Baker v. Gen. Elec. Capital, Corp.

819 F.Supp.2d 1332

Brenda BAKER, Plaintiff,

v.GENERAL ELECTRIC CAPITAL, CORP., d/b/a GEMB a/k/a GE Consumer Finance, Defendant.

No. 3:10–CV–62 (CAR).

United States District Court, M.D. Georgia, Athens Division.

May 6, 2011.

James W. Hurt, Jr., Winburn, Lewis & Stolz, LLP, Athens, GA, Thomas J. Lyons, Sr., Trista M. Roy, Vadnais Heights, MN, for Plaintiff.

Daniel J. O'Rielly, San Francisco, CA, Kathleen Louise Ford, Chicago, IL, Marcus G. Keegan, Keegan Law Firm, LLC, Atlanta, GA, for Defendant.

ORDER ON DEFENDANT'S MOTION TO DISMISS COUNT II

C. ASHLEY ROYAL, District Judge.

This matter comes before the Court on Defendant General Electric Capital Corp.'s (“GEMB”) Motion to Dismiss Count II of Plaintiff's Complaint. [Doc. 5]. In its motion, Defendant contends that Count II of the Complaint, which is based on state tort law, is preempted by a provision of the Fair Credit Reporting Act (“FCRA”). Having considered the matter, the Court finds that provision of the FCRA does not preempt Count II of the Complaint; thus, Defendant's Motion [Doc. 5] is DENIED.

I. BACKGROUND

Plaintiff Brenda Baker's (“Baker”) well-pleaded allegations are as follows. In 2005, Baker's husband opened a Lowe's account, financed by GEMB, with an account number ending in 6055 (“6055 account”). At some point prior to August 2009, Baker was listed as an authorized user on the 6055 account. On August 8, 2009, Baker's husband filed for Chapter 7 bankruptcy. He discharged the 6055 account through bankruptcy on December 2, 2009.

In September 2009, Baker attempted to refinance her home loan, but was told that the GEMB tradeline had adversely affected her credit score. As a result, she was unable to obtain the lowest possible interest rate. Shortly thereafter, GEMB began attempting to collect the overdue balance on the 6055 account from Baker and sent its dunning letter in her name.

After receiving the dunning letter, Baker contacted GEMB and attempted to explain that GEMB was trying to collect on the 6055 account from the incorrect account holder. She explained that her husband was the proper account holder, and that he had discharged the account through bankruptcy. She also requested any documentation proving that she bore any responsibility for paying the balance of the 6055 account.

In a letter to Baker, GEMB admitted that it was no longer in possession of the original application for the 6055 account. But in a later letter dated October 8, 2009, GEMB claimed that the 6055 account was an individual account in the name of Brenda Baker. Then, in a letter dated October 9, 2009, GEMB confirmed that it had made the necessary changes to Baker's account and reported the changes to the major credit reporting agencies. On November 3, 2009, GEMB sent two separate letters to Baker: one alleging that she was still behind on payments on the 6055 account and another requesting bankruptcy information. Although Baker responded with her husband's bankruptcy information, including a letter from his bankruptcy attorney, GEMB began to report past due amounts on the 6055 account to Baker's credit report.

Some time after these events, GEMB placed the 6055 account with Genpact Services, LLC (“Genpact”), a collection agency. On March 1, 2010, Genpact sent its first dunning letter to Baker. On March 17, 2010, Professional Bureau of Collections of Maryland, Inc. (“PBCM”), another collection agency, also sent Baker a dunning letter. After receiving the letters, Baker disputed the debt directly to PBCM.

On April 21, 2010, Baker wrote to Trans Union, Experian, and Equifax credit bureaus to dispute the inaccurate information reported by GEMB, Genpact, and PBCM. She provided copies of the correspondence to GEMB.

On May 18, 2010, Baker received a letter from Home Depot Credit Services stating that her credit account had been closed due to derogatory information in her Equifax credit report.

On May 21, 2010, Lead Edge Recovery Solutions (“LERS”), another collection agency, sent Baker a dunning letter on the 6055 account. In response, Baker sent a dispute letter to LERS.

Between May 14 and May 28, Baker received responses from all three credit bureaus. The “Results of Reinvestigation” sent by each bureau showed that GEMB had failed to perform a reasonable investigation into Baker's dispute and had inaccurately verified that the 6055 account belonged to Baker, was charged off, and was reporting extremely delinquent.

