PATRICIA NELSKI V AMERITECH
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STATE OF MICHIGAN
COURT OF APPEALS
PATRICIA NELSKI, a/k/a PATRICIA
PELLAND,
UNPUBLISHED
June 29, 2004
Plaintiff-Appellant,
v
AMERITECH, AMERITECH SERVICES, INC.,
AMERITECH COMMUNICATIONS, INC.,
AMERITECH CORPORATION, INC.,
AMERITECH PUBLISHING, INC., and
MICHIGAN BELL TELEPHONE COMPANY,
No. 244644
Wayne Circuit Court
LC No. 01-121059-NO
Defendants-Appellees.
Before: Borrello, P.J., and White and Smolenski, JJ.
PER CURIAM.
Plaintiff, a victim of identify theft, sued defendants alleging defamation and violation of
the Fair Credit Reporting Act (FCRA), 15 USC 1681 et seq. After plaintiff’s FCRA claims were
removed to federal court and subsequently resolved by that court, the trial court granted
defendants summary disposition of plaintiff’s state law claim, concluding that defendants were
furnishers of information under the FCRA, that the FCRA applied to this case, and that
plaintiff’s state law claim was preempted by the FCRA. Plaintiff appeals as of right. We affirm
in part, reverse in part, and remand.
Plaintiff alleges that she discovered in 1996 that someone had opened a telephone
account with defendants in her name, using a fraudulent address. Plaintiff subsequently learned
that she had been the victim of credit card fraud pursuant to a scheme whereby the false address
and telephone number were apparently used to establish credit. Plaintiff notified defendants of
the fraud and alleges that she was advised by defendants in 1996 that the fraudulent account
would be cleared up. But she learned in 1999 that defendants were still reporting false financial
information on her credit report. She attempted to have the matter corrected, without success.
This action followed.
Plaintiff first argues that the trial court erred in relying on collateral estoppel as a basis
for concluding that defendants were furnishers of information under the FCRA. The trial court
held that the federal court had already ruled that defendants were subject to the FCRA, and,
therefore, collateral estoppel barred plaintiff from relitigating this issue. We disagree.
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The FCRA “regulates creditors’ reports to credit-reporting agencies, and prescribes the
actions that must be taken when a customer reports an error in a credit report.” In re Complaint
of Pelland Against Ameritech Michigan, 254 Mich App 675, 684; 658 NW2d 849 (2003). The
FCRA imposes duties on consumer-reporting agencies and on those who furnish information to
credit-reporting agencies. In this case, plaintiff argues that defendants fall within the latter
category.
Collateral estoppel precludes relitigation of an issue in a subsequent, different case
between the same parties if the prior action resulted in a valid final judgment and the issue was
actually and necessarily determined in the prior matter. Horn v Dep't of Corrections, 216 Mich
App 58, 62; 548 NW2d 660 (1996). The ultimate issue in the second case must be the same as
that in the first proceeding. Detroit v Qualls, 434 Mich 340, 357; 454 NW2d 374 (1990). The
doctrine requires that the same parties must have had a full opportunity to litigate the issue in the
prior proceeding, and there must be mutuality of estoppel. Nummer v Dep’t of Treasury, 448
Mich 534, 542; 533 NW2d 250 (1995).
To be necessarily determined in the first action, the issue must have been
essential to the resulting judgment; a finding upon which the judgment did not
depend cannot support collateral estoppel. [Bd of Co Road Comm'rs v Schultz,
205 Mich App 371, 377; 521 NW2d 847 (1994).]
Collateral estoppel will only apply if the basis of the former “judgment can be clearly, definitely,
and unequivocally ascertained.” Ditmore v Michalik, 244 Mich App 569, 578; 625 NW2d 462
(2001).
