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The Superior Court of Pennsylvania Issues Opinion in Dietz V. Chase Home Finance, LLC, Clarifying Preemption of State Common Law Claims by Fair Credit Reporting Act

Apr 23 12

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. 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. 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.

A.G. Schneiderman Announces Major Lawsuit Against Nation's Largest Banks for Deceptive & Fraudulent Use of Electronic Mortgage Registry

Feb 3 12

Attorney General Eric T. Schneiderman has filed a lawsuit against several of the nation's largest banks charging that the creation and use of a private national mortgage electronic registry system known as MERS has resulted in a wide range of deceptive and fraudulent foreclosure filings in New York state and federal courts, harming homeowners and undermining the integrity of the judicial foreclosure process. The lawsuit asserts that employees and agents of Bank of America, J.P. Morgan Chase, and Wells Fargo, acting as "MERS certifying officers," have repeatedly submitted court documents containing false and misleading information that made it appear that the foreclosing party had the authority to bring a case when in fact it may not have. The lawsuit names JPMorgan Chase Bank, N.A., Bank of America Corporation, Wells Fargo Bank, National Association, as well as MERSCORP, Inc. and its subsidiary, Mortgage Electronic Registration Systems, Inc. The lawsuit further asserts that the MERS System has effectively eliminated homeowners' and the public's ability to track property transfers through the traditional public records system. Instead, this information is now stored only in a private database - which is plagued with inaccuracies and errors - over which MERS and its financial institution members exercise sole control. Additional defendants include BAC Home Loans Servicing, LP, Chase Home Finance, LLC, EMC Mortgage Corporation, and Wells Fargo Home Mortgage, Inc.

Keller Rohrback L.L.P. Files Class Actions Lawsuits Against SunTrust Mortgage, Inc., SunTrust Banks, Inc., Chase Home Finance LLC and JPMorgan Chase Bank, N.A

May 11 11

Keller Rohrback L.L.P. announced the filings of two class action lawsuits in the United States District Court for the Southern District of California. One case was filed against SunTrust Mortgage, Inc. and SunTrust Banks, Inc. The other case was filed against Chase Home Finance LLC and JPMorgan Chase Bank, N.A. The complaints were filed on behalf of California homeowners who have pursued mortgage loan modifications with SunTrust or Chase, and allege that the Defendants violated California consumer protection laws and breached contracts and other duties by, among other things. Keller Rohrback's investigation of the practices alleged in the complaints is ongoing, particularly regarding homeowners whose houses were sold in foreclosure sales after they tried to have their loans modified by SunTrust or Chase.