Holmes v. Experian Information Solutions, Inc.
Filing
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OPINION : For the foregoing reasons, the court grants Experian's motion for summary judgment dismissing Holmes's action. This opinion resolves document numbers 16 and 27 on the docket. SO ORDERED. re: 27 MOTION for Summary Judgment. filed by Keith A. Holmes, 16 MOTION for Summary Judgment (Notice of Motion). filed by Experian Information Silutions, Inc. (Signed by Judge Thomas P. Griesa on 9/30/2011) (ama)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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KEITH A. HOLMES,
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Plaintiff,
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– against –
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EXPERIAN INFORMATION SOLUTIONS,
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INC.,
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Defendant.
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09 Civ. 874 (TPG)
OPINION
Plaintiff Keith A. Holmes brings this pro se action alleging that
Experian Information Solutions, Inc. (“Experian”) placed inaccurate
information in his credit report, which adversely impacted his “credit
score” and prevented him from obtaining financing. Holmes’s claim is for
negligence.
Experian moves for summary judgment. The motion is granted.
FACTS
The following facts are undisputed except where otherwise
indicated.
Holmes is an entrepreneur conducting business in real estate
acquisition and development. He lives in New York and has invested in
various properties throughout New York State. Experian is a company
that collects and disseminates information used to determine credit
scores. Its headquarters are in California.
In January 2005, a service called Equifax reported that Holmes
had a credit score of 706. This credit score, Holmes alleges, was high
enough to enable him to obtain credit to finance his projects. However,
at some point in the spring of 2005, Experian erroneously noted two
default judgments from a state court in Bronx County from January and
April of that year in Holmes’s credit file. The judgments, totaling
approximately $13,000, listed “Keith P. Holmes, Sr.” as the defendant,
who had a different home address and social security number from
plaintiff Holmes. The judgments were not against plaintiff Holmes.
By August Holmes’s credit score, as reported by Experian, had
declined to 536. At this time, Holmes’s brother told Holmes that there
were two judgments referred to in credit information about Holmes.
Holmes then requested a copy of his credit report from Kroll Factual
Data, a supplier of credit information. Kroll faxed Holmes a “residential
merged credit report” (the Kroll Report) that drew information from three
separate credit reporting agencies including Experian. The judgments
were listed in the Kroll Report. Holmes has testified that he spoke to
someone at Kroll who said that the information about the judgments
came from Experian. This was indeed the case.
Holmes contends that his credit score declined between January
and August 2005 solely because of the erroneously listed judgments.
Experian disputes this and asserts that the record shows various other
unfavorable circumstances about Holmes’s financial condition in 2005.
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In late 2005, Holmes contacted Experian and asked that the
judgments in Keith P. Holmes’s name be removed from his credit file.
Experian received Holmes’s request on December 5, 2005, and removed
the judgments the next day. Holmes claims that Experian made no effort
to contact other companies who may have placed derogatory information
about the two judgments in Holmes’s credit report. However, Holmes
has offered no evidence that any other credit reporting companies
actually reported the two judgments.
Holmes claims that it was necessary for him to refinance his
existing obligations in August 2005. He also asserts, however, that he
did not try to obtain refinancing prior to February 2006, when he
attempted to refinance his adjustable rate mortgage on his home.
Although Holmes did not apply for credit while the erroneous judgments
were on his Experian report, Holmes claims that individuals with bad
credit are not supposed to attempt to refinance until these issues are
resolved and their credit has improved. Holmes states that “applying for
financing with damaged credit is an exercise in futility.”
In February 2006, Holmes applied for credit from the lender
Centex Home Equity Company, LLC. He wanted to refinance the
adjustable rate mortgage. The rate on this mortgage was set to readjust
from 6.00% to 11.00% in April of 2006. Holmes’s credit application was
denied based, in whole or in part, on a credit report from “First American
Credco.” The reason for this denial was “Value or Type of Collateral not
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Sufficient.” Holmes claims that his inability to refinance in August 2005
because of his low credit score caused him to fall behind on payments,
which caused Centex Home Equity to deny his February 2006 credit
application.