On August 24, 2010, Baker filed her complaint against GEMB. Count I of the complaint alleges that GEMB violated various sections of the FCRA, 15 U.S.C. §§ 1681 et seq. Count II alleges that GEMB committed credit defamation.

II. LEGAL STANDARD

On motion to dismiss, the Court must accept as true all well-pled facts in a plaintiff's complaint. Sinaltrainal v. Coca–Cola Co., 578 F.3d 1252, 1260 (11th Cir.2009). The complaint may be dismissed if the facts as pled do not state a claim for relief that is plausible on its face. Id.

III. DISCUSSION

GEMB's sole contention in its motion is that Count II must be dismissed because section 1681t(b)(1)(F) of the FCRA preempts all state law causes of action against furnishers of credit information.

The FCRA contains two preemption provisions. Prior to 1996, preemption of state law claims by the FCRA was governed only by section 1681h(e). Section 1681h(e) provides:

Except as provided in sections 1681n and 1681 o 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 enacted the Consumer Credit Reporting Reform Act of 1996, which introduced another preemption provision to the FCRA. Relevant to this case, section 1681t(b)(1)(F) provides:

No 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, except that this paragraph shall not apply [to specified provisions of the Massachusetts Annotated Laws or the California Civil Code].

15 U.S.C. § 1681t(b)(1)(F).

District courts' attempts to apply these two provisions to state law tort claims against entities that furnish information to consumer reporting agencies have spawned a variety of approaches. See generally Tracy Bateman Farrell, Annotation, Preemption of State Law by Fair Credit Reporting Act, 8 A.L.R. Fed.2d 233 (2006 & cum. supp.2010). In the district courts, three main approaches have developed. The “total preemption” approach holds that section 1681t(b)(1)(F) preempts all state law claims against furnishers of information to credit reporting agencies. See, e.g., Carruthers v. Am. Honda Fin. Corp., 717 F.Supp.2d 1251 (N.D.Fla.2010) (adopting “total preemption” approach). The “temporal” approach holds that state law claims against a furnisher of information that arise after the furnisher receives notice of a dispute are categorically barred by section 1681t(b)(1)(F), but preemption of state law claims arising before the furnisher receives notice of a dispute are governed by section 1681h(e). See, e.g., Woltersdorf v. Pentagon Fed. Credit Union, 320 F.Supp.2d 1222 (N.D.Ala.2004) (adopting “temporal” approach). The “statutory” approach holds that section 1681t(b)(1)(F) applies to state statutory law claims, while section 1681h(e) applies to state common-law claims. See, e.g., Johnson v. Citimortgage, Inc., 351 F.Supp.2d 1368 (N.D.Ga.2004) (adopting “statutory” approach). Given the lack of consensus on the matter, the Court will address the question anew and reference the three approaches and the decisions applying them as necessary.

Because Defendant argues that Count II is preempted by section 1681t(b)(1)(F), the Court begins its analysis with the plain language of that provision. It preempts any “requirement or prohibition ... imposed under the laws of any State with respect to any subject matter regulated under ... section 1681s–2.” 15 U.S.C. § 1681t(b)(1)(F). The first question in this case is whether a state common-law tort action is a “requirement or prohibition ... imposed under the laws of any State.”

Defendant suggests that the Supreme Court's decision in Cipollone v. Liggett Group, Inc., 505 U.S. 504, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992), provides a definitive answer to that question. In that case, the Supreme Court addressed whether several state common-law tort causes of action were preempted by the Public Health Cigarette Smoking Act of 1969, which provided: “No requirement or prohibition based on smoking and health shall be imposed under State law with respect to the advertising or promotion of any cigarettes the packages of which are labeled in conformity with the provisions of this Act.” Id. at 515, 112 S.Ct. 2608 (internal quotation marks omitted). Although disagreeing on the application of the provision to the specific claims in question, a majority of the Court concluded that common-law actions fell within the ambit of the statute. Dealing first with the phrase “[n]o requirement or prohibition,” the plurality concluded that the phrase “sweeps broadly and suggests no distinction between positive enactments and common law.” Id. at 521, 112 S.Ct. 2608 (plurality opinion). Turning to the phrase “imposed under State law,” the plurality noted that its decisions regularly construed references to state law ...