Premium Mortgage Corp. v. Equifax Inc. ( 2009 )

08-5317-cv
Premium Mortgage Corp. v. Equifax Inc.
1 UNITED STATES COURT OF APPEALS
2
3 F OR THE S ECOND C IRCUIT
4
5
6
7 August Term, 2008
8
9 (Argued: September 11, 2009 Decided: October 5, 2009
10 Amended: October 14, 2009)
11
12 Docket No. 08-5317-cv
13
14
15 P REMIUM M ORTGAGE C ORP., on behalf of itself and all others
16 similarly situated,
17
18 Plaintiff-Appellant,
19
20 –v.–
21
22 E QUIFAX, I NC., a Georgia corporation, T RANS U NION LLC, a
23 Delaware limited liability company, E XPERIAN I NFORMATION
24 S OLUTIONS, I NC., an Ohio corporation, and E QUIFAX I NFORMATION
25 S ERVICES, LLC, a Georgia limited liability company,
26
27 Defendants-Appellees,
28
29 C REDIT P LUS, I NC., a Maryland corporation, individually and as
30 a Representative of similarly situated defendants,
31
32 Defendant.
33
34
35
36
37
38
39 Before:
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1 P ARKER and W ESLEY, Circuit Judges, and R ESTANI, * Judge.
2
3 Appeal from an order of the United States District
4 Court for the Northern District of New York (Telesca, J.),
5 entered on September 30, 2008, dismissing all claims against
6 Equifax, Inc., Trans Union LLC, Experian Information
7 Solutions, Inc., and Equifax Information Services, LLC.
8
9 A FFIRMED.
10
11
12
13 L OUIS B. C RISTO, Trevett Lenweaver & Salzer P.C.,
14 Rochester, New York, for Plaintiff-Appellant.
15
16 M EIR F EDER, Jones Day, New York, New York
17 (Christopher R. Lipsett and David Sapir
18 Lesser, Wilmer Cutler Pickering Hale & Dorr
19 LLP, New York, New York, David Cooper and
20 Victoria Dorfman, Jones Day, New York, New
21 York, Craig E. Bertschi and Cindy D. Hanson,
22 Kilpatrick Stockton LLP, Atlanta, Georgia, on
23 the brief), for Defendants-Appellees.
24
25 J AMES C HAREQ, Hudson Cook, LLP, Washington, DC, for
26 Amicus Curiae Consumer Data Industry
27 Association.
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29
30
31 P ER C URIAM:
32 Plaintiff Premium Mortgage Corp. commenced this
33 putative class action on behalf of itself and similarly
34 situated mortgage lenders, bringing nine state-law claims
35 against several consumer credit reporting agencies —
*
The Honorable Jane A. Restani, Chief Judge of the United States Court
of International Trade, sitting by designation.
2
1 defendants Equifax Inc., Trans Union LLC, Experian
2 Information Solutions, Inc., and Equifax Information
3 Services, LLC (collectively, the “Credit Bureau defendants”)
4 — and Credit Plus, Inc. (“Credit Plus”), an intermediate
5 “reseller” of consumer credit information. The United
6 States District Court for the Northern District of New York
7 (Telesca, J.), dismissed plaintiff’s claims against the
8 Credit Bureau defendants on preemption grounds, and granted
9 plaintiff permission to file this partial appeal pursuant to
10 Rule 54(b) of the Federal Rules of Civil Procedure. 1
11 Background
12 Plaintiff’s claims relate to defendants’ sale of
13 mortgage “trigger leads” to third-party lenders. Trigger
14 leads are generated during the process by which mortgage
15 brokers such as plaintiff evaluate consumer loan
16 applications; according to plaintiff, these “leads” indicate
17 that, “within the past 24 to 48 hours, a particular
18 individual [has] expressed a desire to [a] mortgage bank” to
19 obtain a loan. In order to assess an applicant’s
1
Credit Plus did not join the Credit Bureau defendants’ motion to
dismiss, it is not a party to this appeal, and plaintiff’s claims against it
remain pending in the district court.
