Plaintiff Amanda Groettum may be alive and well, but in Groettum v. Kohl’s Department Stores, Inc., the United States District Court for the District of Minnesota laid to rest her claims under Minnesota’s credit defamation laws and any contention that the Fair Credit Reporting Act’s two preemption provisions are in conflict.
In her complaint, Groettum alleged that she opened a credit card account with defendants Kohl’s and Capital One Financial Corporation in November 2014. In the years following, Groettum learned that defendants were reporting to the consumer reporting agencies that she was deceased. Groettum claimed that, as a result of these reports, she was denied credit for medical care, loans, and mortgage opportunities, and incurred mental and emotional distress. Groettum asserted that defendants’ actions were willful violations of the FCRA because, upon notice of her dispute, they failed to conduct a reasonable investigation and correct the misinformation.
Additionally, and at issue in this opinion, Groettum asserted that she was entitled to relief under Minnesota’s credit defamation laws for defendants’ misreporting of her death. Defendants argued that her state law claims were preempted by the FCRA and, therefore, failed as a matter law.
The FCRA contains two sections that expressly preempt state-law claims against furnishers of information. The first, Section 1681h(e), prohibits a consumer from bringing a defamation, invasion of privacy, or negligence claim against furnishers of information, except as to false information furnished with malice or with intent to injure, and thereby preempts any similar state-law claim. The second, the later enacted Section 1681t(b)(1)(F), is broader, and declares that no requirement or prohibition may be imposed under the laws of any state with respect to any subject matter that would be regulated by Section 1681s-2.
Groettum asserted that these provisions were in conflict because applying the plain text of Section 1681t(b)(1)(F) (prohibiting the imposition of any state law where Section 1681s-2 is deemed to control) to preempt her Minnesota credit defamation claim would nullify the earlier enacted provision – Section 1681h(e) (prohibiting consumer defamation claims under state law except as to claims that the furnisher acted with malice or willful intent to injure). To reconcile this “conflict” between the sections, Groettum urged the Court to adopt the so-called “temporal approach,” in which actions arising prior to a consumer lodging a complaint with a CRA are subject to preemption under Section 1681h(e), and any claims arising out of conduct occurring after such a complaint are subject to preemption under Section 1681t(b)(1)(F).
The Court rejected Groettum’s argument, holding that the two provisions are not in conflict. Specifically, the Court concluded that section 1681h(e) does not give consumers a conditional right of action, which Section 1681t(b)(1)(F) then preempts. Instead, the Court noted that both Section 1681h(e) and Section 1681t(b)(1)(F) are “rights-stripping statutes.” Section 1681h(e) is meant to preempt some state claims and Section 1681t(b)(1)(F) is meant to preempt even more claims through a reduction in the scope of state regulation, without repeal of Section 1681h(e). When Section 1681t(b)(1) does not apply, Section 1681h(e) remains. The Court held, therefore, that Groettum’s credit defamation claim was dismissed due to preemption by Section 1681t(b)(1)(F), thereby ensuring federal regulation and control over the ever-increasing number of claims arising from credit disputes with furnishers. This opinion continues a growing trend of courts rejecting the “temporal approach” to interpreting these two sections of the FCRA.