Source: http://www.myfaircredit.com/forum/viewtopic.php?f=30&t=3607
Timestamp: 2019-04-23 07:59:36+00:00

Document:
SEAN F. COX, District Judge.
*1 This civil action was brought against the Defendants under the Fair Credit Reporting Act. The only defendant that remains in this action is Nissan Motor Acceptance Corporation (“Nissan”). All the other defendants have been dismissed with prejudice.
Before the Court is Plaintiffs Steve Mann and Deanna Mann's (“Plaintiffs”) Objection to Magistrate Judge David R. Grand's Report and Recommendation, which recommends that the Court GRANT Nissan's Motion to Dismiss and Compel Arbitration because this Court lacks subject matter jurisdiction on the basis of an arbitration agreement the parties entered into. The Court finds that the issues have been adequately presented in the parties' briefs and that oral argument would not significantly aid the decision making process. See Local Rule 7.1(f)(2), U.S. District Court, Eastern District of Michigan. The Court therefore orders that the motion will be decided on the briefs. For the reasons that follow, the Court shall ACCEPT and ADOPT Magistrate Judge Grand's Report and Recommendation [Docket Entry No. 44].
On September 18, 2012, Plaintiffs filed a Complaint, alleging multiple counts under the Fair Credit Reporting Act against Defendants Equifax Information Services, LLC; Ally Financial, Inc.; Credit One Bank; Nissan; and HSBC Bank USA, NA. (Docket Entry No. 1.) Plaintiffs' claims against Defendants Equifax Information Services, LLC; Ally Financial, Inc.; Credit One Bank; and HSBC Bank USA, NA, have been dismissed with prejudice. (Docket Entry Nos. 25, 29, 31, 35.) As a result, the only defendant that remains in this action is Nissan.
A motion under Federal Rule of Civil Procedure 12(b)(1) seeks to dismiss a complaint for lack of subject matter jurisdiction. A court must consider a 12(b)(1) motion prior to other challenges since proper jurisdiction is a prerequisite to determining the validity of a claim. See Gould, Inc. v. Pechiney Ugine Kuhlmann & Trefimetaux, 853 F.2d 445, 450 (6th Cir.1988). The plaintiff has the burden of proving jurisdiction in order to survive a 12(b)(1) motion. Moir v. Greater Cleveland Reg'l Transit Auth., 895 F.2d 266, 269 (6th Cir.1990).
Jurisdictional challenges under Rule 12(b)(1) can be either facial or factual. RMI Titanium Co. v. Westinghouse Elec. Corp. 78 F.3d 1125, 1134–35 (6th Cir.1996). A facial challenge is directed at the allegations in the complaint, which the court must accept as true. Id. at 1134. Factual challenges rely on matters outside of the pleadings and, unlike motions under Rule 12(b)(6), “the court is empowered to resolve factual disputes.” Id. at 1135 (“Because at issue in a factual 12(b)(1) motion is the trial court's jurisdiction-its very power to hear the case-there is substantial authority that the trial court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case.”); see also 2 James Wm. Moore, Moore's Federal Practice § 12.30 (3d ed. 2000) (“When a court reviews a complaint under a factual attack, the allegations have no presumptive truthfulness, and the court that must weigh the evidence has discretion to allow affidavits, documents, and even a limited evidentiary hearing to resolve disputed jurisdictional facts.”).
