Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-azd-2_09-cv-02518/USCOURTS-azd-2_09-cv-02518-0/pdf.json

Nature of Suit Code: 480
Nature of Suit: Consumer Credit
Cause of Action: 28:1441 Petition for Removal - Fair Credit Reporting Act

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1

 Plaintiffs’ request for oral argument is denied because the parties have had an

adequate opportunity to discuss the law and evidence and oral argument will not aid the

Court’s decision. See Lake at Las Vegas Investors Group, Inc. v. Pac. Malibu Dev., 933 F.2d

724, 729 (9th Cir. 1991).

WO

IN THE UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF ARIZONA

Home Care Services, Inc., an Arizona

corporation d/b/a LJM Air Conditioning;

John Lamont and Lisa Lamont, man and

wife, 

Plaintiff, 

vs.

Advanta Bank Corporation, a Utah

industrial bank, 

Defendant. 

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No. 09-CV-2518-PHX-GMS

ORDER

Pending before the Court is Defendant’s Motion to Dismiss Counts Six Through Eight

of the Amended Complaint (Dkt. # 22). For the following reasons, the Court denies the

Motion.1

BACKGROUND

The Complaint alleges the following facts. In September 2006, Ms. Tamarom In, who

was once a defendant in this action, provided office administration services to Home Care

Services, Inc. d/b/a LJM Air Conditioning (“LJM”), by virtue of an agreement between LJM

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2

 The notice of removal included a different version of the Third Amended Complaint.

This Court then granted Plaintiffs’ Motion to Amend to file their “Revised” Third Amended

Complaint (Dkt. ## 32, 33), which Plaintiffs apparently inadvertently neglected to file

originally. Because the revised version raises substantially the same claims and the parties

appear to proceed under the revised TAC, the Court analyzes the Motion to Dismiss under

the revised TAC.

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and Diversified Human Resources, Inc., which was Ms. In’s employer. Ms. In then applied

to Advanta Bank Corporation (“Advanta”) for issuance of a credit card to LJM. No person

with authority to act on LJM’s behalf authorized, knew of, ratified, or received of any notice

or benefit from Ms. In’s credit card application. Advanta failed to verify the accuracy of the

information that Ms. In provided in the application and failed to confirm Ms. In’s authority

to apply for and to receive the credit card. Ms. In began using the credit card issued to LJM

and falsified company reports to conceal this activity. 

In August of 2008, Advanta’s fraud investigator reported that the credit card was

fraudulently obtained by Ms. In to LJM’s detriment and that Advanta would write-off the

credit card balance that remained on the card. Advanta’s legal department, however, did not

follow that course of action and instead informed LJM that both LJM and its president and

CEO, John Lamont, were liable for the amount of the unpaid balance. Advanta then,

according to Plaintiffs, began “knowingly and wrongfully” reporting false information to

credit reporting agencies, presumably regarding the liability for the card payments.

The Revised Third Amended Complaint (“TAC”) raised three new claims: (1)

violation of 15 U.S.C. § 1681s-2, (2) defamation, and (3) intentional infliction of emotional

distress.2

 In their Response to this Motion, Plaintiffs clarify that these three claims apply

only to the Lamonts individually and not to LJM as an entity. 

DISCUSSION

I. Statutory Background of the Fair Credit Reporting Act, 15 U.S.C. § 1681 et seq.

Plaintiffs allege a violation of the Fair Credit Reporting Act (“FCRA”) against

Advanta. Defendant’s Motion asserts both that Plaintiffs’ FCRA claim fails and that FCRA

preempts Plaintiffs’ state law claims for intentional infliction of emotional distress and

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defamation.

Under FCRA, Sections 1681n and 1681o provide a general cause of action for a

plaintiff who successfully alleges that a defendant willfully or negligently failed to comply

with an applicable section of FCRA. Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147,

1154 (9th Cir. 2009) (citing 15 U.S.C. §§ 1681n, 1681o). Plaintiffs allege that Advanta

violated Section 1681s-2, which sets forth two main duties relating to the “responsibilities

of furnishers of information to consumer reporting agencies.”15 U.S.C. § 1681s-2. Section

1681s-2(a) deals with the duty “to provide accurate information.” Id. § 1681s-2(a).