We find that the trial court did not err in relying upon the earlier decisions issued in the
federal court to conclude that plaintiff was barred by collateral estoppel from arguing that
defendants were not furnishers of information under the FCRA. The same parties were involved
in both proceedings and there is mutuality of estoppel. Additionally, the question whether the
FCRA was applicable to plaintiff ’s claims against defendants was an essential issue in the
federal proceedings, and plaintiff had the opportunity to argue this issue before the federal court.
Furthermore, even if collateral estoppel did not apply, we agree that the FCRA applies to
defendants in this matter. Plaintiff appears to argue that defendants are not furnishers of
information under 15 USC 1681s-2 because it was Risk Management Alternatives, Inc., and
Abacus Financial, both collection agencies, that actually supplied the consumer-reporting
agencies with information about plaintiff ’s account. This distinction does not compel a different
result in this case.
Plaintiff relies on Carney v Experian Information Solutions, Inc, 57 F Supp 2d 496 (WD
Tenn, 1999), to argue that Risk Management and Abacus Financial are the furnishers of
information in this case. The facts of that case do not support plaintiff ’s position. In Carney,
the plaintiff sued both Exxon and its collection company, G. E. Capital, for violating the FCRA
after someone falsely obtained an Exxon credit card in the plaintiff ’s name. Id. at 499. The
court considered the duties upon furnishers of information under the FCRA and held that both
Exxon and its collection agency were furnishers of information under the act:
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Section 1681s-2 of Title 15 of the FCRA is entitled: “Responsibilities of
furnishers of information to consumer reporting agencies.” That section identifies
two duties imposed upon such furnishers of information: the duty to provide
accurate information [§ 1681s-2(a)] and the duty to undertake an investigation
upon receipt of notice of dispute from a consumer reporting agency [§ 1681s2(b)]. Although the term “furnisher of information” is not defined within the
FCRA, common sense dictates that the term would encompass an entity such as
Exxon which transmits information concerning a particular debt owed by a
particular consumer to consumer reporting agencies such as Experian, Equifax,
MCCA, and Trans Union. Thus, Exxon and G. E. Capital are subject to the
requirements enumerated in 15 USC § 1681s-2. [Id. at 501-502.]
Therefore, under Carney, a business and its collection agency both may qualify as furnishers of
information under the FCRA. Plaintiff believed that Risk Management and Abacus Financial
were acting as defendants’ agents. Pursuant to Carney, the FCRA applies to businesses that
provide their collection agencies with credit information that is eventually supplied to consumerreporting agencies. Accordingly, plaintiff has failed to show that defendants were not furnishers
of information because they used the services of collection agencies.
Plaintiff also challenges the trial court’s ruling that her state law claim for defamation
was preempted by 15 USC 1681t(b)(1)(F), a section of the FCRA. This federal provision limits
the rights of states to adopt laws that conflict with the FCRA. Section 1681t provides, in
relevant part, as follows:
(a) In general
Except as provided in subsections (b) and (c) of this section, this
subchapter does not annul, alter, affect, or exempt any person subject to
the provisions of this subchapter from complying with the law of any State
with respect to the collection, distribution, or use of any information on
consumers, except to the extent that those laws are inconsistent with any
provision of this subchapter, and then only to the extent of this
inconsistency.
(b) General exceptions
No requirement or prohibition may be imposed under the laws of any
State-(1) with respect to any subject matter regulated under -***
(F) section 1681s-2 of this title, relating to the responsibilities of persons
who furnish information to consumer reporting agencies, except that this
paragraph shall not apply --
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(i) with respect to section 54A(a) of chapter 93 of the Massachusetts
Annotated Laws (as in effect on September 30, 1996); or
(ii) with respect to section 1785.25(a) of the California Civil Code (as in
effect on September 30, 1996). [Emphasis added.]
