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Banga v. Allstate Insurance Co.


March 31, 2010



Plaintiff brings claims against defendant Allstate Insurance Company concerning plaintiff's homeowner's insurance policy. Because plaintiff is proceeding pro se, this case was assigned to a magistrate judge under Local Rule 302(c)(21) (formerly L.R. 72-302(c)(21)) and 28 U.S.C. § 636(b)(1).

Defendant moved to dismiss plaintiff's claims. Plaintiff opposed this motion and moved for leave to file an amended complaint. On September 22, 2009, the magistrate judge filed findings and recommendations regarding these two motions. These were served on the parties and contained notice that any objections to the findings and recommendations were to be filed within ten days. Defendant filed objections on October 9, 2009, and they were considered by the undersigned.*fn1 In addition, plaintiff prematurely filed a "Third Amended Complaint" on October 21, 2009, which defendant moved to dismiss on November 9, 2009. On December 28, 2009, plaintiff acknowledged that the Third Amended Complaint was filed prematurely and therefore moved to withdraw that amended complaint. Because the Third Amended Complaint was filed without leave to amend, plaintiff's motion to withdraw that complaint will be granted and defendant's motion to dismiss that complaint will be denied as moot.

This court reviews de novo those portions of the proposed findings of fact to which objection has been made. 28 U.S.C. § 636(b)(1); McDonnell Douglas Corp. v. Commodore Business Machines, 656 F.2d 1309, 1313 (9th Cir. 1981). As to any portion of the proposed findings of fact to which no objection has been made, the court assumes its correctness and decides the motions on the applicable law. See Orand v. United States, 602 F.2d 207, 208 (9th Cir. 1979). The magistrate judge's conclusions of law are reviewed de novo. See Britt v. Simi Valley Unified Sch. Dist., 708 F.2d 452, 454 (9th Cir. 1983).

The court adopts the magistrate judge's findings and recommendations in full, except as they pertain to the unfair competition law ("UCL") claim.*fn2 The magistrate judge concluded that the UCL claim failed insofar as it was predicated on violations of 15 U.S.C. §§ 1681m(a) and 1681s-2(a), because these statutes did not themselves provide a private cause of action. Conversely, the magistrate judge concluded that the UCL claim could proceed insofar as it was predicated on a violation of 15 U.S.C. § 1681s-2(b), because this section did provide a cause of action. Under California law, the mere presence or absence of a private right of action in a statute does not determine whether a violation of that statute may serve as the predicate of a UCL claim. The court nonetheless concludes that the UCL claim fails as to all three predicates.

I. Discussion

Plaintiff's first amended complaint ("FAC") alleges that defendant violated the federal Fair Credit Reporting Act ("FCRA"), 15 U.S.C. § 1681m(a),*fn3 by taking an action adverse to plaintiff on the basis information contained in a consumer report without providing notice to plaintiff. FAC ¶¶ 11-14. The FAC alleges that this same conduct violated California's Unfair Competition Law, Cal. Bus. & Prof. Code § 17200 ("UCL").

Plaintiff's proposed second amended complaint ("SAC") alleges that defendant violated the FCRA by making false reports to a credit reporting agency, SAC ¶¶ 15-19, and by failing to notify plaintiff that defendant had reported negative information to a credit reporting agency, SAC ¶ 21. These claims implicate two other provisions of the FCRA, respectively, 15 U.S.C. §§ 1681s-2(a) and (b). The SAC alleges that this conduct also violated California's Unfair Competition Law. The SAC further alleges various common law claims, violation of the California Consumer Credit Reporting Act, and violation of California Civil Code § 1785.26(b)-(c) (itself a section of the California Consumer Credit Reporting Act).

The court adopts the magistrate judge's findings and recommendations regarding all but the unfair competition law claim. To summarize those recommendations, the FRCA claims seeking to enforce 15 U.S.C. §§ 1681m(a) and 1681s-2(a) fail because FCRA does not provide a private right of action for enforcement of these claims. Plaintiff adequately alleges claims under 15 U.S.C. § 1681s-2(b) and California Civil Code § 1785.25(a). The remaining non-UCL claims fail because plaintiff has not adequately alleged that defendant violated an obligation imposed upon it.