Meanwhile, Section 1681s-2(b) applies only after a furnisher receives information of a

dispute from a consumer reporting agency and imposes certain affirmative duties on

furnishers. Id. § 1681s-2(b). After receiving notice of a dispute, a furnisher then has an

obligation to conduct an investigation, review relevant information, and report the results of

the investigation to the consumer reporting agency. Id. If the information is found to be

incomplete or inaccurate, the furnisher must report the results to all consumer reporting

agencies to whom the information was furnished, as well as modify, delete, or permanently

block the reporting of that incomplete or inaccurate information. Id.

II. Plaintiffs’ FCRA Claims

To the extent Plaintiffs allege that Advanta violated Section 1681s-2(a), that claim is

dismissed because there is no private right of action for a violation of Section 1681s-2(a). See

15 U.S.C. § 1681s-2(c) (stating that “sections 1681n and 1681o of this title,” which impose

civil liability for willful or negligent failure to comply with the FCRA, “do not apply to any

violation of [Section 1681s-2(a)]”); Gorman, 584 F.3d at 1154 (“[Section] 1681s-2 limits this

private right of action to claims arising under [Section 1681s-2(b)] . . . Duties imposed on

furnishers under [Section 1681s-2(a)] are enforceable only by federal or state agencies.”).

Plaintiffs also allege a violation of Section 1681s-2(b), for which a private right of

action exists. Upon review of the TAC, Defendant’s Reply withdrew its argument that

Plaintiffs failed to state a claim under Section 1681s-2(b). (Dkt. # 30.) Accordingly,

Plaintiffs’ claim under Section 1681s-2(b) survives.

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3

 Defendant also contends that Advanta, as a corporation, is incapable of suffering

emotional distress. Plaintiffs, however, clarify that its intentional infliction of emotional

distress claim applies only to the Lamonts personally. 

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II. Plaintiffs’ Common Law Claims

Defendant moves to dismiss Plaintiffs’ common law claims for intentional infliction

of emotional distress and defamation because 15 U.S.C. § 1681t(b)(1)(F) preempts state

common law claims. Plaintiffs respond that the law of the case doctrine precludes this

argument and that, in any event, their state common law claims are not preempted.3

 Because

the Court concludes that preemption is inapplicable, the Court need not discuss the law of

the case doctrine.

Defendant contends that 15 U.S.C. § 1681t(b)(1)(F) preempts Plaintiffs’ claims for

defamation and intentional infliction of emotional distress. “[S]tate law that conflicts with

federal law is without effect.” Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516 (1992)

(internal quotations omitted); see U.S. Const. Art. VI, cl. 2. Congress may indicate

preemptive intent either through the statute’s express language or through its structure and

purpose. Altria Group, Inc. v. Good, 129 S. Ct. 538, 543 (2008). 

Although FCRA generally preempts state laws only to the extent those laws are

inconsistent with federal law, FCRA includes two preemption provisions: Section

1681t(b)(1)(F) and Section 1681h(e). Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147,

1166 (9th Cir. 2009). Section 1681h(e) was enacted in 1970 and provides, 

Except as provided in sections 1681n and 1681o of this title, no consumer may

bring any action or proceeding in the nature of defamation, invasion of

privacy, or negligence with respect to the reporting of information against any

consumer reporting agency, any user of information, or any person who

furnishes information to a consumer reporting agency, based on information

disclosed pursuant to section 1681g, 1681h, or 1681m of this title, or based on

information disclosed by a user of a consumer report to or for a consumer

against whom the user has taken adverse action, based in whole or in part on

the report except as to false information furnished with malice or willful intent

to injure such consumer.

15 U.S.C. § 1681h(e). In 1996, Congress added Section 1681t(b)(1)(F), which states: 

No requirement or prohibition may be imposed under the laws of any State--

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(1) with respect to any subject matter regulated under-- 

(F) section 1681s-2 of this title, relating to the responsibilities of

persons who furnish information to consumer reporting

agencies, except that this paragraph shall not apply-- 

(i) with respect to section 54A(a) of chapter 93 of the

Massachusetts Annotated Laws (as in effect on

September 30, 1996); or 

(ii) with respect to section 1785.25(a) of the California

Civil Code (as in effect on September 30, 1996); 

Id. § 1681t(b)(1)(F). In other words, Section 1681t(b)(1)(F) preempts certain claims

regarding subject matter governed by Section 1681s-2. See id. Defendant contends that

Plaintiffs’ claims for defamation and intentional infliction of emotional distress are

preempted because they stem from the reporting of credit information about John Lamont,

which relates to the “responsibilities of persons who furnish information to consumer

reporting agencies,” see id.

