# BAILEY v. HALSTED FINANCIAL SERVICES, LLC

> District Court, M.D. North Carolina · August 22, 2022

URL: https://www.frixlaw.com/law-library/cases/10254244

## Case

- **Court:** District Court, M.D. North Carolina
- **Decided:** August 22, 2022
- **Opinion:** 100trialcourt
- **Cited by:** 0 later opinions in the Frix Law Library

## Citator (automated)

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## Opinion text

IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF NORTH CAROLINA

GLORIA BAILEY, on behalf of herself and )
others similarly situated, )
Plaintiff,
v. 1:21CV686
HALSTED FINANCIAL SERVICES, LLC, .

Defendant.

MEMORANDUM OPINION AND RECOMMENDATION
OF UNITED STATES MAGISTRATE JUDGE
This matter is before the Court on Defendant Halsted Financial Services, LLC’s
(“Halsted”) motion to compel arbitration as to Plaintiff Gloria Bailey and to dismiss class
action complaint. (Docket Entry 17.) Also before the Court is Plaintiff's motion to remand
this action to state court pursuant to 28 U.S.C. § 1447. (Docket Entry 21.) The matters are
ripe for disposition. For the teasons stated herein, the undersigned will recommend
Plaintiffs motion be granted and this action be remanded to the General Court of Justice,
Superior Court Division, in Forsyth County, North Carolina. The undersigned will further
recommend that Halsted’s motion be denied without prejudice as moot for lack of subject
matter jurisdiction.
OL PROCEDURAL BACKGROUND
Plaintiff, on behalf of herself and others similarly situated, commenced this action
against Halsted in the General Court of Justice, Superior Court Division, in Forsyth County,
North Carolina on or about July 7, 2021. (Complaint, Docket Entry 4.) On September 3,

2021, Halsted filed a notice of removal pursuant to 28 U.S.C. § 1441 ef seg. (Docket Entry
1.) Halsted thereafter filed an answer to the Complaint. (Docket Entry 11.) Plaintiff then
filed an Amended Complaint (Docket Entry 13), and Halsted filed an answer to the
Amended Complaint (Docket Entry 14). After allowing limited discovery solely on the issue
of atbitrability (see Text Order dated 11/12/2021), Halsted filed the pending motion to
compel arbitration of the individual claims asserted by Plaintiff and to dismiss all further
proceedings with prejudice. (Docket Entry 17.) Plaintiff filed a response in opposition to
Halsted’s motion (Docket Entry 19) and Halsted filed a reply (Docket Entry 20). Shortly
thereafter, Plaintiff filed the motion to remand. (Docket Entry 21.) Halsted did not file a
response to Plaintiff's motion.
Il. FACTUAL BACKGROUND
Plaintiff brings this putative class action seeking to recover damages against Halsted
for violations of the North Carolina Debt Collection Act, N.C. Gen. Stat. § 75-50 ef seq., the
North Carolina Collection Agency Act, N.C. Gen. Stat § 58-70 ef seg., the North Carolina
Unfair and Deceptive Trade Practices Act, N.C. Gen. Stat. § 75-1.1, and the federal Fair
Debt Collection Practices Act, 15 U.S.C. § 1692 e¢ seg. (“FDCPA”). (See Am. Compl.
Docket Entry 13.) The putative class consists of consumers in North Carolina whose debt
information Halsted sent to a third-party without ptior consent of those consumers. (Id. |
27.) Specifically, as to Plaintiff, it is alleged that she owes a debt, which was in default and
subsequently transferred to Halsted, a debt collector. (See cd. J] 9, 13, 17-18.) In an effort to
collect on the debt, Halsted used a third-party vendor to prepare and mail written
correspondence to Plaintiff regarding the deb. Ud. {| 19-20.) To accomplish such, Plaintiff

