Lochner v. Merrick Bank et al
MEMORANDUM OPINION & ORDER: It is hereby ORDERED that Defendant's 46 MOTION for Judgment on the Pleadings are GRANTED. Plaintiff's negligence and defamation claims against Guardian Finance Company are DISMISSED WITH PREJUDICE. Signed by Judge Gregory F. VanTatenhove on 9/8/2020.(JJ)cc: COR
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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
GUARDIAN FINANCE COMPANY, et al.,
GUARDIAN FINANCE COMPANY, et al.,
Civil No.: 3:19-cv-00036-GFVT
Civil No.: 3:19-cv-00038-GFVT
These two substantially similar and related cases were both filed in this Court on May 22,
2019. [See, e.g., R. 1, 3:19-cv-00036-GFVT.]1 Plaintiffs Myra and Kenneth Lochner discovered
that their delinquency with Defendant Guardian Finance Company (Guardian) was disclosed by
credit reporting agencies. In their Complaint, Plaintiffs assert that Guardian and the credit
reporters failed to investigate and correct the allegedly false credit reports, notwithstanding their
As the filings in each case are substantially similar, for present purposes, any citation to the record that
does not indicate otherwise will refer to filings in Lochner v. Merrick Bank, et al., Civ. No. 3:19-cv00036-GFVT.
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notice to them that such reports were mistaken. Plaintiffs initiated this suit to recover against the
defendants for their alleged violations of the Fair Credit Reporting Act (FCRA), 15 U.S.C. §
1681, as well as the two-state law tort claims of defamation and negligence. Defendant Guardian
has moved to dismiss both state law claims, and for the following reasons, the Court GRANTS
the Defendant’s motions.
In or around December 2018, while in the process of obtaining mortgage financing,
Plaintiffs accessed their Equifax and Experian reports and discovered a paste-due Guardian
account. [R. 1 at ¶ 37.] Plaintiffs claim that they disputed the alleged past due account to
Equifax and Experian in writing. Id. at ¶ 38. Plaintiffs believe that Equifax and Experian
notified Guardian of the dispute within five days of receiving notice from Plaintiff. Id.
In January 2019, Plaintiffs allege that Guardian, Equifax, and Experian all failed to
investigate the tradeline and failed to note it as “in dispute.” Id. at ¶ 39. Due to Defendants’
failure, Plaintiffs claim that their credit history was damaged. Id. at ¶ 40. Plaintiffs have been
denied credit and/or have been forced to pay a high rates of interest. Id. Plaintiffs allege that
these actions have caused them “embarrassment, humiliation, and emotional distress.” Id. Based
upon these allegations, Plaintiffs assert four causes of action against Guardian: (1) negligence;
(2) defamation; (3) negligent violation of the Fair Credit Reporting Act (FCRA) § 1681s-2b; and
willful violation of the FCRA § 1681s-2b. Defendant Guardian has now filed a Motion for
Judgment on the Pleadings as to Plaintiffs’ state-law claims for negligence and defamation. [R.
40.] Plaintiffs have failed to file a response, and the time to do so has now expired.
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Guardian seeks a judgment on the pleadings pursuant to Federal Rule of Civil Procedure
12(c), which provides that “[a]fter the pleadings are closed – but early enough not to delay trial –
a party may move for judgment on the pleadings.” Fed. R. Civ. P. 12(c). “The standard of
review for a Rule 12(c) motion is the same as for a motion under Rule 12(b)(6) for failure to
state a claim upon which relief can be granted.” Fritz v. Charter Tp. of Comstock, 592 F. 3d 718,
722 (6th Cir. 2010) (citing Zeigler v. IBP Hog Market, Inc., 249 F.3d 509, 511-12 (6th Cir.
2001)). “For purposes of a motion for judgment on the pleadings, all well-pleaded material
allegations of the pleadings of the opposing party must be taken as true, and the motion may be
granted only if the moving party is nevertheless clearly entitled to judgment.” JP Morgan Chase
Bank, N.A. v. Winget, 510 F.3d 577, 581 (6th Cir. 2007) (internal citations omitted).
Well-pleaded complaints contain a “short and plain statement of the claim showing that
the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). “[D]etailed factual allegations” are
unnecessary but the rule “‘demands more than an unadorned, the-defendant-unlawfully-harmedme accusation.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 555 (2007)). As is the case with a motion to dismiss under Rule
12(b)(6), in a Rule 12(c) motion for judgment on the pleadings, the Court is required to “accept
all the Plaintiffs' factual allegations as true and construe the complaint in the light most favorable
to the Plaintiffs.” Hill v. Blue Cross & Blue Shield of Mich., 409 F.3d 710, 716 (6th Cir. 2005)
(citing Marks v. Newcourt Credit Group, Inc., 342 F.3d 444, 451 (6th Cir. 2003)).
