[FCRA] Employers Beware: Ninth Circuit Precedent Leads to Easy FCRA Disclosure Class Certification Win
Employers beware. Last week, a class certification win in Bebault v. DMG Mori USA, Inc., No. 18-cv-02373-JD, 2020 U.S. Dist. LEXIS 75538 (N.D. Cal. Apr. 29, 2020) reminds employers how important compliant Fair Credit Reporting Act (“FCRA”) disclosures are to fending off class action lawsuits (and for doing the right thing). If you are an employer that procures consumer reports during the hiring process, make sure you do not fall into the same trap as the Bebault defendant or else a certified class could be headed your way soon. Especially in the Ninth Circuit.
Plaintiffs Mr. Bebault and Mr. Arnold are former DMG Mori USA, Inc. (“DMG”) employees. During the DMG job application process, they were provided a one-page FCRA disclosure and authorization form that authorized DMG to procure consumer reports during pre-employment background checks. DMG procured their consumer reports. After working at DMG for several years, Plaintiffs filed a class action alleging DMG violated the FCRA––but for what?
Refresher: the FCRA requires an employer to provide “a clear and conspicuous” written disclosure to a prospective employee during the application process and prior to the consumer report being procured (or causing to be procured). This written clear and conspicuous disclosure must be “in a document that consists solely of the disclosure”. 15 U.S.C. §1681b(b)(2)(A)(i).
In Bebault, the FCRA disclosure was clogged with various state-law consumer report disclosures in addition to the FCRA disclosure––and this is a big no, no in the Ninth Circuit. First, let’s look at the disclosure at issue in Bebault:
Because of DMG’s clogged disclosure, it was easy for the Court to find that Mr. Arnold (catch that, only Mr. Arnold still in it. More on that below) had standing and a plausible claim. In the Ninth Circuit, “an improper disclosure under Section 1681b(b)(2)(A)(i) causes a concrete injury sufficient to establish Article III standing.” Id. at *5-6 (citing Syed v. M-I, LLC, 853 F.3d 492, 499-500 (9th Cir. 2017). Further, the Ninth Circuit reads the FCRA “‘as mandating that a disclosure form contain nothing more than the disclosure itself,’ without any ‘extraneous information’ even if it might be ‘closely related’ to the FCRA.” Id. at *5-6 (quoting Walker v. Fred Meyer, Inc., 953 F.3d 1082, 1087-88 (9th Cir. 2020). Indeed, the “closely related” state-law consumer report disclosures were “extraneous information” that tipped the scales in favor of Mr. Arnold’s claim.
Now for that standing update. It was not a complete win for the plaintiffs. The Court held that Mr. Bebault could not serve as class representative because his claim was time barred. The FCRA has a two year statute of limitations that runs from when a plaintiff discovers his consumer report was procured using the improper FCRA disclosure. “[T]he relevant inquiry is when did [Mr.] Bebault discover that DMG had procured a report about him.” Id. Mr. Bebault discovered DMG had procured his consumer report by at least October, 2015, when a copy of the procured report was mailed to his home, but he did not file his complaint until April 19, 2018. Per the Court, he should have filed by November 1, 2017. As a result, the Court dismissed Mr. Bebault and left only Mr. Arnold as the class representative. The Court also re-defined the class definition from “within five years of filing” to “on or after April 19, 2016, which is two years before the date the original complaint was filed”. This is significant because it possibly cut thousands of potential class members when the Court axed years off the class definition––also known as reducing damage exposure in defense land.
After overcoming these threshold questions, the Court easily found that the Rule 23 class certification requirements were met and certified the class. Stay tuned for what happens next. My guess is settlement, and a whole lot of companies giving a fresh review to their “clear and conspicuous” FCRA disclosures.