Section 1681t was added to the FCRA in 1996. Carlson v Trans Union, LLC, 259 F
Supp 2d 517, 520 (ND Texas, 2003). Before § 1681t was adopted, 15 USC 1681h(e) provided
consumers with a limited right to file state claims. That subsection provides as follows:
(e) Limitation of liability
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, any user of information, or any person who furnishes
information to a consumer reporting agency, based on information disclosed
pursuant to section 1681g, 1681h, or 1681m of this title, or based on information
disclosed by a user of a consumer report to or for a consumer against whom the
user has taken adverse action, based in whole or in part on the report except as to
false information furnished with malice or willful intent to injury such consumer.
[Emphasis added.]
After § 1681t(b)(1)(F) was adopted, it was not clear how that limitation on liability
affected § 1681h(e), and whether Congress intended to bar all state law claims implicating the
FCRA. Various approaches have been taken by other courts in an attempt to reconcile these
provisions. Two of which are summarized in Stafford v Cross Country Bank, 262 F Supp 2d
776, 785 (WD Ky, 2003):
The tension between these two provisions therefore results from the fact that §
1681h(e) permits state tort claims, but requires a higher standard of proof for
those in the nature of defamation, slander, or invasion of privacy, while §
1681t(b)(1)(F) prohibits all state claims covered by § 1681s-2. These inherent
contradictions have caused disagreement about how best to harmonize them. See
Riley [v Gen Motors Acceptance Corp], 226 F Supp 2d 1316 [SD Ala, 2002]
(noting the complete lack of circuit court authority on how to analyze the
preemption provisions and discussing the various approaches to analyzing the two
provisions). No circuit court has weighed in on this issue.
Under the more sweeping approach, some courts have held that the newer
section, § 1681t(b)(1)(F), completely preempts all state causes of action, and thus
also eliminates the possibility of any supplemental state claims against furnishers
of information. See, e.g., Hasvold [v First USA Bank], 194 F Supp 2d [1228,]
1239 [D Wyo, 2002] (dismissing state claims because “federal law under the
FCRA preempts plaintiff's claims against the defendant relating to it as a furnisher
of information”); Jaramillo [v Experian Info Solutions, Inc], 155 F Supp 2d
[356,] 362 [ED Pa 2001] (“The plain language of section 1681t(b)(1)(F) clearly
eliminated all state causes of action against furnishers or information, not just
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ones that stem from statutes that relate specifically to credit reporting”). The
logic in these cases is that because § 1681t(b)(1)(F) preempts “any subject matter
regulated under . . . section 1681s-2”—which addresses the responsibilities of
furnishers of credit information—Congress intended to preempt all state law
claims that bear any connection to furnishers of credit information. See
Jaramillo, 155 F Supp 2d at 361-62. Adopting this rule means that no state tort
claims are ever permissible against any furnisher of credit information.
Other courts hold that this preemption provision has a more limited scope.
See, e.g., Vazquez-Garcia v Trans Union De Puerto Rico, 222 F Supp 2d 150, 161
(D PR, 2002); Aklagi [v Nationscredit Financial Services Corp], 196 F Supp 2d
[1186,] 1194 [D Kan, 2002]. Under this approach the only state law claims
preempted are those relating to the obligations of furnishers of information once
they know, or have reason to know, about possible inaccuracies. That is, these
courts interpret § 1681t(b)(1)(F) as preempting only those claims that relate to the
actual language of § 1681s-2.
The Stafford Court gave several reasons for rejecting the argument that § 1681t(b)(1)(F)
preempts all state claims:
For one, to find that § 1681t(b)(1)(F) preempts all state tort claims would
extend that section well beyond its express terms. Section 1681t(b)(1)(F) simply
states that “no requirement or prohibition may be imposed under the laws of any
state . . . with respect to any subject matter regulated under . . . section 1681s-2 . .
. .” Section 1681s-2, in turn, explains the duties of furnishers of information to
provide accurate information, 15 USC § 1681s-2(a), and the obligations of
furnishers once they are notified of a dispute. 15 USC § 1681s-2(b). The Bank’s
argument, however, would have the Court also preempt all state law claims—
including those not regulated by § 1681s-2. The distinction is important because,
as this case illustrates, some state tort claims against furnishers of information
have nothing to do with the furnisher's correlation to a credit reporting agency.
