Opinion
C.A. 3:23-2755-JFA-PJG 3:23-2757-JFA-PJG 3:23-2758-JFA-PJG 3:23-2760-JFA-PJG
08-15-2023
Richard A. McKnight, Jr., Plaintiff, v. Experian, Defendant. Richard A. McKnight, Jr., Plaintiff, v. Experian, Defendant. Richard A. McKnight, Jr., Plaintiff, v. Experian, Defendant. Richard A. McKnight, Jr., Plaintiff, v. Experian, Defendant.
REPORT AND RECOMMENDATION
PAIGE J. GOSSETT UNITED STATES MAGISTRATE JUDGE
Plaintiff Richard A. McKnight, Jr., a self-represented litigant, filed these lawsuits in the Richland County Magistrate's Court against Defendant Experian, a credit reporting agency, raising state law claims arising from purported inaccuracies in McKnight's credit report. Experian removed the actions to this court based on federal question jurisdiction, arguing that McKnight's claims are preempted by the Fair Credit Reporting Act, 15 U.S.C. § 1681, et seq. This matter is before the court pursuant to 28 U.S.C. § 636(b) and Local Civil Rule 73.02(B)(2) (D.S.C.) for a Report and Recommendation on McKnight's motions to remand the cases to state court. The motions are fully briefed. Having reviewed the record presented and the applicable law, the court concludes that the court lacks subject matter jurisdiction over these cases, McKnight's motions should be granted, and these cases should be remanded to the Richland County Magistrate's Court.
(C/A No. 23-2755, ECF No. 14; C/A No. 23-2757, ECF No. 14; C/A No. 23-2758, ECF No. 13; C/A No. 23-2760, ECF No. 14.)
In light of the court's recommendation, Experian's motion to consolidate these cases should be denied. (C/A No. 23-2755, ECF No. 5.)
BACKGROUND
In these cases, McKnight alleges that Experian failed to correct false credit information on McKnight's credit report when asked. McKnight asserts state law causes of action for violations of the South Carolina Unfair Trade Practices Act (“SCUTPA”), SC Code. §§ 39-5-10, et. seq.; negligent misrepresentation; defamation; civil conspiracy; and fraudulent misrepresentation. McKnight asserts only one of the common law claims in each case, but asserts the same SCUTPA claim in each case. In each case, McKnight seeks damages of $7,500.
DISCUSSION
A. Applicable Standard
Federal courts are courts of limited jurisdiction, “constrained to exercise only the authority conferred by Article III of the Constitution and affirmatively granted by federal statute.” In re Bulldog Trucking, Inc., 147 F.3d 347, 352 (4th Cir. 1998); see also Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377 (1994). The burden of establishing the court's jurisdiction rests with the party asserting jurisdiction. Kokkonen, 511 U.S. at 377 (citing McNutt v. Gen. Motors Acceptance Corp. of Indiana, 298 U.S. 178, 183 (1936)). “Removal statutes, in particular, must be strictly construed, inasmuch as the removal of cases from state to federal court raises significant federalism concerns.” Barbour v. Int'l Union, 640 F.3d 599, 605 (4th Cir. 2011) (en banc) (abrogated in part on other grounds by statute) (citing Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 108-09 (1941)). “Doubts about the propriety of removal should be resolved in favor of remanding the case to state court.” Id. (citing Dixon v. Coburg Dairy, Inc., 369 F.3d 811, 816 (4th Cir. 2004)).
A defendant may remove any civil action brought in a state court of which the federal district court has original jurisdiction, 28 U.S.C. § 1441(a); but the court must remand the case at any time before the final judgment if it appears that the federal court lacks subject matter jurisdiction, 28 U.S.C. § 1447(c); Ellenburg v. Spartan Motors Chassis, Inc., 519 F.3d 192, 196 (4th Cir. 2008). The United States Supreme Court has commanded that, when considering jurisdiction over a removed case, federal courts must “scrupulously confine their own jurisdiction to the precise limits which the statute has defined.” Shamrock Oil & Gas Corp. v. Sheets, 313 U.S. 100, 109 (1941) (internal quotation marks and citation omitted). In addition, “[r]emoval statutes must be strictly construed against removal,” Scott v. Greiner, 858 F.Supp. 607, 610 (S.D. W.Va. 1994), and a federal court must “resolve all doubts about the propriety of removal in favor of retained state court jurisdiction.” Marshall v. Manville Sales Corp., 6 F.3d 229, 232 (4th Cir. 1993).
