UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE
Kenneth A. Kalar and Janet M. Kalar
v. Civil No. 16-cv-149-LM Opinion No. 2017 DNH 074 Bank of America Home Loans and Carrington Mortgage Services
O R D E R
Kenneth and Janet Kalar, proceeding pro se, bring suit
against Bank of America Home Loans (“Bank of America”) and
Carrington Mortgage Services (“Carrington”), alleging that
Carrington falsely reported to credit agencies a debt that had
been discharged in bankruptcy, thereby harming the Kalars’
credit rating. The Kalars also allege that Bank of America
contributed to the harm by transferring servicing of the debt to
Carrington during the pendency of their bankruptcy action and
without notice to them.
The court begins with a summary of the procedural history.
In an order dated June 27, 2016, the court granted defendants’
motion to dismiss the Kalars’ original complaint “without
prejudice to the Kalars’ ability to file an amended complaint
setting forth facts sufficient to state plausible claims against
defendants.” Doc. no. 12 at 8. The Kalars filed their amended
complaint (doc. no. 13), and defendants again moved to dismiss, asserting that the amended complaint fails to adequately state a
claim for relief (doc. no. 16).
While defendants’ motion to dismiss was pending, the Kalars
filed two motions in an effort to add a new claim to their
amended complaint. First, the Kalars filed a “motion of intent
to file additional claim” (doc. no. 22), in which they assert
that they recently learned of new information giving rise to an
additional claim against Bank of America. The Kalars next filed
a “motion to add an additional claim against Bank of America.”
Doc. no. 24. In the second motion, the Kalars allege the basis
for the additional claim: that Bank of America provided false
information to Federal Savings Bank sometime between July and
October 2016.1
In light of the Kalars’ pro se status, the court construes
their first motion (doc. no. 22) as a motion for leave to file
an addendum to their amended complaint. The court grants that
motion and construes the Kalars’ second motion (doc. no. 24) as
the addendum to their amended complaint. See, e.g., Collymore
v. McLaughlin, No. 16-cv-10568-LTS, 2016 WL 6645764, at *1 n.1
1 In their objection to the Kalars’ “motion to add an additional claim against Bank of America,” defendants characterize the Kalars’ new claim as alleging that Bank of America made misrepresentations to consumer reporting agencies. The new claim, however, appears to allege that Bank of America made misrepresentations to Federal Savings Bank, not to consumer reporting agencies. 2 (D. Mass. Nov. 8, 2016) (construing pro se plaintiff’s
additional filing as a supplement to his complaint for purposes
of defendant’s motion to dismiss).
As defendants filed the motion to dismiss the amended
complaint before the Kalars filed the addendum to that
complaint, the court will address only the amended complaint in
this order.
Standard of Review
Under Rule 12(b)(6), the court must accept the factual
allegations in the complaint as true, construe reasonable
inferences in the plaintiff’s favor, and “determine whether the
factual allegations in the plaintiff’s complaint set forth a
plausible claim upon which relief may be granted.” Foley v.
Wells Fargo Bank, N.A., 772 F.3d 63, 71 (1st Cir. 2014)
(citation omitted). A claim is facially plausible “when the
plaintiff pleads factual content that allows the court to draw
the reasonable inference that the defendant is liable for the
misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678
(2009).
Because the Kalars are proceeding pro se, the court is
obliged to construe their complaint liberally. See Erikson v.
Pardus, 551 U.S. 89, 94 (2007) (per curiam) (internal citations
omitted) (“a pro se complaint, however inartfully pleaded, must
3 be held to less stringent standards than formal pleadings
drafted by lawyers”). However, “pro se status does not insulate
a party from complying with procedural and substantive law.
Even under a liberal construction, the complaint must adequately
allege the elements of a claim with the requisite supporting
facts.” Chiras v. Associated Credit Servs., Inc., No. 12-10871-
TSH, 2012 WL 3025093, at *1 n.1 (D. Mass. July 23, 2012)
(quoting Ahmed v. Rosenblatt, 118 F.3d 886, 890 (1st Cir. 1997)
(internal citation and quotation marks omitted)).