A. Whether the Arbitration Agreement was Terminated by the Bankruptcy Proceeding?
*3 Plaintiffs contend that the arbitration agreement was terminated/voided by the bankruptcy discharge. ( Id. at 1–4.) However, Plaintiffs have not provided a controlling case that establishes that a valid arbitration clause is terminated by bankruptcy discharge, when the underlying claim, which would be otherwise subject to arbitration, is based on the Fair Credit Reporting Act. The Court agrees with Magistrate Judge Grand's analysis and recommendation that Plaintiffs' claims are not core proceedings because they do not relate to the collection of a debt. Sanders Confectionary Products, Inc. v. Heller Financial, Inc., 973 F.2d 474, 483 (6th Cir.1992) (“The court looks at both the form and the substance of the proceeding in making its determination [whether a proceeding is a core or non-core proceeding]. A core proceeding either invokes a substantive right created by federal bankruptcy law or one which could not exist outside of the bankruptcy.”) (internal citations omitted). Instead, Plaintiffs' claims, under the Fair Credit Reporting Act, relate to whether Nissan willfully or negligently failed to conduct a proper investigation of Deanna Mann's “dispute [with regard to its trade lines on her respective consumer credit files] as required by [15 U.S.C. § 1681 s2(b) ].” (Docket Entry No. 1, at 11–12.) It is unclear how these claims, which challenge Nissan's compliance with the procedures outlined in 15 U.S.C. § 1681 s–2(b), relate to the collection of a debt or can be considered core proceedings. Plaintiffs cite to several cases that are not controlling and which this Court does find persuasive. With regard to Magistrate Judge Grand's analysis under In re Eber, 687 F.3d 1123, 1129 (9th Cir.2012), and In re Hermoyian, 435 B.R. 456, 463 (E.D.Mich.2010), there does not appear to be any conflict with the underlying purposes of the Bankruptcy Code by holding that the arbitration clause applies to Plaintiffs' claims under the Fair Credit Reporting Act. Accordingly, this Court agrees with Magistrate Judge Grand's recommendation that the bankruptcy discharge did not terminate/void the arbitration clause.
B. Whether Nissan Waived Its Right to Enforce the Arbitration Agreement?
*4 “[B]ecause of the strong presumption in favor of arbitration, waiver of the right to arbitration is not to be lightly inferred.” Glazer v. Lehman Bros., Inc., 394 F.3d 444, 450 (6th Cir.2005). “[A] party may waive an agreement to arbitrate by engaging in two courses of conduct: (1) taking actions that are completely inconsistent with any reliance on an arbitration agreement; and (2) delaying its assertion to such an extent that the opposing party incurs actual prejudice.” Hurley v. Deutsche Bank Trust Co. Americas, 610 F.3d 334, 338 (6th Cir.2010) (internal quotations omitted).
Nissan addressed the arbitration provision as an affirmative defense in its Answer. (Docket No. 8, at 12.) This Court held a scheduling conference on March 4, 2013. The Scheduling Order following that conference states that discovery was due by June 4, 2013. (Docket Entry No. 33.) The Plaintiffs do not deny that Nissan did not take any depositions or produce any witnesses for deposition, nor do they deny that Nissan refused to answer Plaintiffs' discovery requests or serve no any discovery requests of its own.
I am attaching the following documents for your review: 1. Excerpts from Mrs. Mann's Equifax report of March 22, 2013 showing the Nissan trade line reporting twice.... 2. Our Dispute letter to Equifax regarding the Nissan Double Reporting issue of June 28, 2012; 3. Equifax's results of its investigation (selected pages).
(Docket Entry No. 45–8, at 2.) It is unclear how the exchange of these documents, or any other documents that the Plaintiffs may have submitted to Nissan, prejudices the Plaintiffs. Accordingly, this Court holds that Nissan has not waived its right to enforce the arbitration provision.
*5 IT IS ORDERED that the Court ADOPTS and ACCEPTS Magistrate Grand's Report and Recommendation [Docket Entry No. 44].
DAVID R. GRAND, United States Magistrate Judge.
In this action Plaintiff Deanna Mann (“Mann”) alleges that Defendant Nissan Motor Acceptance Corporation (“NMAC”) FN1 violated her rights under the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq. (the “FRCA”) by reporting a debt to the credit bureaus that had been discharged in bankruptcy. On April 3, 2013, NMAC filed a Motion to Dismiss and Compel Arbitration (the “Motion”) , which has been referred to this court for a report and recommendation pursuant to 28 U.S.C. § 636(b)(1)(B). For the reasons discussed below, the court RECOMMENDS that NMAC's Motion be GRANTED.
