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Dorton v. Kmart Corp.

United States District Court, E.D. Michigan, Southern Division

January 26, 2017



          MARK A. GOLDSMITH United States District Judge

         Plaintiff William Dorton filed his amended complaint against Defendants on June 6, 2016, alleging that Defendants violated the Equal Credit Opportunity Act, 15 U.S.C. § 1691 et seq. (“ECOA”), when they communicated with Dorton regarding his application to lease a videogame system made at one of Defendant Kmart's Detroit, Michigan, locations. See generally Am. Compl. (Dkt. 19).[1] In lieu of an answer, Defendants filed a motion to dismiss on June 28, 2016, which makes alternative arguments that the complaint should be dismissed under Federal Rule of Civil Procedure 12(b)(1) and/or 12(b)(6) (Dkt. 25). The issues have been fully briefed, and a hearing was held on November 9, 2016. For the reasons set forth below, the Court grants Defendants' motion to dismiss.

         I. BACKGROUND

         Defendant Kmart is a retail store that sells, among many other things, videogame systems. See Am. Compl. ¶¶ 24-25. Defendant WhyNot Leasing is a company “partnered with” Kmart, which offers alternative financing by providing Kmart customers “an option to purchase the product at the end of [a] lease term.” Id. ¶¶ 7, 13(a).

         Dorton is an individual who, on May 2, 2014, went to a Kmart location to purchase a videogame system. Id. ¶¶ 24-25. Because Dorton was unable to pay for the videogame system in full at that time, he sought to obtain the videogame system under Defendants' “WhyNotLeaseIt” program (the “Program”), id. ¶¶ 29-31, which permits a customer to lease the product for a term of months and, if he so chooses, to purchase the product at the end of the lease term, id. ¶ 13. As a first step in this process, Dorton furnished Defendants with his social security number; Kmart's salesperson, however, told Dorton that someone else's information was associated with that social security number. Id. ¶¶ 33-34. The salesperson told Dorton that, as a result of the confusion surrounding the social security number, Dorton was not eligible for the Program. Id. ¶ 37.

         Dorton alleges that the salesperson did not provide him with the information necessary to identify the source of the inaccurate information concerning the social security number. Id. ¶ 42. However, Dorton does not allege that he requested any such information from the salesperson. See id.

         On June 3, 2014, Dorton claims that he sent Kmart a letter “pursuant to 15 U.S.C. § 1961(d), ” requesting an “adverse action notice” and specific reasons for the “adverse action” taken. See Am. Compl. ¶ 44. As discussed fully below, when certain criteria are met, a creditor is required to issue these notices to a “credit applicant, ” usually when the creditor denies that applicant's application for credit. The only reply that Dorton received was a handwritten letter from Kmart stating that they were referring his request to the “lease company, ” which Dorton identifies as Defendant WhyNot Leasing. Id. ¶¶45-47.


         Subject-matter jurisdiction is always a “threshold determination, ” American Telecom Co., L.L.C. v. Republic of Lebanon, 501 F.3d 534, 537 (6th Cir. 2007) (citing Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 101 (1998)), and “may be raised at any stage in the proceedings, ” Schultz v. General R.V. Center, 512 F.3d 754, 756 (6th Cir. 2008). “A Rule 12(b)(1) motion can either attack the claim of jurisdiction on its face, in which case all allegations of the plaintiff must be considered as true, or it can attack the factual basis for jurisdiction, in which case the trial court must weigh the evidence and the plaintiff bears the burden of proving that jurisdiction exists.” DLX, Inc. v. Kentucky, 381 F.3d 511, 516 (6th Cir. 2004). “A facial attack on the subject-matter jurisdiction alleged in the complaint questions merely the sufficiency of the pleading.” Gentek Bldg. Products, Inc. v. Sherwin-Williams Co., 491 F.3d 320, 330 (6th Cir. 2007). “If the court determines at any time that it lacks subject-matter jurisdiction, the court must dismiss the action.” Fed.R.Civ.P. 12(h)(3).

         In evaluating a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), “[c]ourts must construe the complaint in the light most favorable to plaintiff, accept all well-pled factual allegations as true, and determine whether the complaint states a plausible claim for relief.” Albrecht v. Treon, 617 F.3d 890, 893 (6th Cir. 2010). To survive a motion to dismiss, a complaint must plead specific factual allegations, and not just legal conclusions, in support of each claim. Ashcroft v. Iqbal, 556 U.S. 662, 678-679 (2009). A court may consider exhibits attached to the complaint without converting the motion to one for summary judgment. Rondigo, L.L.C. v. Twp. of Richmond, 641 F.3d 673, 680-681 (6th Cir. 2011).

         III. ANALYSIS

         The ECOA exists to prevent discrimination by creditors against certain classes of credit applicants. See Mays v. Buckeye Rural Elec. Coop., 277 F.3d 873, 876 (6th Cir. 2002); 15 U.S.C. § 1691. As part of its scheme to create accountability for creditors' decisions, the ECOA imposes certain notice obligations on creditors when they take “adverse action” against a credit applicant, which is typically a denial of credit. See id. § 1691(d)(6) (defining “adverse action” as, inter alia, “a denial or revocation of credit”); id. § 1691(d)(2) (general notice requirements).

