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DEGRAZIANO v. VERIZON COMMUNICATIONS

July 22, 2004.

JOANNE DEGRAZIANO, Plaintiff,
v.
VERIZON COMMUNICATIONS, INC. CELLCO PARTNERSHIP d/b/a VERIZON WIRELESS, VODAFONE GROUP, PLC, DISCOVER BANK, DISCOVER FINANCIAL SERVICES, INC. MORGAN STANLEY DEAN WITTER AND COMPANY, Defendants.



The opinion of the court was delivered by: ARTHUR SPATT, District Judge

MEMORANDUM OF DECISION AND ORDER

Joanne Degraziano ("Degraziano" or the "plaintiff") commenced this action against Verizon Communications, Inc. ("Verizon Communications"), Cellco Partnership d/b/a Verizon Wireless ("Verizon Wireless"), Vodafone Group, PLC ("Vodafone"), Bank of America, N.A. (U.S.A.), Bank of America Corporation, Discover Bank, Discover Financial Services, Inc. and Morgan Stanley Dean Witter and Company (the "defendants") alleging various violations of the Fair Credit Reporting Act (the "FCRA"), 15 U.S.C. § 1681, et seq. On March 30, 2004 a stipulation was filed with the Court dismissing the claims against the defendants Bank of America, N.A. (USA) and Bank of America Corporation with prejudice.

Presently before the Court is a motion by the defendants Verizon Communications and Verizon Wireless (the "moving defendants") to (1) dismiss the first and second causes of actions and compel arbitration of those claims; and (2) dismiss the third and fourth causes of action pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure ("Fed.R. Civ. P.") for failure to state a claim.

  I. BACKGROUND

  A. As to the Motion to Compel Arbitration of the First and Second Causes of Action

  The following facts are taken from the complaint and from the Declaration of Jeffrey Nason, the Supervisor, Customer Satisfaction for the Northeast Area of Verizon Wireless, sworn to on December 8, 2003, and are undisputed unless otherwise noted.

  On or about May 4, 1998, the plaintiff began receiving wireless telephone services from Verizon Wireless. As a precondition of receiving such services, the plaintiff agreed to a Cellular Services Agreement (the "CSA"). Among its terms and conditions, the CSA includes an arbitration clause which states:
Independent Arbitration. INSTEAD OF SUING IN COURT, YOU'RE AGREEING TO ARBITRATE DISPUTES ARISING OUT OF OR RELATED TO THIS OR PRIOR AGREEMENTS. THIS AGREEMENT INVOLVES COMMERCE AND THE FEDERAL ARBITRATION ACT APPLIES TO IT. ARBITRATION ISN'T THE SAME AS COURT. THE RULES ARE DIFFERENT AND THERE'S NO JUDGE AND JURY. YOU AND WE ARE WAIVING RIGHTS TO PARTICIPATE IN CLASS ACTIONS, INCLUDING PUTATIVE CLASS ACTIONS BEGUN BY OTHERS PRIOR TO THIS AGREEMENT, SO READ THIS CAREFULLY. THIS AGREEMENT AFFECTS RIGHTS YOU MIGHT OTHERWISE HAVE IN SUCH ACTIONS THAT ARE CURRENTLY PENDING AGAINST US OR OUR PREDECESSORS IN WHICH YOU MIGHT BE A POTENTIAL CLASS MEMBER. (We each retain our rights to complain to any regulatory agency or commission.) YOU AND WE EACH AGREE THAT, TO THE FULLEST EXTENT PROVIDED BY LAW:
(1) ANY CONTROVERSY OR CLAIM ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR TO ANY PRIOR AGREEMENT FOR CELLULAR SERVICE WITH US OR, ANY OF OUR AFFILIATES OR PREDECESSORS IN INTEREST, OR TO ANY PRODUCT OR SERVICE PROVIDED UNDER OR IN CONNECTION WITH THIS AGREEMENT OR SUCH A PRIOR AGREEMENT, WILL BE SETTLED BY INDEPENDENT ARBITRATION INVOLVING A NEUTRAL ARBITRATOR AND ADMINISTERED BY THE AMERICAN ARBITRATION ASSOCIATION ("AAA") UNDER WIRELESS INDUSTRY ARBITRATION ("WIA") RULES, AS MODIFIED BY THIS AGREEMENT. WIA RULES AND FEE INFORMATION ARE AVAILABLE FROM US OR THE AAA;
(2) EVEN IF APPLICABLE LAW PERMITS CLASS ACTIONS OR CLASS ARBITRATIONS, YOU WAIVE ANY RIGHT TO PURSUE ON A CLASS BASIS ANY SUCH CONTROVERSY OR CLAIM AGAINST US, OR ANY OF OUR AFFILIATES OR PREDECESSORS IN INTEREST, AND WE WAIVE ANY RIGHT TO PURSUE ON A CLASS BASIS ANY SUCH CONTROVERSY OR CLAIM AGAINST YOU. . . .
Nason Decl. Exh. 2 (emphasis added).