FN1. NMAC is the sole remaining defendant in this action, the others have settled with Plaintiffs. [25, 29, 31, 35].
On February 3, 2007, Mann purchased a 2007 Nissan Armada pursuant to a Retail Installment Sale Contract (the “Contract”) between she and the dealer. Thereafter, the dealer assigned the Contract to NMAC. Mann claims that on July 22, 2009, she and her husband (Plaintiff Steve Mann) received a Chapter 7 Bankruptcy discharge of their debts, including the balance remaining due on the Contract at that time. Thus, they claim that as of that date “there should [have been] no balances reported [to the credit reporting agencies].” Cplt. at ¶¶ 5–6.
FN2. The reports also listed debts owed to the other Defendants.
On September 18, 2012, the Manns commenced this action against, inter alia, various creditors who were still reporting debts owed to them despite the fact that they had been extinguished by the Manns' Chapter 7 discharge. Specifically Mann brought claims for Negligent and Willful Violation of the FCRA against NMAC, alleging, inter alia, that it “failed to conduct a proper reinvestigation of Mrs. Mann's dispute as required by [the FCRA],” “failed to review all relevant information ...,” and “failed to direct all of the [CRAs] to remove or update its trade lines.” Id. at ¶¶ 62–63. See also id. at ¶¶ 61–71. Mann claims that she “suffered damages, mental anguish, suffering humiliation and embarrassment” as a result of NMAC's continued reporting of the trade line. Id. at ¶ 65.
Plaintiffs served NMAC with a copy of their Complaint on September 24, 2012. . NMAC's counsel filed an appearance on October 9, 2012.. NMAC filed its Answer and Affirmative Defenses on October 29, 2012.. One of those affirmative defenses stated: “NMAC relies upon any all releases or agreements to arbitrate which have been signed by the Plaintiffs, barring actions for damages arising out of any dispute or controversy relating to the application for credit, the Contract, or any resulting transaction or relationship including that with a motor vehicle dealer or third party arising out of the agreement.” [8 at 12].
*6 Thereafter, Plaintiffs appear to have focused their energies on settling the case with the other defendants. At any rate, it is undisputed that it was not until February 14, 2013, that NMAC's counsel e-mailed Plaintiffs' counsel to introduce himself in advance of a scheduling conference that had been set for March 4, 2013 before Judge Cox, and that there had been no communications between the two counsel prior. [37–3]. The scheduling conference took place [3/4/13 docket entry] and Judge Cox requested that NMAC and Plaintiffs pursue settlement, with Plaintiffs making an initial demand. [37–4]. The parties were unable to settle the matter. Thus, as of March 4, 2013, other than their brief and limited settlement efforts, NMAC and Plaintiffs had done essentially no work to advance the litigation.
EITHER YOU OR WE MAY CHOOSE TO HAVE ANY DISPUTE BETWEEN U.S. DECIDED BY ARBITRATION AND NOT IN COURT OR BY JURY TRIAL ... Any claim or dispute, whether in contract, tort, statute or otherwise [ ] between you and us [ ] which arise out of relate to your credit application, purchase or condition of this vehicle, your purchase or financing contract or any resulting transaction or relationship (including any such relationship with third parties [ ] ) shall at your or our election, be resolved by neutral, binding arbitration and not by a court action.
[37–2 at 11] (the “Arbitration Agreement”).
Regardless of why NMAC did not locate the Contract sooner, it is undisputed that on March 29, 2013—a mere 8 days after receiving the details underlying Mann's claim—NMAC's counsel advised Mann's counsel that NMAC was invoking the Arbitration Agreement, and that NMAC would file a motion to compel arbitration if Mann did not consent to arbitrate the dispute. [37–6].
