The financial services arm of carmaker Mercedes-Benz did not owe a duty of care to a man whose stolen identity was used to fraudulently purchase a more than $70,000 vehicle, a federal judge has ruled in a case that waded into a question of law that has not yet been addressed by the U.S. Court of Appeals for the Third Circuit.

U.S. District Judge Joseph Leeson of the Eastern District of Pennsylvania on Monday granted Mercedes-Benz's motion on the pleadings to dismiss the plaintiff's common-law negligence claim in the case Havassy v. Mercedes-Benz Financial Services. The litigation is now set to proceed against the automaker on a single claim under the Fair Credit Reporting Act.

According to Leeson, plaintiff James Havassy had argued that, although some common-law negligence claims stemming from credit reporting are preempted by the FCRA, his claim that the company negligently allowed the fraudster to open an account in his name fell outside the FCRA and, therefore, should not be preempted.

Leeson noted that the question has not yet been addressed by the Third Circuit, but ultimately determined that, even if it had not been preempted, Havassy and Mercedes-Benz did not have a contractual or special relationship that would create a common duty.

"Here, there is no evidence to suggest that Mercedes owed a duty to Havassy. At the time of the identity theft, there was no contractual or special relationship between Havassy and Mercedes which would warrant a duty on the part of Mercedes," Leeson said. "Absent that relationship, Havassy's claim cannot proceed."

According to Leeson, Havassy had his identity stolen, and then in June 2017, someone opened an auto loan account with Mercedes without his knowledge. The person used the account to buy a Mercedes at a dealership in Colorado Springs, Colorado. Leeson said the person was able to buy a $73,078 vehicle for no money down and no trade-in using the loan account.

After the purchase, Mercedes reported that the account under Havassy's name had an outstanding balance of $73,078, and then, about three months later, a representative from the company's fraud department contacted Havassay and told him Mercedes believed he had been the victim of identity theft. The company continued reporting the debt on Havassy's credit reports until November 2017.

According to Leeson, a total of nine disputes arose from Havassy contesting the debt with Mercedes and consumer reporting agencies, and in December 2017 Mercedes told Havassy it would delete the account from his credit reports. However, Leeson said the company continued to report the account as a charge-off with a negative payment history through July 2018.

Havassy sued raising FCRA and common-law negligence claims. He contended that the opening of the loan account should have immediately alerted Mercedes that the account was fraudulent, and that as a result, he received negative credit reports, lost credit opportunities and suffered distress.

Much of Leeson's 11-page opinion focused on whether the FCRA preempts common-law claims related to the initial opening of a fraudulent account. According to Leeson, although the Third Circuit has not spoken squarely on the issue, several other circuit courts and district courts have, and the majority of those venues have held that Section 1681t(b)(1)(F) of the law preempts both state statutory and common-law claims against furnishers of information.

In making his case, Havassy pointed to the Second Circuit's 2015 ruling in Galper v. JPMorgan Chase Bank, in which a plaintiff was able to pursue claims that did not deal with a defendant's responsibilities as a furnisher. Leeson, however, said that case did not apply, since that plaintiff did not raise common-law claims, but rather raised a cause of action based on a state statute.

Leeson further said that, regardless of preemption, under common law, without a contractual or special relationship between Havassy and the car company, there was no basis for the negligence claim.

"Havassy's theory is similar to the theories posited in Fink [v. Corporate Liaison] and Eisenberg [v. Wachovia Bank], where the plaintiffs sought better detection capabilities for fraud on the part of the defendants," Leeson said. "Similar to the plaintiffs in Fink and Eisenberg, there is no contractual or special relationship that creates a duty."

James Francis of Francis Mailman Soumilas, who represented Havassy, said the ruling was interlocutory, and therefore would not be able to be appealed until after trial.

"We're disappointed by the ruling, but we respect the court's ruling," he said.

Breeana Somers of Duane Morris, who is representing Mercedes-Benz, declined to comment.