alleges that Defendant “conveyed information regarding the [d]ebt to the third-party
vendor[,]” and the vendor “then populated some or all this information into a prewritten
template, [and] printed, and mailed the letter to Plaintiff at [Halsted’s] direction.” (Ud. {ff 21,
24.) Plaintiff did not consent to Halsted sharing her debt information with anyone including
the third-party vendor. (Id. {f] 46-48.)!
I. DISCUSSION
Plaintiff seeks an order remanding this action to State court. (Docket Entry 21.)?
She argues that remand is proper “for a failure to allege concrete harm required by Spokeo,
Inc. v. Robins, 578 U.S. 330, 341 (2016), as revised (May 24, 2016) and TransUnion LLC ».
Ramirez, 141 S. Ct. 2190, 2205, 210 L. Ed. 2d 568 (2021).” Cd. at Plaintiff also relies on
three recent decisions from this Court “remanding similar actions back to State court, for a
failure to identify concrete harm resulting from the defendant’s alleged federal statutory
violations.” (Docket Entry 22 at 3 citing Brown v. Alltran Fin., LP, No. 1:21-CV-595, 2022
WL 377001, at *1 (M.D.N.C. Feb. 8, 2022) (unpublished); Asbury v. Credit Corp Sols., Inc., No.
1:21-CV-650, 2022 WL 377011, at *1 (M.D.N.C. Feb. 8, 2022) (unpublished); Haschett v. Fin.
Bus. ¢ Consumer Sols. Ine, No. 1:21-CV-622, 2022 WL 377002, at *1 (M.D.N.C. Feb. 8,
2022) (unpublished).) Halsted did not file a response to Plaintiff's motion.
' The allegations in Plaintiff's original Complaint and her Amended Complaint surrounding
her claim under the FDCPA are substantially similar. (Compare Am. Compl. {J 35-56 2th Compl. □□□
36-57)
* Since Plaintiffs motion raises jurisdictional issues, the undersigned will address this motion
first. See Kee/ v. Priv. Bus., Inc., No. 7:02-CV-156-F(1), 2002 WL 35645665, at *2 (E.D.N.C. Dec. 31,
2002) (anpublished) (“Because it determines whether or not this court even has subject
mattet jurisdiction of this case, the Motion to Remand first will be addressed.”’).
> Unless otherwise noted, all citations herein refer to the page numbers at the bottom right-
hand corner of the documents as they appear in the Court’s CM/ECF system.

A defendant may remove a case from state court to federal court in instances where
the federal court is able to exercise original jurisdiction over the matter. 28 U.S.C. § 1441(a).
The patty seeking removal bears the burden of establishing federal jurisdiction. Muscabey □□
Columbia Organic Chems. Co. Inc, 29 F.3d 148, 151 (th Cir. 1994). This includes
“[e|stablish[ing] that all elements of jurisdiction—including Article III standing—existed at
the time of removal.” Cumberland Cnty. v. Chemours Co., No. 5:22-CV-157-D, 2022 WL
2195009, at *2 (E.D.N.C. June 17, 2022) (quoting Colher v. SP Plus Corp., 889 F.3d 894, 896
(7th Cir. 2018)). “In determining whether the removing party sustained its burden, the court
must strictly construe the removal statute and resolve all doubts against removal.” Miller v.
Martin, No. CIV.A. C-87-226-G, 1987 WL 46753, at *1 (M.D.N.C. July 20, 1987) (quoting
Shamrock, Oil ¢ Gas Corp. v. Sheets, 313 U.S. 100, 108-09 (1941); see also Butler v. Polk, 592 F.2d
1293, 1296 (5th Cir. 1979),
Plaintiff argues that substantial questions atise as to this Court’s federal question
jurisdiction in this matter, particularly in the light of the ruling in Brown. (See Docket Entry
22 at 4.) The Court in Brown explained the standing requitement—with emphasis on
establishing “concrete hatm”—and the Supreme Coutt’s recent tuling in TransUnion:
“Standing to sue is a doctrine rooted in the traditional
understanding of a case or controversy.” [Spokeo, 578 U.S. at
338]. “For there to be a case or controversy under Article II],
the plaintiff must have a personal stake in the case—in other
wotds, standing.” TransUnion, 141 S. Ct. at 2203 (cleaned up).
To satisfy the standing requirement, a “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.” Spokeo, 578 U.S. at
338....

To establish injury in fact, the allegations must be sufficient to
show a plaintiff has suffered a concrete harm. Id at 339-40....
Intangible harms are concrete when the asserted harm has a
“close telationship to harms traditionally rfecognized as
providing a basis for lawsuits in American courts.” TransUnion,
141 S. Ct. at 2204.
While Congress’s views on harm may be “instructive,” a
plaintiff does not “automatically satisfly] the injury-in-fact
requirement whenever a statute grants a person a statutory right
and purports to authorize that person to sue to vindicate that
right.” Spokeo, 578 US. at 341. “Only those plaintiffs who have
been concretely harmed by a defendant’s statutory violation may
sue that private defendant over that violation in federal
court.” TransUnion, 141 S. Ct. at 2205. In other words, “an
injury in law is not an injury in fact.” Id.
The Supreme Court recently applied these standards
in TransUnion. In that case, a class of consumers sued
TransUnion, a credit reporting agency, alleging violations of the
Fair Credit Reporting Act. Id at 2200. Specifically, the class
members claimed that TransUnion did not adopt reasonable
procedures to ensure the accuracy of their internally-maintained
credit files when it used a product that wrongfully designated
the class members as potential terrorists, drug traffickers, or
other serious criminals. Id. at 2200-01.

