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Pa. Appellate Court Issues Opinion in Dietz v. Chase Home Finance, LLC, Clarifying Preemption of State Common Law Claims by Fair Credit Reporting Act

April 16, 2012

The decision in Dietz is one of first impression in the Pennsylvania appellate courts and essentially forecloses would-be plaintiffs from asserting common law claims against creditors based on incorrect credit reporting, unless they can show actual malice or intent to injure.

In a case of first impression, the Superior Court of Pennsylvania on April 2, 2012, issued its opinion in Dietz v. Chase Home Finance, LLC, holding that state common law negligence and defamation claims based on erroneous information furnished to credit reporting agencies are preempted by the federal Fair Credit Reporting Act, unless the plaintiff alleges that the false information was supplied with malice or willful intent to injure. (Note: Duane Morris represented defendant Chase Home Finance in this case.)

In Dietz, plaintiffs Paul Dietz and Marian Dietz contended that Chase Home Finance, LLC (Chase) incorrectly reported to credit reporting agencies that the plaintiffs were in default on their home mortgage loan payments. Despite the error being promptly corrected, the plaintiffs claimed that, as a result of the incorrect reporting, their credit limits were reduced and certain sources of credit were eliminated. The plaintiffs asserted state law causes of action for negligence and defamation against Chase.

At the trial level, Chase sought summary judgment on the basis that the plaintiffs' claims were preempted by the federal Fair Credit Reporting Act, 15 U.S.C. § 1681, et seq. (FCRA). The FCRA bars actions for, among other things, defamation and negligence arising out of incorrect credit reporting, unless the incorrect information was furnished to the credit reporting agencies with malice or willful intent to injure the plaintiff. See 15 U.S.C. § 1681h(e). As the plaintiffs had not alleged malice or an intent to injure on behalf of Chase, the trial court granted Chase's motion for summary judgment, finding that the plaintiffs' claims were preempted. However, the trial court relied on a separate section of the FCRA, section 1681t(b)(1)(F), which provides that no state law may impose duties on furnishers of information, such as Chase, with respect to the manner in which they furnish information to the credit reporting agencies.

The plaintiffs appealed to the Pennsylvania Superior Court, arguing that § 1681t(b)(1)(F) was intended only to bar claims based on state statutes and not common law causes of action like defamation and negligence.

On appeal, the state Superior Court affirmed the trial court's grant of summary judgment for Chase. After analyzing cases from surrounding jurisdictions which were split on whether state common law claims are preempted, the Superior Court adopted the "statutory approach" finding that § 1681t(b)(1)(F) preempted only statutory causes of action. However, the court also found that § 1681h(e) preempted negligence and defamation claims that did not allege that the incorrect reporting was done with malice, and thus held that § 1681h(e) preempted the plaintiffs' claims. Moreover, the court cited with approval a federal court decision, which held that common law negligence claims were always preempted by §1681h(e) because, by definition, a plaintiff cannot allege malicious or willful negligence. As a result, the Superior Court concluded that, under any possible analysis, the plaintiffs' claims were preempted.

This decision is significant as it is one of first impression in the Pennsylvania appellate courts and essentially forecloses would-be plaintiffs from asserting common law claims against creditors based on incorrect credit reporting, unless they can show actual malice or intent to injure.

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