Citibank (South Dakota) N.A. v. Abel N. Osagie (2012)

MEMORANDUM OF DECISION

This action comes before the court on the motion of plaintiff to strike the defendant's Third Amended Counterclaim (“Counterclaim”).   For the reasons stated hereafter, the motion is granted.

This is an action by plaintiff to collect approximately $22,000 claimed due under a credit installment contract.   The defendant has filed multiple counterclaims leading up to this final one.   The factual allegations at the heart of the counterclaim are that in 2008 the defendant had one or more accounts at the plaintiff bank with an available credit balance.   Defendant alleges he was offered an opportunity to transfer indebtedness on one account at an attractive rate and he intended to use part of that balance to fund a “consulting opportunity” which would generate profits to him.   During the course of this financing, in November of 2008, a third party reported a delinquency on defendant's part to a credit reporting bureau.   Defendant alleges the report was inaccurate and he disputed it with the credit reporting agencies.   As a result of this negative report, CitiBank allegedly began to limit defendant's available credit which he needed to complete his consulting opportunity.

The counterclaim asserts three causes of action:  breach of the duty of good faith and fair dealing, negligence, and violation of the Connecticut Unfair Trade Practices Act (CUTPA).   The Motion to Strike challenges all of these claims.

THE STANDARD OF REVIEW

“The purpose of a motion to strike is to contest ․ the legal sufficiency of the allegations of any complaint ․ to state a claim upon which relief can be granted.”  (Internal quotation marks omitted.)  Fort Trumbull Conservancy, LLC v. Alves, 262 Conn. 480, 498, 815 A.2d 1188 (2003).  “It is fundamental that in determining the sufficiency of a complaint challenged by a defendant's motion to strike, all well-pleaded facts and those facts necessarily implied from the allegations are taken as admitted ․ Indeed, pleadings must be construed broadly and realistically, rather than narrowly and technically.”   (Internal quotation marks omitted.)   Connecticut Coalition for Justice in Education Funding, Inc. v. Rell, 295 Conn. 240, 252–53, 990 A.2d 206 (2010).  “If any facts provable under the express and implied allegations in the plaintiff's complaint support a cause of action ․ the complaint is not vulnerable to a motion to strike.”  Bouchard v. People's Bank, 219 Conn. 465, 471, 594 A.2d 1 (1991).   The court “construe[s] the complaint in the manner most favorable to sustaining its legal sufficiency.”   Connecticut Coalition for Justice in Education Funding, Inc. v. Rell, supra, 295 Conn. 240, 252.

COUNT ONE

Every contract within the State of Connecticut carries with it the implied obligation of good faith and fair dealing.  Landry v. Spitz, 102 Conn.App. 34, 42, 925 A.2d 334 (2007).   This obligation is simply that “neither party shall do anything that will injure the right of the other to receive the benefit of the agreement.”  Id. Of course every breach of contract interferes with the right of a party to receive the benefit of their bargain.   The difference between actions for breach of contract and ones for breach of the implied obligation of good faith and fair dealing is an important one, however.

When a party has allegedly broken some express term of the agreement, an action for breach of contract will lie.   When, however, one party takes actions not contrary to the express terms of the agreement but which nonetheless interfere with the right of the other to enjoy the benefit of that bargain, the covenant of good faith and fair dealings comes into play.   Because such disputes involve “discretionary application or interpretation of a contract term”;  Neiditz v. Housing Authority, 43 Conn.Sup. 283, 294 654 A.2d 812 (1994), aff'd, 231 Conn. 598, 651, A.2d 1295 (1995); ¹  the courts have consistently required that the actions complained of must have been taken in bad faith.  Rafalko, supra, 129 Conn.App. at 51.

Here, the counterclaim never alleges any bad faith on the part of the plaintiff, nor presents any set of facts from which this court can infer such an allegation.   The counterclaim, liberally construed and with every possible inference drawn in favor of the defendant, simply alleges that the plaintiff reduced the available credit of defendant based on what is alleged to be a negative change in his credit report.   Defendant's complaint that plaintiff failed either to accept his dispute as to the accuracy of the report or to perform an independent investigation into the underlying dispute (a “bungled” real estate transaction) does not suggest in any way bad faith on the part of the plaintiff.   Likewise, defendant also complains that in a letter of January 11, 2009, the plaintiff claimed it used a November 25, 2008 credit report, when defendant alleges plaintiff had accessed defendant's credit history since that date.   This letter is attached to the counterclaim as an exhibit and the court has treated it as a part of the pleading in question.   Defendant does not allege the credit report was different on those dates in any material way or that this letter mislead him in any way.   To the contrary, the counterclaim specifically alleges that the plaintiff's agents told defendant they were relying on the November 25 report, even though it was disputed.   At best, any updates would simply have noted defendant disputed the negative credit report, but this does not suffice under the definition of “bad faith” utilized by the courts in Connecticut:  “Bad faith in general implies both actual or constructive fraud, ․ a design to mislead or deceive, [a] refusal to fulfill some duty or some contractual obligation, not [due to] mistake ․ but by some interested or sinister motive ․ Bad faith ․ involves a dishonest purpose.”  Landry v. Spitz, supra, 102 Conn.App. at 42–43.   No allegations of dishonesty, deceit or bad faith are made here.

