by Douglas Ankney

In consolidated appeals, the Court of Appeal of California, Fourth Appellate District, held that the phrase “from the date of parole” refers to the start date of parole and that the federal Fair Credit Reporting Act (“FCRA”) does not preempt the California Investigative Consumer Reporting Agencies Act (“ICRAA”).

In 2011, R. Kemp was convicted of a crime and went to prison. In December 2011, Kemp was released from prison on parole, and in December 2014, his parole ended.

In March 2020, Amazon, Inc. (“Amazon”) offered Kemp a job pending a background check. In April 2020, Accurate Background LLC (“Accurate”) provided Amazon with the background check (“2020 Report”) revealing Kemp’s conviction, and Amazon then rescinded its job offer.

In July 2021, Kemp filed an amended class action complaint under the ICRAA and under the California Consumer Reporting Agencies Act (“CCRAA”), both of which prohibit an agency from reporting a “conviction of a crime that, from the date of disposition, release, or parole, antedate the report by more than seven years.” California Civil Code §§ 1785.13(a)(6) and 1786.18(a)(7). (Note: Subsequent undesignated statutory references are to the California Civil Code.)

Kemp alleged that because his 2011 conviction predated Accurate’s 2020 Report by more than seven years, Accurate: (1) violated the ICRAA, (2) violated the CCRAA, and (3) derivatively violated California’s Unfair Competition Law (“UCL”).

In August 2021, Accurate demurred, arguing that Kemp’s claims were barred because his parole ended in 2014, which predated the 2020 Report by less than seven years. Alternatively, Accurate argued that the FCRA preempted Kemp’s ICRAA claim (Accurate did not argue that CCRAA claim was preempted.) Accurate also argued the UCL claim was barred as a derivative of the ICRAA and CCRAA claims.

In December 2021, the trial court overruled Accurate’s demurrer as to the parole issue but sustained it as to the preemption issue. Both Kemp and Accurate appealed.

The Court observed “[w]hen interpreting a statute, a court’s role ‘is to determine the Legislature’s intent so as to effectuate the law’s purpose.’” People v. Murphy, 25 19 P.3d 1129 (Cal. 2001). The Court “begin[s] as always with the statute’s actual words, the ‘most reliable indicator’ of legislative intent, ‘assigning them their usual and ordinary meanings, and construing them in context. If the words themselves are not ambiguous, [the court] presume[s] the Legislature meant what it said, and the statute’s plain meaning governs. On the other hand, if the language allows more than one reasonable construction, [the court] may look to such aids as the legislative history of the measure and maxims of statutory construction. In cases of uncertain meaning, [the court] may also consider the consequences of a particular interpretation, including its impact on public policy.” Even Zohar Construction & Remodeling, Inc. v. Bellaire Townhouses, LLC, 352 P.3d 391 (Cal. 2015).

The ICRAA and the CCRAA, as enacted in 1975, were enacted “to ensure that consumer reporting agencies ‘exercise their grave responsibilities with fairness, impartiality, and a respect for the consumer’s right to privacy.’” First Student Cases, 423 P.3d 953 (Cal. 2018) (“Connor”). “As originally enacted, ICRAA applied to consumer reports that included character information obtained only through personal interviews.” Id. But in 1998, the ICRAA was amended “to eliminate the personal interview limitation and expand the statute’s scope to include character information ... ‘obtained through any means.’” Id.

Under the ICRAA, a consumer report is a report bearing “on a consumer’s character, general reputation, personal characteristics, or mode of living.” § 1786.2(c). A report under the CCRAA is a report “bearing on a consumer’s credit worthiness, credit standing, or credit capacity.” § 1785.3(c). A conviction touches on a person’s character and credit worthiness, and that information is subject to regulation under both statutes. Connor.

Under both the ICRAA and the CCRAA, investigative agencies are prohibited from providing “[r]ecords of arrest, indictment, information, misdemeanor complaint, or conviction of a crime that, from the date of disposition, release, or parole, antedate the report by more than seven years.” Under California law, the word “parole” means “[r]elease from jail, prison, or other confinement after actually serving part of sentence.” Black’s Law Dictionary (6th ed. 1990) (“Black’s”). Both “date of parole” and “parole date” are well understood in California law to mean the start date of an inmate’s release on parole. California Penal Code §§ 3041(a)(1) and 1170.2(b).

