Haug v. PNC Financial Services Group, Inc.

Citations: 930 F. Supp. 2d 871; 2013 WL 980440; 2013 U.S. Dist. LEXIS 40530Docket: Case No. 1:12 CV 485

Court: District Court, N.D. Ohio; March 12, 2013; Federal District Court

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The Court, under District Judge Donald C. Nugent, adopted the Magistrate Judge William H. Baughman Jr.'s Report and Recommendation regarding Plaintiff Kevin Haug's case against The PNC Financial Services Group and related defendants. Haug, proceeding pro se, alleged that while employed at National City Bank (later PNC), he was denied timely processing of a debt consolidation loan application, which was compounded by retaliation for his whistle-blowing actions. His claims included violations of the federal Equal Credit Opportunity Act (ECOA), the Financial Institutions Reform Recovery and Enforcement Act (FIRREA), and the Ohio Deceptive Trade Practices Act (ODTPA), along with various Ohio common law torts.

PNC's Motion to Dismiss argued that Haug's ECOA claims were time-barred and lacked sufficient allegations of adverse action related to discrimination or retaliation. The Magistrate Judge recommended granting PNC's Motion by dismissing Haug's ECOA notice claims as untimely and rejecting the discrimination claims for failure to state a valid claim. The FIRREA claim was similarly dismissed because Haug's report did not meet the statutory definition of reporting to a federal banking agency, and subsequent communications occurred after the alleged retaliatory acts. The recommendation also included declining supplemental jurisdiction over Haug's state law claims, advising they be dismissed without prejudice due to the preliminary stage of the action. Haug has filed objections to this Report and Recommendation.

The district court's standard of review for a magistrate judge's report and recommendation hinges on whether objections have been filed. If objections are made, the court evaluates the report de novo, as stipulated by Fed. R. Civ. P. 72(b). This rule allows the district judge to accept, reject, modify the magistrate's recommendations, or gather further evidence as needed. In the case at hand, the court conducted a de novo review of Magistrate Judge Baughman's report and the objections submitted by Plaintiff. After a thorough examination of the record and relevant filings, the court deemed the report well-researched and accurate, adopting it in full.

The court granted Defendants’ Motion to Dismiss with regard to the Plaintiff’s federal claims (counts one through six), dismissing them with prejudice. Conversely, the state law claims (counts seven through eleven) were dismissed without prejudice. The action has been terminated. The report detailed the legal standards and application of Rule 12(b)(6), leading to the conclusion that the federal claims were either time-barred or failed to state a valid claim, while the state claims were also recommended for dismissal.

In 2005, Haug filed a debt consolidation loan application with National City Bank (NCB), which later became PNC. The complaint alleges NCB failed to respond promptly to the application, did not address Haug's inquiries regarding the delay, and ultimately misled him regarding the application process. Haug claims these actions were retaliatory, stemming from his whistle-blower status, and violated the Equal Credit Opportunity Act (ECOA), the Financial Institutions Reform Recovery and Enforcement Act (FIRREA), and the Ohio Deceptive Trade Practices Act (ODTPA). Additionally, he alleges PNC is liable for various common law torts, including fraudulent concealment and misrepresentation, as well as negligence.

PNC's motion to dismiss argues that: (1) the ECOA claims are time-barred; (2) no discrimination occurred under the ECOA as Haug did not suffer an adverse credit action; (3) Haug did not allege an adverse employment action necessary for a retaliation claim; (4) the ODTPA claim fails as the alleged actions do not fall under its purview; (5) misrepresentation claims are invalid since Haug did not detrimentally rely on PNC's statements; and (6) the negligence claims should be dismissed due to lack of a special relationship that would impose a duty on PNC.

Under Rule 12(b)(6), the court must evaluate the complaint favorably towards Haug, ensuring that factual allegations provide a plausible claim for relief. The complaint must contain sufficient factual content to suggest that PNC is liable for the alleged misconduct, avoiding mere speculation or conclusory statements. The court can consider the complaint, attached exhibits, public records, and relevant documents when ruling on the motion to dismiss.

PNC's motion for dismissal should be granted based on the following key points regarding ECOA claims. Under the ECOA, as established in Mays v. Buckeye Rural Electric Cooperative, a prima facie case of credit discrimination requires the plaintiff to demonstrate: (1) membership in a protected class, (2) application for credit from the defendant, (3) qualification for the credit, and (4) denial of the credit application despite qualification. 

The limitations period for ECOA claims was extended from two years to five years by Public Law 111-203, effective July 21, 2010. Claims that accrued prior to this date remain subject to the two-year period. Courts generally do not apply newly enacted limitations retroactively unless explicitly stated by Congress, following the precedent set in Landgraf v. USI Film Products. Thus, the limitations period begins when the violation occurs—specifically, when a loan application is denied.

The continuing violation doctrine may toll the statute of limitations if a plaintiff can demonstrate a persistent discriminatory policy and an act of discrimination within the limitations period. However, the Sixth Circuit is cautious in applying this doctrine outside of Title VII contexts, and equitable tolling is considered a rare remedy. To invoke equitable tolling, a plaintiff must show diligence in pursuing rights and the existence of extraordinary circumstances that hindered timely filing.

Counts one and two of Haug's complaint regarding the failure of notice under the Equal Credit Opportunity Act (ECOA) are to be dismissed as untimely. Haug applied for credit on December 22, 2005, and claims he was first informed of the denial in March and April of 2010. He argues that PNC's failure to provide a response within the required 30 days constitutes a violation of the ECOA, which mandates notification of action within 30 days after receiving a completed application. The required notice for his application was due by January 21, 2006, and since Haug did not file his complaint until February 29, 2012, it is time-barred by the two-year limitations period. Haug's awareness of the notice requirement and his choice to pursue the issue internally rather than in court negate the possibility of equitable tolling. 