The Supreme Court compared the harm suffered by class
membets whose misleading credit reports TransUnion had
shared with third-party businesses to the kind of harm in a
defamation action and determined that the class members’ harm
had a “close relationship” to the reputational harm associated
with defamation. ...
The result was different for those class members whose credit
files TransUnion did not share with a third party. Although the
internal credit files contained misleading information, there was
no historical or common law analogue “where the mere
existence of inaccurate information, absent dissemination,
amounts to concrete injury.” Id. Likewise, the risk of harm if
the information was disseminated did not create a concrete

harm, as there was no historical analogue, and the tisk of harm
was speculative in nature. Id at 2211-12.
Brown, 2022 WL 377001, at *3-4.
In assessing the complaints in Brown, the Court first “[a]lssume[d] without deciding
that it was a violation of the [FDCPA] for [the defendant] to share [the plaintiffs] debt
information with a third-party mailing vendor.” Id. at *4. That presumed statutory violation
alone, however, was “not sufficient to confer standing.” Id. The Court further stated that
“violations of the FDCPA could cause intangible harm closely related to the harm caused by

... invasion of privacy torts.” Id. (citation omitted). However, the ultimate question in
Brown was “whether the complaint includes allegations that [the plaintiff] suffered harms
with a ‘close relationship’ to the harms caused by those or other traditional torts.” Id.
(citation omitted). The Court found that the plaintiffs “original complaint [was] almost
silent on the kind of harm [the plaintiff] sa[id] she ha[d] suffered from [the defendant’s]
illegal sharing of her debt information with the third-party vendor.” Id. at *5. Nor did “[t]he
amended complaint ... cure the problem [as i]t contain[ed] the same relevant underlying
factual allegations and nonspecific references to the ‘unfair and unconscionable’ disclosure
of [the plaintiffs] private information.” Id. (citation omitted). While it did include further
notation of “consumer informational injury,” neither the amended complaint nor the
plaintiff explained the meaning of such. Id. ‘The Court therefore concluded that it did not
have subject matter jurisdiction and remanded the case. Id. at *6.
Similar to Brown, the original Complaint here is nearly silent on the type of harm
Plaintiff alleges to have suffered from Halsted’s nonconsensual shating of her debt

.

information to the third-party vendor.4 See Brown, 2022 WL 377001, at *5-6 (finding no
specific allegations of harm suffered by defendant’s unauthorized disclosure); Asbury, 2022
WL 377011, at *4 (same); Hatchett, 2022 WL 377002, at *5 (same). Plaintiff alleges that
Halsted “disclosed information to a third patty without prior consent” (Compl. §] 41) and did
so “with reckless disregard for the harm to Plaintiff and the Classes that could result from
Defendant’s unauthorized disclosure of private and sensitive information.” (Id. J 53.)
According to Plaintiff, such disclosure “is both unfair and unconscionable.” (Id. 455.) But
“Te]ven if that were true, [Halsted’s] failure to consider future harms caused by its disclosure
of information to the third-party vendor is not a concrete harm, as it is too speculative.”
Dunn, 2022 WL 2483577, at *3 (citing TransUnion, 141 S. Ct. at 2211-12).
Plaintiffs Amended Complaint does not cure the noted deficiencies. Beyond the
same televant underlying factual allegations, the Amended Complaint alleges that Halsted’s
harm stems from its “unauthorized disclosure of private and sensitive financial information
to the third party in the form of consumer informational injury.” (Am. Compl. § 52.)
However, as in Brown, there is no further explanation of “consumer informational injury.”
See Brown, 2022 WL 377001, at *5 (“[The plaintiff] has not explained what she means by
‘informational injuty’ or identified a historical analogue for her asserted informational
harm.”). Ultimately, the undersigned finds, and Halsted has not contested, that there are no
“specific allegations of injury in fact from the alleged disclosure at issue, and, as such, the

‘The court will accept as true the factual allegations in the complaints. See Beck ». McDonald,
848 F.3d 262, 270 (4th Cir. 2017) (accepting as true factual allegations in complaint when analyzing
standing at the pleadings stage); see a/so Dunn v. Enhanced Recovery Co., LLC, No, 21-CV-665, 2022 WL
2483577, at *3 (M.D.N.C. July 6, 2022) (unpublished) (analyzing the original and amended
complaints); Brown, 2022 WL 377001, at *1 n.1 & 5 (same).

Court does not have subject matter jurisdiction and remand is appropriate.” Dunn, 2022 WL
2483577, at *3 (internal quotations, brackets and citation omitted).
IV. CONCLUSION
For the reasons stated above, IT IS HEREBY RECOMMENDED that Plaintiffs
motion to remand (Docket Entry 21) be GRANTED, and this action be remanded to the
General Court of Justice, Superior Court Division, in Forsyth County, North Carolina for
further proceedings.
IT IS FURTHER RECOMMENDED that Defendant Halsted Financial Services,
LLC’s motion to compel arbitration of the individual claims asserted by Plaintiff and to
dismiss all further proceedings with prejudice (Docket Entry 17) be DENIED without
ptejudice as moot for lack of subject matter jurisdiction.

Qu /Nebato=
Joe L. Webster
United States Magistrate Judge
August 22, 2022 □
Dutham, North Carolina

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/10254244. Public record. Not legal advice.