Holmes alleges that as result of Experian’s negligence, he was
unable to refinance his residence and two investment properties in
addition to losing other real estate investment opportunities. However,
Holmes has not provided evidence that First American Credco. or Centex
Home Equity Company, LLC knew about the two default judgments that
Experian had already removed from his credit file.
The Present Action
On December 28, 2008, Holmes commenced the present action in
Supreme Court, Bronx County, alleging that Experian’s negligence
caused him damages of at least one million dollars by hindering his
ability to refinance his existing obligations. Experian removed the action
to federal court on January 30, 2009, contending that Holmes’s state law
claim was “controlled by the Fair Credit Reporting Act (‘FCRA’), 15 U.S.C.
§ 1681 et seq.”
On November 15, 2010, Experian filed its motion for summary
judgment.
Although, as just indicated, Experian referred to this action as
being controlled by the FCRA, the sole cause of action in the complaint is
a claim of negligence, without reference to the FCRA.
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DISCUSSION
Subject-Matter Jurisdiction and the Propriety of Removal
Experian removed this case, in which Holmes pleaded a state law
claim, on the grounds that Holmes’s state law claim was “controlled by
the Fair Credit Reporting Act.” However, Experian has cited no authority
supporting the proposition that state law causes of action are subject to
federal jurisdiction under the FCRA.
“[A] plaintiff's suit does not arise under federal law simply because
the defendant may raise the defense of ordinary preemption.” Sullivan
v. Am. Airlines, 424 F.3d 267, 273 (2d Cir. 2005). Accordingly, the fact
that Experian is raising a federal preemption defense to Holmes’s state
law claims does not make those state law claims removable. However,
“[u]nder the complete-preemption doctrine, certain federal statutes are
construed to have such ‘extraordinary’ preemptive force that state-law
claims coming within the scope of the federal statute are transformed, for
jurisdictional purposes, into federal claims - i.e., completely preempted.”
Id. at 272. “When a plaintiff raises such a completely preempted
state-law claim in his complaint, a court is obligated to construe the
complaint as raising a federal claim and therefore ‘arising under’ federal
law.” Id.
Experian has not provided any authority for the proposition that
the FCRA is a statute that completely preempts state law and thus
provides for federal subject matter jurisdiction. Many federal statutes –
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such as the FCRA – expressly preempt state law and thus provide for a
federal preemption defense, but the Supreme Court has only identified
three statutes that completely preempt state law and allow for the
removal of preempted state law causes of action: § 301 of the LaborManagement Relations Act (LMRA), 29 U.S.C. § 185; § 502(a) of the
Employee Retirement Income Security Act (ERISA), 29 U.S.C. § 1132(a);
and §§ 85 and 86 of the National Bank Act, 12 U.S.C. §§ 85- 86. Id. at
272.
Although, as will be discussed below, the FCRA does provide
Experian with a defense of preemption in this case, courts have regularly
found that the FCRA does not provide a basis for removal of state law
claims pursuant to the complete preemption doctrine. See Chase Bank
USA, N.A. v. Duran, No. C-06-2258 MMC, 2006 U.S. Dist. LEXIS 20154,
at *2-3 (N.D. Cal. Apr. 5, 2006); King v. Retailers Nat'l Bank, 388 F.
Supp. 2d 913, 916-17 (N.D. Ill. 2005); Swecker v. Trans Union Corp., 31
F. Supp. 2d 536, 540 (E.D. Va. 1998); Harper v TRW, Inc., 881 F Supp
294, 299-300 (E.D. Mich. 1995); but see Williams v. Met. Life Ins. Co.,
No. 94 Civ. 3791 (CSH), 1994 U.S. Dist. LEXIS 13682, at *7 (S.D.N.Y.
Sep. 26, 1994) (allowing for removal of a case because of FCRA
preemption, without discussing the complete preemption doctrine).
