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Two Courts Diverge on the FCRA in the Wake of Spokeo

By Kelly Muensterman

It seems that employers were right to be concerned with the United States Supreme Court’s decision to “punt” in its May 2016 opinion in Spokeo Inc. v. Robins, after two United States District Courts reached opposite outcomes in opinions issued last month. Spokeo represents one of many recent putative class actions brought under the Fair Credit Reporting Act (“FCRA”), wherein plaintiffs allege “technical” or “procedural” violations of the FCRA’s oft-byzantine compliance requirements. Most employers are by now aware that the FCRA’s broad scope sets out strict compliance procedures for employers who wish to use criminal background checks for “employment purposes.”

 In the Spokeo opinion, which was discussed in greater depth in a prior blog post, the Supreme Court remanded back to the Ninth Circuit with instructions to determine whether plaintiffs’ alleged harm was sufficiently “concrete” to confer Article III standing. Though the Court openly hinted at its disapproval of such procedural class actions (e.g. “It is difficult to imagine how the dissemination of an incorrect zip code…could work any concrete harm.”), it did not definitively hold that such claims could never satisfy Article III’s standing requirements.

Taking cues from Spokeo, class action defendants in Nokchan v. Lyft, Inc. and Moody v. Ascenda USA, Inc. filed motions to dismiss on the grounds that plaintiffs had not alleged “concrete” injuries. In both cases, plaintiffs had previously advanced the now well-worn argument that defendants’ “disclosure and authorization” forms were not compliant with 15 U.S.C. §§ 1681b(b)(2)(A)(i)-(ii).

In Lyft, the United States District Court for the Northern District of California agreed with defendant, granting its motion and dismissing the case without prejudice. The Lyft court noted that plaintiff “has not alleged that he suffered any real harm,” nor had he claimed to have been “harmed by the background check in any way.” In Ascenda, however, the United States District Court for the Southern District of Florida, denied defendant’s motion to dismiss, holding on strikingly similar facts that noncompliance with §§ 1681b(b)(2)(A)(i)-(ii) was not “akin to the dissemination of an incorrect zip code” and did in fact represent a sufficiently “concrete” injury.

While the recent FCRA case law might be divergent, the message to employees remains clear: make sure your FCRA forms are compliant.