The parties dispute what types of claims FCRA preempts, as Sections 1681t(b)(1)(F)

and 1681h(e) are somewhat in conflict. Plaintiffs suggest that Section 1681t governs only

the preemption of statutory claims, whereas Section 1681h(e) governs the preemption of

common law claims. The Court is unaware of any binding Ninth Circuit authority explicitly

deciding this issue, but Gorman offers meaningful guidance. 584 F.3d at 1165–68. Gorman

recognized the potential tension between Section 1681t(b)(1)(F) and Section 1681(h)(e)

because, while the former appears to preempt all state law claims based on a creditor’s

responsibilities under Section 1681s-2, the latter implies that claims in the nature of

negligence, defamation, and invasion of privacy may proceed if the plaintiff alleges falsity

and malice. Gorman, 584 F.3d at 1166. In addressing this conflict, Gorman highlighted

several ways to reconcile these statutes and to clarify the appropriate scope of FCRA

preemption. Id. at 1167. 

Among these approaches, the Ninth Circuit analyzed the “statutory” approach now

advanced by Plaintiffs, under which “[Section 1681t(b)(1)(F)] preempts only state law claims

against credit information furnishers brought under state statutes, just as 1681h(e) preempts

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4 Gorman also described the “temporal approach,” which is not advanced by either

party in this case. The Ninth Circuit stated,

Attempting to give meaning to both sections, other courts have observed that

§ 1681t(b)(1)(F) relates to “any subject matter regulated under section

1681s-2,” the section which regulates the responses of furnishers to notices of

dispute. Hence, these courts apply a “temporal approach,” holding that “causes

of action predicated on acts that occurred before a furnisher of information had

notice of any inaccuracies are not preempted by § 1681t(b)(1)(F), but are

instead governed by § 1681h(e).

584 F.3d at 1167.

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only state tort claims.”4 Id. Gorman then impliedly rejected the statutory approach,

concluding that the FCRA’s text suggests that at least some common law claims may be

preempted. See 584 F.3d at 1166–68. While the statutory approach is premised on a

distinction between statutory and common law claims insomuch as Congress was concerned

with protecting furnishers from inconsistent statutory obligations, the Gorman court

explained that “this distinction” between statutory and common law claims “does not appear

in the text of the statute.” 584 F.3d at 1167 n. 25; see also Alvarado v. Cajun Operating Co.,

588 F.3d 1261, 1268 (9th Cir. 2009) (“The starting point for the interpretation of a statute is

always its language,” and “courts must presume that a legislature says in a statute what it

means and means in a statute what it says there.”) (citation omitted). To the contrary, Section

1681t(b)(1)(F)’s use of “[t]he phrase ‘[n]o requirement or prohibition’ sweeps broadly and

suggests no distinction between positive enactments and common law . . . those words easily

encompass obligations that take the form of common-law rules.” Id. (citing Cipollone v.

Liggett Group, Inc., 505 U.S. 504,521 (1992)); see also, e.g., Johnson v. JP Morgan Chase

Bank, 536 F. Supp. 2d 1207, 1214–15 (E. D. Cal. 2008) (holding that common law causes

of action were preempted by Section 1681t(b)(1)(F)); Roybal v. Equifax, 405 F. Supp. 2d

1177, 1182 (E. D. Cal. 2005) (“On its face, FCRA precludes all state statutory or common

law causes of action that would impose ‘any requirement or prohibition’ on the furnishers

of credit information.”). That Section 1681t exempts various statutes from preemption does

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5

 In a footnote, Gorman also stated that Section 1681t(b)(1)(F) “probably” preempted

the libel claim, although Gorman explicitly did not decide the question. 584 F.3d at 1166 n.

23. In any event, Gorman seems at least to acknowledge that Section 1681h(e) may present

a different preemption analysis than does Section 1681t(b)(1)(F).

