In Tillman v. Mich. First Credit Union, No. 19-12860, 2020 U.S. Dist. LEXIS 139056 (E.D. Mich. Aug. 5, 2020), Judge Lawson declined to exercise jurisdiction over a collection counter-claim in an FCRA case.
Nonetheless, federal courts have had little trouble finding that supplemental jurisdiction is proper over counterclaims like the one pleaded here where the underlying dispute is between a creditor that says a debt still is owed and a borrower who says it is not, even though there might be some mutually exclusive elements of proof in the competing causes of action. Cronin v. CitiFinancial Services, Inc., 352 F. App’x 630, 636 (3d Cir. 2009) (“[W]e disagree with the premise that the claims are not sufficiently factually related for the exercise of supplemental jurisdiction. Both the FCRA claim and the breach of contract counterclaim share a common nucleus of operative fact because they both turn on the terms of the written loan agreement between CitiFinancial and Cronin. Although Cronin argues the claims are unrelated because their legal elements differ, the legal differences do not affect whether the claims share a common nucleus of fact.”). The plaintiff takes no issue with that premise. Instead, relying primarily on Barrios v. Equifax Info. Servs., LLC, No. 19-5009, 2020 U.S. Dist. LEXIS 76537, 2020 WL 2046395, at *4 (C.D. Cal. Feb. 14, 2020), she contends that “exceptional circumstances” weigh in favor of declining jurisdiction under 28 U.S.C. § 1367(c)(4), because “exercising supplemental jurisdiction over the breach of contract [c]ounterclaim would chill the litigation of FCRA claims, and . . . the breach of contract [c]ounterclaim would substantially predominate” in the course of the litigation since it might give rise to numerous other disputes over the propriety of issuance of the loan. 2020 U.S. Dist. LEXIS 76537, [WL] at *5 (collecting cases). Other federal courts have observed that “[t]he threat of a debt collection case may quell attempts to assert FRCA rights,” and, therefore, “[s]trong public policy is well served to prevent chilling effects of litigating FRCA claims with claims to collect underlying debt to establish exceptional circumstances to decline supplemental jurisdiction over [a creditor’s] debt collection counterclaim.” Witt v. Experian Info. Sols., Inc., No. 08-0553, 2008 U.S. Dist. LEXIS 51380, 2008 WL 2489132, at *5 (E.D. Cal. June 16, 2008). Contrary to Michigan First’s argument, the claims and counterclaim do not present two sides of the same coin. Tillman contends that Michigan First’s reported tradeline is inaccurate and misleading because the debt was charged off and the monthly payment should be zero, regardless of whether she reaffirmed the debt itself. That has little to do with whether she has a balance owing on the reaffirmed obligation, as the counterclaim alleges. The defenses to the breach of contract claim, whatever they may be, will not overlap with the plaintiff’s affirmative proofs showing that Michigan First failed to conduct a proper investigation and modify or delete the erroneous information, as it must do following an inquiry. See 15 U.S.C. § 1681s-2(b)(1); Scott v. First Southern National Bank, 936 F.3d 509, 517 (6th Cir. 2019) (“Under the FCRA, those who furnish information to consumer reporting agencies have two obligations: (1) to provide accurate information; and (2) to undertake an investigation upon receipt of a notice of dispute regarding credit information that is furnished.”) (quotation marks omitted). The parties to the claims and counterclaim may be the same, but the causes of action are appreciably different. Entertaining the counterclaim would allow the breach of contract dispute to predominate over the FCRA claims. The Court also is persuaded by the reasoning in Barrios, which cautioned against chilling the rights of FCRA claimants by allowing creditors to turn such cases into federal collection actions. “Congress enacted [the Fair Credit Reporting act (FCRA), 15 U.S.C. § 1681 et seq.,] in 1970 to ensure fair and accurate credit reporting, promote efficiency in the banking system, and protect consumer privacy.” Pittman, 901 F.3d at 628. “The FCRA requires consumer credit reporting agencies to ‘follow reasonable procedures to assure maximum possible accuracy of’ consumer credit reports.” Buchholz v. Meyer Njus Tanick, PA, 946 F.3d 855, 2020 WL 35431, at *3 (6th Cir. 2020) (quoting 15 U.S.C. § 1681e(b)). That congressional policy is not advanced by allowing a marginally related counterclaim on an underlying debt in an action that challenges only the way that obligation is reported. Exceptional circumstances weigh in favor of declining the invitation to exercise supplemental jurisdiction. The defendant’s authorities do not hold contrary to that result, because, as the plaintiff correctly points out, in the defendant’s principal competing case, Wingo v. Experian Info. Sols., Inc., No. 17-11275, 2017 U.S. Dist. LEXIS 139789, 2017 WL 3765784 (E.D. Mich. Aug. 9, 2017), report and recommendation adopted, No. 17-11275, 2017 U.S. Dist. LEXIS 139238, 2017 WL 3727399 (E.D. Mich. Aug. 30, 2017), where the court denied a motion to dismiss, the plaintiff did not mount any argument for declining jurisdiction under section 1367(c)(4) based on “exceptional circumstances.” Nor does any of the reasoning in that decision run counter to the discussion in Barrios or the cases that it surveyed concerning the chilling effects of permitting such discretionary counterclaims to be tacked onto routine consumer credit actions. Correctly noting that the dismissal of the counterclaim without prejudice would allow it to refile it in state court, Michigan First contends that dismissing the counterclaim will chill FCRA claimants by requiring them to litigate in two separate forums. Perhaps. But it is the plaintiff who initially chose a state forum to bring her federal causes of action; it was this defendant that brought the case to federal court and then attempted to assert a purely state-law claim. If inefficiencies result, it is solely the defendant’s doing.