Several cannons of statutory construction also suggest that Congress in
fact intended to preserve § 1681h(e) as it applied to furnishers of credit
information. First, where “Congress explicitly enumerates exceptions to a general
prohibition, additional exceptions are not to be implied in the absence of evidence
of a contrary legislative intent.” TRW, 534 US at 28; 122 S Ct. 447. In this case,
in § 1681t(a) Congress provided that states were free to enact laws regulating
consumer credit reporting. Congress then enumerated several exceptions to this
rule in § 1681t(b)(1), one of which was for instances where the subject matter the
state sought to regulate was already regulated by § 1681s-2. Importantly, §
1681s-2 says absolutely nothing about state common law causes of action, such as
those sounding in defamation or slander. Instead, it pertains to the process for
collecting information and what a furnisher must do once it is notified the
information it possesses is disputed. The most natural reading of § 1681t, then, is
that Congress implicitly excluded an exception pertaining to all state common law
claims against furnishers of information by explicitly only including the subject
matter regulated under § 1681s-2. See Leatherman v Tarrant County Narcotics
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Intelligence and Coordination Unit, 507 US 163, 168; 113 S Ct 1160; 122 L Ed
2d 517 (1993) (“Expressio unius est exclusio alterius.”).
Another well-known rule of statutory construction is that “a statute ought,
upon the whole, to be so construed that, if it can be prevented, no clause,
sentence, or word shall be superfluous, void, or insignificant.” TRW Inc v
Andrews, 534 US 19, 31; 122 S Ct 441; 151 L Ed 2d 339 (2001); see United
States v Menasche, 348 US 528, 538-539; 75 S Ct 513; 99 L Ed 615 (1955) (“It is
our duty to give effect, if possible, to every clause and word of a statute”). When
it enacted § 1681t(b)(1)(F), Congress neither made reference to nor expressly
repealed § 1681h(e). Moreover, the Court cannot assume in these circumstances
that a more recently enacted provision, such as § 1681t(b)(1)(F), amounts to an
implied repeal of the former—in this case § 1681h(e). In fact, an “implied repeal
will only be found where provisions in two statutes” are in “irreconcilable
conflict,” or where the latter act covers the whole subject of the earlier one and “is
clearly intended as a substitute.” Branch v Smith, 538 US 254; 123 S Ct 1429,
1441; 155 L Ed 2d 407 (2003). Neither is true here. The Court is able to
reconcile the two provisions; the entire subject matter discussed in §
1681t(b)(1)(F) does not cover the whole subject matter provided in § 1681h(e).
As such, the Court must assume § 1681h(e) still applies and was not repealed with
regard to furnishers of credit information.
Last, as a matter of public policy, the FCRA is most properly read as
harmonizing both preemption provisions. To be sure, because § 1681s-2
regulates the behavior of furnishers of credit information, a fair argument can be
made, as two other district courts have done, that any tort claims against those
furnishers affect the “subject matter” regulated therein. But, for all practical
purposes, adopting that approach makes § 1681s-2 limitless; states would lose any
and all power to regulate credit card companies. All state law tort claims against
companies like the Bank for behavior completely unrelated to either their
reporting function, or negligence in supplying information might be eliminated.
The FCRA generally and § 1681t(b)(1)(F) specifically were not intended to
broadly protect credit card companies. Rather, as its stated findings suggest in §
1681(a), Congress purported to expand consumer protection and not shrink it as
such a broad interpretation of § 1681s-2 would do. [Id. at 785-787; emphasis in
original.]