Plaintiff's UCL claim must proceed, if at all, on the basis of conduct that is "unlawful" because it is in violation of one of the above statutes, as explained in findings and recommendations. Conduct that is prohibited by a statute may be actionable under the UCL even if the predicate statute does not provide a private right of action. Stop Youth Addiction, Inc. v. Lucky Stores, Inc., 17 Cal. 4th 553, 561 (1998) (rejecting the argument that plaintiff "should not be permitted to use the UCL to obtain relief, indirectly, for violation of an underlying statute . . . that [plaintiff] is not authorized to enforce directly."), id. at 566 (rejecting the argument that "a private UCL claim is barred whenever the predicate statute fails to afford a private right of action."). Thus, the mere fact that the FCRA does not provide a private right of action for enforcement of 15 U.S.C. §§ 1681m(a) and 1681s-2(a) does not preclude plaintiff from bringing a UCL claim predicated on violation of those sections.*fn4

Nonetheless, the UCL cannot be used to "'plead around' [an] absolute bar[] to relief contained in other possible causes of action." Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co., 20 Cal. 4th 163, 182 (1999). Insofar as plaintiff's UCL claim is predicated on a violation of 15 U.S.C. § 1681m(a), 15 U.S.C. § 1681m(h)(8)(B) is a "bar" to relief. Insofar as the UCL claim is predicated on violations of 15 U.S.C. §§ 1681s-2(a) and (b), the claim is preempted by 15 U.S.C. § 1681t(b)(1)(F).

A. Section 1681m(a)

Section 1681m, relating to "requirements on users of consumer reports," contains the following paragraph:

(8) Enforcement.

(A) No civil actions. Sections 616 and 617 [15 U.S.C. §§ 1681n and 1681o] shall not apply to any failure by any person to comply with this section.

(B) Administrative enforcement. This section shall be enforced exclusively under section 621 [15 U.S.C. § 1681s] by the Federal agencies and officials identified in that section.

15 U.S.C. § 1681m(h)(8). Subparagraph A does not bar plaintiff's UCL claim. Although the subparagraph is titled "no civil actions," titles are not themselves controlling. Fla. Dep't of Revenue v. Piccadilly Cafeterias, Inc., ___ U.S. ___, ___, 128 S.Ct. 2326, 2336 (2008). The body of the subparagraph merely provides that the private rights of action provided by those two sections of the Fair Credit Reporting Act do not permit enforcement of section 1681m. Under Cel-Tech Communications, 20 Cal. 4th at 182, a statute's failure to provide a private right of action is not itself an "absolute bar to suit" for purposes of an unfair competition claim.

Subparagraph B, however, is a bar to suit. Rather than merely describing the scope of particular rights of action, this subparagraph provides that administrative enforcement is the sole enforcement mechanism. Under Cel-Tech Communications, this is a bar to private suit. Accordingly, as a matter of state law, violation of 15 U.S.C. § 1681m cannot serve as the predicate for a UCL claim. Because this claim fails as a matter of California law, the court does not address whether a UCL claim predicated on 15 U.S.C. § 1681m(a) would be preempted as a matter of federal law.

B. FCRA Preemption of Claims Enforcing section 1681s-2

The remaining possible predicates for plaintiff's UCL claim are violations of 15 U.S.C. §§ 1681s-2(a) and (b). The only possible "bar" to this use of these predicates is preemption under the FCRA. Accordingly, the court analyzes this issue from the preemption perspective.

"In general, the FCRA does not preempt any state law 'except to the extent that those laws are inconsistent with any provision of this subchapter, and then only to the extent of the inconsistency.'" Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147, 1166 (9th Cir. 2009) (quoting 15 U.S.C. § 1681t(a)). Two subsections provide exceptions to this general rule, explicitly preempting certain types of state laws. See generally Silvas v. E*Trade Mortg. Corp., 514 F.3d 1001, 1004 (9th Cir. 2008) (citing Bank of Am. v. City and County of S. F., 309 F.3d 551, 558 (9th Cir. 2002)) (discussing explicit preemption). One exception lies in section 1681t(b), which specifically applies to subjects regulated by sections 1681s-2(a) and (b), the remaining possible predicates for plaintiff's UCL claim. Under this section,

No requirement or prohibition may be imposed under the laws of any State . . . with respect to any subject matter regulated under ...

(F) section 623 [15 USCS § 1681s-2], relating to the responsibilities of persons who furnish information to consumer reporting agencies, except that this paragraph shall not apply--

(ii) with respect to section 1785.25(a) of the

California Civil Code (as in effect on the date of enactment of the Consumer Credit Reporting Reform Act of 1996)

