California Supreme Court Holds California Confidentiality of Medical Information Act Is Not Preempted By Federal Fair Credit Reporting Act

            Plaintiff Brown and his two children were patients of dentist Reinholds.  Dr. Reinholds billed Brown $600 for a crown that Brown claimed he never received.  Brown refused to pay the bill, and Reinholds referred the debt to a collection agency (defendant Mortensen). 

            The story continues: “Over the next two years, Mortensen repeatedly disclosed the contents of Brown's and his children's dental charts to the three major national consumer reporting agencies, Experian, Equifax, and Trans Union. Additionally, Mortensen disclosed to the agencies the Browns' names, Social Security numbers, dates of birth, addresses, telephone numbers, and Brown's and his children's entire dental history with Dr. Reinholds, including alleged dental treatments.”

       Brown and his children sued Mortensen for violation of the California Confidentiality of Medical Information Act (Civ.Code, § 56 et seq.), which 

prohibits the unauthorized dissemination of individually identifiable medical information and provides for compensatory damages and other remedies. . . . The trial court sustained a demurrer with leave to amend and then, when Brown elected not to amend, dismissed the action. 

The Court of Appeal affirmed. While it rejected the trial court's conclusion that Brown's Confidentiality Act claims were impermissibly vague, it accepted Mortensen's alternative argument that the FCRA preempted them. The Court of Appeal opined that all state law claims arising from the furnishing of information to consumer reporting agencies are preempted by the FCRA. . . .  Reasoning that Mortensen had acted as a furnisher of credit information when disclosing the Browns' medical information to various credit agencies, the court affirmed dismissal.

            The California Supreme Court reversed, holding that the FCRA did not preempt the California cause of action.  Brown v. Mortensen, --- P.3d ----, 51 Cal.4th 1052, 2011 WL 2409913.  

            The Consumer Credit Reporting Reform Act of 1996 amended the FCRA by imposing affirmative duties on entities that furnish information to consumer reporting agencies, and by adding a state-law preemption clause, 15 U.S.C. § 1681t(b)(1)(F): “(b) No requirement or prohibition may be imposed under the laws of any State—[¶] (1) with respect to any subject matter regulated under—[¶] ... [¶] (F) section 1681s–2 of this title, relating to the responsibilities of persons who furnish information to consumer reporting agencies . . . .”

            Following four federal district courts, the California Supreme Court held that the preemption of state law was limited to the two specific areas “regulated under . . . section 1681s-2,” which are “what a furnisher must do to ensure the information it provides is accurate (a subject covered in exhaustive detail by the many subparts of § 1681s–2(a)), and what a furnisher must do upon receiving official notice that the accuracy or completeness of its information is in dispute.”  It further stated, “Our own inspection of the overall statutory scheme and the pertinent legislative history reveals evidence suggesting Congress never intended in section 1681t(b)(1)(F) to preempt state laws regulating medical privacy and thereby to relieve entities otherwise obligated to maintain confidentiality of the duty to do so when reporting credit information.”

            Thus, the claims for damages under the California Confidentiality Act, “having as their gravamen issues neither of accuracy nor of credit dispute resolution, do not involve the same subject matter as section 1681s–2 and are not preempted.”

            The article in the online journal amednews.com (American Medical News)  says Mortensen is considering petitioning SCOTUS for review.

--PHM