The U.S. Court of Appeals for the Eighth Circuit recently held that various federal Fair Credit Reporting Act, 15 U.S.C. § 1681, et seq. (FCRA) claims should be dismissed for lack of Article III standing.
A copy of the opinion is available at: Link to Opinion
This appeal arose out of an action commenced by plaintiff, a prospective employee ("Prospective Employee") after having an offer of employment rescinded by a prospective employer ("Employer").
Prospective employee alleged three violations of the FCRA: (1) taking adverse employment action based on a consumer report without first providing the report to the applicant, in violation of 15 U.S.C. § 1681b(b)(3)(A) ("adverse action claim"); (2) obtaining a consumer report without providing a disclosure form that complied with the FCRA, in violation of 15 U.S.C. § 1681b(b)(2)(A)(i) ("improper disclosure claim"); and (3) exceeding the scope of the Authorization by obtaining more information than disclosed in the Authorization, in violation of 15 U.S.C. § 1681b(b)(2)(A)(ii) ("failure to authorize claim").
Employer moved to dismiss for lack of standing. The trial court initially granted the motion as to the improper disclosure and failure to authorize claims. However, on further review the court reinstated both claims. Employer appealed, alleging Employee lacked standing to pursue the FCRA claims.
A party invoking federal jurisdiction must establish three elements to meet the "irreducible constitutional minimum" of standing: (1) facts demonstrating "an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, (3) that is likely to be redressed by a favorable judicial decision." Spokeo, Inc., v. Robins, 578 U.S. 330, 338 (2016) (citations omitted). Injury in fact has been construed by the Supreme Court as meaning "'an invasion of a legally protected interest' that is concrete and particularized' and 'actual or imminent, not conjectural or hypothetical.'" Id. (quoting Lujan v. Defenders of Wildlife, 504 U.S. 555, 559-60 (1992)). Concreteness is determined by assessing "whether the asserted harm has a 'close relationship' to a harm traditionally recognized as providing a basis for a lawsuit in American courts—such as physical harm, monetary harm, or various intangible harms" such as reputational harm." TransUnion LLC v. Ramirez, 594 U.S. __, 141 S. Ct. 2190, 2200 (2021).
The Eighth Circuit noted that, although the FCRA grants a statutory right to sue to vindicate violations of the statute, "Article III standing requires a concrete injury even in the context of a statutory violation." Spokeo, 578 U.S. at 341. In reviewing whether Prospective Employee had standing, the Court noted that only plaintiffs who have suffered a concrete harm (physical, monetary, or cognizable intangible harm) have standing, while those seeking to collect statutorily allowed damages to ensure defendant's compliance with the law, do not. Transunion, 141 S. Ct. at 2206.
Prospective Employee's first claim alleged that Employer took an adverse employment action based on her consumer report prior to showing her the report. The Court found that as the FCRA defines a consumer report as "any written, oral, or other communication of any information by a consumer reporting agency bearing on a consumer's creditworthiness . . character, general reputation, personal characteristic, or mode of living . . . collected in whole or in part for the purpose of serving as a factor in establishing the consumer's eligibility for . . . employment purposes," 15 U.S.C. § 1681a(d)(1), Employer had obtained a consumer report within the meaning of the statute.
The Eighth Circuit acknowledged that Prospective Employee had an unambiguous right to receive a copy of the consumer report prior to adverse action being taken based on the report, the Court then had to determine whether an employer's failure to provide a copy of the consumer report prior to taking adverse action was a bare procedural violation or conduct that caused an intangible harm.
The Eighth Circuit noted that federal appellate courts disagree over what qualifies as "injury in fact" in FCRA adverse action claims. The Third and Seventh Circuits have both essentially held that taking an adverse employment action without first providing the required consumer report is an "informational injury", but the Ninth Circuit has found standing lacking. See Long v. Southeastern Penn. Transp. Auth., 903 F.3d 312, 324 (3d Cir. 2018); Robertson v. Allied Sols., LLC, 902 F.3d 690, 697 (7th Cir. 2018); and Dutta v. State Farm Mut. Auto. Ins. Co., 895 F.3d 1166, 1176 (9th Cir. 2018).
The Eighth Circuit noted that the harm present in cases where the court found standing for 15 U.S.C. § 1681b(b)(3)(A)(i) violations was premised on the prospective employee's right to discuss the information in the report with the employer prior to adverse action being taken. However, the Court found the right to pre-action explanation to an employer was not unambiguously written in the statute.
The Court also found that neither the text of the FCRA nor the legislative history provided support for Prospective Employee's claim that she had a right under the FCRA to not only receive a copy of the consumer report but to also discuss accurate but negative information within the report directly with the employer prior to the employer's taking adverse action.
Thus, the Eighth Circuit held that while Prospective Employee may have demonstrated an injury in law, she failed to demonstrate an injury in fact, and therefore her claim was not redressable under the plain language of the statute.
Prospective Employee next claimed that Employer obtained her consumer report prior to providing her with an FCRA compliant disclosure form. A consumer report procured for employment purposes, requires an employer to provide to the applicant "a clear and conspicuous" written disclosure "in a document that consists solely of the disclosure." 15 U.S.C. § 1681b(b)(2)(A)(i).
However, the Eighth Circuit has previously held that a technical violation of this provision, absent more, is insufficient to confer standing. See Auer v. Trans Union, LLC, 902 F.3d 873, 877 (8th Cir. 2018). The Court has also held that without specific facts which describe the harm, the plaintiff has failed to allege anything more than a statutory violation "completely removed from any concrete harm or appreciable risk of harm." Id.
The Eighth Circuit found Prospective Employee's claim "notably absent" of any claim of harm, either tangible or intangible. Thus, the Court found that Prospective Employer failed to establish she suffered a concrete injury and, therefore, lacked standing to pursue her improper disclosure claim. See TransUnion, 141 S. Ct. at 2206.
Finally, Prospective Employee claimed that she did not authorize Employer to obtain her consumer report. However, Prospective Employee did give permission to the company utilized by Employer to conduct a criminal background search and "make an independent investigation of [her] criminal records maintained by public and private organizations."
The Court found that Prospective Employee authorized Employer to obtain her consumer report documenting her criminal history. The only potential "non-criminal" search pertained to the database search listed as "National Sex Offender." However, the Court found that because Prospective Employee consented to a criminal background check, the search of the sex offender registry was not so unrelated as to fall outside the scope of the authorization.
As such, the Eighth Circuit found Prospective Employee had failed to allege an intangible injury to her privacy sufficient to confer standing under Article III. The Court further noted that even if the search of the national sex offender database was beyond the scope of the authorization, the only possible harm would be invasion of privacy, and Prospective Employee still failed to plead any facts demonstrating a concrete harm.
Thus, the Court vacated the trial court's orders and remanded with instructions to dismiss the case for lack of jurisdiction.
Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 6th Floor
Chicago, Illinois 60602
Direct: (312) 551-9320
Fax: (312) 284-4751
Mobile: (312) 493-0874
Email: rwutscher@MauriceWutscher.com
Admitted to practice law in Illinois
Alabama | California | Florida | Illinois | Massachusetts | New Jersey | New York | Ohio | Pennsylvania | Tennessee | Texas | Washington, DC
NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.
Our updates and webinar presentations are available on the internet, in searchable format, at:
Financial Services Law Updates
and
The Consumer Financial Services Blog™
and