15 U.S.C. § 1681t(b)(1).*fn5 Numerous district courts have held that this section "totally preempts 'all state statutory and common law causes of action which fall within the conduct proscribed by § 1681s-2.'" Forester v. Pa. Higher Educ. Assistance Agency, 2009 U.S. Dist. LEXIS 107372, *16-17 (C.D. Cal. Oct. 30, 2009) (quoting Buraye v. Equifax, 625 F. Supp. 2d 894, 899 (C.D. Cal. 2008)); see also Mora v. Harley-Davidson Credit Corp., 2009 U.S. Dist. LEXIS 61851 (E.D. Cal. July 7, 2009), Howard v. Blue Ridge Bank, 371 F. Supp. 2d 1139, 1143 (N.D. Cal. 2005) (UCL claim predicated on 15 U.S.C. § 1681s-2 preempted), Jaramillo v. Experian Info. Solutions, Inc., 155 F. Supp. 2d 356, 362 (E.D. Pa. 2001) (Pennsylvania statute preempted to the extent it would allow private enforcement of 15 U.S.C. § 1681s-2). In a passage in Gorman explicitly demarcated as dicta, the Ninth Circuit observed that "§ 1681t(b)(1)(F) appears to preempt all state law claims based on a creditor's responsibilities under § 1681s-2," although the court held that a separate FCRA preemption provision, section 1681h(e), "suggests that defamation claims can proceed against creditors as long as the plaintiff alleges falsity and malice." Gorman, 552 F.3d at 1026.

It appears to this court that the issue is more complex than these opinions have recognized. In Cipollone v. Liggett Group, the court interpreted a statute providing that "No requirement or prohibition based on smoking and health shall be imposed under State law . . . ." 505 U.S. 504, 515 (1992) (quoting the Public Health Cigarette Smoking Act of 1969 § 5(b)). The plurality opinion held that state law merely imposing "liability" was not preempted, distinguishing imposition of "liability" from imposition of a "requirement or prohibition." Id. at 526 n.24. (Stevens, J., joined by Rehnquist, C.J. and White and O'Connor, JJ.). This principle implies that insofar as the UCL is used merely to provide for enforcement of pre-existing obligations, it is not preempted by the FCRA.

This aspect of Cipillone plurality's opinion has not been clearly embraced by subsequent decisions. The Court has held that state laws enforcing federal requirements are not preempted by various other preemption clauses, but the text of those statutes preempted state law only to the extent that it imposed requirements "in addition to or different from" the federal obligations. See, e.g., Riegel v. Medtronic, Inc., 552 U.S. 312, 316, 322 (2008) (Medical Device Amendments to the Food, Drug, and Cosmetics Act, 21 U.S.C. § 360k(a)), Bates v. Dow Agrosciences L.L.C., 544 U.S. 431, 439 (2005) (Federal Insecticide, Fungicide, and Rodenticide Act ("FIFRA"), 7 U.S.C. § 137v(b)). See also Premium Mortg. Corp. v. Equifax Info. Servs., LLC, 583 F.3d 103, 106 (2d Cir. 2009) (per curiam) (noting that 15 U.S.C. § 1681t(b) was analogous to the statutes at issue in Reigel and Cipillone). This "in addition to or different from" language is absent from the FCRA. Indeed, while the FCRA explicitly saves state law that is not "inconsistent" with the FCRA, this savings provision does not apply to subjects regulated under 15 U.S.C. § 1681s-2.

In this case, the court declines to read this footnote from Cipillone broadly. The Ninth Circuit has implied that the FCRA preempts plaintiff's UCL claim, and district courts have uniformly found claims of this type to be preempted, although none have discussed this precise issue. Accordingly, the court concludes that plaintiff's UCL claim is preempted insofar as it is predicated on violations of 15 U.S.C. §§ 1681s-2(a) and (b), and therefore that the UCL claim fails in its entirety.

II. Conclusion

For the reasons stated above, it is ORDERED that:

1. The proposed Findings and Recommendations filed September 22, 2009, Dckt. No. 29, are ADOPTED IN PART. The court DECLINES to adopt these Findings and Recommendations as they pertain to plaintiff's Unfair Competition Law claim, and the court ADOPTS the remainder;

2. Defendant's Motion to Dismiss, Dckt. No. 13, is granted;

3. Plaintiff's First Amended Complaint is dismissed with leave to amend;

4. Plaintiff's motion for leave to file a Second Amended Complaint, Dckt. No. 22, is granted in part and denied in part. Plaintiff may amend to add claims for violation of California Civil Code § 1785.26(a) and 15 U.S.C. § 1681s-2(b).

5. Plaintiff's Motion to Withdraw the "Third Amended Complaint," Dckt. No. 37, is granted;

6. Defendant's Motion to Dismiss plaintiff's "Third Amended Complaint," Dckt. No. 33, is denied as moot; and

7. Plaintiff is directed to file, within 30 days of the filing date of this order, a Fourth Amended Complaint setting forth only those claims identified in the Findings and Recommendations, without the addition of any new claims. In addition, plaintiff shall attach to her Fourth Amended Complaint all reports or documents upon which she relies, including but not limited to all pertinent credit reports, notices of adverse action, insurance premium assessments, and correspondence with defendant Allstate.


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