms, rates and conditions of the loan on the timeframe required by TILA. Id. ¶78. Ms. Bentley claims that these actions violated sections 1637(a), 1638(a), and/or 1638(b)(2)(c) of TILA, and analogous provisions of the Connecticut TILA, Conn. Gen. Stat. §§ 36a-675-36a-685. Id. ¶¶80, 83; 15 U.S.C. §§1637(a), 1638(a), 1638(b)(2)(c). The cited TILA sections provide a list of “required disclosures” a creditor must make to borrowers in various circumstances. Section 1640 of the Federal Act provides a civil remedy for failure to comply with TILA’s provisions. 15 U.S.C. §1640.

The cited Connecticut provisions essentially incorporate the terms of the federal law. See Conn. Gen. Stat. 36a-678(a) (“Except as otherwise provided… each person shall comply with all provisions of [Federal TILA]”). Federal TILA and Connecticut TILA “are generally coextensive;” thus federal case law interpreting relevant provisions of TILA applies “where there is an absence of Connecticut authority.” Bank of New York v. Conway, 916 A.2d 130, 137 (Conn. Super. Ct. 2006). Ms. Bentley has identified no salient difference between Connecticut and federal law. Accordingly, the Court will treat the analysis of the claims as the same.

“TILA seeks to ‘protect… consumer[s] against inaccurate and unfair credit billing and credit card practices’ and promote ‘the informed use of credit’ by ‘assur[ing] a meaningful disclosure’ of credit terms.” Vincent v. The Money Store, 736 F.3d 88, 105 (2d Cir. 2013) (quoting 15 U.S.C. 1601(a)) (alteration in original). Section 1637(a) requires the creditor to make a number of disclosures “[b]efore opening any account under an open end consumer credit plan.” The statute defines “open end credit plan” as one under which “the creditor reasonably contemplates repeated transactions… and which provides for a finance charge which may be computed from time to time on the outstanding unpaid balance.” 15 U.S.C. §1602(j). Because “a one-time loan transaction [ ] is considered a ‘closed-end credit’ transaction, ” section 1637 does not apply to the instant case. Douce v. Banco Popular N. Am., No. 05 Civ. 8979 LAK, 2006 WL 2627966, at * 8 (S.D.N.Y. Sept. 12, 2006) (citation omitted) (finding that a “retail installment” loan provided to finance the purchase of a car was a closed-end credit transaction). Thus, the claims asserted under section 1637(a) against the bank are futile.

Section 1638(a) requires certain disclosures for “consumer credit transaction[s] other than under an open end credit plan.” Section 1638(b)(2)(B) requires additional disclosures to be made where “credit [ ] is secured by the dwelling of a consumer.” GreenSky argues that these disclosure requirements are only triggered after the transaction is “consummated.” Opp. Br. 13, ECF No. 74 (citing 12 C.F.R. §226.17(b)). Because Ms. Bentley ...


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