Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_07-cv-02467/USCOURTS-cand-3_07-cv-02467-0/pdf.json

Parties Involved:
Jeffrey Schreiber
Plaintiff
Suzanne Schreiber
Plaintiff
Robert Michael Siemons
Defendant

Document Text:

United States District Court

For the Northern District of California

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Docket No. 12.

United States District Court

For the Northern District of California

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SUZANNE SCHREIBER,

 Plaintiff,

 v.

ROBERT MICHAEL SIEMONS,

Defendant. /

No. C07-02467 MJJ

ORDER GRANTING DEFENDANT’S

MOTION TO DISMISS

INTRODUCTION

Before the Court is Defendant Robert Michael Siemons’ (“Defendant” or “Siemons”) Motion

to Dismiss For Lack of Subject Matter Jurisdiction.1

 Plaintiffs Suzanne Shreiber and Jeffrey

Schreiber (collectively, “Plaintiffs” or “Shreibers”) oppose the motion. For the following reasons,

the Court GRANTS Defendant’s Motion to Dismiss.

FACTUAL BACKGROUND

In this declaratory relief action, Plaintiffs – who are currently state court defendants in an

action brought by Defendant for violations of state law arising from the same underlying conduct at

issue here – seek an order finding that Defendant’s state law claims are preempted by the Fair Credit

Reporting Act, 15 U.S.C. § 1681, et seq. (“FCRA”). 

A. State Court Action

On August 25, 2004, Defendant filed a state court action against Plaintiffs, among others, 

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For the Northern District of California

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Siemons v. First U.S.A. Bank, N.A., et al., Alameda County Superior Court, Case No. VG04172155.

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California Civil Code § 1785.16.2 is entitled “Sale of consumer debt to debt collector; identity theft; subsidiaries

or affiliates; interstate commerce requirement,” and provides that:

(a) No creditor may sell a consumer debt to a debt collector, as defined in 15 U.S.C.

Sec. 1692a, if the consumer is a victim of identity theft, as defined in Section 1798.2,

and with respect to that debt, the creditor has received notice pursuant to subdivision (k)

of Section 1785.16.

(b) Subdivision (a) does not apply to a creditor's sale of a debt to a subsidiary or affiliate

of the creditor, if, with respect to that debt, the subsidiary or affiliate does not take any

action to collect the debt.

(c) For the purposes of this section, the requirement in 15 U.S.C. Sec. 1692a, that a

person must use an instrumentality of interstate commerce or the mails in the collection

of any debt to be considered a debt collector, does not apply.

Cal. Civ. Code § 1785.16.2

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and alleged that Plaintiffs intentional transmitted false debt-related credit information about

Defendant to various credit reporting agencies (“state court action”). (Cain Decl. Ex. A at ¶¶ 13-

18.)2

 In the state court action, Defendant alleged that Plaintiffs continued to knowingly provide the

false credit information, refused to withdraw or correct the credit information, ignored Defendant’s

notice indicating that he was a victim of identity theft, and improperly sold the debt to a thirdparties. (Id. at ¶ 19-22.) Defendant asserted causes of action under California law for defamation,

intentional infliction of emotional distress, and violations of California Civil Code § 1785.16.2(c)3

,

and seeks actual and punitive damages (“state law claims”). (Id. at ¶¶ 20-25.) Defendant has

asserted no federal claims in the state court action.

On March 1, 2007, an arbitrator granted a non-binding judgment in favor of Defendant

awarding Defendant $100,000 in damages and reasonable attorneys’ fees. (Id., Ex. F.) The

arbitrator found that a preponderance of the evidence indicated that Plaintiffs had acted in concert

with the intent to defraud Defendant. (Id.) After Plaintiffs requested a trial de novo, the state court

scheduled a jury trial for November 2, 2007. (Id., Ex. D.) 

B. The Current Action

On May 8, 2007 and June 19, 2007, Plaintiffs filed the original Complaint and First

Amended Complaint (“FAC”) in the current action, respectively (“current action”). Plaintiffs assert

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diversity jurisdiction is appropriate because the parties are diverse and the action involves the

requisite amount in controversy. (FAC ¶ 2.) Plaintiffs seek a declaratory judgment in their favor

finding that they are not legally responsible for any alleged harm caused to Defendant. (Id., ¶ 34.) 

Plaintiffs base their current declaratory relief claim on the same nucleus of operative facts that form

the basis of Defendant’s state law claims. (Id. ¶¶ 22 -32.I.) In their FAC, in this action, Plaintiffs

contend that Defendant lacks standing to assert any state or federal claims against Plaintiffs, and that

any state law claim that Defendant may seek to assert is preempted by the FCRA. (Id. ¶¶ 32.A.-K.) 

Defendant now seeks an Order dismissing the current declaratory relief action for lack of

subject matter jurisdiction.

