Michael Scott v. First S. Nat'l Bank
936 F.3d 509
6th Cir.2019Background
- Michael Scott and Linda Larkin (Plaintiffs) borrowed from First Southern: a $300,000 commercial line of credit and a construction loan to renovate a hotel into apartments; parties executed a written Commercial Loan Agreement with a stated maximum and integration clause.
- During construction, Plaintiffs sought substantial additional financing (roughly $650k–$712k more than initially estimated); First Southern reviewed updated financials, discovered undisclosed additional debt (about $600k from United Bank), and denied the additional loan request.
- First Southern did not extend the line-of-credit maturity date during review; its computer system generated automated delinquency reports to credit bureaus in July–August 2014, and later reported delinquencies in Sept–Nov 2014 despite Plaintiffs’ payoff in early September 2014.
- First Southern later submitted corrections to the credit bureaus; Plaintiffs alleged ongoing reporting errors affected credit approvals and sent demand letters; final credit reporting corrections were made in September 2015 and Plaintiffs’ deposition indicated issues were resolved.
- Plaintiffs sued in state court asserting FCRA claims (failure to investigate/inaccurate reporting), breach of the covenant of good faith and fair dealing, tortious interference, and fraudulent misrepresentation; case removed to federal court, summary judgment granted for First Southern, and Plaintiffs appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether First Southern violated the FCRA (failed to investigate and furnished inaccurate info) | Plaintiffs say they relied on bank employees’ assurances (so they did not file disputes with credit bureaus) and bank’s conduct caused harm; FCRA should protect them | First Southern says Plaintiffs never filed a dispute with a consumer reporting agency, so §1681s-2(b) duties never triggered | Court: Plaintiffs failed to notify a CRA; FCRA investigation duty not triggered; summary judgment for First Southern |
| Whether state common-law claims (good-faith breach, tortious interference) survive preemption | Plaintiffs say state-law remedies apply for bank’s alleged retaliatory/reporting conduct | First Southern says FCRA preempts state laws concerning furnishers’ reporting to CRAs (15 U.S.C. §1681t(b)(1)(F)) | Court: FCRA preempts state common-law claims that relate to furnishers’ reporting; claims dismissed as preempted |
| Whether fraudulent misrepresentation claim is preempted by FCRA | Plaintiffs argue bank promised additional loans and fraud claim is separate from reporting issues | First Southern contends claim lacks merit or is barred | Court: FCRA does not preempt the fraud claim, but Plaintiffs forfeited appellate review because they failed to challenge the district court’s statute-of-frauds ground for dismissal |
| Whether equitable estoppel excuses Plaintiffs’ failure to file CRA disputes | Plaintiffs suggest reliance on bank representatives prevented them from filing disputes | Plaintiffs did not raise equitable estoppel below or on appeal | Court: Not decided on merits; noted equitable estoppel could be a possible avenue but Plaintiffs never asserted it, so court did not reach the issue |
Key Cases Cited
- Boggio v. USAA Fed. Sav. Bank, 696 F.3d 611 (6th Cir. 2012) (private right of action under §1681s-2(b) arises only after furnisher receives notice from a consumer reporting agency)
- Purcell v. Bank of America, 659 F.3d 622 (7th Cir. 2011) (§1681t(b)(1)(F) preempts state-law claims relating to furnishers’ reporting; harmonizes earlier §1681h(e))
- Macpherson v. JPMorgan Chase Bank, N.A., 665 F.3d 45 (2d Cir. 2011) (state common-law claims are preempted by §1681t(b)(1)(F) when they concern furnishers’ reporting)
- Cipollone v. Liggett Group, Inc., 505 U.S. 504 (1992) (discusses preemption principles and supports that a later, broader preemption provision can supersede earlier, narrower one)