Counts three, four, and five, which allege discrimination in Haug's loan application handling, also fail to state a valid claim under the ECOA. In count three, Haug asserts that Robert Wilson, a PNC supervisor, unfairly evaluated his application due to personal biases stemming from past interactions. Count four claims that PNC deviated from its normal procedures, opting for a rushed evaluation process instead. Haug contends this irregularity resulted in discriminatory treatment compared to other applicants. Overall, the motion to dismiss all counts is recommended for approval.

Haug alleges in count five that PNC Bank unlawfully discouraged him from applying for a loan, violating 12 C.F.R. 202.4(b), part of the Equal Credit Opportunity Act (ECOA), which prohibits discouraging statements to loan applicants. Haug claims that his loan application, submitted in 2005, was not entered into the bank’s credit review system, constituting this discouragement. He argues this is a continuing violation since PNC has denied wrongdoing and misled him during his attempts to seek a remedy. However, the court views this as a single claim that accrued between late 2005 and early 2006, making it subject to a two-year statute of limitations, which has now expired. Haug's claims of retaliation and procedural failures also stem from this same timeframe, reinforcing the untimeliness of his ECOA claim. 

Even if the continuing violation argument were valid, Haug’s basis for discrimination—PNC's failure to adhere to its own lending procedures—does not qualify for relief under the ECOA. The ECOA identifies specific discriminatory practices based on race, income source, or the exercise of rights under the act, requiring plaintiffs to demonstrate membership in a protected class. The district court's ruling in High v. McLean Financial Corp. clarifies that the ECOA does not cover all lender-customer interactions, focusing instead on defined areas of discrimination, which does not preclude state law claims based on other theories such as fraud or negligence.

Haug’s discrimination claim under 15 U.S.C. 1691(a)(3), associated with the Equal Credit Opportunity Act (ECOA), fails to establish a valid basis for relief. The Sixth Circuit in Lewis v. ACB Business Services clarified that while this section prohibits retaliatory discrimination against those exercising rights under the Consumer Protection Act, it includes a "good faith" provision that excludes individuals engaging in frivolous disputes. For a prima facie case of retaliation, a plaintiff must demonstrate participation in a protected activity. Haug's assertion that the bank acted negatively due to his internal report does not qualify as exercising a right under the ECOA, as he has not linked the alleged bank error to any impermissible factor. Allegations of the bank not adhering to its internal procedures alone do not suggest discriminatory intent. Consequently, Haug's claims in counts three, four, and five should be dismissed as either time-barred or for lack of sufficient claim. 

Regarding count six, which pertains to the Financial Institutions Reform, Recovery, and Enforcement Act of 1989 (FIRREA), the statute protects employees from discrimination for reporting violations or misconduct. To establish a prima facie case of retaliation under FIRREA, a plaintiff must show that they made a protected disclosure, faced an adverse action, and that the disclosure was a contributing factor to the adverse action. Additionally, FIRREA claims must be filed within two years of the alleged discrimination or discharge.

Haug's claim is deemed insufficient to warrant legal relief. He alleges retaliation for making a protected disclosure in 2002 regarding misconduct at PNC and for requesting a review of his loan denial in 2006. However, the statute limits whistle-blower protections to disclosures made to specific federal banking agencies, which does not include internal reports to bank supervisors. Therefore, Haug's 2002 report does not qualify for protection under the statute. Additionally, his communication with the Office of the Comptroller of the Currency occurred after the alleged retaliatory actions and after his employment had ended, negating any potential retaliation claim. Consequently, Count Six should be dismissed for failing to state a valid claim under 12 U.S.C. 1831j.

Regarding the state law claims (Counts Seven to Eleven), since all federal claims have been recommended for dismissal, the court may decline to exercise supplemental jurisdiction over the remaining state law claims as per 28 U.S.C. 1367(c)(3). The claims pertain to Ohio statutes and include allegations of intentional misrepresentation, fraudulent concealment, negligent misrepresentation, and negligence. In accordance with Sixth Circuit precedents, it is recommended that these state law claims be dismissed without prejudice due to the dismissal of federal claims.

The recommendation is to grant the motion to dismiss entirely regarding claims based on federal law while dismissing state law claims without prejudice. PNC Bank, National Association is identified as the sole proper defendant, as The PNC Financial Services Group, Inc. could not have engaged in the actions described in the complaint. Various legal precedents and case citations support the analysis, referencing standards for stating a claim and discussing the implications of limitations periods for claims under the Equal Credit Opportunity Act (ECOA). Notably, Congress previously enacted legislation to revive certain ECOA claims previously barred by the statute of limitations. PNC contests the receipt of a completed application, but for the motion's purposes, the court assumes the truth of the facts as alleged by Haug.

The complaint spans 10 pages and includes 23 subsections detailing actions taken by Haug between early 2006 and February 2010 regarding his 2005 loan application. Notably, Haug addressed concerns about the timeliness of the loan decision with PNC’s legal department in January 2009. Legal precedents indicate that claims under the Equal Credit Opportunity Act (ECOA) are not applicable to negligence and fraud allegations, and failures by banks to adhere to internal policies do not imply discriminatory intent. Haug was requested by bank management to clarify inconsistencies and risk concerns across various consumer underwriting sites, which he provided. After exhausting internal avenues at PNC, he escalated the matter to the Office of the Comptroller of the Currency. Citations and case law referenced include various decisions affirming these principles and the limitations of claims under ECOA.