LEGAL STANDARD

The Declaratory Judgment Act, 28 U.S.C. § 2201, et seq., embraces both constitutional and 

prudential concerns. Gov’t Employees Ins. Co. v. Dizol, 133 F.3d 1220, 1222 (9th Cir. 1998). A

lawsuit seeking federal declaratory relief must first present an actual case or controversy within the

meaning of Article III, section 2 of the United States Constitution. Aetna Life Ins. Co. of Hartford v.

Haworth, 300 U.S. 227, 239-40 (1937). It must also fulfill statutory jurisdictional prerequisites.

Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 672 (1950). If the suit passes constitutional

and statutory muster, the district court must also be satisfied that entertaining the action is

appropriate. Dizol, 133 F.3d at 1223. This determination is discretionary, because the Declaratory

Judgment Act is “deliberately cast in terms of permissive, rather than mandatory, authority.” Id.

(citing Public Serv. Comm'n of Utah v. Wycoff Co., 344 U.S. 237, 250 (1952) (J. Reed, concurring)). 

The Declaratory Judgment Act “gave the federal courts competence to make a declaration of rights;

it did not impose a duty to do so.” Public Affairs Associates v. Rickover, 369 U.S. 111, 112 (1962).

In deciding whether jurisdiction is appropriate, the district court “must balance concerns of

judicial administration, comity, and fairness to the litigants.” Chamberlain v. Allstate Ins. Co., 931

F.2d 1361, 1367 (9th Cir. 1991). In doing so the district court should consider the following factors:

(1) avoiding needless determination of state law issues; (2) discouraging litigants from filing

declaratory actions as a means of forum shopping; and (3) avoiding duplicative litigation. Dizol,

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Other factors considered include whether the declaratory action: 1) will settle all aspects of the controversy; 2) will

serve a useful purpose in clarifying the legal relations at issue; 3) is being brought for purposes of “procedural fencing” or

to obtain a res judicata advantage; and 4) will result in entanglement between the federal and state court systems. Dizol, 133

F.3d at 1225 n. 5.

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At the outset the Court dismisses Defendant’s argument that Plaintiffs failed to timely remove the current action.

As best the Court can discern from the current record, Plaintiffs do not have a basis to remove the state court action. First,

there is no diversity jurisdiction because the state court action lacks complete diversity. (Cain Decl., Ex. A at ¶¶ 1-5.)

Second, there is no federal question jurisdiction because the state court action does not assert any claims arising under federal

law or the United States Constitution. Third, there is no removal jurisdiction because federal preemption, as a defense, does

not create removal jurisdiction. Franchise Tax Board v. Constr. Laborers Vacation Trust, 463 US 1, 12 (1983) (quoting

Gully v. First Nat'l Bank in Meridian, 299 US 109, 116 (1936)). While “complete preemption” would operate to confer

original federal subject matter jurisdiction notwithstanding the absence of a federal cause of action on the face of the state

court complaint, here the parties concede that the FCRA does not “completely preempt” state law. In re U.S. Healthcare,

Inc., 193 F3d 151, 160 (3rd Cir. 1999). 

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133 F.3d at 1225 (citations omitted)4. If there are parallel state proceedings involving the same

issues and parties pending at the time the federal declaratory action is filed, there is a presumption

that the entire suit should be heard in state court. Id.; Chamberlain, 931 F.2d at 1366-67. The

pendency of a state court action does not, of itself, require a district court to refuse federal

declaratory relief, however district courts should generally decline to entertain reactive declaratory

actions. Id. (citing Chamberlain, 931 F.2d at 1367.) “Ordinarily it would be uneconomical as well

as vexatious for a federal court to proceed in a declaratory judgment suit where another suit is

pending in a state court presenting the same issues, not governed by federal law, between the same

parties.” Id. at 1231. Gratuitous interference with the orderly and comprehensive disposition of a

state court litigation should be avoided.” Id.

ANALYSIS

Defendant argues that this Court does not have subject matter jurisdiction over the current

action because it is an impermissible collateral attack on Defendant’s state law claims long-pending

in the state court action. According to Defendant, unless his pending state law claims are

“completely preempted” by the FCRA, his well-pleaded state law claims must prevail. Sprague v.

Bulletin Co., 527 F. Supp. 1016 (E.D. Pa. 1981). Defendant also contends that the current action is

an untimely “end-run” attempt by Plaintiff to improperly remove the state court action after

litigating in state court for over two years.5

 In opposition, Plaintiffs argue that this Court has

subject matter jurisdiction over the current action under 28 U.S.C. § 1332 because the parties are

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Plaintiffs allege that Plaintiff Suzanne Schreiber resides in Massachusetts, that Plaintiff Jeffrey Schreiber resides

in Indiana, and that Defendant resides in California. (FAC ¶¶ 5-7.)

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As evidence that the current controversy exceeds $75,000, Plaintiffs point to the $100,000 non-binding arbitration

award in favor of Defendant. (Cain Decl. Ex. F.)

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Plaintiffs contend that the FCRA preempts each of Defendant’s state law claims now pending in the state court

action. According to Plaintiffs, the FCRA preempts claims relating to the intentional furnishing of false credit information,

and the sale and collection of identity theft accounts. 

