New England Biz Law Update
A plaintiff lacked standing to sue her former employer under the federal Fair Credit Reporting Act for conducting a background check when she was hired that did not technically comply with the statute’s disclosure requirements, a U.S. District Court judge has found.
When plaintiff Nicole Kenn applied for a position with defendant Eascare LLC, she signed a disclosure form and authorization allowing Eascare to perform a background check that could include a look into her credit history. The disclosure form also included a waiver releasing the defendant from any liability resulting from the background check, as well as other allegedly extraneous language.
The plaintiff left the company a year later, alleging that the employer retaliated against her for complaining of sexual harassment.
In addition to bringing discrimination and retaliation claims, the plaintiff brought a putative class action under the FCRA. Specifically, Kenn argued that by including the liability waiver and other additional language on its disclosure form and accordingly running the check without proper authorization, the employer violated the FCRA’s “standalone” disclosure and authorization requirements, creating a cause of action under the statute.
But Judge Allison J. Burroughs in Boston dismissed the claim, finding that the plaintiff failed to demonstrate an injury-in-fact that would give rise to a cause of action.
“The mere fact of technical noncompliance [with the statute] does not establish that individuals have suffered a sufficiently concrete injury,” Burroughs wrote, quoting Stacy v. Dollar Tree Stores, Inc., a 2017 case from the U.S. District Court for the Southern District of Florida. “‘The Court thus concludes that violation of the FCRA’s stand-alone document requirement does not automatically cause a concrete injury for purposes of Article III standing. In doing so, the Court joins the vast majority of other courts that have so held.’”
The 16-page decision is Kenn v. Eascare, LLC, et al.
‘Common sense’ decision
Sarah C. Spatafore of Quincy, Massachusetts, one of the employer’s attorneys, said she and her co-counsel were pleased the court accepted their position as to what constitutes an injury under the FCRA.
“Given the widespread use of credit checks as part of the hiring process, this decision provides significant clarity for employers when assessing potential liability.”
— Sarah C. Spatafore, counsel for employer
“Given the widespread use of credit checks as part of the hiring process, this decision provides significant clarity for employers when assessing potential liability,” she said.
Her co-counsel, Paul G. King, added that while other circuits have taken a more expansive interpretation of standing in reaching a contrary conclusion, “we believe that the District Court’s decision here sets the appropriate bar for plaintiffs to meet under the FCRA.”
The plaintiff’s lawyer, Raven Moeslinger of Boston, declined to comment.
But Barry J. Miller, a Boston attorney who defends employers in class action cases, said the decision was “well aligned with common sense.”
The plaintiff claimed various forms of mistreatment by her employer but did not relate any of it to the purely formal statutory violation arising under the FCRA, Miller said.
“The court acknowledged that the formalistic statutory injury could give rise to a genuine injury and Article III standing, but that the plaintiff here had failed to allege any actual harm connected to this paperwork issue,” he said.
Still, Miller continued, the judge’s reasoning appeared to allow for a claim that the plaintiff’s subjective confusion about her rights was sufficient to substantiate an injury.
“That aspect of the decision is a bit concerning, as allegations of subjective confusion could be very difficult or impossible for an employer to debunk, and the decision does not address any reasonableness requirements that might need to accompany a claim of subjective confusion,” he said.
Kristin L. Thurbide of Boston, who represents workers and consumers in class action cases, said that while there is a split among circuits as to how a procedural violation can be held to cause actual injury, the issue here appeared to be that the complaint did not allege with particularity that the plaintiff was actually hurt by the statutory violation.
The U.S. Supreme Court’s 2016 decision in Spokeo, Inc. v. Robins makes clear that failure to strictly comply with the statute does not in and of itself cause an injury-in-fact and that plaintiffs must allege specific facts to show they suffered an injury traceable to the violation, she said.
“The practical takeaway should be to ensure that the complaint is sufficiently specific to withstand a Spokeo challenge, and if there’s a question, file an amended complaint,” Thurbide said.
John Albanese, a Minneapolis attorney, has represented plaintiffs in a number of jurisdictions bringing FCRA claims on the issue in question. He said that, before Spokeo, such claims were highly successful, resulting in numerous multi-million-dollar settlements.
Still, Albanese said, in a number of post-Spokeo cases like Kenn — in which the plaintiff initially brought an FCRA claim in state court and the federal court found lack of Article III standing on Spokeo grounds once it was removed — the FCRA claim was remanded to state court and successfully litigated there. That is because states often have more relaxed standing requirements than what is laid out in Spokeo for federal courts, he said.
“That didn’t happen here,” he said, noting that Burroughs only remanded the plaintiff’s state law claims. “But these claims are proceeding in state courts across the country. … This illustrates that plaintiffs’ counsel should consider [when a federal court finds no standing] to ask the [federal court] to remand the entire case.”
Boston class action lawyer Melanie A. Conroy said Article III standing is poised to be a hotly contested issue as privacy rights are encoded in more statutes.
“I have little doubt you will see this case extensively analyzed and cited by privacy class action litigators as the law continues to develop,” she said.
Technical violation
Kenn applied for a job as an emergency technician with Eascare, an ambulance services company, in January 2018.
As part of the application process, she signed a disclosure form and authorization for Eascare to perform a background check.
The form stated that Eascare could utilize PT Research to prepare a consumer report or investigative report under the FCRA. It also stated that information received could include, but was not limited to, her academic, residential, employment and job performance, as well as credit, driving and criminal history, among other things.
A second page of the form included a waiver discharging Eascare, PT Research and any entity that provided any such information from liability.
In August 2018, the plaintiff lodged an internal complaint of sexual harassment by co-workers.
Her complaints were confirmed in an investigation, but Eascare allegedly took no action to resolve the situation and retaliated against her instead by denying requests for days off, cutting her hours, and threatening to fire her.
In October 2018, when human resources allegedly suggested she transfer to a new location, which was managed by the supervisor who allegedly investigated but failed to act on her complaint, Kenn resigned.
She sued Eascare and individual defendants in Norfolk Superior Court in December 2019, bringing state law discrimination and retaliation claims and a putative class action under the FCRA, alleging that the employer violated statutory requirements by not providing a standalone disclosure and then, as a result, running a background check without proper authorization.
The defendants removed the case to U.S. District Court, where they moved to dismiss the FCRA claim for lack of standing.
No standing
With a split in authority over the issue, Burroughs said she disagreed that the inclusion of additional information or documentation, such as a liability waiver, in a disclosure notice “automatically constitutes a sufficiently concrete injury.”
She said a plaintiff could still bring a claim by showing that such a technical violation did, in fact, cause him or her such an injury, but Kenn did not do so.
“Plaintiff’s allegation of an informational injury fails because she has not alleged that ‘the extraneous language, allegedly contained in the Disclosure Form, caused any actual confusion about whether her personal information would be made available for a background check,’” Burroughs said, adding that because the plaintiff consented to the report and did not allege that she misunderstood the form, she could not claim a privacy violation either.
Accordingly, Burroughs dismissed the claim while remanding the state law claims back to Superior Court.