Guardian argues that the two state law claims for negligence and defamation are
preempted by FCRA 15 U.S.C. § 1681t(b). [R. 44-1 at 1.] The Court agrees. The FCRA has two
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preemption provisions: 15 U.S.C. §§ 1681t(b)(1)(F) and 1681h(e), for common law claims—
here, defamation and negligence—that arise from the statute’s subject matter. However, the
preemptions conflict inasmuch as “§ 1681h(e) permits state tort claims, but requires a higher
standard of proof for those in the nature of defamation, slander, or invasion of privacy, while §
1681t(b)(1)(F) prohibits all state claims covered by § 1681s-2.” Stafford v. Cross Country Bank,
262 F. Supp. 2d 776, 785 (W.D. Ky. 2003). The Sixth Circuit has yet to provide direction on
how to best reconcile these contrary provisions, see Eddins v. Cenlar FSB, 964 F. Supp. 2d 843,
850–51 (W.D. Ky. 2013) (“[p]erhaps at this point some judges with a higher pay grade should
resolve the issue”), and multiple approaches have been adopted in other district courts. See id.
While these two provisions might seem contradictory on the face of the statute, Judge
Easterbook of the Seventh Circuit Court of Appeals has clarified how the two provisions operate
[W]e do not perceive any inconsistency between the two statutes. Section 1681h(e)
preempts some state claims that could arise out of reports to credit agencies; §
1681t(b)(1)(F) preempts more of these claims. Section 1681h(e) does not create a
right to recover for willfully false reports; it just says that a particular paragraph
does not preempt claims of that stripe. Section 1681h(e) was enacted in 1970.
Twenty-six years later, in 1996, Congress added § 1681t(b)(1)(F) to the United
States Code. The same legislation also added § 1681s-2. The extra federal remedy
in § 1681s-2 was accompanied by extra preemption in § 1681t(b)(1)(F), in order to
implement the new plan under which reporting to credit agencies would be
supervised by state and federal administrative agencies rather than judges. Reading
the earlier statute, § 1681h(e), to defeat the later-enacted system in § 1681s-2 and
§ 1681t(b)(1)(F), would contradict fundamental norms of statutory interpretation.
Our point is not that § 1681t(b)(1)(F) repeals § 1681h(e) by implication. It is that
the statutes are compatible: the first-enacted statute preempts some state regulation
of reports to credit agencies, and the second-enacted statute preempts more. There
is no more conflict between these laws than there would be between a 1970 statute
setting a speed limit of 60 for all roads in national parks and a 1996 statute setting
a speed limit of 55. It is easy to comply with both: don't drive more than 55 miles
per hour. Just as the later statute lowers the speed limit without repealing the first
(which means that, if the second statute should be repealed, the speed limit would
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rise to 60 rather than vanishing), so § 1681t(b)(1)(F) reduces the scope of state
regulation without repealing any other law. This understanding does not vitiate the
final words of § 1681h(e), because there are exceptions to § 1681t(b)(1)(F). When
it drops out, § 1681h(e) remains. But, even if our understanding creates some
surplusage, courts must do what is essential if the more recent enactment is to
operate as designed.
Purcell v. Bank of America, 659 F.3d 622, 625 (7th Cir. 2011). At least one district court in this
Circuit that has considered this issue has reached a similar conclusion. See Stafford, 262 F.Supp.
at 785–86. Therefore, the Court must first consider whether the Lochners’ claims are preempted
by § 1698t(b)(1)(F), with the secondary provision of § 1681(h)(e) only factoring in the decision
if the former does not apply.
Section 1698t(b)(1)(F) states, “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.” § 1698t(b)(1)(F). According to the Complaint, Plaintiffs’ negligence claim
is based on “Guardian’s failure to investigate Plaintiff’s dispute and its false reporting to Equifax
and Experian . . ..” [R. 1 at ¶ 59.] The defamation claim seems to be based on Guardian’s
alleged false reporting. Id. at ¶ 85. In their words, “Guardian’s publication of false statements
regarding Plaintiff’s creditworthiness and the alleged past due Guardian account amounts to
defamation and defamation per se of the Plaintiff…” Id. at ¶ 86. Therefore, it is clear from the
Complaint that Mr. and Ms. Lochner’s state law claims for negligence and defamation are based
on the allegedly inaccurate reporting of the furnisher, Guardian, which is the exact type of
conduct regulated under § 1681s-2. As a result, both of Plaintiffs’ claims are preempted by §
1698t(b)(1)(F), making dismissal appropriate.