Section 1681t of the FRCA governs its preemptive scope. 16 U.S.C. § 1681t. This section provides, in pertinent

part, that “[n]o requirement or prohibition may be imposed under the laws of any State-(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 ....” 15 U.S.C. § 1681t(b). Section 1681s-2 prohibits furnishing information known to be false,

or where there is reasonable cause to believe it is false, about a consumer to a consumer reporting agency. 15 U.S.C. § 1681.

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completely diverse6 and because the amount in controversy exceeds the requisite jurisdiction

amount7

. Plaintiffs concede that the FCRA does not “completely preempt” state law, however

Plaintiffs contend that the FCRA does preempt all of Defendant’s state law claims now pending in

the state court action, and therefore Plaintiffs can have no liability under state or federal law. On

that basis, Plaintiffs explain that the current action – seeking declaratory relief under the FCRA only

– is proper. 

Here, the Court finds that prudential concerns predominate the analysis. In exercising its

discretion, the Court finds that an exercise of subject matter jurisdiction is not appropriate on the

current record. If the Court were to exercise subject matter jurisdiction over the current declaratory

relief action it would likely necessitate factual and legal findings that would unreasonably overlap

and entangle with the issues long-pending in the state court action. Such an exercise of subject

matter jurisdiction would be improper because it would encourage the filing of declaratory actions as

a means of forum shopping. Dizol, 133 F.3d at 1225 (citations omitted). Moreover, the Court notes

that because the state court action was ongoing at the time Plaintiffs filed the current action and

because the actions are parallel – to the extent they involve the same alleged conduct and parties –

there exists a presumption that the entire suit should be heard in state court. Id. at 1225;

Chamberlain, 931 F.2d at 1366-67. Recognizing that “procedural fencing” and gratuitous

interference with the orderly and comprehensive disposition of a state court litigation should be

avoided, the Court finds that the exercise of subject matter jurisdiction over the current action would

be inappropriate. Dizol, 133 F.3d at 1231. Plaintiffs have adduced no basis to conclude otherwise.8

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Based on this statutory language, a district court in California has found that “[o]n its face, the FCRA precludes all state

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

information.” Roybal v. Equifax, 405 F. Supp. 2d 1177, 1181 (E.D. Cal. 2005) (finding plaintiff’s state law claims, including

one under the Rosenthal Act, based on an alleged injury arising purely from the reporting of credit information were

preempted). Although the Ninth Circuit has not yet ruled on this issue, “the majority of district courts in the Ninth Circuit

have held that the FCRA preempts state statutory and common law causes of action which fall within the conduct proscribed

under § 1681s-2(a).” Pacheco v. Citibank (South Dakota), N.A., 2007 WL 1241934 at *2 (N.D. Cal. 2007) (citing Trout v.

BMW of North America, 2007 WL 602230, *2 (D. Nev. 2007); Cisneros v. Trans Union, LLC, 293 F. Supp. 2d 1167, 1175

(D. Hawai'i 2003); Roybal, 405 F. Supp. 2d at 1179-80; see also Davis v. Maryland Bank, N.A., 2002 WL 32713429 at *12

(N.D. Cal. 2002) (citing Aklagi v. Nationscredit Financial Serv. Corp., 196 F. Supp. 2d 1186, 1194-95 (D. Kan. 2002)

(finding defamation claim preempted under section 1681t(b)(1)(F)); Hasvold v. First U.S.A. Bank, 194 F. Supp.2d 1128, 1239

(D. Wyo. 2002) (finding FCRA preempts state common law claims for defamation, invasion of privacy, and interference with

prospective advantage); Jaramillo v. Experian Info. Solutions, Inc., 155 F. Supp. 2d 356, 362 (E.D. Pa. 2001) (Section

1681t(b)(1)(F) preempts Pennsylvania’s Consumer Protection law); Carney v. Experian Info. Solutions, Inc., 57 F. Supp. 2d

496, 503 (W.D. Tenn.1999) (finding that section 1681t(b)(1)(F) preempts Tennessee’s consumer protection act); National

Home Equity Mortgage Ass'n v. Face, 64 F. Supp. 2d 584, 592 (E.D. Va. 1999); but see Dornhecker v. Ameritech Corp., 99

F. Supp. 2d 918, 931 (N.D. Ill. 2000) (finding that claims for negligence, defamation, and invasion of privacy “may not fairly

be characterized as imposing any requirement or prohibition on persons who furnish credit” as that term is used in section

1681t(b)(1)(F))).

However, because the Court has determined that subject matter jurisdiction is inappropriate on the current record,

it need not reach the issue of whether the preemptive scope of the FRCA will serve as a defense to Defendant’s state law

claims now pending in the state court action. To the extent the FCRA provides a federal preemption defense to the pending

state law claims, Plaintiffs are free to properly assert that defense in state court. 

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CONCLUSION

For the foregoing reasons, the Court GRANTS Defendant’s Motion to Dismiss.

IT IS SO ORDERED.

Dated: August___, 2007 

MARTIN J. JENKINS

UNITED STATES DISTRICT JUDGE

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