United States: Eighth Circuit Holds Individual Plaintiff Lacks Standing For Alleged Violations Of The FCRA's Authorization And Disclosure Requirement

Last Updated: September 12 2018
Article by Rod M. Fliegel and Julie A. Stockton

On September 6, 2018, in Auer v. Trans Union, LLC, the U.S. Court of Appeals for the Eighth Circuit joined the Seventh Circuit in holding that an individual plaintiff did not have constitutional standing to sue in federal court under the Fair Credit Reporting Act (FCRA) for an alleged violation of the FCRA's authorization and disclosure requirement This is one in slew of recent federal circuit court opinions that address the threshold issue of standing.  Standing is constitutionally required for the plaintiff to pursue his or her claim in federal court.  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 Auer, the court held that the plaintiff failed to establish her standing and directed the trial court to dismiss the lawsuit.

Following Spokeo, Standing is a Live Issue in the Circuit Courts

Constitutional standing has been a live issue since the U.S. Supreme Court revisited the legal standard in Spokeo, Inc. 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

Federal circuit courts have been applying Spokeo to FCRA cases with varying results. For example, earlier this year, the Ninth Circuit issued an opinion, Dutta v. State Farm, which addressed constitutional standing under the FCRA's "pre-adverse action" notice provision.2 The Ninth Circuit held that the plaintiff in Dutta 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.3

In contrast, last month the Seventh Circuit in Robertson v. Allied Solutions, LLC reached the opposite conclusion, finding that the plaintiff established standing for her class action claims based on the same alleged violation of the FCRA's pre-adverse action notice requirement.  The Seventh Circuit reasoned that the plaintiff had alleged a sufficient injury to confer standing because she 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

Interestingly, the Ninth and Seventh Circuits recently reached the reverse conclusion in cases involving the FCRA's authorization and disclosure requirement—the requirement at issue in Auer.  The Ninth Circuit upheld, while the Seventh Circuit rejected, the plaintiff's standing.5

Auer

The plaintiff in Auer alleged that the City of Minot, North Dakota, had wrongfully terminated her employment after it improperly obtained her credit report. She brought claims against the City, the law firm that represented the City, and the background check company, CBCInnovis, Inc. (CBC), for violations of the FCRA.  The trial court dismissed the plaintiff's claims against all of the defendants.  She filed an appeal. 

On appeal, the Eighth Circuit reframed the issue and identified the "threshold question" as whether the plaintiff alleged sufficient injury to have standing to proceed in federal court. The plaintiff claimed that she had suffered injury to her privacy, reputation, personal security, the security of her identity information, and loss of time spent trying to prevent further violations of her rights under the FCRA.

The Eighth Circuit disagreed, holding that she failed to state facts establishing any concrete injury. The court found that the plaintiff's privacy was not harmed because she gave consent for the City's background check. In addition, the court determined that the plaintiff's allegation of reputational harm, which may in some instances constitute an injury for standing, was not pled with sufficient detail. Further, the plaintiff failed to allege any facts that the security of her personal information had been compromised, and the plaintiff could not manufacture standing by claiming loss of her personal time based on her "fears of hypothetical future harm that is not certainly impending." As a result, the Eighth Circuit directed the trial court to dismiss the plaintiff's claims for lack of jurisdiction.

Takeaways

The recent opinions across the federal circuit courts indicate that this 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 

Overall, 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 Accordingly, employers should continue to keep the compliance with all of the various laws on the top of their to-do list.

Footnotes

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).

See  Rod Fliegel, Jennifer Mora, and Molly Shah,  Federal District Court Holds Employer to its Promise in FCRA "Pre-Adverse Action" Notice, Littler Insight (June 30, 2017).

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).

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).

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 Insight (Jan. 25, 2017).

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).

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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