FN3. On March 7, 2013, Mann served a 30(b)(6) deposition notice to depose a corporate representative of NMAC on various topics. [42–10]. However, that notice included neither a date, time or place for the deposition. Two weeks later, NMAC served a similar “placeholder” notice to depose Mann, again with no date, time or place specified. [42–12].
Mann refused to consent to arbitrate the dispute, leading NMAC to file the instant Motion seeking to compel arbitration. . Mann filed a response , and NMAC filed a reply . The court heard oral argument on May 20, 2013.
*7 NMAC moves to compel arbitration and to dismiss the instant complaint for lack of subject matter jurisdiction pursuant to Fed.R.Civ.P. 12(b)(1). See Multiband Corp. v. Block, 2012 WL 1843261, at *5 (E.D.Mich., May 21, 2012) (explaining that substantively a motion to compel arbitration is a motion to dismiss under Rule 12(b)(1) for lack of subject matter jurisdiction); MRI Scan Center, LLC v. National Imaging Associates, Inc., 2013 WL 1899689, at *2 (S.D.Fla., May 7, 2013) (“courts generally treat motions to compel arbitration as motions to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1).”) Such a motion may be based on either a facial attack or a factual attack on the complaint's allegations. Tri–Corp. Mgmt. Co. v. Praznik, 33 F. App'x 742, 745 (6th Cir.2002). When the court reviews a factual attack on subject matter jurisdiction, as it is asked to do here, no presumption of truthfulness applies to the complaint's factual allegations. United States v. Ritchie, 15 F.3d 592, 498 (6th Cir.1994). “The Court may rely on affidavits or any other evidence properly before it and has wide latitude to collect evidence to determine the issue of subject matter jurisdiction.” Multiband, at *5 (citing Rogers v. Stratton Indus., 798 F.2d 913, 915 (6th Cir.1986)).
The parties here do not dispute that, if the Arbitration Agreement applies to their dispute and has not been nullified or otherwise waived, this action should be dismissed in favor of having Mann's claims resolved in arbitration. Stout v. J.D. Byrider, 228 F.3d 709, 714 (6th Cir.2000) (“Under the Federal Arbitration Act, 9 U.S.C. § 1 et seq., (‘FAA’), a written agreement to arbitrate disputes, which arises out of a contract involving transactions in interstate commerce shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract.”). Mann raises three arguments as to why the court should not compel arbitration: (1) her Chapter 7 bankruptcy discharge “terminated” the Arbitration Agreement; (2) the Arbitration Agreement does not apply to the claims she raises against NMAC; and (3) NMAC waived its right to compel arbitration in this matter by failing to timely file the instant Motion. None of Mann's arguments are persuasive.
Before turning to the parties' specific arguments, the court notes the well-settled principles that federal policy favors arbitration, and that federal courts are to “rigorously enforce agreements to arbitrate.” Wilson Electrical Contractors, Inc. v. Minnotte Contracting Corp., 878 F.2d 167, 169 (6th Cir.1989). Moreover, “[t]he Arbitration Act establishes that, as a matter of federal law, any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration ...” Moses H. Cone Memorial Hospital v. Mercury Construction Corp., 460 U.S. 1, 24–25, 103 S.Ct. 927, 74 L.Ed.2d 765 (1983).
*8 Mann's first argument is that her Chapter 7 bankruptcy discharge “terminated” or “discharged” the Arbitration Agreement. [42 at 10]. The court disagrees. Although the underlying debt Mann owed to NMAC was discharged in her bankruptcy case, she cited no binding case law which would require this court to find that the discharge also applied to the Arbitration Agreement. Instead, Mann cited two non-binding, unpublished opinions, Jernstad v. Green Tree Servicing, Inc., 2012 U.S. Dist. LEXIS 108988, 2012 WL 8169889 (N.D.Ill., 2012) and Harrier v. Verizon Wireless Personal Communications, 2012 U.S. Dist. LEXIS 142428 (M.D.Fla., 2012), without providing any actual analysis of either case. Mann merely concludes that if the court were to enforce the Arbitration Agreement “Plaintiffs would be denied a fresh start which is ‘one of the central purposes of the Bankruptcy Code.’ ” [42 at 11] (quoting Jernstad, at *6).
