Plaintiff’s Statutory and Common Law Claims Against Furnisher Preempted by 15 U.S.C. 1681(t)(b)(1)(F)

El-Aheidab v. Citibank (S.D.), N.A., 2012 U.S. Dist. LEXIS 19038 (N.D. Cal. Feb. 15, 2012)

Facts: Plaintiff filed suit against Citibank and alleged that Citibank erroneously reported that Plaintiff owed a past due balance on a student loan. Plaintiff claimed that he paid the loan on time every month but that he and his wife were denied a home loan due to Plaintiff’s credit report indicating that he was 270 months past due on his student loan. Plaintiff claimed that Citibank wrongfully reported the past due balance to the consumer reporting agencies ruining his credit and causing his name to be removed from his mortgage loan application. Plaintiff filed suit and alleged statutory violations of California Civil Code § 1785.25 and California Business and Professional Code § 17200. Plaintiff also alleged a common law claim for negligence. Citibank filed a motion to dismiss under Federal Rule 12(b)(6) for failure to state a claim upon which relief may be granted. Citibank argued that Plaintiff failed to state a claim for his statutory violations. Additionally, Citibank argued that all of Plaintiff’s claims were preempted by the Fair Credit Reporting Act (“FCRA”) § 1681s-2(a). The Court granted Citibank’s 12(b)(6) motion to dismiss with prejudice as to Plaintiff’s negligence claim, § 17200 claim, and any claim based on § 1785.25(b)-(g). However, the dismissal was without prejudice as to Plaintiff asserting other claims based solely on a § 1785.25(a) violation as such claim would not be preempted by the FCRA.

Preemption of State Statutory Claims. Section 1681t(b)(1)(F) provides that “[n]o requirement or prohibition may be imposed under the laws of any State –with respect to any subject matter regulated under 15 USCS § 1681s-2, relating to the responsibilities of persons who furnish information to consumer reporting agencies, except that this paragraph shall not apply to—with respect to section 54A(a) of chapter 93 of the Massachusetts Annotated Laws or with respect to section 1785.25(a) of the California Civil Code.” First, the Court considers whether Plaintiff’s § 17200 claim is preempted. The Court notes that every district court to consider the issue has determined that a § 17200 is preempted if it is based on violations of the FCRA. The Court in turn ruled that Plaintiff’s § 17200 claim is preempted as far it claimed violations based § 1681s-2 of the FCRA.

Preemption of State Statutory Claims. Next, the Court considered if Plaintiff’s § 17200 claim is based on violations of § 1785.25(a), which is expressly exempted from preemption under § 1681t(b)(1)(F) of the FCRA. The Court noted that such a claim does not impose additional duties on furnishers but rather acts as an additional “procedural vehicle for enforcing § 1785.25(a).” The 9th Circuit explained that the FCRA preemption provision distinguished between state statutes that created additional duties and those that allow for additional remedies. State statutes which merely allow plaintiffs additional remedies are not preempted while those statutes that create additional obligations or duties are preempted. Citibank argued that it was unclear whether Plaintiff was attempting to allege violations of § 1785.25(a) as a basis for his § 17200 claim or was attempting to allege violations of one of the other subsections of § 1785.25 because Plaintiff only refers to § 1785.25 and not a particular subsection of the statute. The Court notes that some of Plaintiff’s allegations are covered by the preemption provision while others seem like § 1785.25(a) claims. The Court ultimately dismissed Plaintiff’s claim under § 1785.25 with leave to amend should Plaintiff wish to directly allege a § 1785.25(a) claim.

Preemption of Common Law Claims.Additionally, the Court considered whether Plaintiff’s common law claim of negligence was preempted by § 1681t(b)(1)(F). The Court explained that there has been disagreement among the district courts as to whether § 1681t(b)(1)(F) preempted both common law and state statutory claims or exclusively state statutory claims. The Court noted that they must first accurately determine the meaning of “laws of any state”, as contained in the language of § 1681t(b)(1)(F) before making this determination. The Court went on to explain that the majority of district courts in the 9th Circuit have taken a total preemption approach, interpreting § 1681t(b)(1)(F) to preempt both state statutory and common law claims. Further, the Court pointed out that the only circuit court to rule on this matter had also found in favor of total preemption of state statutory and common law. Accordingly, the Court found that Plaintiff’s common law claim for negligence was preempted by § 1681t(b)(1)(F) and explained that “’the laws of any state’ literally encompasses common law.”