Premium Mortg. Corp. v. Equifax, Inc.

Citations: 583 F.3d 103; 2009 WL 3163225Docket: 08-5317-cv

Court: Court of Appeals for the Second Circuit; October 14, 2009; Federal Appellate Court

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Premium Mortgage Corp. initiated a class action lawsuit against several consumer credit reporting agencies (Equifax Inc., Trans Union LLC, Experian Information Solutions, Inc., and Equifax Information Services, LLC) and Credit Plus, Inc., concerning the sale of mortgage 'trigger leads' to third-party lenders. The United States District Court for the Western District of New York dismissed the claims against the credit reporting agencies on grounds of preemption, allowing for a partial appeal under Rule 54(b). The case revolves around how trigger leads, generated when consumers apply for loans, are sold to other lenders, leading to competition for clients. Plaintiff claims these leads represent proprietary customer information, as they are not commonly known in the industry and require significant effort to obtain. The issue at hand includes the legality of prescreened consumer reports that incorporate trigger leads, which the plaintiff argues undermines their business by allowing competing lenders access to targeted consumer information.

Plaintiff filed nine state-law claims against the Credit Bureau defendants, including misappropriation of trade secrets, fraud, unfair competition, tortious interference, breach of contract, and unjust enrichment. The defendants sought dismissal, claiming the Fair Credit Reporting Act (FCRA) preempts these claims and that the complaint fails to state a viable cause of action. Judge Telesca granted the dismissal, ruling that the FCRA expressly preempts all state claims related to consumer report prescreening. The appellate court reviews preemption de novo, affirming that state powers are not overridden by federal law unless Congress's intent is clear. The relevant FCRA provision, 15 U.S.C. § 1681t(b)(1)(A), prohibits state requirements regarding prescreened consumer reports, which includes the trigger leads obtained by third-party lenders from the Credit Bureau. Plaintiff's claims, which are linked to the prescreening process, are thus preempted. The court found that the FCRA's language does not differentiate between statutory and common-law claims, meaning common-law duties related to consumer reports must yield to federal law. Consequently, the court upheld the dismissal of the plaintiff's claims for misappropriation of trade secrets, unfair competition, and unjust enrichment.

Plaintiff argues that its claims for breach of contract and tortious interference with contract are not preempted as they rely on contractual obligations, referencing Cipollone. The plaintiff contends that a common-law remedy for a voluntarily undertaken contractual commitment should not be seen as a state law requirement. Additionally, the plaintiff claims its fraud allegation is exempt from preemption because it is based on a general duty against fraudulent statements. However, the Credit Bureau defendants assert that these claims are inadequately pleaded.

The court agrees with the defendants, stating it will not address the preemption argument and affirms the lower court's decision based on the inadequacy of the pleadings. Under New York law, tortious interference with a contract requires proof of a valid contract and intentional procurement of its breach without justification. The plaintiff fails to establish the Credit Bureau defendants' obligation to maintain confidentiality regarding trigger leads and lacks allegations showing intentional harm or improper means.

Furthermore, the tortious interference with prospective economic relations claim is weak, lacking necessary allegations. The seventh cause of action is also flawed, as a non-party to a contract cannot enforce it absent clear intent for third-party enforcement. The plaintiff's allegations are deemed conclusory and implausible. Lastly, the fraud claim is inadequately pleaded, as New York law necessitates specific elements including misrepresentation, reliance, and injury, and federal rules require particularity in pleading fraud claims.

Plaintiff did not adequately identify any misrepresentations or material omissions by the Credit Bureau defendants, nor did the complaint establish a basis for inferring justifiable reliance. Conclusory allegations without factual support are deemed insufficient, as established in ATSI Commc'ns, Inc. v. Shaar Fund, Ltd. Consequently, the court affirms the dismissal of the plaintiff's fraud claim due to inadequate pleading. Furthermore, the fourth, sixth, and seventh causes of action merely present unsubstantiated accusations against the defendants, which do not meet the criteria for a valid claim as articulated in Ashcroft v. Iqbal. Thus, these claims are also dismissed on similar grounds. The court reviewed the plaintiff's additional arguments and found them meritless, affirming the district court's order from September 30, 2008. Notably, Credit Plus did not join the Credit Bureau defendants' motion to dismiss and is not part of this appeal, with claims against it still pending. Additionally, the court clarified that any perceived conflict between certain statutory provisions is irrelevant to this appeal. Finally, the court commented on the nature of tortious interference claims, indicating that they impose a state-law requirement distinct from enforcing mutual contractual promises.