         For purposes of this motion, Defendants concede that they did not provide Dorton with an adverse action notice. See Defs. Mot. at 5. The parties' dispute is twofold: (i) whether Defendants were required to provide Dorton with an adverse action notice; and (ii) if such notice was required, what that notice should have contained. Generally speaking, an adverse action notice must contain “a statement of reasons for such [adverse] action” that is “specific.” 15 U.S.C. § 1691(d)(2), (3). Dorton complains that he was harmed when Defendants did not comply with his request for an adverse action notice, see Am. Compl. ¶¶ 48-49; additionally, he argues that a proper “statement of reasons” includes “the information necessary to identify the source of the inaccurate information concerning his Social Security Number.” Id. ¶ 42.

         A. Subject-Matter Jurisdiction

         Defendants argue that this Court lacks subject-matter jurisdiction because Dorton lacks standing. See Defs. Mot. at 3-4; see also Fed.R.Civ.P. 12(b)(1). Specifically, Defendants claim that Dorton lacks standing because he has not alleged a “concrete and particularized” injury. Id. at 4 (citing Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., Inc., 528 U.S. 167, 180-181 (2000)). Defendants assert that, even after the complaint was amended, Dorton's allegations of harm merely speculate that, had Defendants provided him with the requested adverse action notice, such notice “may have allowed him to correct his consumer reports and prevent future damage.” Id. at 4 (quoting Am. Compl. ¶ 48) (emphasis by Defendants). To allege sufficiently a concrete and particularized harm, say Defendants, Dorton at least had to claim that Defendants' actions caused - not “may have caused” - his injury.

         Moreover, claim Defendants, even assuming that Dorton had alleged a non-speculative harm flowing from his inability to identify the “source” of the inaccurate information, this harm cannot be attributed to Defendants, because Defendants have no statutory duty to provide such information. Id. at 5-6. Assuming for the sake of argument that Defendants are “creditors” subject to the ECOA, Defendants claim that a creditor need only provide a “short, check-list statement” that “reasonably indicates the reasons for adverse action.” Id. at 6 (quoting O'Dowd v. S. Cent. Bell, 729 F.2d 347, 352 (5th Cir. 1984)). As Defendants interpret this requirement, it does not entitle Dorton to the “source of the reported reason for denial” under the statute. Id. (citing Anderson v. Capital One Bank, 224 F.R.D. 444, 447 (W.D. Wis. 2004)). Accordingly, say Defendants, Dorton lacks standing to claim he was injured by a failure to receive information to which, under their view of the statute, he was not entitled. Id.

         Dorton counters that he did allege a harm that meets Article III's standing requirements. See Pl. Resp. at 8-9. Dorton says his injury was not speculative, because he alleged exactly what the statute prohibits - a failure to deliver a requested adverse action notice. See Pl. Resp. at 7. For standing purposes, Dorton's response fails to discuss his original claim that he suffered specific harm from the lack of “source” information, see id. at 7-11; instead, he focuses his argument on the fact that “Defendants were required to provide adverse action notices yet failed to do so when required, ” id. at 7, notwithstanding the content of the notice.

         “[T]he ‘irreducible constitutional minimum' of standing consists of three elements. The plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1547 (2016), as revised (May 24, 2016) (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)). “To establish injury in fact, a plaintiff must show that he or she suffered ‘an invasion of a legally protected interest' that is ‘concrete and particularized' and ‘actual or imminent, not conjectural or hypothetical.'” Id. at 1548 (quoting Lujan, 504 U.S. at 560).

         Again, Defendants' standing argument takes two forms: (i) that Dorton's claimed injury flowing from a lack of “source” information was speculative; and (ii) that, in any case, an adverse action notice did not have to contain “source” information. The parties' dispute about the required contents of an adverse action notice, however, does not bear on standing; standing “in no way depends on the merits of the plaintiff's contention that particular conduct is illegal.” Warth v. Seldin, 422 U.S. 490, 500 (1975). “The fundamental aspect of standing is that it focuses on the party seeking to get his complaint before a federal court and not on the issues he wishes to have adjudicated.” Flast v. Cohen, 392 U.S. 83, 99 (1968); see also Jenkins v. McKeithen, 395 U.S. 411, 423 (1969) (“[T]he concept of standing focuses on the party seeking relief, rather than on the precise nature of the relief sought.”). The Supreme Court has stated:

[T]he district court has jurisdiction if the right of the petitioners to recover under their complaint will be sustained if the Constitution and laws of the United States are given one construction and will be defeated if they are given another, unless the claim clearly appears to be immaterial and made solely for the purpose of obtaining jurisdiction or where such a claim is wholly insubstantial and frivolous. Dismissal for lack of subject-matter jurisdiction because of the inadequacy of the federal claim is proper only when the claim is so insubstantial, ...

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