The court does not find the cases cited by Mann to be applicable here, and it declines to follow them. For example, in Jernstad, the debtor (Jernstad) defaulted on his mortgage, and later obtained a Chapter 7 discharge of the balance owed to the bank. After Jernstad obtained the discharge, the bank allegedly violated the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq., by making harassing phone calls to him and his family. Jernstad commenced a proceeding in federal district court against the bank for these alleged violations, and the bank moved to compel arbitration of the matter pursuant to an arbitration provision that was contained in the underlying mortgage. The district court found that the “discharge rendered the parties' Arbitration Agreement unenforceable.” Jernstad, at *6.
Jernstad is distinguishable from the instant case because the debtor's claim in Jernstad arose directly out of the bank's attempt to collect a discharged debt—something Mann does not accuse NMAC of doing here. As the district court explained, a discharge “operates as an injunction against the commencement or continuation of an action [to collect the debt] ...” Id. at *3 (quoting 11 U.S.C. § 524(a)(2)). The court went on to explain that “the sole remedy for a violation of § 524 is a contempt action brought in the bankruptcy court that issued the order of discharge.” Id. at *3–4 (citation omitted). Thus, enforcing the arbitration provision in Jernstad would necessarily have conflicted with the Bankruptcy Code, and may, in that sense, have denied Jernstad the “fresh start” to which he was entitled with respect to that debt.FN4 Id. at *6.
FN4. The court finds part of the reasoning in Jernstad to be unpersuasive, at least for the reasons urged by Mann. In the very sentence after concluding that the “discharge rendered the parties' Arbitration Agreement unenforceable,” the district court stated, “What is discharged is a claim to payment.” Id. at *6 (emphasis added). An arbitration agreement, however, is not a “claim to payment,” but rather merely defines the venue in which a claim to payment is to be resolved.
The court finds more persuasive the rule applied in In re. Eber, 687 F.3d 1123, 1129 (9th Cir.2012), that “[t]he relevant inquiry [in deciding an issue like the one before this court] becomes ‘whether there is an inherent conflict between arbitration and the underlying purposes of the Bankruptcy Code.’ ” Id. (quoting In re Thorpe Insulation Co., 671 F.3d 1011 (9th Cir.2012). The court noted, that “a bankruptcy court has discretion to decline to enforce an otherwise applicable arbitration provision only if arbitration would conflict with the underlying purposes of the Bankruptcy Code.” Id. (quoting Thorpe at 1021). This is akin (albeit not identical) to the reasoning in In re. Hermoyian, 435 B.R. 456 (E.D.Mich.2010), where the bankruptcy court held that, “A bankruptcy court has no discretion, and is required to allow arbitrators to go forward with respect to non-core matters.” Id. at 463.
*9 Here, the court sees no inherent conflict between the Bankruptcy Code's purposes and enforcing the Arbitration Agreement with respect to Mann's post-discharge FCRA action against NMAC. The Arbitration Agreement is only in play because of Mann's FCRA claim, not because NMAC is attempting to collect a debt that has been discharged. The matter certainly is not a “core” part of Mann's bankruptcy proceedings. Moreover, simply enforcing a provision which defines the venue for resolving their instant dispute does not deprive Mann of the “fresh start” granted by the Bankruptcy Code, because it imposes on her no financial liability whatsoever, and would not undermine any Bankruptcy Code provision. Cf. Jernstad, supra (enforcing arbitration provision would conflict with 11 U.S.C. § 524(a)(2)'s requirement that claim be resolved exclusively in bankruptcy court.).
In sum, the mere fact that Mann was granted a discharge of the debt owed to NMAC does not mean that the Arbitration Agreement executed in connection with the Contract cannot be enforced with respect to their future disputes which are otherwise covered by that Agreement.
