In a recent decision from the Middle District of North Carolina, a federal district court found a plaintiff in a Fair Credit Reporting Act (“FCRA”) case to have Article III standing to bring his claims in federal court, relying on the Supreme Court’s ruling in Ramirez last year and so denied an employer defendant’s Motion to Dismiss. The case involved allegations that the employer defendant violated the FCRA by failing to include a copy of the consumer’s background screening report in the “pre-adverse action letter” sent to him. Read on to learn more.
One trend in FCRA litigation is a rising number of claims brought against employers in the background check context. As shown by some recent cases, many prospective employers are not aware of potential FCRA litigation risk concerning background check disclosure issues because template disclosures and notices are frequently provided by third-parties.
In Derrick v. Full House Mktg., 2022 U.S. Dist. LEXIS 38999 (M.D.N.C. Mar. 4, 2022), Plaintiff Derrick Perez Scott applied for employment in March 2019 with Defendant, an employment agency. Based on information in a consumer report provided by Resolve Partners, LLC (“Resolve”), a consumer reporting agency, Defendant determined that Plaintiff was ineligible for employment. On March 15, 2019, Resolve (on Defendant’s behalf) sent Plaintiff the pre-adverse action letter that the FCRA requires employers to provide consumers before taking an adverse action based on information in a consumer report. However, the pre-adverse action letter did not include a copy of the consumer report used by Defendant in determining that Plaintiff was not eligible for employment, in alleged violation of FCRA Section 1681b(b)(3).
Because Plaintiff did not receive a copy of his consumer report, he was unaware that the consumer report provided by Resolve and relied on by Defendant inaccurately stated that he had been found guilty of six felonies and misdemeanors (the convictions related to a Derrick Lee Scott). Plaintiff only became aware of error five weeks later, after the position he had applied for had been filled.
Plaintiff then sued Defendant in federal court, alleging that Defendant violated the FCRA by failing to provide him a copy of his consumer report prior to taking an adverse action. Plaintiff also in the Complaint alleged that he suffered actual harm as a result of the violation—the loss of an employment opportunity and damages in the form of wage loss and emotional distress. Defendant in turn asserted a facial challenge to Plaintiff’s standing under Article III of the US Constitution, arguing that Plaintiff “has failed to articulate any injury” because an informational injury cannot confer Article III standing.
As a reminder, a party wishing to sue in federal court bears the burden of establishing Article III standing, which requires that a plaintiff demonstrate: (1) an injury in fact; (2) the injury was caused by defendant’s conduct; and (3) the injury can likely be redressed by a favorable judicial decision. Five years after the Supreme Court’s significant holding in Spokeo, Inc. v. Robins, 136 S. Ct. 1540, the Court reconsidered the question of what constitutes an “injury in fact” under Article III in Ramirez. In doing so, the Court held that “[o]nly plaintiffs concretely harmed by a defendant’s statutory violation have Article III standing to seek damages against that private defendant in federal court.” (emphasis added). The Court reaffirmed that “Article III standing requires a concrete injury even in the context of a statutory violation” and it was not the case that “a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.” As the Court explained, “[a]n injury in law is not an injury in fact.” The Court’s opinion resolved a circuit split on whether increased risk of future harm could constitute an injury in fact sufficient to confer standing.
In the Derrick case, the Court found that Defendant was required under the FCRA to provide Plaintiff with a copy of his consumer report, but failed to do so. Because Plaintiff never received a copy, he had no reason to know about the inaccurate consumer report and his ability to correct the report was hindered. The court found that the Defendant’s failure was material insofar as it ultimately prevented him from being hired by Defendant. In denying Defendant’s Motion, the court held that Plaintiff had sufficiently alleged that he suffered an injury in fact that was concrete and particularized and so had Article III standing.
Derrick seems to underscore a growing number of financial privacy decisions limiting TransUnion’s scope in early stages of litigation for FCRA claims, as opposed to class certification (see our blog post here for another example). For more developments in this area of the law, stay tuned. CPW will be there to keep you in the loop.