Where removal is challenged, the defendant bears the burden of establishing jurisdiction by a preponderance of the evidence. See Mulcahey v. Columbia Organic Chems. Co., Inc., 29 F.3d 148, 151 (4th Cir. 1994); Chau v. Air Cargo Carriers, LLC, 425 F.Supp.3d 658, 661 (S.D. W.Va. 2019). The court must resolve the issue by reference to the complaint, notice of removal, and state court record at the time the notice of removal was filed, and the court may consider evidence on issues of fact. See 14C Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 3739 (Rev. 4th ed. Oct. 2020); see also Sherr v. S.C. Elec. & Gas Co., 180 F.Supp.3d 407, 413 n.2 (D.S.C. 2016) (“On a motion to remand for lack of subject matter jurisdiction, the court may consider materials outside of the complaint including documents appended to a notice of removal or a motion to remand that convey information essential to the court's jurisdictional analysis and may assume the truth of facts raised in the complaint that are non-jurisdictional.”) (internal alterations omitted) (quoting BGC Partners Inc. v. Avison Young (Canada) Inc., C/A No. 2:15-02057-DCN, 2015 WL 7458593, at *1 n.2 (D.S.C. Nov. 24, 2015)).
Further, while the federal court is charged with liberally construing a complaint filed by a pro se litigant to allow the development of a potentially meritorious case, see, e.g., Erickson, 551 U.S. 89, the requirement of liberal construction does not mean that the court can ignore a clear failure in the pleadings to allege facts which set forth a federal claim, nor can the court assume the existence of a genuine issue of material fact where none exists. Weller v. Dep't of Soc. Servs., 901 F.2d 387 (4th Cir. 1990).
B. McKnight's Motion to Remand
McKnight argues the court lacks federal question jurisdiction over these actions because the complaints raise only state law causes of action. Federal question jurisdiction requires the plaintiff to show that the case is one “arising under the Constitution, laws, or treaties of the United States.” 28 U.S.C. § 1331. McKnight's allegations do not assert that Experian has violated a federal statute or constitutional provision, nor is any source of federal question jurisdiction otherwise evident from the face of the pleading. Experian concedes as much, but argues that McKnight's claims are preempted by federal law-the Fair Credit Reporting Act-and therefore, the court has federal question jurisdiction. The court disagrees.
And Experian does not assert that the court has diversity jurisdiction. (Def.'s Resp. Opp'n, ECF No. 17 at 12.)
Under the well-pleaded complaint rule, “[s]tate law complaints usually must stay in state court when they assert what appear to be state law claims.” Lontz v. Tharp, 413 F.3d 435, 440 (4th Cir. 2005). The well-pleaded complaint rule applies to the original jurisdiction of the district courts as well as to their removal jurisdiction, and “a plaintiff may avoid federal jurisdiction by exclusive reliance on state law in pleading its case.” Rosciszewski v. Arete Assocs., Inc., 1 F.3d 225, 231 (4th Cir. 1993) (quoting Caterpillar Inc. v. Williams, 482 U.S. 386, 392 (1987)). A narrow exception to this rule is the doctrine of complete preemption, which provides that “if the subject matter of a putative state law claim has been totally subsumed by federal law-such that state law cannot even treat on the subject matter-then removal is appropriate.” Lontz, 413 F.3d at 439-40. As explained by the United States Court of Appeals for the Fourth Circuit:
[W]hen complete preemption exists, there is no such thing as the state action since the federal claim is treated as if it appears on the face of the complaint because it effectively displaces the state cause of action. Complete preemption thus transforms the plaintiff's state-law claims into federal claims. Since the complaint
is then understood to state a federal question, the well-pleaded complaint rule is satisfied, thereby justifying removal under § 1441(b).Id. at 441 (internal quotation marks, citations, and alterations omitted).
Complete preemption is rare, but it is a jurisdictional inquiry that provides defendants a way to remove cases to federal court. Skidmore v. Norfolk S. Ry. Co., 1 F.4th 206, 212 (4th Cir. 2021) (stating that the Supreme Court has thus far found only three federal statutes that completely preempt state law-the National Bank Act, the Labor Management Relations Act, and the Employee Retirement and Income Security Act). And complete preemption should not be confused with “ordinary preemption,” which is merely a defense against a claim's merit that does not provide a basis for removal. Skidmore, 1 F.4th at 212; see also Lontz, 413 F.3d at 441 (“Even if preemption forms the very core of the litigation, it is insufficient for removal.”). “A preemption defense therefore has to be determined by a state court if the action is not removable for any other reason.” 14C Charles Alan Wright & Arthur R. Miller, Federal Practice & Procedure § 3722 (Rev. 4th ed. Apr. 2023).