This case was improperly removed because the FCRA does not
qualify for the complete preemption removal doctrine. However, the
court will not remand this suit because the court has another basis for
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subject-matter jurisdiction. “[W]hen a suit is removed prematurely, the
district court may proceed if it has subject-matter jurisdiction at the time
it enters judgment.” City of Joliet v. New West, L.P., 562 F.3d 830, 833
(7th Cir. 2009). Here, although Experian’s removal based on complete
preemption was improper, the court has diversity jurisdiction over this
case. It is undisputed that Holmes is a citizen of New York and Experian
is a citizen of California.
FRCA Preemption of Holmes’s Common Law Negligence Claims
Experian argues that summary judgment is appropriate because
Holmes’s state law claim for negligence is preempted by the FCRA.
Although, as discussed above, the FCRA does not qualify for the
complete preemption removal doctrine, the FCRA can still provide a basis
for ordinary defensive preemption. The defense of preemption may arise
in any of three ways: (1) express preemption by Congress, (2) implied
preemption where federal law is so comprehensive that Congress left no
room for supplementary state regulation, and (3) preemption based on an
actual conflict between state law and a federal statute. Bedford Affiliates
v. Sills, 156 F.3d 416, 426 (2d Cir. 1998).
In the present case, there is express preemption by the FCRA with
respect to Holmes’s negligence claim. The statute provides in relevant
part:
Except as provided in sections 1681n and 1681o 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
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. . . 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). Sections 1681n and 1681o are irrelevant for
present purposes. The statute thus provides that there can be no action
based on negligence (and certain other common law theories), with
respect to the reporting of credit information, brought against a
consumer reporting agency, except as to false information furnished with
malice or willful intent to injure.
The court is constrained to say that the treatment of negligence in
the statute is an oddity because malice and willful intent to injure involve
intent, not mere negligence. However, the statute says what it says.
Section 1681h(e) applies to Holmes’s cause of action because
Holmes’s claim is for negligence. This is made clear in his various
descriptions of his claim. To describe Experian’s conduct, he uses the
words “carelessness, recklessness, and negligence,” and refers to a
“breach of duty owed,” which “was the proximate cause of [Holmes’s]
substantial monetary injuries.” Later in his complaint Holmes repeatedly
seeks damages incurred “[d]ue to Defendant’s negligence,” “due to
Experian’s negligence,” and “as a direct result of Experian’s negligence.”
Holmes introduces the theory that his claim is actually a products
liability claim under New York law. He refers to this case as a “product
negligence and liability case” and argues that Experian’s design “raises
the issue of negligence under New York State Product Liability Law.”
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Thus, there can be no doubt about the fact that Holmes is
attempting to assert a negligence claim under New York law. However,
Section 1681h(e) prohibits the bringing of a negligence claim, “except as
to false information furnished with malice or willful intent to injure such
consumer.” Holmes makes no allegation, and surely makes no factual
showing, of any malice or willful intent to injure on the part of Experian
in connection with the erroneous noting of the two judgments. Thus, the
claim of Holmes, as made by him in this case, is prohibited by the
express terms of Section 1681h(e) and must be dismissed.
Of course, there are provisions of the FCRA which describe in
detail the elements of various causes of action under the statute – not
common law negligence, but claims under the statute. See, e.g., 15
U.S.C. § 1681e(b). However, Holmes does not attempt to bring his claim
under any of these provisions.
It is perhaps useful to add that, if Holmes had sued in this case
under the statutory provisions of the FCRA, such suit would have been
time-barred. The FCRA has a two year statute of limitations that begins
running at “the date of discovery by the Plaintiff of the violation that is
the basis of such liability.” 15 U.S.C. § 1681p. Holmes became aware of
the default judgments noted in his Experian file in August 2005 when he
received the Kroll Report. The present action was commenced on
December 23, 2008, well over two years after he learned of Experian’s
error.
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CONCLUSION
For the foregoing reasons, the court grants Experian's motion for
summary judgment dismissing Holmes's action.
This opinion resolves document numbers 16 and 27 on the docket.
SO ORDERED.
Dated: New York, New York
September 30, 2011
,~e
Thomas P. Griesa
U.S. District Judge
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