Background2
On May 4, 2006, Kenneth and Janet Kalar executed a
promissory note in favor of Countrywide Home Loans, Inc.
(“Countrywide”), in exchange for a loan of $57,500. That same
2 The court draws these facts from the Kalars’ amended complaint (doc. no. 13), filings in the Kalars’ bankruptcy proceeding, and a copy of one of the Kalars’ notes and one of the Kalars’ mortgages, which were attached as exhibits to defendants’ motion to dismiss. See Rivera v. Centro Médico de Turabo, Inc., 575 F.3d 10, 15 (1st Cir. 2009) (noting that a court may consider official public records and documents sufficiently referred to in the complaint on a motion to dismiss without converting the motion to one for summary judgment). In addition, the court considers the factual allegations in the original complaint to the extent they give context to and help explain the Kalars’ claims. See Torosian v. Garabedian, 206 F Supp. 3d 679, 680 n.1 (D. Mass. 2016) (“However, because plaintiffs are proceeding pro se, the Court considers the factual allegations in the original complaint . . . to be part of the amended complaint . . . .”).
4 day, the Kalars granted a mortgage on their home to Countrywide
to secure the loan, with Mortgage Electronic Registration
Systems, Inc. (“MERS”) as the mortgagee in its capacity as
nominee for Countrywide. It appears that prior to the May 4,
2006 note and mortgage, the Kalars had previously executed a
separate promissory note and granted another mortgage on their
home. The court will therefore refer to the note and mortgage
dated May 4, 2006, as the “second note” and the “second
mortgage,” respectively.
On October 13, 2010, the Kalars instituted a voluntary
Chapter 13 bankruptcy proceeding in the United States Bankruptcy
Court for the District of New Hampshire. See In re Kenneth and
Janet Kalar, Bk. No. 10-14397-JMD (Bankr. D.N.H. 2010). On
January 18, 2011, the bankruptcy court granted the Kalars’
motion to deem the second mortgage unsecured. In the order
granting that motion, the court stated that the second mortgage
would be deemed void upon the Kalars’ completion of their
Chapter 13 plan and the court’s issuance of a discharge under 11
U.S.C. § 1328(a).
Prior to the Kalars’ bankruptcy filing, Bank of America was
the loan servicer on the second mortgage. Sometime in September
or October 2011, after the bankruptcy court deemed the second
mortgage unsecured but prior to the Kalars completing their
bankruptcy plan, Bank of America transferred servicing
5 responsibilities on the second mortgage to Carrington. Both
Bank of America and Carrington claim to have sent the Kalars
letters in October 2011 informing them of the transfer. The
Kalars did not receive either letter.
The Kalars completed their Chapter 13 plan and on November
5, 2013, the bankruptcy court granted them a discharge. The
bankruptcy case was closed on January 14, 2014. On April 25,
2014, MERS recorded in the Strafford Country Registry of Deeds a
release of the second mortgage and any liability for the Kalars
on the second note. On June 12, 2014, MERS sent a copy of the
release to the Kalars, with a cover letter confirming the
release.
On October 16, 2015, the Kalars obtained a copy of Janet’s
credit report. The report allegedly shows that after the
bankruptcy court discharged the second mortgage, Carrington
reported to credit reporting agencies that the Kalars had missed
and/or still owed payments relating to the second mortgage. The
report also shows that Bank of America transferred servicing
rights of the second mortgage to Carrington. The Kalars allege
that they did not learn of the transfer until they saw the
report.
The Kalars contacted Carrington regarding the credit
report. In a letter dated February 1, 2016, Carrington informed
the Kalars that it had notified the credit reporting agencies of
6 the errors, and requested that the agencies delete the
“tradeline” reported by Carrington and send the Kalars a copy of
Carrington’s request. The Kalars state as of February 4, 2016,
the report no longer contained the inaccurate references to the
second mortgage.
The Kalars also contacted Bank of America regarding the
entry on Janet’s credit report showing the transfer of servicing
rights on the second mortgage. In a letter dated February 10,
2016, Bank of America responded by stating that it had provided
accurate information to the credit reporting agencies.