COUNT TWO

The second count alleges a claim for negligence.   This alleges that plaintiff, as “a ‘user’ and ‘furnisher of,’ information to the credit reporting system [under the Fair Credit Reporting Act] has a duty to ․ use accurate, up-to-date ․ credit report[s].”  No other duty, statutory or common law, is alleged in this count.²  There are several problems with this count.   First, the Fair Credit Reporting Act (FCRA) specifically sets out what causes of action may be brought for violation of its provisions.   See 15 U.S.C. § 1681n.   Not only does the complaint not assert any such action under FCRA but, at oral argument, defendant repeatedly denied that he was asserting any claim for relief under the FCRA. What defendant claims is that he is bringing a claim for negligence, but based on a duty consistent with the purpose of the FCRA, “a duty to ․ use accurate, up-to-date ․ credit reportz[s].”  This leads quickly to the second problem.   The purposes of the FCRA are set out in 15 U.S.C. § 1681, “Congressional Findings and Statement of Purpose.”   The findings and purpose set out there repeatedly reference “fair and accurate credit reporting.”  This statement does not appear to include any intent to regulate how persons evaluate credit reports.   With regard to “users,” the FCRA only regulates permissible purposes to obtain such reports;  15 U.S.C. § 1681b;  and how adverse credit actions must be disclosed;  15 U.S.C. § 1681m.   Defendant has not asserted any such claim here.³

Accordingly, count two fails to state any legally sufficient claim and must be dismissed.

COUNT THREE

The third cause of action asserts a CUTPA violation.   The longstanding principles for determining whether a business practice violates CUTPA are described as the “cigarette rule” and are set out, among many other locations, in H & L Chevrolet, Inc. v. Berkley Ins. Co., 110 Conn.App. 428, 441–42, 955 A.2d. 565 (2008).   While these principles cannot be described as establishing a “bright line” test, they require “showing either an actual deceptive practice ․ or a practice amounting to a violation of public policy.”  Id. Count Three fails to allege such a practice.   The only place where such an allegation is attempted is in paragraph 37 of Count Three which alleges:  “The [FCRA] recognizes that the use of not-up-to-date information by a “User” of the credit reporting database for employment purposes is unfair.”   Defendant does not provide any citation as to where the FCRA does this and this court's review of the act does not lead it to the same conclusion.   Even if such a policy could be assumed, defendant has not alleged it was violated.   First, the complaint does not allege CitiBank ever used anything for employment purposes.   Defendant's after the fact disclosure that he would use the available credit to finance some business opportunity is not employment or employment related.   Second, the complaint never alleges that the information in the November 25, 2008 report was outdated.⁴

Finally, it must be noted that the complaint alleges defendant and plaintiff discussed this very concern after the January 11th letter disclosing his available credit was being limited.   Plaintiff learned at that time, if not before, the negative credit information was disputed.   Yet Count Three alleges the negative report was still present and the fact that it was disputed did not change CitiBank's position.   The timeliness of defendant's credit report had no impact on CitiBank's actions.   Ultimately, the essence of the dispute here is not that plaintiff did not use timely credit report information;  the dispute is that CitiBank did not make its business decisions as defendant wanted it to.   CitiBank did not mislead or deceive defendant in any way.   CUTPA does not prohibit businesses within this state from making decisions as to how they conduct business.   CUTPA simply prohibits the use of unfair or deceptive practices in the operation of those businesses.   The Third Count fails to state a legally sufficient cause of action and is also dismissed.

Wenzel, J.

FOOTNOTES

FN1. This language has been repeated in a sequence of decisions and as recently as Rafalko v. University of New Haven, 129 Conn.App. 44, 51, 19 A.3d 215 (2011)..  FN1. This language has been repeated in a sequence of decisions and as recently as Rafalko v. University of New Haven, 129 Conn.App. 44, 51, 19 A.3d 215 (2011).

FN2. While the count also asserts plaintiff tried to hide its conduct and refused to mitigate damages, these are not presented as additional duties..  FN2. While the count also asserts plaintiff tried to hide its conduct and refused to mitigate damages, these are not presented as additional duties.

FN3. Any failure to comply with the requirements which are imposed on users of consumer reports may be enforced only through administrative action, not private civil actions.  15 U.S.C. § 1681m(h)(8)..  FN3. Any failure to comply with the requirements which are imposed on users of consumer reports may be enforced only through administrative action, not private civil actions.  15 U.S.C. § 1681m(h)(8).

FN4. The complaint alleges only that CitiBank had accessed his credit information between November 25 and January 11..  FN4. The complaint alleges only that CitiBank had accessed his credit information between November 25 and January 11.

Wenzel, William J., J.