The Fourth Circuit has not yet decided whether the Fair Credit Report Act completely preempts state law, but courts within this circuit uniformly hold that it does not. See Rule v. Ford Receivables, Inc., 36 F.Supp.2d 335, 339 (S.D. W.Va. 1999); Swecker v. Trans Union Corp., 31 F.Supp.2d 536, 540 (E.D. Va. 1998); see also Hunter v. Background Investigation Bureau, LLC, C/A No. 1:19-CV-115-MOC-WCM, 2019 WL 2722187, at *2 (W.D. N.C. June 28, 2019) (citing Swecker, 31 F.Supp.2d at 538); Cochran v. Newrez LLC, C/A No. 2:21-cv-00626, 2022 WL 1600536, at *3 (S.D. W.Va. May 19, 2022) (collecting cases). Also, in analyzing the statutory scope of the act, courts in this district have uniformly held that the Fair Credit Reporting Act preempts only state statutory causes of action and some common law causes of action, see Barnhill v. Bank of Am., N.A., 378 F.Supp.2d 696, 703-04 (D.S.C. 2005); see also Crowe v. United Cmty. Bank, C/A No. 8:20-cv-1048-TMC, 2022 WL 18584370, at *4 (D.S.C. Jan. 24, 2022), which, while not conclusive of the related issue of complete preemption, strongly suggests that the Fair Credit Reporting Act does not “totally subsume” state law, or “effectively displace” the state causes of action. Lontz, 413 F.3d at 439-41.
Notably, Experian does not argue that the Fair Credit Report Act completely preempts state law. Instead, Experian argues that because ordinary preemption applies, McKnight's complaints are not well-pled. (Def.'s Resp. Opp'n, ECF No. 17 at 10.) But as explained above, ordinary preemption is merely a defense, not a jurisdictional springboard to removal. See Skidmore, 1 F.4th at 212; see also Franchise Tax Bd. of State of Cal. v. Constr. Laborers Vacation Tr. for S. California, 463 U.S. 1, 14 (1983) (“[S]ince 1887 it has been settled law that a case may not be removed to federal court on the basis of a federal defense, including the defense of preemption, even if the defense is anticipated in the plaintiff's complaint, and even if both parties admit that the defense is the only question truly at issue in the case.”). Because the court does not have jurisdiction over McKnight's state law claims, Experian must raise its arguments about preemption and the sufficiency of McKnight's pleadings in state court.
RECOMMENDATION
Based on the foregoing, the court recommends McKnight's motions to remand be granted and these cases be remanded to the Richland County Magistrate's Court.
The parties' attention is directed to the important notice on the next page.
Notice of Right to File Objections to Report and Recommendation
The parties are advised that they may file specific written objections to this Report and Recommendation with the District Judge. Objections must specifically identify the portions of the Report and Recommendation to which objections are made and the basis for such objections. “[I]n the absence of a timely filed objection, a district court need not conduct a de novo review, but instead must ‘only satisfy itself that there is no clear error on the face of the record in order to accept the recommendation.' ” Diamond v. Colonial Life & Acc. Ins. Co., 416 F.3d 310 (4th Cir. 2005) (quoting Fed.R.Civ.P. 72 advisory committee's note).
Specific written objections must be filed within fourteen (14) days of the date of service of this Report and Recommendation. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b); see Fed.R.Civ.P. 6(a), (d). Filing by mail pursuant to Federal Rule of Civil Procedure 5 may be accomplished by mailing objections to:
Robin L. Blume, Clerk
United States District Court
901 Richland Street
Columbia, South Carolina 29201
Failure to timely file specific written objections to this Report and Recommendation will result in waiver of the right to appeal from a judgment of the District Court based upon such Recommendation. 28 U.S.C. § 636(b)(1); Thomas v. Arn, 474 U.S. 140 (1985); Wright v. Collins, 766 F.2d 841 (4th Cir. 1985); United States v. Schronce, 727 F.2d 91 (4th Cir. 1984).