3
1 creditworthiness after receiving a loan application,
2 plaintiff purchases an aggregated credit report from an
3 intermediate reseller of consumer credit information, such
4 as Credit Plus. The reseller, in turn, purchases individual
5 credit reports from each of the Credit Bureau defendants and
6 bundles the information for use by plaintiff.
7 The Fair Credit Reporting Act (“FCRA”), 15 U.S.C. §
8 1381 et seq. requires a mortgage broker seeking to purchase
9 a credit report to disclose the reason for its purchase. As
10 relevant in this case, plaintiff’s requests for consumer
11 credit reports are motivated by the fact that a consumer
12 recently applied for a loan. The disclosure of this
13 information to the reseller, and ultimately to the Credit
14 Bureau defendants, generates a trigger lead.
15 The crux of this dispute is plaintiff’s challenge to
16 defendants’ practice of permitting other lenders to purchase
17 “pre-screened” consumer reports, see 15 U.S.C. § 1681b(c),
18 (e), that, in essence, contain trigger leads. According to
19 plaintiff, these trigger leads constitute its “proprietary
20 customer information” because “such information is not
21 readily known in the industry and it cannot be obtained
22 except through extraordinary effort . . . .” However, the
4
1 prescreened reports in question use the information conveyed
2 by a trigger lead as a screening criterion in order to
3 generate a list of consumers who are in the market for
4 mortgages and other loan facilities. The lenders purchasing
5 these lists then compete with plaintiff and similarly
6 situated mortgage brokers by offering terms on loans to the
7 customers.
8 Based on these allegations, plaintiff brought nine
9 state-law claims, including misappropriation of trade
10 secrets, fraud, unfair competition, tortious interference
11 “with contractual or prospective business relations,” breach
12 of contract “of which class members were intended
13 beneficiaries,” and unjust enrichment. The Credit Bureau
14 defendants moved to dismiss plaintiff’s claims against them,
15 arguing that the claims are preempted by the FCRA, and,
16 alternatively, that the allegations in the Amended Class
17 Action Complaint (the “complaint”) fail to state a claim.
18 Judge Telesca granted the motion and held that the FCRA
19 expressly preempts each of plaintiff’s claims against the
20 Credit Bureau defendants. Plaintiff appeals.
21 Discussion
22 We review de novo a district court’s application of
5
1 preemption principles. See, e.g., Drake v. Lab. Corp. of
2 Am. Holdings, 458 F.3d 48, 56 (2d Cir. 2006). “When
3 addressing questions of express or implied pre-emption, we
4 begin our analysis with the assumption that the historic
5 police powers of the States are not to be superseded by the
6 Federal Act unless that was the clear and manifest purpose
7 of Congress.” Altria Group, Inc. v. Good, 129 S. Ct. 538,
8 543 (2008) (internal quotation omitted). However, “[s]ince
9 the existence of preemption turns on Congress’s intent, we
10 are to ‘begin as we do in any exercise of statutory
11 construction[,] with the text of the provision in question,
12 and move on, as need be, to the structure and purpose of the
13 Act in which it occurs.’” McNally v. Port Auth. of N.Y. &
14 N.J., 414 F.3d 352, 371 (2d Cir. 2005) (quoting N.Y. State
15 Conference of Blue Cross & Blue Shield Plans v. Travelers
16 Ins. Co., 514 U.S. 645, 655 (1995)).
17 Applying these standards, we affirm Judge Telesca’s
18 conclusion with respect to the bulk of plaintiff’s state
19 common-law claims. The operative provision of the FCRA for
20 the purpose of this analysis is 15 U.S.C. § 1681t(b)(1)(A),
21 which states: “[N]o requirement or prohibition may be
6
1 imposed under the laws of any State . . . with respect to
2 any subject matter regulated under . . . subsection (c) or
3 (e) of section 1681b of this title, relating to the
4 prescreening of consumer reports . . . .” Id. §
5 1681t(b)(1)(A) (emphases added). 2
6 Plaintiff’s allegations “relate[] to the prescreening
7 of consumer reports.” Id. As plaintiff acknowledges,
8 third-party lenders obtain trigger leads from the Credit
9 Bureau defendants by purchasing prescreened consumer
10 reports. See id. § 1681b(c), (e). Trigger leads are simply
11 one of the constituent parts of these “consumer report[s].”