During the period when the Kalars were attempting to fix
the inaccurate entry on Janet’s credit report, Janet alleges
that defendants treated her disrespectfully and that she “took
verbal abuse on a daily basis.”
Discussion
Defendants move to dismiss the amended complaint, arguing
that it fails to state a plausible claim for relief. The
amended complaint asserts a claim against Bank of America for
violation of the implied covenant of good faith and fair dealing
and a claim against Carrington for “defamation of
character/libel.”3 The court addresses these claims below.
3 The amended complaint also references a violation of the Fair Credit Reporting Act (“FCRA”) and a violation of the bankruptcy stay. See doc. no. 13 at 3-4. The Kalars make 7 I. Implied Covenant of Good Faith and Fair Dealing
The Kalars’ claim against Bank of America arises out of
Bank of America’s transfer of servicing rights on the second
mortgage to Carrington during the pendency of the Kalars’
bankruptcy case. The Kalars allege that Bank of America
violated the implied covenant of good faith and fair dealing in
the second mortgage by “[s]elling [their] account to Carrington
Mortgage Services [which] allowed Bank of America Home Loans to
be compensated for their loss and destroy the Plaintiffs’
ability to secure credit post Chapter 13, at reasonable costs to
the Plaintiffs.” Doc. no. 13 at 2.
Under New Hampshire law, in “every agreement there is an
implied covenant that the parties will act in good faith and
fairly with one another.” Moore v. Mortg. Elec. Registration
Sys., Inc., 848 F. Supp. 2d 107, 126-27 (quoting Birch Broad.,
Inc. v. Capitol Broad. Corp., Inc., 161 N.H. 192, 198 (2010)
(internal quotation marks omitted)). “A necessary prerequisite
to a claim for breach of the implied covenant of good faith and
clear, however, that the amended complaint “is two-fold: against Bank of America Home Loans under Good Faith and Fair Dealing; and Carrington Mortgage Services under Defamation of Character/Libel.” See id. at 2. To the extent the Kalars intended, however, to allege additional claims based on violations of the FCRA and the bankruptcy stay, those claims would fail for the reasons discussed below.
8 fair dealing is a contract between the parties.” Moore, 848 F.
Supp. 2d at 127.
There is no dispute that Bank of America was the loan
servicer on the second mortgage. “A mortgage servicer that is
not a party to the mortgage contract owes no implied covenant to
the mortgagor.” Mudge v. Bank of Am., N.A., No. 13-cv-421-JD,
2015 WL 1387476, at *5 (D.N.H. Mar. 25, 2015), reconsideration
denied, No. 13-CV-421-JD, 2015 WL 1954343 (D.N.H. Apr. 29,
2015), appeal dismissed (Oct. 16, 2015); see also McCusker v.
Ocwen Loan Servs., LLC, No. CV 14-13663-MGM, 2015 WL 4529986, at
*6 (D. Mass. July 27, 2015) (“Loan servicers owe no duty to
plaintiffs arising out of mortgage contracts because loan
servicers are technically not parties to the mortgage.”). As
the loan servicer, Bank of America was not a party to the second
mortgage and therefore owed no implied duty to the Kalars.
Accordingly, the Kalars cannot maintain a claim against Bank of
America for breach of the implied covenant of good faith and
fair dealing in the second mortgage.4
4 Although it is undisputed that Bank of America was the servicer of their mortgage, the Kalars also describe themselves and the Bank as having “a contract that was a second mortgage.” Doc. no. 13 at 1. The Kalars, however, do not allege that Bank of America ever held the second mortgage. Even assuming that Bank of America was a party to the mortgage, the breach of the implied covenant of good faith and fair dealing claim would still fail. The Kalars do not explain how the act of transferring service responsibilities on the second mortgage, prior to the bankruptcy court’s discharge of the mortgage, could 9 II. Defamation of Character/Libel
The Kalars allege that Carrington is liable for defamation
because it improperly reported for 46 months that they had
missed payments on the second mortgage after the mortgage was
discharged through bankruptcy.5 They allege that Carrington knew
the information was false when it provided the information to
the consumer reporting agencies. Defendants argue that this
claim is preempted by a provision of the Fair Credit Reporting
Act, 15 U.S.C. § 1681t(b)(1)(F), and should be dismissed.