Any claim or dispute, whether in contract, tort, statute or otherwise [ ] between you and us [ ] which arise out of relate to your credit application, purchase or condition of this vehicle, your purchase or financing contract or any resulting transaction or relationship (including any such relationship with third parties [ ] ) shall at your or our election, be resolved by neutral, binding arbitration and not by a court action.
[37–2 at 11] (emphasis added).
Here, Mann's claim clearly arises out of a “transaction or relationship” that resulted from her obtaining credit with NMAC. NMAC only came into Mann's credit information because she supplied that information in order to obtain financing to purchase the car. Not that foreseeability is a relevant consideration, but the court notes that it was certainly foreseeable (if not known) to Mann that as a result of her obtaining credit with NMAC it would report her credit information to the various CRAs. Thus, application of the Arbitration Agreement to Mann's FCRA claim should not surprise her. The court's conclusion that the Arbitration Agreement applies to Mann's claim is also bolstered by the fact that federal policy strongly favors arbitration, Wilson, 878 F.2d at 169, and that “any doubts concerning the scope of arbitrable issues should be resolved in favor of arbitration.” Mercury Construction, 460 U .S. at 24–25.
Mann's final argument, that NMAC waived its right to enforce the arbitration agreement, also fails. As the Sixth Circuit recently explained, “because of the strong presumption in favor of arbitration, waiver of the right to arbitrate is not to be lightly inferred.” Johnson Associates Corp. v. HL Operating Corp., 680 F.3d 713, 715 (6th Cir.2012) (quoting Glazer v. Lehman Bros., Inc. ., 394 F.3d 444, 450 (6th Cir.2005)). The Sixth Circuit further explained that “a party may waive an agreement to arbitrate by engaging in two courses of conduct: (1) taking actions that are completely inconsistent with any reliance on an arbitration agreement; and (2) ‘delaying its assertion to such an extent that the opposing party incurs actual prejudice.’ ” Id. (citations omitted). Here, both prongs favor a finding that NMAC did not waive the Arbitration Agreement.
*10 With respect to the first prong, the court notes that NMAC included in its affirmative defenses that it was relying “upon any all releases or agreements to arbitrate which have been signed by the Plaintiffs ... arising out of any dispute or controversy relating to the application for credit, the Contract ...” [8 at 12]. Cf. Johnson at 718 (a defendant's failure to raise arbitration as an affirmative defense shows his intent to litigate rather than arbitrate.”); id. (“Once the defendant, by answer, has given notice of insisting on arbitration the burden is heavy on the party seeking to prove waiver.”) (quoting Gen. Guar. Ins. Co. v. New Orleans Gen. Agency, Inc., 427 F.2d 924, 927 (5th Cir.1970)). Moreover, as explained in detail above, supra at 3–4, the only affirmative action NMAC took in this case that could even arguably be construed as a waiver of the right to arbitrate was to serve a single placeholder deposition notice for Mann's deposition, with no date, no time, and no place specified, in response to one served by Mann. NMAC did not actually take any depositions. Nor did it produce any witnesses for deposition. It refused to answer Plaintiffs' discovery requests. And it served no discovery requests of its own. On these facts, it cannot be said that NMAC took actions “that are completely inconsistent with any reliance on an arbitration agreement.” Johnson, 680 F.3d at 715.
Even if the court were to grant [the instant motion], I will pursue this with arbitration in New York. Why? I have two very good reasons. First, Mrs. Mann has a slam dunk case as to liability against your client ... The second reason why I would arbitrate this case I because there is a fee shifting provision under the FCRA which means that all of my time in these emails explaining things to you, and building this case will be chargeable to your clients.
Accordingly, Mann has failed to show that she will be prejudiced by having this dispute resolved in arbitration.
For all of the foregoing reasons, it is RECOMMENDED that Defendant's Motion to Dismiss and Compel Arbitration  be GRANTED.

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