Even if not preempted, it is likely that Plaintiffs’ state law claims would still meet the
same fate. To recover for negligence in Kentucky, a plaintiff must show that the defendant owed
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the plaintiff a duty; that the defendant breached that duty; and that the breach caused an injury to
the plaintiff. Illinois Cent. R.R. v. Vincent, 412 S.W.2d 874, 875–76 (Ky. 1967). Whether a
defendant had a duty to the plaintiff is a question of law for the court, and without a duty there is
no negligence. Pathways, Inc. v. Hammons, 113 S.W.3d 85, 89 (Ky. 2003). Kentucky courts
have suggested that, “the failure to perform a contractual obligation typically does not give rise
to a cause of action in tort,” unless the plaintiff can show that the defendant had an independent
legal duty to act. Mims v. Western-Southern Agency, Inc., 226 S.W.3d 833, 836 (Ky. Ct. App.
2007) (citing Jones v. Hartford Life and Accident Ins. Co., 443 F.Supp.2d 3, 5 (D.D.C. 2006)).
As the relationship between Guardian and Plaintiffs were contractual, the sustainability of
Plaintiffs’ negligence claim against Guardian turns on whether a lender owes an independent
duty of care to its borrower. Jones, 443 F.Supp.2d at 5. Kentucky law is clear that “except in
special circumstances, a bank does not have a fiduciary relationship with its borrowers.” Layne
v. Bank One Kentucky, N.A, 395 F.3d 271, 281 (6th Cir. 2005) (citing Sallee v. Fort Knox Nat’l
Bank, N.A., 286 F.3d 878, 893 (6th Cir. 2002)). Plaintiffs’ Complaint simply fails to identify any
special circumstances that exist here. Moreover, to the extent that § 1681s-2b of the FCRA lays
out the “[d]uties of furnishers of information upon notice of dispute,” it is not clear to the Court
that Guardian ever breached those duties which were triggered by Plaintiffs’ initiation of the
dispute; the Court need not “accept as true [Plaintiffs’] legal conclusion” that Guardian failed to
investigate their dispute or received notice from the credit reporters. Twombly, 550 U.S. at 556.
Without an independent duty, or factual allegations evidencing breach of Guardian’s statutory
duties, Plaintiffs would be unable to raise their state law negligence claim regardless of
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It is equally evident that Plaintiffs’ defamation claim would be dismissed if it were not
preempted. Under Kentucky law, to establish a prima facie case of defamation, a plaintiff must
show proof of published, defamatory language about the plaintiff, which causes injury to his or
her reputation. Columbia Sussex Corp., Inc. v. Hay, 627 S.W.2d 270, 273 (Ky. Ct. App 1981);
see also Williams v. Blackwell, 487 S.W.3d 451, 454 (2016) (holding the same) (citing Stringer
v. Wal-Mart Stores, Inc., 151 S.W.3d 781, 793 (Ky. 2004)). For a statement to be actionable as
defamation, a plaintiff must show that the statement is sufficiently factual to be provable as false,
or the statement must imply underlying facts which can be provable as false. Williams, 487
S.W.3d at 454 (citing Milkovich v. Lorain Journal Co., 497 U.S. 1, 110 S. Ct. 2695, 111 L. Ed.
2d 1 (1990)). Truth of the statement, however, remains a complete defense. Stringer, 151
S.W.3d at 796.
Plaintiffs assert that Guardian’s reports to the credit agencies amount to defamation. [R.
1 at ¶ 86.] Specifically, Plaintiffs allege that “Guardian, with knowledge of the falsity of its
statements, has published and continues to publish statements to others… that Plaintiff has an
undisputed past due and payable Green Dot account.” Id. at ¶ 85. However, to the extent
Guardian never received notice of any dispute and the investigation does not relinquish a debt,
Plaintiffs do have a past due and payable Guardian account. Truthful statements do not
constitute defamation, and therefore Plaintiffs would be unable to raise their state law defamation
claim were it not already preempted.
For the foregoing reasons and the Court being otherwise sufficiently advised, it is hereby
ORDERED that Defendant Guardian’s Motions for Judgment on the Pleadings [R. 46 in 3:19cv-00036-GFVT; R. 28 in 3:10-cv-00038-GFVT] are GRANTED. Plaintiffs’ negligence and
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defamation claims against Guardian Finance Company are DISMISSED WITH PREJUDICE.
This the 8th day of September, 2020.
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