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California Federal Court Remands Background Check Class Action On Basis Of Article III Standing

posted Dec 11, 2016, 2:17 PM by Resty Manapat

On December 2, the court in Lee v. Hertz Corp., No. 15-cv-04562-BLF (N.D. Cal.) granted a motion to dismiss a putative Fair Credit Reporting Act class action against Hertz.  

The court's order, which was based on a finding that the named plaintiffs—Peter Lee and Latonya Campbell—lacked Article III standing, remanded the case to San Francisco Superior Court because it was before the federal district court as a result of removal based on federal question jurisdiction.  

The case is the latest in a string of decisions considering the contours of standing in the wake of the Supreme Court's 2016 decision in Spokeo, Inc. v. Robin. 

According to the complaint, Lee and Campbell applied to work at rental car locations in California owned by Hertz.  As part of the hiring process, Hertz obtained criminal background checks about both named plaintiffs after providing a disclosure of its intent to do so and securing authorization from each.  

Lee and Campbell each had a criminal incident on their background checks, which were apparently reported accurately, and each alleged that they were subsequently denied employment with Hertz as a result.

Both claimed that Hertz violated the FCRA by failing to provide a clear and conspicuous standalone disclosure of its intent to procure a consumer report and by failing to provide pre-adverse action notice, and a copy of the underlying report, before taking adverse action.

After the Supreme Court decided Spokeo, Hertz moved to dismiss the case, arguing that neither Lee nor Campbell had sufficiently alleged Article III standing.  

Lee and Campbell argued that their claims could proceed in federal court because they each had suffered, with respect to both claims, an invasion of privacy and an informational injury.  The court rejected both theories.

With respect to the disclosure claim, the court found that because Hertz had disclosed its intent to procure a report, and secured authorization from Lee and Campbell to do so, there was nothing more than a bare, technical violation of the statute, which was insufficient to survive an Article III challenge post-Spokeo.  

The court also acknowledged that while deprivation of statutorily required information may cause an intangible but concrete harm, that theory was inapplicable to the Lee case because Lee and Campbell alleged only that their disclosures were not in the format required by the FCRA, making them technically non-compliant. 

With respect to the pre-adverse action notice claim, the court noted that neither plaintiff had alleged an inaccuracy in their criminal background check.  

The court found that this was precisely the type of situation envisioned by the Supreme Court in Spokeo:  the failure of a defendant to provide a consumer notice but where the reported information is nonetheless accurate.  

The court noted that both Lee and Campbell had been able to communicate with Hertz regarding the content of their background reports and that Campbell was even afforded an opportunity to provide written evidence explaining the information therein.  

The court thus concluded that the crux of the claim was a belief that Hertz simply should not have considered the information, not that Lee or Campbell were deprived of the opportunity to dispute inaccurate information.

In opposing the motion to dismiss, the plaintiffs also argued that if the court found that jurisdiction was lacking, it should remand the case, not dismiss it outright.  

The court agreed, rejecting Hertz's invitation to dismiss the case, and instead remanded it back to San Francisco Superior Court, where it was originally filed.

Source: Mondaq News Alerts