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Kruckow v. Merchants Bank

United States District Court, D. Minnesota

July 19, 2017

Dana D. Kruckow, Plaintiff,
Merchants Bank, Rushford State Bank, Craig Schroeder, individually, and Paul A. Kruckow, individually, Defendants.

          Thomas J. Lyons, Jr, Esq., Consumer Justice Center P.A., counsel for Plaintiff.

          Charles E. Nelson, Esq., Kathryn E. Wendt, Esq., and Kirstin D. Kanski, Esq., Lindquist & Vennum LLP; and Patrick D. Newman, Esq., Bassford Remele, counsel for Defendant Merchants Bank.

          John P. Boyle, Esq., and Sarah E. Doerr, Esq., Moss & Barnett, PA, counsel for Defendant Rushford State Bank.

          Christopher J. Haugen, Esq., and Kristin B. Rowell, Esq., Anthony Ostlund Baer & Louwagie P.A., counsel for Defendant Craig Schroeder.

          Charles A. Bird, Esq., and Grant M. Borgen, Esq., Bird, Jacobsen & Stevens, P.C., counsel for Defendant Paul A. Kruckow.


          DONOVAN W. FRANK United States District Judge


         This case is before the Court on Defendants' Motions to Dismiss. (Doc. Nos. 45, 50, 58, 62.) The plaintiff brought this action after learning in divorce proceedings that her husband had obtained a number of loans by allegedly forging her signature as a co-signer. After this revelation, the plaintiff filed suit against the banks, the loan officer, and her husband alleging violations of the Fair Credit Reporting Act (“FCRA”)[1] as well as various state law claims. The defendants have individually moved to dismiss for lack of subject matter jurisdiction and for failure to state a claim. As explained in more detail below, the Court denies the defendants' motions to dismiss for lack of subject matter jurisdiction, and the Court grants in part and denies in part the defendants' motions to dismiss for failure to state a claim.


         On September 21, 2016, Plaintiff Dana Kruckow (generally, “D. Kruckow”) filed an amended complaint (Doc. No. 35) against Defendants Merchants Bank (“Merchants”), Rushford State Bank (“Rushford Bank”), Craig Schroeder, and her husband Paul Kruckow (generally, P. Kruckow”) after she learned that P. Kruckow obtained a number of loans by allegedly forging her signature as a co-signer. Craig Schroeder was the loan officer for all of the loans (he moved from Merchants to Rushford Bank).[2] Much of D. Kruckow's Amended Complaint retraces her steps investigating the alleged fraud. After notifying the banks, Rushford Bank agreed not to hold D. Kruckow responsible for the outstanding loans, and Merchants informed her that there was no outstanding liability.

         As relevant here, Plaintiff brought claims related to three credit reports about D. Kruckow obtained by Defendants. The first two credit reports-February 8, 2013, and November 8, 2013-were obtained by Schroeder during the life of the allegedly fraudulent loans held by Merchants and Rushford Bank, respectively. The last credit report-October 31, 2014-was allegedly obtained by Schroeder for P. Kruckow to use for his divorce petition, which was filed in mid-December 2014. Plaintiff's Amended Complaint contains claims for violations of FCRA and state law claims for invasion of privacy and negligence. Plaintiff seeks to hold Defendants jointly liable through a claim for civil conspiracy and to hold the banks vicariously liable for Schroeder's actions. Defendants have moved to dismiss for lack of subject matter jurisdiction and for failure to state a claim.


         I. Motion to Dismiss for Lack of Subject Matter Jurisdiction

         A. Legal Standard

         A motion to dismiss under Rule 12(b)(1) challenges the Court's subject matter jurisdiction. Fed.R.Civ.P. 12(b)(1). To survive a motion under Rule 12(b)(1), the party asserting jurisdiction has the burden of proof. V S Ltd. P'ship v. Dep't of Hous. & Urban Dev., 235 F.3d 1109, 1112 (8th Cir. 2000). “Subject-matter jurisdiction is a threshold requirement which must be assured in every federal case.” Kronholm v. Fed. Deposit Ins. Corp., 915 F.2d 1171, 1174 (8th Cir. 1990).

         A Rule 12(b)(1) motion may challenge a plaintiff's complaint either on its face or on the factual truthfulness of its averments. Osborn v. United States, 918 F.2d 724, 729 n.6 (8th Cir. 1990). When a defendant brings a facial challenge-that is, even if the allegations were true, they lack an essential element for jurisdiction-a court reviews the pleadings alone and assumes the allegations are true. Titus v. Sullivan, 4 F.3d 590, 593 (8th Cir. 1993); accord Osborn, 918 F.2d at 729 n.6. In a factual challenge to jurisdiction, the court may consider matters outside the pleadings and weigh the accuracy of the allegations. Titus, 4 F.3d at 593; accord Osborn, 918 F.2d at 729 n.6.

