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The U.S. Supreme Court has announced that it will review a Fair Credit Reporting Act (FCRA) case involving the question of whether a person may sue under a statute and possibly bring a class action even if he or she has not suffered any injury, but if there has merely been a technical, statutory violation.
The case is “very significant for employers,” as class actions under the FCRA are becoming increasingly common, remarked Rod Fliegel, an attorney with Littler in San Francisco.
Such lawsuits are alleging that employers are failing to get consent for background checks and make required statutory disclosures. If reports come back with information that an employer uses to not hire someone, such as in a criminal background check, the employer must, for example, provide a preadverse action notice.
“The law is very technical,” Fliegel noted. “HR may start poking around in the [compliance] process and find bugs.” If an employer finds problems in a nonprivileged way, that employer will not be able to avail itself of the attorney-client privilege’s protections.
In the case that the Supreme Court will review, Thomas Robins alleged that Spokeo, a consumer reporting agency, is issuing consumer reports in violation of the FCRA. Robins claimed that the search results associated with his name in Spokeo’s social media reports included inaccurate information indicating that he has more education and professional experience than he actually has, that he is married even though he is not, and that he is better situated financially than he really is.
The district court dismissed the case with leave to amend, ruling that Robins had no injury-in-fact. The court paraphrased his allegations as stating “that he has been unsuccessful in seeking employment, and that he is concerned that the inaccuracies in his report will affect his ability to obtain credit, employment insurance and the like.” But the court said that allegations of possible future injury do not satisfy standing requirements to sue.
The complaint was amended, and the district court initially held that Spokeo’s “marketing of inaccurate consumer reporting information about” Robins amounted to injury-in-fact, so that he could sue. But it reconsidered its views and dismissed the case based on the analysis in its original dismissal order.
The 9th U.S. Circuit Court of Appeals reversed, holding that “the violation of a statutory right is usually a sufficient injury-in-fact to confer standing” to sue. It went on to hold that because “the statutory cause of action does not require a showing of actual harm when a plaintiff sues for willful violations,” actual harm is unnecessary to establish injury-in-fact.
“The decision below—along with those of two other circuits—directly conflicts with the decisions of at least two other courts of appeals,” Spokeo asserted in its petition for review of the 9th Circuit decision. “Those courts have held that a plaintiff pursuing a statutory cause of action still must demonstrate a concrete injury-in-fact (as opposed to a mere injury-in-law) in order to establish Article III standing.”
The company added, “The need to resolve the conflict is especially acute because this fundamental question of Article III jurisdiction has significant implications for class-action litigation under a statute that generates dozens of class actions in the federal courts every year.”
Spokeo observed that while the 4th Circuit “has not addressed the issue in the context of the FCRA, it has—in the context of an ERISA [Employee Retirement Income Security Act] action—squarely rejected the argument that, in the absence of any concrete injury, the mere ‘deprivation of a statutory right … is sufficient to constitute an injury-in-fact for Article III standing.”
Similarly, the 2nd Circuit has reached the same conclusion, rejecting the argument that “either an alleged breach of fiduciary duty to comply with ERISA, or a deprivation of the plaintiff’s entitlement to that fiduciary duty, in and of themselves constitutes an injury-in-fact sufficient for constitutional standing.”
Class Actions Common
Class actions invoking the FCRA and grounded in the injury-in-law theory upheld in this case are being filed “with great frequency,” Spokeo asserted. “Indeed, at least 29 putative class actions claiming statutory damages under FCRA have been filed in the first four months of this year alone. And those lawsuits target a broad range of businesses. As this case demonstrates, FCRA class actions are being filed with increasing frequency against employers and other entities that are not traditional ‘consumer reporting agencies,’ but cannot escape the litigation (and potentially massive exposure) at the pleading stage.”
“If the case goes in favor of Spokeo, the risks for HR will be greatly reduced,” said Donna Wilson, an attorney with Manatt in Los Angeles. However, “if the case rules against Spokeo, the risks in FCRA suits will go up substantially.”
This case is Spokeo Inc. v. Robins, No. 13-1339.
Allen Smith, J.D., is the manager of workplace law content for SHRM. Follow him @SHRMlegaleditor.
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