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Paul W. Dietz and Marian L. Dietz v. Chase Home Finance

April 2, 2012


Appeal from the Order Entered March 17, 2011 In the Court of Common Pleas of Lehigh County Civil Division at No(s): 2010-C-3532

The opinion of the court was delivered by: Ott, J.


Paul W. Dietz and Marian L. Dietz, husband and wife ("the Dietzes"), appeal the Lehigh County Court of Common Pleas' order, entered on March 17, 2011,*fn2 granting Chase Home Finance, LLC's ("Chase") motion for judgment on the pleadings and dismissing the Dietzes' complaint with prejudice. On appeal, the Dietzes allege the trial court erred in finding their causes of action for negligence and defamation were preempted by Section 1681t(b) of the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. § 1681t(b). Based on the following, we affirm.

On September 16, 2009, the Dietzes received a foreclosure notice from Chase for failure to make monthly mortgage payments between May 29, 2009 and September 15, 2009. Chase also notified the Dietzes' major credit reporting agencies about the delinquency. This action led to credit reports that allegedly led the Dietzes' creditors to decrease the couple's credit limits and increase their finance charges. The Dietzes, however, were not delinquent on their mortgage payments, and on September 29, 2009, Chase sent a second letter to the couple, acknowledging it had, in fact, received the timely made mortgage payments. In the same letter, Chase also indicated it had sent an electronic notification to the major credit bureaus, notifying them of this error and requesting to update the Dietzes' credit profiles.

On July 19, 2010, the Dietzes filed a complaint against Chase, alleging common law negligence and defamation. On September 14, 2010, Chase filed an answer and new matter, asserting the Dietzes' claims were barred and preempted by the FCRA under 15 U.S.C. §§ 1681t and 1681h(e).

Chase also filed a motion for judgment on the pleadings on October 12, 2010, solely asserting its Section 1681h(e) preemption claim. The trial court entered an order on March 17, 2011, granting that motion and dismissing the case with prejudice. Specifically, the court stated:

While [Chase] argued that § 1681h(e) of the Fair [Credit]

Reporting Act requires the dismissal of [the Dietzes'] negligence and defamation causes of action, the Court does not agree.

Instead, the Court is persuaded by, and agrees with, the Massachusetts District Court in Islam v. Option One Mortgage, which found that causes of action like [the Dietzes'] are preempted by § 1681t(b) of the Fair [Credit] Reporting Act. See id. 432 F.Supp[.] 2d 181, 194 (D. Mass[.] 2006).

Order, 3/17/2011, at 1 n. 1. This appeal followed.

In their sole argument, the Dietzes claim the court erred in granting Chase's motion for judgment on the pleadings. Citing Sites v. Nationstar Mortg. LLC, 646 F. Supp. 2d 699, 706 (M.D. Pa. 2009), and Islam v. Option One Mortg. Corp., 432 F. Supp. 2d 181 (D. Mass. 2006), they state Section 1681h does not apply because Chase is "neither a credit reporting agency, nor a user of a consumer report that denied, revoked, or refused credit with respect to [them]" as required by the statute. The Dietzes' Brief at 3. Moreover, they allege the court erred in finding their suit was barred pursuant to Section 1681t(b) because they assert that a majority of federal district courts have adopted the "statutory approach" regarding preemption, which they argue obstructs only state statutory causes of action and not common law causes of action, like their present claims for negligence and defamation. Id. at 4-5.

We begin with our well-settled standard of review:

The standard of review of a grant of a motion for judgment on the pleadings is limited. A motion for judgment on the pleadings will be granted where, on the facts averred, the law says with certainty that no recovery is possible. Since this matter presents a legal question, the scope of review is plenary.

In re Weidner, 938 A.2d 354 (Pa. 2007).

Federal preemption is a jurisdictional matter for a state court because it challenges subject matter jurisdiction and the competence of the court to reach the merits of the claims raised. The principle of federal preemption of state law derives from the second clause of Article VI of the United States Constitution's Supremacy Clause, which provides that the laws of the United States "shall be the supreme Law of the Land; . . . any Thing in the Constitution or Laws of any State to the Contrary notwithstanding." U.S. Const. art. VI, cl. 2. Thus, laws that are in conflict with federal law are without effect.

Congress has the undisputed power to preempt state law in areas of federal concern. In determining the breadth of a federal statute's preemptive effect on state law, courts are guided by the tenet that the purpose of Congress is the ultimate touchstone in every pre-emption case. However, because the States are independent sovereigns in our federal system, we have long presumed that Congress does not cavalierly preempt state-law causes of action. From this premise, the Supreme Court has relied upon an assumption that the historic police powers of the States were not to be superseded by [a] Federal Act unless that was the clear and manifest purpose of Congress.

Kiak v. Crown Equip. Corp., 989 A.2d 385, 390 (Pa. Super. 2010) (some citations and quotation marks omitted).*fn3

In 1968, the United States Congress enacted the FCRA.

The purpose of the FCRA is to "require that consumer reporting agencies adopt reasonable procedures for meeting the needs of commerce for consumer credit" and other information "in a manner which is fair and equitable to the consumer." 15 U.S.C. § 1681(b). Prompted by congressional concern over abuses in the credit reporting industry, the FCRA safeguards the "confidentiality, accuracy, relevancy and proper utilization" of consumer credit information. See id.

Leet v. Cellco P'ship, 480 F. Supp. 2d 422, 428 (D. Mass. 2007).

"When first enacted in 1968, the FCRA only had one section dealing with preemption of state law claims, 15 U.S.C. § 1681h(e)[.]" Manno v. Am. Gen. Fin. Co., 439 F. Supp. 2d 418, 423 (E.D. Pa. 2006). Section 1681h(e) provides, in part:

[N]o 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 609, 610, or 615 [15 USCS ยง 1681g, 1681h, or 1681m], 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, ...

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