United States: Court Holds No Statutory Right To Indemnification Or Contribution Under The FCRA

Smith v. Waverly Partners, LLC, 2011 U.S. Dist. LEXIS 46399 (W.D.N.C. Apr. 29, 2011)

Facts: Plaintiff, the Senior VP, GC and Secretary of the Cato Corporation, had begun the process of pursuing the GC position with another company, Waverly Partners, LLC. As part of that process, Plaintiff provided her resume and a list of references to Waverly and participated in several interviews. She also had signed an FCRA consent form, which permitted verification of her former employment, but did not permit Waverly to contact her current employer. Waverly's representative told Plaintiff that no references would be contacted unless she was the final candidate, and even then only the listed references would be contacted. Waverly hired AlliedBarton Security Services, LLC ("AlliedBarton") to conduct a background check. AlliedBarton faxed a copy of Plaintiff's consent form to Cato to verify her current employment. Upon receiving same and learning of Plaintiff's job search, Cato forced her to resign. Plaintiff soon thereafter learned that she did not receive the Waverly position. Plaintiff filed suit against Waverly and AlliedBarton, alleging claims for invasion of privacy, violations of the North Carolina Unfair Trade Practices Act and a violation of the FCRA. Waverly filed a cross-claim against AlliedBarton, seeking indemnification and contribution as to all of Plaintiff's claims. Defendants separately moved to dismiss Plaintiff's claims, and AlliedBarton filed a separate motion to dismiss Waverly's cross-claims. The Court granted all of Defendants' motions to dismiss, including AlliedBarton's motion to dismiss Waverly's cross-claim.

Permissible Purpose. AlliedBarton argued that Plaintiff's FCRA claim should be dismissed because Plaintiff failed to specify which section of the FCRA that AlliedBarton had violated. Plaintiff argued that AlliedBarton violated the entire spirit and purpose of the FCRA by conducting a background investigation and furnishing a consumer report to Waverly that exceeded the scope of the authorization in the consent form. Plaintiff cited to § 1681b(b)(1); however, that provision does not require a CRA, such as AlliedBarton, to obtain permission from a consumer before contacting her current employer. Section 1681b(b)(1) merely requires the user of a consumer report to certify to a CRA that the user has made the required disclosure to the consumer that a consumer report may be obtained for employment purposes and that the user has obtained prior written authorization from the consumer to procure a report. Section 1681b(b)(1) does not place any limitation on a CRA's ability to contact any third party when conducting a background investigation.

Permissible Purpose. Plaintiff also based her FCRA argument on § 1681b(b)(2). However, that section does not require a CRA to obtain permission from a consumer before contacting her current employer. Section 1681(b)(b)(2) requires the user to give the consumer a written disclosure to obtain the written authorization for the procurement of the report. Again, it does not place any limitation on a CRA's ability to contact any third party when conducting a background investigation. Accordingly, the Court granted AlliedBarton's motion to dismiss Plaintiff's claim for violation of the FCRA.

Indemnification and Contribution. In its motion to dismiss Waverly's cross-claim, AlliedBarton argued that the FCRA does not create rights of indemnification and contribution. The Court noted: 1) that the FCRA does not contain any express language providing for indemnification or contribution; 2) nor does it implicitly create rights of indemnification or contribution. Given Congress's careful drafting of the comprehensive statutory scheme, omitting any right of indemnification and contribution, it is clear that the FCRA structure negates any inference that contribution or indemnification are permitted. Accordingly, the Court held that the FCRA neither expressly nor impliedly creates a right to indemnification or contribution.

Indemnification and Contribution. The Court addressed the issue of whether there exists a federal common law right to indemnification or contribution under the FCRA. Because the FCRA neither implicates a uniquely federal interest or delegates powers to the courts to create rules of law, the Court held that federal common law does not create rights of indemnification or contribution in the FCRA context.

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