A. Preemption Under the FCRA
“The FCRA imposes obligations on [consumer reporting
agencies] and users of consumer information and provides for
enforcement by various federal agencies.” Chiang v. Verizon New
England Inc., 595 F.3d 26, 34 (1st Cir. 2010) (citing 15 U.S.C.
§ 1681s). The FCRA also imposes obligations on “furnishers” of
information to consumer reporting agencies, which includes
prohibitions against providing inaccurate information to those
constitute a breach of the implied covenant of good faith and fair dealing in the mortgage agreement, how this action violated the bankruptcy stay, or how they were harmed by such an action.
5The Kalars state in their objection to the motion to dismiss that Carrington misreported information to the consumer reporting agencies for 52 months. See doc. no. 18 at 3. The precise amount of time Carrington allegedly misreported the Kalars’ information is not material to the court’s analysis.
10 agencies, see § 1681s-2(a)(1), and specific duties in the event
of a dispute over furnished information, see § 1681s-2(b). A
“furnisher of information” under the FCRA is defined as “an
entity which transmits information concerning a particular debt
owed by a particular consumer to consumer reporting agencies
such as Experian, Equifax, and Trans Union.” Chiang v. MBNA,
634 F. Supp. 2d 164, 167 (D. Mass. 2009) (internal quotation
marks, citation, and alteration omitted), aff’d, 620 F.3d 30
(1st Cir. 2010).
The FCRA contains a broad preemption provision, which
provides that “[n]o requirement or prohibition may be imposed
under the laws of any State with respect to any subject matter
regulated under . . . section 1681s-2 of this title, relating to
the responsibilities of persons who furnish information to
consumer reporting agencies.” 15 U.S.C. § 1681t(b)(1)(F).
Thus, the FCRA preempts all state law claims against a furnisher
of information based on conduct regulated by § 1681s-2, which
includes providing inaccurate information to consumer reporting
agencies.
The Kalars specifically allege that their defamation claim
against Carrington is based on Carrington reporting inaccurate
information to consumer reporting agencies, and they reference
the FCRA’s prohibition against that action. See doc. no. 13 at
2 (“Due to false information reported/stated to the Credit
11 Reporting Agencies (CRA’s) by Carrington Mortgage Services, for
46 consecutive months, and the resulting financial harm the
Plaintiffs are claiming Defamation of Character/Libel.”); see
id. at 4 (stating that the Kalars’ defamation claim is based on
a violation of the “FAIR CREDIT AND REPORTING ACT, section
623”).6 The Kalars’ defamation claim is based on conduct
regulated by § 1681s-2 and is therefore preempted by §
1681t(b)(1)(F) of the FCRA.7
B. Section 1681h(e)
Although not raised by the Kalars, defendants note the
existence of a separate and narrower preemption provision under
the FCRA: § 1681h(e). Defendants assert that this provision
could be interpreted as allowing certain state law defamation
claims to proceed even when they are based on conduct regulated
6 Section 623 is the FCRA section number for § 1681s-2.
7 To the extent the Kalars intended to allege a violation of the FCRA based on Carrington’s allegedly inaccurate credit reporting activity, as explained in the court’s order granting defendants’ motion to dismiss the original complaint, that conduct does not give rise to a private right of action under the FCRA. See Chiang, 595 F.3d at 35 (“Section 1681s–2(a) prohibits any person from ‘furnish[ing] any information relating to a consumer to any consumer reporting agency if the person knows or has reasonable cause to believe that the information is inaccurate.’ Id. § 1681s–2(a)(1)(A). Congress expressly limited furnishers’ liability under § 1681s–2(a) by prohibiting private suits for violations of that portion of the statute. Id. § 1681s–2(c)(1).”). 12 by § 1681s-2. Defendants argue, however, that § 1681h(e) is not
implicated by the Kalars’ defamation claim.