         B. Subject Matter Jurisdiction and Spokeo

         Defendants argue that the Court does not have jurisdiction because D. Kruckow does not have standing to pursue her claims. Federal courts are courts of limited jurisdiction. Spokeo, Inc. v. Robins, 136 S.Ct. 1540, 1546-47 (2016). Article III of the Constitution limits the courts' jurisdiction to “Cases” and “Controversies.” Id. at 1547. “Standing to sue is a doctrine rooted in the traditional understanding of a case or controversy.” Id. Standing has 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.” Id. (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)).

         Defendants argue that D. Kruckow has not shown that she suffered a concrete injury. In Spokeo, the Supreme Court reiterated that an injury in fact requires both a concrete and particularized injury. In addressing whether an injury is concrete, the question is whether the injury is “real” and “not abstract.” Id. at 1548. While real injuries are most closely associated with tangible harm, the harm can also be intangible. Id. at 1549. When evaluating intangible harm, “it is instructive to consider whether [the] alleged intangible harm has a close relationship to a harm that has traditionally been regarded as providing a basis for a lawsuit in English or American courts.” Id. As the Supreme Court noted, Congress is well positioned to elevate intangible harms to concrete injuries. Id. But the Court cautioned against concluding that a plaintiff will automatically demonstrate an injury in fact merely by showing that a statute authorized her to sue. Id. That is, the plaintiff must allege more than a “bare procedural violation” of that statute. Id. at 1550.

         D. Kruckow alleges that she was injured because Defendants invaded her privacy by obtaining a consumer report without a permissible purpose. D. Kruckow argues that unauthorized access of information has long constituted a concrete injury. Courts have struggled with deciding whether a plaintiff has suffered a concrete injury when a defendant fails to follow FCRA's statutory prerequisites to obtain the plaintiff's information. Compare Shoots v. iQor Holdings U.S. Inc., Civ. No. 15-563, 2016 WL 6090723, at *4 (D. Minn. Oct. 18, 2016) (“By contending that non-compliance with one provision of the FCRA automatically renders a defendant's subsequent actions an invasion of privacy, [the plaintiff] would raise every technical violation of any statute to the realm of a major substantive harm.”), with Thomas v. FTS USA, LLC, 193 F.Supp.3d 623, 636 (E.D. Va. 2016) (“[W]here a defendant fails to comply with statutory prerequisites protecting the plaintiff's privacy, the plaintiff's privacy has been unlawfully invaded and he has suffered concrete injury, regardless of actual damages.”).

         In arguing that Plaintiff did not suffer any concrete injuries, Defendants rely on Reed v. Experian Information Solutions, Inc., 321 F.Supp.2d 1109 (D. Minn. 2004). But in Reed, the court concluded on a motion for summary judgment that the plaintiff had not demonstrated actual damages or a willful violation of FCRA. Id. at 1114 (“The remainder of plaintiff's FCRA claims fail[s] for want of evidence of either harm or willful noncompliance with the Act.”). Thus, Reed has little to do with whether a consumer suffers a concrete injury when an entity obtains the consumer's credit report without a permissible purpose.[3]

         Here, Plaintiff has adequately pleaded a concrete injury to her privacy. Congress has allowed a person to access consumer reports but only when the person has a permissible purpose. Requiring a proper purpose works as bulwark against intrusions into the sensitive information contained in a consumer report. Thus, when a plaintiff alleges that the person obtained the plaintiff's consumer report without a permissible purpose, the plaintiff has adequately alleged a concrete injury to her privacy. See, e.g., In re Ocwen Loan Servicing LLC Litig., Civ. No. 16-483, 2017 WL 1289826, at *5 (D. Nev. Mar. 3, 2017); Firneno v. Nationwide Mktg. Servs., Inc., Civ. No. 14-10104, 2017 WL 85831, at *3 (E.D. Mich. Jan. 10, 2017); Perrill v. Equifax Info. Servs., LLC, 205 F.Supp.3d 869, 875 (W.D. Tex. 2016); see also Engebretson v. Aitkin Cty., Civ. No. 14-1435, 2016 WL 5400363, at *4 (D. Minn. Sept. 26, 2016) (finding that the plaintiff had standing to sue under the DPPA for claims based on Defendants viewing her motor vehicle records without a proper purpose). But see Bultemeyer v. CenturyLink, Inc., Civ. No. 14-02530, 2017 WL 634516, at *3 (D. Ariz. Feb. 15, 2017) (finding the plaintiff did not have standing merely because her consumer report was obtained without a proper purpose). Because D. Kruckow has pleaded that Defendants accessed her consumer report without a permissible purpose, she has adequately alleged a concrete injury.[4] The Court therefore denies Defendants' Motions to Dismiss for Lack of Subject Matter Jurisdiction.

         II. Motion to Dismiss for Failure to State a Claim

         Defendants individually moved to dismiss Plaintiff's Amended Complaint, which brings claims for: (1) violation of FCRA; (2) invasion of privacy-seclusion; (3) negligence; (4) vicarious liability; and (5) civil conspiracy.[5] While Defendants moved individually, many of their arguments overlap or are duplicative, and thus the Court will address the arguments together.

         A. ...

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