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Third Circuit Holds Individual Plaintiffs Lack Standing for Some Alleged Violations of the FCRA's Pre-Adverse Action Notice Requirement

BY ROD M. FLIEGEL AND WILLIAM J. SIMMONS ON SEPTEMBER 10, 2018

This article was originally published on Littler Mendelson's website. Click here to read the original article.

On September 10, 2018, in Long v. Southeastern Pennsylvania Transportation Authority (SEPTA), the U.S. Court of Appeals for the Third Circuit joined the chorus of recent circuit court opinions tackling the question of constitutional standing to sue in federal court under the Fair Credit Reporting Act (FCRA). Standing is constitutionally required for the plaintiff to pursue any claims in federal court. It is a question that implicates the court's jurisdiction to adjudicate the case, not a determination of the merits of the plaintiff's claims. In order to have standing, a plaintiff must show that he or she suffered a concrete "injury-in-fact" because of the defendant's alleged wrongdoing. In Long, the court held that the plaintiffs established standing for one type of violation of the FCRA's "pre-adverse action" notice requirement (failing to provide them with a copy of the background report before terminating their employment), but not the other (failing to provide them with information about their rights under the FCRA before doing so).

The Circuit Court Landscape

Constitutional standing has become a primary battleground in consumer rights cases in federal court, including FCRA class actions. The Supreme Court breathed new life into the issue when it revisited the legal standard in Spokeo, Inc. v. Robins. In Spokeo, the plaintiff alleged that the defendant violated the FCRA by publishing false information about him to prospective employers. The Court held that a plaintiff does not "automatically" have the requisite injury-in-fact "whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right." In other words, a plaintiff is not entitled to proceed in federal court merely because the plaintiff claims that the defendant violated the plaintiff's statutory rights. To demonstrate standing, the plaintiff must allege and ultimately prove that the violation caused the plaintiff an injury-in-fact. The Court remanded the case to the Ninth Circuit to determine whether the plaintiff's allegations satisfied the "concreteness" element of standing—i.e., whether the statutory violation actually caused the plaintiff to suffer some "real" harm that "actually exists in the world."1

Recently, the federal circuit courts have issued several opinions applying Spokeo to FCRA cases. All of the courts have been faithful to Spokeo's mandate to require the plaintiff to do more than merely allege a statutory violation. Some courts have found the requisite injury-in-fact, but others have not. For example, in Auer v. TransUnion, et al., the Eighth Circuit recently joined the Seventh Circuit in finding that the plaintiff job applicant lacked standing to sue in federal court for a violation of the FCRA's disclosure and authorization provision.2 Last year, the Ninth reached the opposite conclusion in a similar case, holding that the plaintiff had standing to sue in federal court.3

The courts have likewise come to varying opinions in cases considering the question of standing to sue in federal court for violations of the FCRA's "pre-adverse action" notice provision. Last month, the Seventh Circuit in Robertson v. Allied Solutions, LLC held that the plaintiff established standing for her class action claims, reasoning that the plaintiff had alleged a sufficient injury to confer standing because the plaintiff claimed that she was not provided with information she was entitled to by law, i.e., a copy of the background report and a summary of her legal rights under the FCRA.4 Earlier in the year, the Ninth Circuit reached the opposite result in Dutta v. State Farm, holding that the plaintiff failed to allege that the violation resulted in actual harm or substantial risk of harm, even though he sufficiently alleged a violation of the FCRA itself.5

Long

The plaintiffs in Long alleged that SEPTA violated the FCRA's pre-adverse action notice provision by terminating their employment based on their background checks, without first providing them with (i) a copy of the background report, and (ii) information about their rights under the FCRA. They filed a class action lawsuit, but the trial court dismissed it, finding the plaintiffs lacked standing under Spokeo.

On appeal, the Third Circuit held that the plaintiffs had standing for the first alleged violation, but not the second one. After explaining the purpose served by the FCRA's pre-adverse action notice requirement, the court held that the plaintiffs established their standing by alleging they did not receive a copy of their background reports before SEPTA terminated their employment. The plaintiffs had standing even though they did not allege any errors in the background reports, because they had a right to see the background reports before any adverse action was taking against them. On the other hand, the plaintiffs lacked standing based on their failure to receive information about their rights under the FCRA, because this was a "bare procedural violation, divorced from any concrete harm." The plaintiffs were not injured, the court explained, because they learned of their rights under the FCRA and were able to file their lawsuit within the FCRA's two-year statute of limitations. The court thus affirmed the dismissal in part and remanded the case to the district court for further proceedings only as to the first of the two alleged FCRA violations.

Takeaways

The slew of recent federal circuit court opinions underscore how standing is a developing area of the law that will turn on the specific facts. There is no bright-line rule that will dictate the outcome of the standing question in FCRA cases. Employers thus must continue to keep a close eye on their compliance with the FCRA in order to minimize their legal risks, including the fertile risk of class action litigation.6

Generally speaking, employment-related background checks continue to implicate a host of legal obligations, including duties under the many state and local "ban the box" laws.7 Employers therefore should continue to keep the compliance with all of the various laws on the top of their to-do list.

© 2018 Littler Mendelson. All Rights Reserved. LITTLER MENDELSON®, ASAP®, INSIGHT® and LITTLER REPORT® are registered trademarks of Littler Mendelson, P.C.

1 See Rod Fliegel and Phil Gordon, U.S. Supreme Court Holds Not Every Violation of a Federal Statute is a Ticket to File a Federal Court Lawsuit, Littler Insight (May 17, 2016).
2 See Rod M. Fliegel and Julie A. Stockton, Eighth Circuit Holds Individual Plaintiff Lacks Standing for Alleged Violations of the FCRA's Authorization and Disclosure Requirement, Littler Insight (Sept. 10, 2018).
3 See Jennifer Mora and Rod Fliegel, Ninth Circuit is the First Appellate Court to Rule on "Extraneous Text" in a FCRA Background Check Disclosure, Littler ASAP (July 18, 2018).
4 See Rod M. Fliegel, Seventh Circuit Holds Class Action Plaintiff Had Standing for an Alleged Violation of the FCRA's "Pre-Adverse Action" Notice Provision, Littler ASAP (Aug. 30, 2018).
5 See Rod M. Fliegel, The Ninth Circuit Holds Plaintiff Lacked Standing for an Alleged Violation of the FCRA's "Pre-Adverse Action" Notice Provision, Littler ASAP (July 18, 2018).
6 See Rod Fliegel, Alison Hightower, and Allen Lohse, High Alert for California Employers and Employers Nationwide for the Second Wave of FCRA Class Actions, Littler Insight (Oct. 19, 2017); Rod Fliegel and Allen Lohse, Employers Prevail in FCRA Class Actions, Littler Insight (Feb. 28, 2018).
7 See Rod Fliegel and Allen Lohse, Impending Necessary Ban-the-Box Updates for Criminal Record Inquiries in Massachusetts and San Francisco, Littler ASAP (Apr. 24, 2018); Rod Fliegel, Criminal Record Screening Policies Continue to Raise Important Compliance Issues, Littler ASAP (Apr. 6, 2018).

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