12 Id. § 1681a(d)(1). Consequently, plaintiff’s claims fall
13 within § 1681a(d)(1), irrespective of whether the
14 allegations in the complaint focus more narrowly on the
15 resulting uses of the trigger lead information obtained
16 through this practice. Therefore, there is no merit to
17 plaintiff’s argument that its claims are not preempted
18 because the trigger leads themselves are not “consumer
19 reports” under the FCRA.
2
Because Judge Telesca’s analysis was based on § 1681t(b)(1)(A), any
perceived tension between 15 U.S.C. § 1681h(e) and § 1681t(b)(1)(F), see,
e.g., Prakash v. Homecomings Fin., No. 05 Civ. 2895, 2006 WL 2570900, at *5-7
(E.D.N.Y. Sept. 5, 2006), is of no moment in this appeal.
7
1 Plaintiff’s distinction between statutory and common-
2 law claims under this section of the FCRA’s express
3 preemption provision is likewise unpersuasive. “The phrase
4 ‘[n]o requirement or prohibition’ sweeps broadly and
5 suggests no distinction between positive enactments and
6 common law; to the contrary, those words easily encompass
7 obligations that take the form of common-law rules.”
8 Cipollone v. Liggett Group, Inc., 505 U.S. 504, 521 (1992)
9 (plurality opinion); see also Riegel v. Medtronic, Inc., 128
10 S. Ct. 999, 1007-08 (2008). The complaint makes clear that
11 plaintiff’s common-law claims are predicated on the
12 existence of a duty — allegedly owed by defendants to
13 mortgage brokers such as plaintiff — to keep confidential
14 the fact that a consumer has recently applied for a
15 mortgage. The terms used by Congress in § 1681t(b)(1)(A)
16 require that such an obligation must yield to the FCRA under
17 the Supremacy Clause. Therefore, plaintiff’s common-law
18 claims for misappropriation of trade secrets, unfair
19 competition, and unjust enrichment were properly dismissed.
20 Relying on Cipollone, plaintiff argues that its sixth
21 and seventh causes of action (for breach of contract and
8
1 tortious interference with contract, respectively) are not
2 preempted because they are “based, in whole or in part, upon
3 contractual obligations.” See Cipollone, 505 U.S. at 526
4 (plurality opinion) (“[A] common-law remedy for a
5 contractual commitment voluntarily undertaken should not be
6 regarded as a ‘requirement . . . imposed under State law’ .
7 . . .” (emphasis omitted)); but see id. at 551 (Scalia, J.,
8 concurring in the judgment in part and dissenting in part)
9 (“When liability attaches to a particular promise or
10 representation, it attaches by law.”). Similarly, plaintiff
11 asserts that its fraud claim evades preemption under Good
12 and Cipollone because the claim, in plaintiff’s view, is
13 based on a “more general duty not to make fraudulent
14 statements.” Good, 129 S. Ct. at 549; see also Cipollone,
15 505 U.S. at 529 (plurality opinion). However, in their
16 motion to dismiss and again in this appeal, the Credit
17 Bureau defendants also argue that plaintiff’s claims are
18 inadequately pleaded. For the reasons discussed below, we
19 agree. Therefore, we decline to reach plaintiff’s
20 preemption argument as to these causes of action and affirm
21 the decision below on this properly preserved alternative
9
1 ground. See, eg., Palmer v. Occidental Chem. Corp., 356
2 F.3d 235, 236 (2d Cir. 2004).
3 In New York, the elements of a claim for tortious
4 interference with a contract include, inter alia, “the
5 existence of a valid contract between the plaintiff and a
6 third party,” and an “intentional procurement of the third-
7 party’s breach of the contract without justification . . .