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not mean that only state statutes, and not common law claims, are preempted. Therefore, the

Court rejects Plaintiffs’ statutory approach and concludes that Section 1681t(b)(1)(F)

generally preempts both statutory and common law causes of action. 

This does not end the Court’s analysis, however. Although the Court finds that

Section 1681t(b)(1)(F) applies to both statutory and common law claims generally, Section

1681h(e) states that certain tort claims are barred “except as to false information furnished

with malice or willful intent to injure such consumer.” 15 U.S.C. § 1681h(e) (emphasis

added). As Gorman stated, “[Section] 1681h(e) suggests that defamation claims can proceed

against creditors as long as the plaintiff alleges falsity and malice.”5

 584 F.3d at 1166.

Several canons of statutory interpretation confirm this view.

Beginning, as always, with the text of FCRA, the Court “must interpret statutes as a

whole, giving effect to each word and making every effort not to interpret a provision in a

manner that renders other provisions of the same statute inconsistent, meaningless or

superfluous.” Boise Cascade Corp. v. U.S. E.P.A., 942 F.2d 1427, 1432 (9th Cir. 1991). If

possible, therefore, the Court reads Sections 1681t(b)(1)(F) and 1681h(e) consistently.

Although the two sections appear at odds, a plausible consistent interpretation is that Section

1681t(b)(1)(F) provides a general preemption rule, while Section 1681h(e) provides an

exception for specifically-enumerated torts. To the extent the two sections are inconsistent,

“[i]t is a well-settled canon of statutory interpretation that specific provisions prevail over

general provisions.” NLRB v. A-Plus Roofing, Inc., 39 F.3d 1410, 1415 (9th Cir. 1994).

Here, Section 1681t(b)(1)(F), which uses broad “[n]o requirement or prohibition” language,

must yield to the more specific Section 1681h(e), which mentions specific types of tort

claims and the additional requirements to plead falsity and malice. As Gorman explained,

Section 1681h(e) is “more specific for preemption purposes, because the tension is the nature

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of the claims preempted, and [Section] 1681h(e) specifies certain claims that can be

brought.” 584 F.3d at 1167 n. 24; see also Morris v. Bank of Am., 2010 WL 761318 at *8 (N.

D. Cal. Mar. 3, 2010) (citing Gorman and noting that “FCRA preemption is inapplicable

where the defendant’s conduct is malicious or willful”). Therefore, Section 1681h(e)

provides somewhat of an “exception from preemption” if a plaintiff can prove falsity and

malice. See Weseman v. Wells Fargo Home Mortgage, Inc., 2008 WL 542961 at *4–5 (D.

Or. Feb. 22, 2008) (discussing that Section 1681h(e) allows certain claims enumerated in that

section if the plaintiff can show falsity and malice).

Defendant urges the Court to adopt the “total preemption” approach and to conclude

that Section 1681t(b)(1)(F) impliedly repealed Section 1681h(e), effectively preempting all

statutory and common law claims. Defendant points to several opinions of district courts that

have held that FCRA preempts both statutory and common law claims. See, e.g., Johnson v.

JP Morgan Chase Bank, 536 F. Supp. 2d 1207, 1214–15 (E. D. Cal. 2008); Cope v. MBNA

Am. Bank, NA, 2006 WL 655742 at *8–9 (D. Or. Mar. 8, 2006); Roybal v. Equifax, 2006 WL

902276 at *3–4 (E. D. Cal. Apr. 4, 2006); Howard v. Blue Ridge Bank, 371 F. Supp. 2d 1139,

1143–44 (N. D. Cal. 2005); Davis v. Md. Bank, N.A., 2002 WL 32713429 at *11–15 (N.D.

Cal. June 19, 2002).

Despite these cases, and despite the fact that Section 1681t(b)(1)(F) generally

preempts both statutory and common law claims, the Court finds it possible to give

substantive meaning to both Sections 1681t(b)(1)(F) and 1681h(e). “[R]epeals by

implication are not favored.” Radzanower v. Touche Ross & Co., 426 U.S. 148, 154 (1976).

