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FCRA Class Action Survives Early Procedural Challenge

This week we got another big FCRA decision in Sanders v. Global Radar Acquisition. In Sanders, the plaintiffs filed a putative class action claiming that the Defendants failed “to obtain certification prior to furnishing a consumer report for employment purposes in violation of 15 U.S.C. § 1681b(b)(1)(A).” The Plaintiffs were employed by Naples Hotel Group, which was not a party to the action, but were terminated based on the contents of background checks provided by Global HR, a consumer reporting agency. The crux of the claim was not that the Defendant reported false information but rather that the Defendant lacked certifications from the Naples Hotel Group that were required by the FCRA before providing reports. The issue before the district court was whether the plaintiffs had Article III standing to sue.

By way of some background: When applying for a position at Naples Hotel Group, Plaintiffs were required to sign documents titled “Notice and Acknowledgment”, which purportedly authorized Naples Hotel Group to procure their consumer reports for employment purposes. Global HR supplied the “Notice and Acknowledgement” forms, which plaintiffs allege did not comply with the FCRA. (If you’re keeping score at home, the relevant statutory provisions are 15 U.S.C. § 1681b(b)(1)(A)(i)-(ii), (b)(2), and (b)(3)).

In the Amended Complaint, Plaintiffs allege they were terminated on October 5, 2016 based upon the consumer reports Global HR unlawfully furnished to Naples Hotel Group and were never provided with pre-adverse action notification required by the FCRA. They further allege that Global HR invaded their “right of privacy” by providing their confidential information without proper authorization. The Defendant moved to dismiss.

Importantly, the question in the Sanders case isn’t whether the Plaintiffs had statutory standing to sue. Instead, the issue was whether under Spokeo the plaintiffs had Article III standing. Article III standing is a threshold requirement to bring a claim, which (like jurisdiction) must be addressed before the merits. To establish Article III standing, a plaintiff must establish injury in fact, causation, and redressability. For injury in fact, it’s not enough to allege a procedural violation. The plaintiff must actually have suffered harm. That harm must be caused by the Defendant’s conduct. It must be “fairly traceable” to the Defendant. Finally, the harm suffered must be capable of redress by a favorable decision.

The Sanders court found that the Plaintiffs’ harm wasn’t a mere technical violation of the statute but, rather, was precisely the type of harm the FCRA intends to protect against: the distribution of consumer reports without authorization. As to causation, the Court also found that, critically, that harm was “fairly traceable” to the Defendant’s conduct. Specifically, the injury flowed from the Defendant’s conduct. The Court denied the Defendant’s motion to dismiss and found that the Plaintiffs had Article III standing to sue.

Now that the Plaintiffs have survived a key hurdle, stay tuned as we closely watch the next big challenge for the Sanders Plaintiffs: class certification.

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