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Employer’s Use of Non-Compliant Disclosure Form Did Not Result in Concrete Injury Under Fair Credit Reporting Act

A job applicant alleging a violation of one of the procedural requirements of the Fair Credit Reporting Act (FCRA) lacked standing to sue under Article III of the United States Constitution because he failed to allege facts showing he suffered a concrete injury in fact, apart from the alleged statutory violation itself, the U.S. Court of Appeals for the Seventh Circuit has ruled unanimously, applying the U.S. Supreme Court’s decision in Spokeo, Inc. v. Robins, 136 S.Ct. 1540 (2016). Groshek v. Time Warner Cable, Inc., No. 16-3355; Groshek v. Great Lakes Higher Education Corp., No. 16-3711 (7th Cir. Aug. 1, 2017).

Background

The FCRA requires that before an employer may obtain a consumer background report on an employee or job applicant, the employer must give the person a “clear and conspicuous” written disclosure that a background report may be obtained. The disclosure must be “in a document that consists solely of the disclosure.” This is known as the “stand-alone disclosure” requirement. In addition, the person must give written consent authorizing the employer to obtain the background report.

In May 2016, the Supreme Court decided Spokeo, which involved a different provision of the FCRA. The Supreme Court held that to have standing to sue under Article III, a plaintiff must have suffered a “concrete” injury apart from the underlying statutory violation itself. (For details of Spokeo, see our article, Supreme Court: ‘Actual Injury’ Needed to Establish Standing to Sue for Violations of Fair Credit Reporting Act.) Spokeo has been applied to actions, typically class actions, brought under many different statutes, including the FCRA. Courts applying Spokeo in FCRA stand-alone disclosure cases, such as Groshek, are divided on the standing question. Decisions dismissing cases for lack of standing presently outnumber approximately two-to-one decisions that find standing.

Facts

Groshek involved appeals from two district court decisions holding the plaintiff lacked standing under Spokeo. In each case, Cory Groshek had received and signed a disclosure and authorization form before the employer obtained a background report on him. Groshek brought class actions alleging that the disclosure and authorization forms he received and signed did not comply with the FCRA’s stand-alone disclosure requirement because they contained extraneous information, including a release of liability. Groshek did not allege, nor could he have, that the inclusion of extraneous language confused him or that he would have done anything differently had the form complied with the FCRA by not including the extraneous language. Groshek and the alleged class sought to recover statutory damages (not actual damages), which can range from $100 to $1,000 per person for willful violations of the FCRA.

Relying on Spokeo, the defendant-employers moved to dismiss the cases for lack of standing. The district courts granted the motions and dismissed each of the cases. Groshek appealed those decisions to the Seventh Circuit, which consolidated the appeals.

Seventh Circuit’s Opinion

The issue before the Seventh Circuit was whether the statutory violation alleged by Groshek (the Court assumed, but did not decide, the legal sufficiency of Groshek’s claim) constituted a “concrete” injury within the meaning of Spokeo. Groshek contended that he suffered two types of concrete injuries: an informational injury and a violation of his right of privacy. Writing for a unanimous panel of the court, Judge William J. Bauer rejected both of Groshek’s arguments and affirmed the district court decisions.

The Court began its analysis by considering the purpose of the FCRA’s disclosure and authorization requirements. It stated that the stand-alone disclosure requirement “is clearly designed to decrease the risk of a job applicant unknowingly providing consent to the dissemination of his or her private information,” and that the authorization requirement further protects consumer privacy by giving the person the right to withhold consent. The Court then reasoned that the statutory violation alleged by Groshek was not tied to the concrete harm that the FCRA sought to protect against, because (a) the disclosure that he received did inform him that a background report may be obtained, and (b) there was no allegation that the extraneous language confused him or “caused him not to understand the consent he was giving.”

In rejecting his claim of an informational injury, the Court distinguished the two Supreme Court cases relied upon by Groshek, Federal Election Commission v. Akins, 524 U.S. 11 (1998), and Public Citizen v. Department of Justice, 491 U.S. 440 (1989). In those cases, the plaintiffs sought to compel the government to disclose information that the government was statutorily required to disclose. In contrast, Groshek was not seeking to compel the employers to provide him with any information, and he therefore suffered no informational injury. The Court also held that Groshek did not suffer a concrete privacy injury, because he had knowingly signed the disclosure and authorization form allowing the employer to obtain a background report.

The Court concluded by distinguishing the decision in Syed v. M-I, LLC, 853 F.3d 492 (9th Cir. 2017), an FCRA stand-alone disclosure case in which the Ninth Circuit held that the plaintiff had standing under Spokeo. The disclosure form in Syed contained a liability waiver similar to those in the disclosure forms at issue in Groshek. However, the Syed court characterized the allegations in that case, and reasonable inferences therefrom, as alleging that the plaintiff was “confused” by the inclusion of the liability waiver and, further, that the plaintiff “would not have signed it” in the absence of the liability waiver. The Seventh Circuit found Syed to be “inapposite,” because, “[u]nlike the plaintiff in Syed, Groshek presents no factual allegations plausibly suggesting that he was confused by the disclosure form … or that he would not have signed it had the disclosure complied” with the FCRA.

Implications

The Seventh Circuit is the second Court of Appeals to decide the question of whether a plaintiff alleging a violation of the FCRA’s stand-alone disclosure requirement has standing. The Ninth Circuit in Syed reached the opposite result. The Groshek opinion likely will be more influential than Syed among district courts, however. First, the standing analysis in Groshek is more thorough than was the Ninth Circuit’s analysis in Syed, which was only two paragraphs long. Also, the Ninth Circuit’s rationale is much narrower, because it is based on the Ninth Circuit’s reading of the plaintiff’s complaint as alleging he was confused by the inclusion of the liability release language and would not have consented to the background check had that language not been there. In our experience, few, if any, plaintiffs would be able to credibly (and truthfully) make such an allegation. And if the existence of an injury in fact turned on whether the named plaintiff was confused by the inclusion of extraneous language in the disclosure, that could turn the standing inquiry into an individual determination, thereby making class certification inappropriate under the predominance requirement of Rule 23 of the Federal Rules of Civil Procedure.

Jackson Lewis P.C. © 2017

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About this Author

James A. McKenna, Jackson Lewis, unfair competition lawyer, arbitration attorney
Principal

James A. McKenna is a Principal in the Chicago, Illinois, office of Jackson Lewis P.C. He specializes in the litigation of employment disputes, including class actions, wage and hour claims, Fair Credit Reporting Act claims, and non-competition counseling and litigation.

Mr. McKenna has over 30 years of experience in civil litigation, representing small and mid-sized businesses, as well as Fortune 500 companies, in a wide range of complex matters involving: commercial litigation, labor and employment, class action and...

312-803-2515
Jackson Lewis Law Firm, Associate, Jason A. Selvey, Labor Employment Attorney
Associate

Jason A. Selvey is an Associate in the Chicago, Illinois, office of Jackson Lewis P.C. With an exclusive focus on representing management in workplace law and related litigation, Mr. Selvey defends employers before federal and state courts and administrative agencies throughout the Midwest.

His practice covers a wide range of employment counseling and litigation, including issues such as: discrimination and harassment based on race, color, sex, age, religion, national origin and disability; disability accommodation; retaliation, including retaliatory discharge; Fair Credit Reporting Act compliance; and defamation in the business context.

312-803-2513