Repeals by implication apply only where “the intention of the legislature to repeal [is] clear

and manifest” and where either “provisions in the two acts are in irreconcilable conflict” or

where “the later act covers the whole subject of the earlier one and is clearly intended as a

substitute” Id. (internal quotations omitted). Section 1681t(b)(1)(F) clearly does not cover

the entire subject matter as Section 1681h(e), nor do the sections appear to be in

irreconcilable conflict,so the Court will not find implied preemption. See Sites v. Nationstar

Mortgage, LLC, 646 F. Supp. 2d 699, 707 (M. D. Pa. 2009) (holding that Section 1681h(e)

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6

 Section 1681h(e) allows a plaintiff, if he or she properly alleges falsity and malice,

to bring a claim for actions “in the nature of defamation, invasion of privacy, or negligence

with respect to the reporting of information.” 15 U.S.C. § 1681h(e) (emphasis added). While

intentional infliction of emotional distress is not specifically included in this list of torts, the

claim is “in the nature of” a claim for the negligent reporting of information.

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was not impliedly repealed because it would null the section and stating that an argument that

Section 1681t coversthe entire subject matter of Section 1681h(e) is “clearly inapplicable”);

Barnhill v. Bank of Am., N.A., 378 F. Supp. 2d 696, 699 (D. S.C. 2005) (same). As already

explained, Section 1681h(e) can fairly be read as a limited exception to Section

1681t(b)(1)(F). While Section 1681t(b)(1)(F) generally preempts both statutory and common

law claims, Section 1681h(e) deals with a specific situation of claims in the nature of

negligence, defamation, and invasion of privacy for which a plaintiff pleads the false

information was reported with malice.

Additionally, Congress evinced no intent to repeal Section 1681h(e), as Congress

added Section 1681t(b) at the same time that it amended Section 1681h(e) to clarify the types

of state common law causes of action preempted by FCRA. See Islam v. Option One

Mortgage Corp., 432 F. Supp. 2d 181, 191 (D. Mass. 2006) (“Finally, and perhaps most

convincing, the fact that Congress amended Section 1681h(e) in the same Act that it added

Section 1681t(b) belies any argument that the latter was meant to repeal the former

completely.”) (citing Pub. L. No. 104-208, 110 Stat. 3009-396, 3009-439 (1996)). Therefore,

under Section 1681h(e), Plaintiffs may plead claims for defamation and intentional infliction

of emotional distress based on the reporting of information because they have alleged falsity

and malice.6

 

To survive a motion to dismiss, Plaintiffs must also have alleged factual allegations

of falsity and malice sufficient to “raise a right to relief above the speculative level.” Bell Atl.

Corp. v. Twombly, 550 U.S. 544, 555 (2007) (explaining standard for a motion to dismiss);

see also Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (requiring “more than a sheer

possibility” of liability to survive a motion to dismiss).

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New York Times v. Sullivan sets the standard for “malice” under FCRA, and Plaintiff

must show that the “publication [was] made ‘with knowledge that it was false or with

reckless disregard of whether it was false or not.’” Gorman, 584F.3d at 1168 (citing New

York Times, 376 U.S. 254, 279–80 (1964)). Applying this standard, Gorman affirmed

summary judgment on the libel claim because the plaintiff had not presented evidence that

the furnisher knew the credit information was false or that the furnisher acted with reckless

disregard as to its falsity; the plaintiff offered no evidence that the publication of the credit

information arose out of something other than a “good faith,” “legal and factual

disagreement,” which does not give rise to malice. Id. at 1168–69. Defendant urges that the

TAC is insufficient because the present case is the result of a legal and factual disagreement

over whether the Lamonts were liable for any debt to Advanta. This, however, is an issue

of fact that is improper to resolve on a motion to dismiss. Gorman was decided at the

summary judgment stage, and the court focused not on the allegations in the complaint, but

instead on the fact that plaintiff had presented “no evidence” of falsity or malice. 584 F.3d

at 1168. Here, the TAC alleges that Advanta provided false information, that Advanta knew

it was false, and that Advanta acted with malice or willful intent. Whether discovery

ultimately reveals facts indicating falsity and malice is a question for summary judgment.

CONCLUSION

Plaintiffs have stated a claim for violations of Section 1681s-2(b), but not of Section

1681s-2(a). Plaintiffs have pled sufficient facts to survive dismissal of their claims for

defamation and intentional infliction of emotional distress.

IT IS THEREFORE ORDERED that Defendant’s Motion to Dismiss (Dkt. # 22)

is DENIED.

DATED this 15th day of June, 2010.

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