The Court concluded that the provisions of the ICRAA and CCRAA “which prohibit an agency from reporting a criminal conviction that predates a report by more than seven years as measured ‘from the date of ... parole’ plainly refers to the start date of that parole.” Consequently, Accurate violated the ICRAA and the CCRAA in its 2020 Report because Kemp’s parole began in 2011. Therefore, the Court affirmed the trial court’s denial of Accurate’s demurrer on that basis.

As to the issue of whether the FCRA preempted the ICRAA, the Court observed “[t]he Supremacy Clause of the United States Constitution provides: ‘This Constitution, and the Laws of the United States which shall be made in Pursuance thereof ... shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby ....” U.S. Const. art. VI, cl. 2.

“The United States Supreme Court has recognized three types of preemption under the supremacy clause: express preemption, conflict preemption, and field preemption.” People v. Burlington Northern Santa Fe Railroad, 209 Cal. App. 4th 1513 (2012). Because Accurate relied on the theory of express preemption, the Court’s task was to identify the domain expressly preempted, requiring the Court to “focus first on the statutory language ‘which necessarily contains the best evidence of Congress’ preemptive intent.” Friends of the Eel River v. North Coast Railroad Authority, 399 P.3d 37 (Cal. 2017). Additionally, relevant to the analysis in preemption cases is the assumption that historic police powers of the states were not to be superseded by the federal law unless that was the clear and manifest intent of Congress. Id. This is known as the “presumption against preemption.” Id.

There is a two-prong test to determine whether the FCRA expressly preempts a state law: (1) the subject matter of the state statute concerns matter under 15 U.S.C. § 1681c and (2) the state law took effect after September 30, 1996. Simon v. Directv, Inc., 2010 U.S. Dist. LEXIS 35940 (D. Colo. March 19, 2010). The text of 15 U.S.C. § 1681c(a)(1)-(8), (d), and (f) delineates data that must be excluded from consumer reports, e.g., records of arrest that antedate the report by more than seven years; data that may be included in reports, e.g., records of conviction of crimes no matter when they occurred; and data that must be included, e.g., disputes filed by consumers. Therefore, Prong (1) is satisfied in the instant case, the Court determined.

The express exemption clause of the FCRA reads in pertinent part: “No requirement or prohibition may be imposed under the laws of any State ... with respect to any subject matter regulated under ... section 1681c of this title, relating to information contained in consumer reports, except that this subparagraph shall not apply to any State law in effect on September 30, 1996.” 15 U.S.C. § 1681t(b)(1)(E). Therefore, the FCRA would expressly preempt the ICRAA only if the ICRAA were not in effect on September 30, 1996.

The trial court determined that the current form of the ICRAA was not in effect on September 30, 1996, due to the amendment of 1998 and granted Accurate’s demurrer as to this claim. The Court disagreed.

The Court observed “[t]he relevant preemption clause in the FCRA only preempts a ‘requirement or prohibition ... imposed under the laws of any State.’” The 1998 amendment to the ICRAA removed the limitation on investigative agencies’ source of information, i.e., the information no longer had to be gained from personal interviews; and arguably the amendment created a private cause of action. These were neither a “requirement” nor a “prohibition,” the Court explained.

A requirement is a rule of law that must be obeyed. Bates v. Dow Agrosciences LLC, 544 U.S. 431 (2005). A “prohibition” is defined as: “An act or law prohibiting something....” Black’s. Under California law, “a remedy creates no rule of law to be obeyed; a remedy simply redresses a violation of a rule of law.” Rex v. Chase Home Finance LLC, 905 F. Supp. 2d 1111 (C.D. Cal. 2012). Therefore, the Court held that the ICRAA enacted in 1975 was in effect on September 30, 1996, and the 1998 amendment did not alter this effective date, as the amendments created neither a requirement nor a prohibition.

Accordingly, the Court ordered a peremptory mandate issue directing the trial court to vacate its prior order, which partially sustained Accurate’s demurrer, and to issue a new order overruling the demurrer in its entirety. See: Kemp v. Superior Court, 86 Cal. App. 5th 981 (2022).

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