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Hello, I'm Henry Chalmers, a partner with Arnold Golden Gregory in the firm's Atlanta office. I co chair our firm's background screening industry team, and I'm the former co chair of the firm's Litigation Practice group. Welcome to our podcast series, AGG Talks that Background Screening. Our podcasts feature AGG colleagues and guests discussing business and legal issues and developments related to the background screening industry. Today's episode will focus on FCRA preemption of state laws and why that's relevant to your business and legal practices. Before we begin, though, let me remind everyone that the information and opinions expressed in this podcast are for educational purposes only and may not be construed as legal advice, express or implied. Now onto the podcast. At its core, preemption is the legal principle that some federal laws trump state laws. This means that where preemption exists, a plaintiff cannot assert state law claims against a defendant. Instead, the plaintiff is limited to pursuing federal law claims alone. So, as background screening companies and furnishers and employers, why should you care? Two reasons, at least. First, the fewer claims made against you, obviously the better. If you can automatically get rid of a plaintiff's state law claims, you're already well ahead of the game. Second, for various reasons, it's often better to be in federal court than in state court. If the only way a plaintiff can sue you is to assert federal law claims, then that's your ticket to avoiding state court, forcing the claims to be litigated federal court instead. In general, as a defendant, federal preemption is your friend. So for the next few minutes, we're going to explore this concept of federal preemption. First, I'll quickly explain its origin and its broad legal principles. Then we'll look at its specific application to the Fair Credit Reporting act and how it might play a role the next time you find yourself on the business end of a lawsuit. Preemption has its roots in the Commerce Clause, the United States Constitution Be constitutional junkies out there. That's Article 1, Section 8, Clause 3. The Commerce Clause gives the United States Congress the power to pass laws that regulate interstate commerce and background screening and credit reporting agencies because they facilitate interstate commerce. Regulation of them falls under the commerce clause. The US Constitution also has a supremacy clause. That's Article 4, clause 2 for you junkies. The Supremacy Clause says this Constitution and the laws of the United States shall be the supreme law of the land, and the judges in every State shall be bound thereby, anything in the Constitution or laws of any State to the contrary notwithstanding. Putting these two clauses together The United States Supreme Court has ruled that a fundamental principle of the Constitution is that Congress has the power to preempt state law, and the state laws that conflict with federal law are without effect. So does this mean anytime a federal law touches a subject, that entire subject is off limits to the states? Nope. That's because the Supreme Court also said that when Congress enacts a law, the presumption is against preemption and in favor of deference to the states. Unless, that is, Congress tended otherwise. As the Supreme Court recently said, when the text of a preemption clause is susceptible to more than one plausible reading, courts ordinarily accept the reading disfavors preemption that brings us now to the Fair Credit Reporting Act. The FCRA has at least two provisions that address preemption. First, section 625A, and that's 15 USC 1681. It says that as a rule based, the FCRA generally does not preempt state laws. But it goes on in section 625. It lists a whole slew of exceptions to the rule where preemption does exist. Some of those preemptions apply to certain subject matters, some apply to certain conduct requirements, and some include exceptions only for specific state laws. All in all, it's a real patchwork of things subject to preemption. The end result, though, is that the exceptions largely swallow the rule, and preemption exists throughout much of the FCRA. The second preemption provision in the FCRA is Section 610, which is also 15 USC 1681 H. It bars most state law claims for defamation and invasion of privacy and negligence against CRAs and furnishers, except as to false information furnished with malice or with willful intent to injure. What this means in practice is that courts regularly dismiss state law claims against CRAs and furnishers, such things as negligence and defamation, breach of contract, implied duty of good faith, fair dealing, unfair and deceptive trade practices, and civil conspiracy. This essentially leaves only claims made under the CRA itself or the handful of remaining exceptions to preemption. A few recent examples of courts dismissing state law claims under an argument of preemption are a federal court in Pennsylvania dismissing a common law negligence claim that did not include section 610's malice or willfulness standard, and a federal court in Washington dismissing a defamation claim. And if the claims are filed in state court, once you get rid of the state law claims, you can then remove the remaining FCRA claims to a federal court. Now, this is not to say the courts always find preemption. For example, a federal court in Texas recently allowed claims under a state law that requires more disclosures than those required by the fcra. As a general proposition, though, the FCRA does preempt other state law claims. You think that sounds a little too easy and straightforward? You're probably right, and you're probably aware of the First Circuit's decision just a few weeks ago in Consumer Data Industry association versus Fray. The Frey case involves amendments to two state laws in the state of Maine, one that governs medical debt reporting and the other that governs economic abuse debt reporting. In the case, CDIA sued the State of Maine in federal court, seeking a ruling that the amendments are preempted by the fcra. The federal district court agreed with cdia. The state of Maine appealed to the First Circuit Court of Appeals. That federal circuit then took the district court's simple, straightforward ruling and muddied the waters, reversing the district court's decision and finding the question whether the FCRA preempted the amendments to be much more nuanced and complex. The First Circuit largely rejected CDIA's argument that FCRA Section 625 preempts all state laws that relate to information containing consumer reports, regardless of whether they regulate the specific subjects listed for preemption in section 625. Instead, the appellate court found that Congress intended only to preempt those claims that concern the specific section 625 subjects. And because the First Circuit found that some of the amendments do not circumscribe or restrict the reach of those specific subjects, it reversed the district court's ruling of preemption. First Circuit also remanded other aspects of the amendments for the district court to consider in light of its ruling. The final outcome of that case remains to be seen, but the question of preemption is a little less clear than we may have thought. So where does that leave us? I think the underlying principle holds that the FCRA generally preempts state law and protects cras and furnishers and some employers from being sued in state court. But like so much of the law, the devil is in the details and traps still exist, but the unwary and the unlucky thank you for joining me today. I hope you found this discussion to be informative. If you have any questions or if you'd like to submit your feedback or topics for future podcasts, please free to reach out to me. Future podcast episodes will be distributed through our AGG website and social media pages, and you can find my contact information@www.agg.com. thank you for joining us today.