Courts Split on Standing Issues in FCRA Suits After Spokeo: Moody v. Ascenda USA and Nokchan v. Lyft
On October 5, 2016, two district courts came to opposite conclusions on whether putative class action plaintiffs had standing to bring claims based on prospective employers’ failure to comply with Fair Credit Reporting Act (FCRA) disclosure requirements.
Standing under Article III of the Constitution requires (1) an injury in fact (2) fairly traceable to the challenged conduct of the defendant and (3) likely to be redressed by a favorable judicial decision. Earlier this year, the Supreme Court in Spokeo, Inc. v. Robins clarified that to confer standing, an injury in fact must be both particularized – affecting the plaintiff in a “personal and individual” way – and concrete – “real, not abstract.”
The Supreme Court noted that in some circumstances, the violation of a procedural right granted by statute could constitute an injury in fact. For instance, the failure to provide a group of voters information that Congress had decided to make public gave rise to a concrete and particularized “informational” injury, as did the failure to provide two advocacy organizations information that was subject to disclosure under federal law. However, the Court held that a “bare procedural violation,” divorced from any concrete harm, would be insufficient to confer Article III standing.
In Moody v. Ascenda USA Inc., the Southern District of Florida held that plaintiffs had alleged in their suit under the FCRA an injury sufficient to confer Article III standing. The FCRA allows pre-hire background checks only when (i) a clear and conspicuous written disclosure is made to the applicant before the report is procured, in a stand-alone document that “consists solely of the disclosure”; and (ii) the applicant authorizes the procurement of the report in writing. 15 U.S.C. § 1681b(b)(2) (emphasis added). The Moody plaintiffs alleged that the defendant, their employer, failed to comply with FCRA disclosure requirements by not providing a stand-alone disclosure, although they acknowledged that a “Disclosure and Authority to Release Information” document had been provided and signed.
The Southern District of Florida reasoned that through the FCRA, Congress had created a new right – the right to receive disclosures as set out in the statute – and a new injury – not receiving a stand-alone disclosure. Therefore, plaintiffs adequately stated an “informational injury” that conferred Article III standing. In addition, because the report contained a “wealth” of private information that an employer had no right to access without specific Congressional license, the plaintiffs’ privacy rights had been “illegally invaded” when the defendant employer procured that report without complying with FCRA disclosure requirements.
However, on the same day, the Northern District of California dismissed the same and similar claims in Nokchan v. Lyft, Inc., holding that the plaintiff did not have standing and explicitly rejecting informational injury and invasion of privacy standing arguments. It reasoned that the plaintiff had not alleged any “real” harm: he had not alleged that he was confused about his rights, that he would not have consented to the background check had he understood his rights, or that he was harmed by the background check; there was no unauthorized disclosure of the plaintiff’s information; and the plaintiff’s written authorization of the background check had not been fraudulently obtained, even though the employer had not complied exactly with FCRA disclosure requirements. In the Northern District of California’s view, the plaintiff had alleged a “bare procedural violation” that did not confer standing.
The conflicting October 5 decisions in Nokchan and Moody, both on motions to dismiss putative class actions based on alleged failures by prospective employers to comply with FCRA disclosure requirements, highlight the fact that the Supreme Court may have to revisit Spokeo to further resolve conflicts across the country over whether technical FCRA violations, such as a failure to provide a stand-alone disclosure, are sufficient to confer standing.