  At some point in time the plaintiff was unable to pay her monthly bills for monies owed to, among other entities, Verizon Wireless. During 2001, the plaintiff entered into a debt reduction program with the Daly Law Center to arrange settlements on her debts. In February 2002, Verizon Wireless provided a report to Asset Management Outsourcing Recoveries, Inc. ("AMO Recoveries") in which Verizon Wireless reported that the plaintiff's account was in collection with an outstanding balance of $681.97.

  The Daly Law Center, on behalf of the plaintiff, and AMO Recoveries, on behalf of Verizon Wireless, settled the outstanding balance for $340.49. Along with a letter dated February 20, 2002, the Daly Law Center submitted a check in the amount of $340.49 to AMO with a request that AMO report to the credit/consumer reporting agencies that the outstanding balance was resolved. The plaintiff alleges that Verizon Wireless failed to inform the credit/consumer reporting agencies that the outstanding balance was satisfied.

  Thereafter, the plaintiff was unable to secure financing for the purchase of a motor vehicle allegedly due to her credit history. The plaintiff asserts two causes of action against Verizon Wireless: (1) that by failing to make any updates and/or reports to the credit/consumer reporting agencies since February 2002 or by implementing proper policies, procedures or controls, Verizon Wireless has knowingly and in bad faith breached the duties imposed on it by the FCRA; and (2) that by failing to make any updates and/or reports to the credit/consumer reporting agencies since February 2002 or by implementing proper policies, procedures or controls, Verizon Wireless has negligently breached the duties imposed on it by the FCRA. For these alleged violations of law the plaintiff seeks compensatory damages for "humiliation," actual financial damages, and punitive damages.

  B. As to the Motion to Dismiss

  As indicated above, Verizon Communications moves to dismiss the third and fourth causes of action pursuant to Rule 12(b)(6) for failure to state a claim. For purposes of this motion, the relevant facts are taken from the complaint and accepted as true.

  The plaintiff alleges that Verizon Communications and Vodafone are the two parent companies of Verizon Wireless, holding a 56% and 44% ownership interest, respectively.

  The third cause of action alleges that because these parent companies enjoy complete ownership of Verizon Wireless they "play the part of the `master' with the role of the `servant/agent' being played by Verizon Wireless." Compl. ¶ 120. As such, the plaintiff alleges that liability for the intentional and negligent failure of Verizon Wireless to comply with the FCRA extends to Verizon Communications and to Vodafone. The complaint further alleges that it was the responsibility of Verizon Communications and Vodafone to establish quality and managerial controls and policies to ensure that Verizon Wireless did not violate and laws in the performance of its duties on behalf of its "masters." Compl. ¶ 130.

  The fourth cause of action seeks to pierce the corporate veil of Verizon Wireless and impose liability on Verizon Communications and Vodafone. In particular, the plaintiff claims that Verizon Communications and Vodafone are responsible for any and all illegal actions taken by Verizon Wireless because of (1) their complete "dominion and control" over Verizon Wireless, (2) "the closeness of the relationship" between Verizon Wireless and its parent companies, (3) the fact that all assets and liabilities of the company are reflected on the balance sheets of its parent companies, and (4) as parent companies, Verizon Communications and Vodafone failed to fulfill ...


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