The Court of Appeals for the Second Circuit has vacated a lower court’s ruling in a case where the defendant was accused of harassing the plaintiff by sending a disputed termination fee to collections and reporting the debt to the credit reporting agencies. The lower court had granted a motion to compel arbitration that was filed by the defendant, but because the plaintiff never actually alleged that a federal law was broken, the lower court had no jurisdiction to issue a ruling, the Appeals Court determined.
The background: The plaintiff filed a handwritten complaint in New York State court, claiming that the defendant’s collection efforts caused him mental anguish and prevented him from opening a new credit card. The plaintiff sought $30,000 in damages and to have the charges erased from his credit report.
- The defendant removed the case to federal court, claiming that the credit reporting remedy concerned the defendant’s responsibilities under the Fair Credit Reporting Act.
- The plaintiff argued that it was not an FCRA case, but a District Cout judge compelled arbitration, which ruled in the plaintiff’s favor and ordered the defendant to refrain from further collection efforts and credit reporting, while also denying the plaintiff’s claim for money damages. The District Court judge affirmed the award, at which point the plaintiff appealed the ruling.
The ruling: Unfortunately for the defendant, removing a case to federal court is only proper when the complaint affirmatively alleges a federal claim. While correcting the plaintiff’s credit report might have implicated a federal remedy, the plaintiff disavowed any reliance on the FCRA.
- The defendant argued that the plaintiff’s references to the FCRA during the arbitration process affirmed his reliance on federal law, but the Appeals Court determined that the lack of a clearly stated federal claim was enough to vacate the arbitration award and order the case remanded back to state court.
