Case Brief: Galper v. JP Morgan Chase Bank, N.A.

A recent decision from the Second Circuit Court of Appeals brings hope and options to victims of identity theft.

There are many stories of identity theft nightmares and the unfortunate reality is many victims of identity theft never discover who appropriated and misused their personal information. In the case of Galper v. JP Morgan Chase Bank, N.A., Ms. Galper knew who stole her identity and sought to hold accountable the institution she alleged made it possible: Chase Bank.

Ms. Galper alleged in her lawsuit that in a nightmarish series of events, Chase employees used Ms. Galper’s information, information they had access to by virtue of their employment with the bank, to engage in a host of fraudulent activities. Among the activities, Ms. Galper alleged Chase employees opened fraudulent accounts in her name and misused accounts that were legitimately hers but that had been dormant as part of a large-scale money laundering and Medicare fraud scheme. Ms. Galper not only experienced some of the many problems of typical identity theft such as overdrawn bank accounts and accounting regularities, but she was also arrested and charged with engaging in a money laundering conspiracy. It was only through a trial lasting nearly two months that a jury finally acquitted Ms. Galper of any wrongdoing.

After Ms. Galper was cleared of the charges, she sued Chase Bank under a number of theories, essentially seeking to hold the bank accountable for the theft its employees committed and the impacts those actions had on Ms. Galper. Unfortunately, the trial court ruled that her claims were preempted by the Fair Credit Reporting Act (“FCRA”), a federal consumer protection law and dismissed them.

Ms. Galper had sued in New York under a state law (the New York Fair Credit Reporting Act) that authorizes consumers to sue when consumer reporting agencies (such as the three major credit bureaus Experian, Equifax and TransUnion) receive consumer information they would not have received if the consumer had not been a victim of identity theft.

For example, assume a consumer’s identity is stolen and the thief opens several credit card accounts under the consumer’s name. The thief uses the cards’ maximum credit limits to make purchases but never pays the credit card bills. Eventually the bills are sent to collections and the credit card companies or collection agencies subsequently report adverse information to the credit bureaus.

In Ms. Galper’s case, the Chase employees that allegedly stole her identity opened fraudulent accounts in her name and their activities caused the accounts to be overdrawn repeatedly, resulting in frequent bounced checks under Ms. Galper’s name. Ms. Galper alleged that the bounced checks and other activity, including her prosecution, ultimately resulted in the credit bureaus receiving adverse reports about Ms. Galper leading to additional financial harm to Ms. Galper.

The trial court, however, ruled that Ms. Galper’s state law claims were, in part, preempted by the federal law – FCRA. The significance is that where the state law, the New York Fair Credit Reporting Act, allows individual consumers to sue for identity theft, the federal law FCRA does not. In finding that FCRA preempted the NY law, the court dismissed Ms. Galper’s claim seemingly leaving her with no individual financial remedy to make her whole.

Ms. Galper appealed, however, arguing her claims were not preempted and the Second Circuit Court of Appeals agreed. The Court of Appeals reasoned that FCRA was not meant to completely preempt state laws and does so only in limited fashion. If Ms. Galper sought to hold Chase accountable for providing false or unwarranted information to the credit bureaus, those actions would be related to Chase’s responsibilities under the FCRA and would be preempted, according to the Court’s opinion. However, the Court found if Ms. Galper sought to hold Chase indirectly responsible for its employees’ theft (a claim known as respondeat superior) rather than directly responsible for furnishing credit information, the state law claims would be permissible. The Second Circuit Court vacated the lower court’s dismissal and remanded the case. It will be some time before the final decision in the matter is rendered and the case officially concluded.

This ruling stands as an important one, however, because it opens litigation doors to consumers who often have limited options available to them. While a consumer can report identity theft to law enforcement and take steps to correct erroneous information, neither option offers financial compensation. In light of this decision, however, consumers who are victims of identity theft and discover both the schemes and the perpetrators may see additional avenues of relief. The consumers may be able not only to hold perpetrators accountable, but to hold accountable the perpetrators’ employers and enablers and also to receive financial compensation for the harms they have suffered.

By Alexandra Tracy-Ramirez, HopkinsWay PLLC. | © HopkinsWay PLLC 2015. All rights reserved.

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