Premium Mortgage Corp. v. Equifax Inc.

• Court: Court of Appeals for the Second Circuit
• Decided: October 14, 2009
• Docket: 08-5317-cv
• Status: Published

Opinion

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: 40 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. 28 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 208

18 (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.