Jan 10

Pre-Adverse Action Fair Credit Reporting Act Claim in Class Action Dismissed for Lack of Standing

After four years of litigation, Judge Jan DuBois of the U.S. District Court for the Eastern District of Pennsylvania dismissed an FCRA claim in a class action for lack of standing.  Moore v. Rite Aid Hdqtrs Corp. d/b/a Rite Aid Corporation, 2017 WL 6525796 (E.D. Pa. Dec. 21, 2017), is one of the first post-discovery rulings in an FCRA case to dismiss a plaintiff’s claim on standing grounds for failure to show concrete injury.  Since the number of FCRA class actions alleging violations of the pre-adverse action notice requirements has exploded over the last few years, Moore provides a welcome blueprint for how to defeat an FCRA class action with a post-discovery Spokeo challenge.

The facts alleged are typical of a pre-adverse action case.  Ms. Moore applied for employment at Rite Aid.  She was offered a job conditioned on a successful background report.  A background report was prepared about Ms. Moore that designated her as “Non-Competitive,” or ineligible for hire, based on Rite Aid’s scoring criteria.  Rite Aid sent her a pre-adverse action notice the same day her background report was adjudicated “Non-Competitive.”  The pre-adverse action notice advised Ms. Moore of her right to dispute the accuracy of her background report and told her how to do it.  Five business days later, Rite Aid’s background check provider sent her an adverse action notice.

Ms. Moore’s theory of the case was that Rite Aid never hired an applicant scored “Non-Competitive,” making the assignment of a “Non-Competitive” background score the de facto final employment decision and the actual adverse action.  Thus, according to her, the pre-adverse action notice was not pre-adverse action at all.  Rather, it was—in effect—an adverse action notice that gave applicants no ability to meaningfully dispute the “Non-Competitive” score.  She also alleged that Rite Aid did not give her the full five business days to contest the background report that the pre-adverse action notice referenced before its agent sent the adverse action notice.

After discovery, Rite Aid moved for summary judgment on the ground that Ms. Moore could not show a concrete injury under Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1559-60 (2016) (persons have standing to sue for damages due to an alleged statutory violation only if they suffered a “concrete, de facto” injury, i.e., one that “actually exists” because it has already occurred or presents a “material risk” that it may occur).  Specifically, Rite Aid argued that Ms. Moore could not show she suffered harm because, in fact, she had availed herself of the pre-adverse action notice protections before the adverse action notice was sent.  Ms. Moore spoke with Rite Aid about the circumstances giving rise to the incident that made her “Non-Competitive” and had an opportunity to dispute the allegedly inaccurate information before Rite Aid’s adverse action.

Judge DuBois agreed with Rite Aid and ruled that the alleged procedural violation could not establish a concrete harm because Ms. Moore had actually availed herself of the process she alleged Rite Aid had prevented her from following.  He thus dismissed the FCRA claim alleging failure to provide a reasonable period to respond to the pre-adverse action notice for lack of standing.

While not every FCRA case will result in a post-discovery dismissal for lack of standing, Moore shows it may be worth pursuing, after discovery if evidence is needed.  A developed factual record may show, as it did in Moore, that one or more of the procedural violations the plaintiff alleges caused no concrete harm.  If nothing else, Moore is a welcome reminder that the seemingly endless FCRA suits against employers can be defeated, even if it takes four years.

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