8 .” Lama Holding Co. v. Smith Barney Inc., 88 N.Y.2d 413,
9 424, 668 N.E.2d 1370, 1375 (N.Y. 1996). 3 “Tortious
10 interference with prospective economic relations requires an
11 allegation that plaintiff would have entered into an
12 economic relationship but for the defendant’s wrongful
13 conduct.” Vigoda v. DCA Prods. Plus Inc., 741 N.Y.S.2d 20,
14 23 (1st Dep’t 2002).
15 The complaint fails to sufficiently plead these
16 elements. Plaintiff has not identified the legal basis for
17 the Credit Bureau defendants’ alleged “duty and obligation
3
Although we need not resolve the application of the relevant
preemption reasoning in Cipollone, which related to a claim for “breach of an
express warranty,” 505 U.S. at 525, we note in passing that a claim for
“tortious interference with contract” is, as its name indicates, a tort that
encompasses interfering with an existing contract. Such a claim — not based
on a breach of any contract — would appear to impose a state-law
“requirement,” 15 U.S.C. § 1681t(b)(1)(A), under Cipollone because the
plaintiff seeks not to enforce a set of mutual promises between private
parties but rather to sanction an act by a non-party that allegedly impaired
those promises.
10
1 to maintain the confidentiality” of trigger leads, and there
2 are no allegations in the complaint capable of supporting a
3 reasonable inference that any Credit Bureau defendant “acted
4 with the sole purpose of harming the plaintiff or used
5 dishonest, unfair, or improper means,” Nadel v. Play-By-Play
6 & Novelties, Inc., 208 F.3d 368, 382 (2d Cir. 2000)
7 (emphasis added). Plaintiff’s allegations of tortious
8 interference with prospective business relations are even
9 more attenuated. Therefore, the allegations in support of
10 plaintiff’s sixth cause of action are insufficient as a
11 matter of law.
12 Plaintiff’s seventh cause of action is also defective.
13 A non-party to a contract governed by New York law lacks
14 standing to enforce the agreement in the absence of terms
15 that “clearly evidence[] an intent to permit enforcement by
16 the third party” in question. Fourth Ocean Putnam Corp. v.
17 Interstate Wrecking Co., 66 N.Y.2d 38, 45, 485 N.E.2d 20818 (1985). The complaint presents only conclusory allegations
19 as to this element, and we find them facially implausible.
20 Finally, plaintiff’s fraud claim is also inadequately
21 pleaded. The elements of fraud under New York law are: “[1]
11
1 a misrepresentation or a material omission of fact which was
2 false and known to be false by defendant, [2] made for the
3 purpose of inducing the other party to rely upon it, [3]
4 justifiable reliance of the other party on the
5 misrepresentation or material omission, and [4] injury.”
6 Lama Holding, 88 N.Y. 2d at 421. In a federal diversity
7 action, such a claim must be pleaded with particularity.
8 See Fed. R. Civ. P. 9(b). Plaintiff failed to identify
9 misrepresentations or material omissions by any Credit
10 Bureau defendant, and the complaint provides no basis to
11 support an inference of justifiable reliance. “Allegations
12 that are conclusory or unsupported by factual assertions are
13 insufficient.” ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493
14 F.3d 87, 99 (2d Cir. 2007). Therefore, we affirm the
15 dismissal of plaintiff’s fraud claim because it is
16 inadequately pleaded.
17 Plaintiff’s fourth, sixth, and seventh causes of action
18 present little more than “unadorned, the-defendant[s]-
19 unlawfully-harmed-me accusation[s].” Ashcroft v. Iqbal, 129
20 S. Ct. 1937, 1949 (2009). These allegations are
21 insufficient to state a claim upon which relief may be
12
1 granted. Therefore, we affirm the dismissal of plaintiff’s
2 fourth, sixth, and seventh causes of action on this
3 alternative ground.
4 Conclusion
5 The Court has reviewed plaintiff’s remaining arguments
6 and finds them to be without merit. Accordingly, the
7 district court’s order of September 30, 2008 is hereby
8 AFFIRMED.
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