In Vartanian v. Portfolio Recovery Associates, LLC, 2013 WL 877863 (C.D.Cal. 2013), Judge Otis Wright III addressed a litany of FCRA and FDCPA claims brought by the Kaas Law Group.  Judge Wright held that a FCRA Plaintiff need not plead that its dispute to the CRA was not frivilous; i.e. non-frivilousness is not an element of a FCRA claim.

Contrary to Portfolio’s contention, Vartanian was not required to allege that the CRAs determined his dispute to be nonfrivolous. While a CRA may terminate an investigation if it determines that a dispute is frivolous, § 1681 s–2(a)(8)(F), a CRA is not required to make a preliminary finding of nonfrivolousness. ¶  The frivolous-dispute exception of 15 U.S.C. § 1681s–2(a)(8)(F) almost identically mirrors the exception in 15 U.S.C. § 1681i(a) (3), the section that establishes a CRA’s reinvestigation duties. The latter section uses permissive, not mandatory, language to allow CRAs to terminate a reinvestigiation “if the agency reasonably determines that the dispute by the consumer is frivolous or irrelevant.” Nowhere does FCRA require a CRA to inquire into the validity of a dispute prior to reinvestigating the claim. See § 1681i(a)(3). ¶  To the extent that Portfolio relies upon Roybal v. Equifax, 405 F.Supp.2d 1177 (E.D.Cal.2005), the Court declines to follow the district court’s reading of FCRA in that case. In Roybal, the court cited to § 1681i(a)(3) in support of its holding that a CRA has an “obligation to investigate whether the claim is frivolous or irrelevant.” Id. at 1180. But as discussed above, this Court finds that CRAs have no obligation under § 1681i(a)(3) to preliminarily assess a consumer dispute’s viability.

Judge Wright found it sufficient for a FCRA plaintiff to plead on information and belief that the CRAs forwarded the consumer’s dispute to the furnisher.

Portfolio correctly states that Vartanian must prove that the CRAs contacted Portfolio to have an actionable claim against Portfolio under § 1681s–2(b). It is not enough for the purpose of Vartanian’s § 1681s–2(b) claims that he allegedly contacted Portfolio directly three times. While furnishers do have a duty to conduct a reasonable investigation of disputed information upon direct notice from a consumer under FCRA’s implementing regulations, 16 C.F.R. § 660.4(e), consumers like Vartanian cannot sue for alleged violations of the regulations promulgated under 15 U.S.C. § 1681s–2(a)(8). § 1681s–2(c)(1). ¶  But Vartanian did allege “on information and belief” that the CRAs contacted Portfolio about Vartanian’s dispute of the account in derogatory status. (FAC ¶ 18.) The Court is mindful that Vartanian has yet to benefit from the Federal Rules’ liberal discovery procedures. He cannot know for sure the extent of communications, if any, between the CRAs and Portfolio. Since the Court must accept the allegations in the Complaint as true at this stage, the Court finds that Vartanian did adequately pleaded § 1681 s–2(b) claims against Portfolio. ¶ The Court therefore DENIES Portfolio’s Motion to Dismiss with respect to Vartanian’s first and second claims.

Judge Wright found that there can be no overshadowing or debt validation claim in the absence of any communications between the debtor and the debt collector.

Even assuming the account is a “debt” for purposes of the FDCPA, Vartanian does not contend that Portfolio ever contacted him. Indeed, it is Portfolio’s lack of communication that irked Vartanian. There was then no “initial communication” from Portfolio sufficient to trigger the 15 U.S.C. § 1692g(a)’s notice requirement. Neither were there any debt-collection practices to stop under § 1692g(b). And by that argument, there were no false, deceptive, or unconscionable debt-collection practices by Portfolio within the meaning of §§ 1692e(2), 1692e(8), and 1692f. ¶  Since section 1788.17 of the RFDCPA merely recapitulates a debt collector’s obligations under FDCPA, Vartanian’s state-law claim fails for the same reasons.

Judge Wright found that Plaintiff’s libel claim was pre-empted by FCRA – malice or not.

Portfolio argues that 15 U.S.C. § 1681t(b)(1)(F) preempts Vartanian’s defamation-by-libel claim. ¶  When Congress amended FCRA in 1996, it expressly preempted any state laws that imposed any “requirement or prohibition” on, among others, any subject matter regulated under § 1681s–2. § 1681t(b)(1) (F). But Congress did not repeal preexisting § 1681h(e), which limits defamation claims brought under §§ 1681n or 1681o to those where the allegedly false information was “furnished with malice or willful intent to injure” the consumer. The two sections provide no clear answer on whether defamation claims against furnishers are still actionable. ¶  The Ninth Circuit hypothecated that although “ § 1681t(b)(1)(F) appears to preempt all state-law claims based on a creditor’s responsibilities under § 1681s–2, § 1681h(e) suggests that defamation claims can proceed against creditors as long as the plaintiff alleges falsity and malice.” Gorman v. Wolpoff & Abramson, LLP, 584 F.3d 1147, 1166 (9th Cir.2009). But the court left resolution of the issue for another day. Id. at 1167. ¶  The United States Supreme Court has interpreted the phrase “no requirement or prohibition” several times with respect to preemption provisions in other federal statutes. Interpreting the term in the Public Health Cigarette Smoking Act of 1969, the Supreme Court reasoned that the “phrase ‘[n]o requirement or prohibition’ sweeps broadly and suggests no distinction between positive enactments and common law; to the contrary, those words easily encompass obligations that take the form of common law rules.” Cipollone v. Liggett Grp., Inc., 505 U.S. 504, 521, 112 S.Ct. 2608, 120 L.Ed.2d 407 (1992) (plurality opinion). The Court subsequently confirmed this reasoning at least twice. Riegel v. Medtronic, Inc., 552 U.S. 312, 324, 128 S.Ct. 999, 169 L.Ed.2d 892 (2008); Medtronic, Inc. v. Lohr, 518 U.S. 470, 510–11, 116 S.Ct. 2240, 135 L.Ed.2d 700 (1996). ¶  Given the Supreme Court’s repeated conclusion that “no requirement or prohibition” precludes common-law claims in the regulated fields, the Court finds that Vartanian’s defamation-by-libel claim is preempted by FCRA, § 1681t(b)(1)(F). It is unclear why Congress spared § 1681h(e) when it took its pruning shears to statecredit-reporting law in 1996. But Congress trimmed dexterously, specifically exempting state laws such as California Civil Code section 1785.25(a) from preemption. § 1681t(b) (1)(F)(ii). To think that Congress clumsily left behind a Trojan horse that a litigant could employ to penetrate § 1681t and destroy FCRA’s delicately crafted preemption scheme is irrational.