A third approach also exists which relies on the statutory language itself and the tenets of
statutory construction. In Carlson, supra at 521, and Jeffrey v Trans Union, LLC, 273 F Supp 2d
725, 727 (ED Va, 2003), the courts held that § 1681t(b)(1)(F) only applies to state statutory
regulation, while § 1681h(e) applies only to torts, i.e., claims based in state common law. The
Carlson Court stated:
Section 1681h(e) clearly applies to torts. The section specifically references “any
action or proceeding in the nature of defamation, invasion or privacy, or
negligence.” 15 USC 1681h(e). All claims in the (non- exclusive) list are torts.
Section 1681t(b)(1)(F) gives every indication of dealing only with state statutory
regulation. This is made yet more clear when you consider the two laws that are
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specifically excluded from Section 1681t(b)(1)(F)’s coverage. [Carlson, supra at
521; emphasis in original.]
The two laws the Carlson Court refers to are statutory laws from Massachusetts and California.1
15 USC 1681t(b)(1)(F)(i), (ii).
This Court finds that the approach adopted in Jeffrey and Carlson to be the most
persuasive. The conclusion that § 1681t(b)(1)(F) only applies to state statutory laws is buttressed
by the fact that § 1681t(d)(2) provides that subsections (b) does not apply “to any provision of
State law (including any provision of a State constitution) that-- (A) is enacted after January 1,
2004; (B) states explicitly that the provision is intended to supplement this subchapter; and (C)
gives greater protection to consumers than is provided under this subchapter.” [Emphasis
added.] Furthermore, § 1681t(a) explicitly states that “this subchapter does not annul, alter,
affect, or exempt any person subject to the provisions of this subchapter from complying with the
law of any State . . . .” Based on the clear language of § 1681t(a) and § 1681t(b)(1)(F), this
Court holds that § 1681t(b)(1)(F) only preempts causes of actions relating to the subject-matter
of § 1681s-2 brought pursuant to state statutory law.2 Therefore, the trial court erred in
dismissing plaintiff’s state common-law claim on the basis that it was preempted by
§ 1681t(b)(1)(F).
However, our analysis has not ended. We must now determine whether plaintiff’s
common-law claim of defamation is preempted by § 1681h(e), which provides qualified
immunity to furnishers of information, such as defendants, “except as to false information
furnished with malice or willful intent to injure such consumer.” In Count III of her complaint,
plaintiff alleges that “Defendants acted in a libelous, slanderous and defamatory manner in terms
of reporting and/or publishing false financial records of your Plaintiff.” Plaintiff further alleges
that she “was declined credit from two separate companies due to negligent reporting/publishing
and/or willful and wanton disregard as to reporting/publishing by Defendants of Plaintiff’s
financial record.” Because plaintiff has sufficiently alleged a cause of action for common-law
1
“Section 54A(a) of Chapter 93 of the Massachusetts Annotated Laws requires furnishers to
follow ‘reasonable procedures to ensure that the information reported to a consumer reporting
agency is accurate and complete’ and forbids furnishers to knowingly provide false information
to a consumer reporting agency. Likewise, section 1785.25(a) of the California Civil Code also
deals with inaccurate or incomplete information in a credit report and closely follows the
requirements of § 1681s-2.” Carlson, supra at 521.
2
We find it unnecessary to resolve the dispute regarding whether § 1681t(b)(1)(F) preempts state
claims based on a person furnishes inaccurate information to a consumer reporting agency before
and/or after the furnisher received notice of, or had reason to know about the dispute (the
“temporal approach”). We note, however, that it seems illogical to hold a furnisher of
information liable for furnishing inaccurate information before it had knowledge, or a reason to
know, that the information was inaccurate. Thus, the common-law/statutory law distinction and
the temporal approach could conceivably co-exist.
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defamation under § 1681h(e), the trial court erred in dismissing this claim for failure to state a
cause of action pursuant to MCR 2.116(C)(8).
Affirmed in part, reversed and remanded. We do not retain jurisdiction.
/s/ Stephen L. Borrello
/s/ Michael R. Smolenski
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