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Secondary Consequences of Spokeo: Litigating FCRA Claims in State Court

By Emma R. Schuering

The discussion in the wake of the United States Supreme Court’s ruling in Spokeo Inc. v. Robbins has focused on an employer’s ability to obtain dismissal of a claim under the Fair Credit Reporting Act (“FCRA”)—where the plaintiff or class alleges nothing more than a “bare procedural violation,” absent of any concrete injury or real harm. As detailed in prior posts, Spokeo clarified that a statutory violation of the FCRA alone does not create an injury in fact sufficient to support standing; a plaintiff must allege something more by way of real harm resulting from the purported violation. Some courts, including the Fourth Circuit Court of Appeals, have followed Spokeo to the letter and dismissed such claims, concluding no discernable concrete injury to the plaintiff existed, and, therefore, the plaintiff lacked Article III standing to pursue the claim. 

However, courts in California, Missouri, and Washington have recently accepted a tangential, aggressive argument that could be troubling for employers defending FCRA claims: that upon removal, a court must remand the case to the state court from which it originated because the plaintiff or class has not alleged a concrete injury in fact sufficient to establish Article III standing to allow the case to proceed in federal court. And because the removing party bears the burden of establishing federal jurisdiction, with all doubts being resolved against removal, this argument is gaining some traction, resulting in the remand of FCRA claims to proceed in state court. 

Even more problematic for defendants is the result if remanded to state court. Because the state courts are not constrained by the Article III requirements for standing, and state standing requirements can be less demanding, a claim for a “bare procedural violation” of the FCRA may survive a motion to dismiss in state court where it may not have in federal court, or in certain state courts, but not others.

With the growing popularity of this maneuver among FCRA plaintiffs, it is important that employers ensure compliance with the FCRA in all employment decision-making processes involving consumer reports. If litigation should result, employers should work with counsel to make strategic decisions regarding removal or early-filed motions to dismiss to allow for the strongest defense possible to these “no-injury” FCRA claims.