Smith v. Target

Background

Cynthia Smith filed a complaint against Target and applied to proceed without prepaying filing fees. The complaint asserted federal-question jurisdiction based on “Article 1 Section 10: Right to Contract” and diversity jurisdiction based on Smith’s stated citizenship in Texas and allegations about Target’s incorporation and principal place of business. Smith alleged that she sent Target a letter about a “first obligation lien,” that Target ignored it, and that Target continued reporting information about credit. She did not identify the account, the reported information, the credit-reporting agency, the alleged inaccuracy, or any dispute submitted to a credit-reporting agency.

The complaint attached a document titled “Notice of Lien.” It identified Smith as trustee of the Cynthia Smith Revocable Living Trust, directed Target to pay $1,000,000 to that trust, and stated that Target would be treated as having agreed to pay if it did not respond or continued reporting to credit bureaus. The court noted that a nonlawyer trustee cannot represent a trust entity in federal court, but said this issue did not affect the result because the complaint would be dismissed before service.

Claims and analysis

The court liberally construed the complaint as asserting three categories of claims: a claim under the Constitution’s Contracts Clause, claims under the Fair Credit Reporting Act, and a state-law claim involving contract, lien enforcement, or related theories.

The Contracts Clause limits state governments; it does not regulate private parties such as Target and does not create a private claim against a private corporation. The court therefore found that this claim was not legally cognizable and was frivolous.

The court considered two possible Fair Credit Reporting Act theories. First, the statute requires information providers to furnish accurate information, but the court explained that this provision cannot be privately enforced. Second, the statute permits a private claim based on a provider’s failure to investigate disputed information, but only after the consumer disputes the information with a credit-reporting agency and that agency notifies the provider. Smith alleged only that she contacted Target directly. The court therefore found that the complaint did not state either type of Fair Credit Reporting Act claim.

The court also rejected the theory that Smith could unilaterally create and enforce a $1 million lien against Target by sending the “Notice of Lien.” It characterized that theory as frivolous.

Ruling

The court dismissed the complaint with prejudice as frivolous under the federal statute governing fee-waiver cases to the extent it asserted Contracts Clause or “Notice of Lien” claims. It dismissed with prejudice the claims under 15 U.S.C. § 1681s-2(a) for failure to state a claim. It dismissed without prejudice the claims under 15 U.S.C. § 1681s-2(b) for failure to state a claim. The court denied Smith’s application to proceed without prepaying fees or costs as moot and directed that judgment be entered.