Section 1681h(e) provides:
Except as provided in sections 1681n and 1681o of this title, no consumer may bring any action or proceeding in the nature of defamation, invasion of privacy, or negligence with respect to the reporting of information against any consumer reporting agency, any user of information, or any person who furnishes information to a consumer reporting agency, based on information disclosed pursuant to section 1681g, 1681h, or 1681m of this title, or based on information disclosed by a user of a consumer report to or for a consumer against whom the user has taken adverse action, based in whole or in part on the report except as to false information furnished with malice or willful intent to injure such consumer.
Thus, if applicable, this provision preempts certain state
common law claims, including defamation, against furnishers of
information unless the plaintiff can show that the furnisher
acted with malice or willful intent.
This provision applies, however, only to a cause of action
“based on information disclosed pursuant to section 1681g,
1681h, or 1681m of this title, or based on information disclosed
by a user of a consumer report to or for a consumer against whom
the user has taken adverse action, based in whole or in part on
the report . . . .” § 1681h(e). Both section 1681g and section
1681h, by their terms, impose obligations on consumer reporting
agencies. See, e.g., Islam v. Option One Mortg. Corp., 432 F.
Supp. 2d 181, 194 (D. Mass. 2006) (“Sections 1681g and 1681h
13 deal with disclosure of information by credit reporting
agencies.). Both section 1681m and the remaining portion of §
1681h(e) address users of information disclosed in a credit
report, who then take adverse action against the consumer based
on that information.8 See id.
As Carrington points out, § 1681h(e) is not applicable
here. Carrington is not a consumer reporting agency, the Kalars
have not sued it in its capacity as a “user” of their consumer
report, and the Kalars do not allege that Carrington took
adverse action against them based on information in their
consumer report. Thus, the narrower preemption provision in §
1681h(e) does not apply to the Kalars’ defamation claim against
Carrington. See Islam, 432 F. Supp. 2d at 194 (holding that §
1681h(e) did not apply to defendant, which was the “alleged
furnisher of the incorrect information”); see also Gonzalez-
Bencon, 759 F. Supp. 2d at 237 (same); Leet v. Cellco P’ship,
480 F. Supp. 2d 422, 430 (D. Mass. 2007).9
“A user of a consumer report is a person that takes 8
actions on the basis of information contained in consumer reports.” Gonzalez-Bencon v. Doral Bank, 759 F. Supp. 2d 229, 237 n.4 (D.P.R. 2010) (citing § 1681m).
Defendants also argue that even if § 1681h(e) applies to 9
the Kalars’ defamation claim, the broader preemption provision in § 1681t(b)(1)(F) would still bar the claim. The court agrees. Although the First Circuit has not yet addressed the apparent conflict between § 1681h(e) and § 1681t(b)(1)(F), two federal appellate courts have recently analyzed the apparent conflict between the two FCRA preemption provisions, and have 14 Conclusion
For the foregoing reasons, defendants’ motion to dismiss
the amended complaint (doc. no. 16) is granted. Plaintiffs’
“motion of intent to add an additional claim” (doc. no. 22) is
construed as a motion for leave to file an addendum to the
amended complaint and is granted. Plaintiffs’ “motion to add an
additional claim” (doc. no. 24) is terminated and construed as
an addendum to plaintiffs’ amended complaint.
Bank of America shall file its answer or motion to dismiss
the addendum on or before May 5, 2017. Carrington Mortgage
Services is dismissed from the case.
SO ORDERED.
__________________________ Landya McCafferty United States District Judge April 14, 2017
cc: William P. Breen, Esq. Christian B. W. Stephens, Esq. Janet M. Kalar, pro se Kenneth A. Kalar, pro se
held that § 1681t(b)(1)(F) preempts all related state law causes of action against furnishers of information. See Purcell v. Bank of Am., 659 F.3d 622, at 625-26 (7th Cir. 2011); Macpherson v. JPMorgan Chase Bank, N.A., 665 F.3d 45 (2d Cir. 2011). The court finds the reasoning set forth in Purcell and Macpherson persuasive, and they appear to be the only Circuit decisions to engage in a detailed analysis of the apparent conflict between § 1681h(e) and § 1681t(b)(1)(F). Therefore, even if § 1681h(e) applied to the Kalars’ defamation claim, the claim would be preempted by § 1681t(b)(1)(F). 15