Moore v. Rite Aid HDQTRS Corp.

Citations: 33 F. Supp. 3d 569; 2014 U.S. Dist. LEXIS 104464; 2014 WL 3735568Docket: Civil Action No. 13-1515

Court: District Court, E.D. Pennsylvania; July 30, 2014; Federal District Court

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The putative class action involves allegations against Rite Aid Hdqtrs Corp. for violating the Fair Credit Reporting Act (FCRA) through its employment screening practices conducted by LexisNexis Screening Solutions, Inc. The class consists of former and current employees or job applicants impacted by adverse employment actions based on LexisNexis background reports. Rite Aid has filed a Motion to Dismiss under Federal Rule of Civil Procedure 12(b)(6), which the Court grants without prejudice, allowing plaintiffs 15 days to potentially amend their complaint.

Rite Aid contracted LexisNexis to perform background checks, assess applicant eligibility, and provide necessary FCRA notification letters. LexisNexis operated as a remote tool to streamline Rite Aid's employment decisions, particularly in identifying applicants with theft or fraud histories. Employers were permitted to access LexisNexis's proprietary Esteem database after signing "Rules of Participation," which mandated them to report employee theft incidents under specific conditions, such as the incident involving theft of merchandise valued over five dollars and being eligible for criminal prosecution.

Notably, LexisNexis did not require employers to disclose the purpose of a Voluntary Admission Statement (VAS) to employees or provide them with a complete copy. Allegations suggest that LexisNexis improperly verified VAS submissions related to non-theft losses, contrary to the established reporting rules, which should have excluded such incidents.

LexisNexis evaluated applicants for Rite Aid positions using a scoring matrix that categorized them as eligible, non-competitive, or decisional based on background checks. An applicant with a verified match in the Esteem database was classified as non-competitive, prompting LexisNexis to send an initial notice letter on Rite Aid stationery. This letter informed the applicant of the background check conducted, included a copy of the report, and outlined rights under the Federal Fair Credit Reporting Act, along with any applicable state laws. The letter warned that failure to respond within five business days could result in non-employment or termination. The employment screening process ensured that this letter was dispatched only after adjudication was complete. The background report attached detailed only the location, date, and value of stolen merchandise but did not include a copy of the VAS (Voluntary Admission Statement). The complaint did not address the provisions in the notice letter regarding the applicant's opportunity to present additional information within the five-day window.

In the case of Kyra Moore, who worked for CVS from 2006 to 2010, she was interviewed by loss-prevention agents in July 2010, where she denied theft but acknowledged that items had gone missing after she left them unattended. A hand-written VAS was created, where she only admitted intent to pay for those items. The loss-prevention agent did not provide her with a copy of the VAS, which was subsequently reported to LexisNexis. Following the interview and VAS completion, Ms. Moore was sent home and terminated.

In April 2011, Ms. Moore applied for a store supervisor position at Rite Aid and was informed by a district manager that employment was contingent on passing a drug test and background check. She received an initial notice letter from LexisNexis dated April 26, 2011, indicating that she could submit additional information within five days for consideration in Rite Aid's hiring decision. The accompanying background report showed that Ms. Moore had passed the criminal check but was deemed non-competitive due to a match in the Esteem database regarding a theft incident from July 2010, where the theft amount was $60.00. Subsequently, Rite Aid withdrew the job offer. Ms. Moore’s complaint does not reference the five-day information submission period but notes that her attorney sent letters disputing the Esteem report on May 23, 2011, and July 28, 2011. In October 2018, LexisNexis issued a revised report scoring her as eligible for the position, but it is unclear if Rite Aid received this report, and she was not re-offered a position. Ms. Moore filed suit against Rite Aid on March 22, 2013. Rite Aid responded with a Motion to Dismiss on May 31, 2013, which was postponed during related settlement discussions. The legal standard for analyzing a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6) requires the court to accept all factual allegations as true and evaluate whether the complaint states a plausible claim for relief, distinguishing between mere possibility and plausibility of entitlement to relief.

Plaintiff alleges that Rite Aid violated the Fair Credit Reporting Act (FCRA), specifically 15 U.S.C. § 1681b(b)(3), by failing to provide a pre-adverse action notice before taking adverse employment actions based on consumer reports from LexisNexis. Rite Aid, acknowledging LexisNexis as a consumer reporting agency, contends that it is a person under the FCRA and that the plaintiff is a consumer. The purpose of the pre-adverse action notice is to allow consumers time to address the report before any adverse employment decisions are made. 

The plaintiff claims Rite Aid did not provide this notice or a complete report, arguing these failures represent willful non-compliance with the FCRA, making the putative class eligible for statutory and punitive damages. The court examines the timing of adverse actions, which are defined as employment decisions that negatively impact current or prospective employees. A pre-adverse action notice must be sent before any adverse action is executed. 

The court notes that while an employer may intend to take adverse action, such action is not considered complete until it is communicated or takes effect. The core issue is whether LexisNexis adjudications are treated as final employment decisions by Rite Aid. The plaintiff contends that these adjudications represent adverse actions, implying that the initial notice from LexisNexis was sent after a decision had already occurred. Rite Aid counters with two arguments: first, that the initial notice indicated it would consider additional information from the applicant before making a final decision; and second, that the plaintiff's factual allegations are insufficient to establish that LexisNexis adjudications qualify as adverse actions.

Rite Aid's first argument is rejected, but the Court finds the Complaint lacks sufficient factual allegations to plausibly support a claim for relief. The Court clarifies that an employer cannot fulfill the requirements of 15 U.S.C. § 1681b(b)(3) by simply designating a future point as the moment of 'final decision' if that decision has already been made. The plaintiff contends that Rite Aid's employment decision was effectively made after a LexisNexis adjudication, with subsequent opportunities to provide information being mere formalities. However, the Complaint does not substantiate this claim. The statute requires a 'real opportunity' for applicants to contest adjudications or alter their outcomes, and if the allegations had been supported, a valid claim could exist.

Regarding Rite Aid's second argument, the Court concludes the allegations do not adequately establish that an adverse action occurred at the time of the LexisNexis adjudication. The plaintiff's assertion that LexisNexis adjudications are adverse actions lacks detail, as there is no claim that Rite Aid relied on these adjudications for its final employment decision, nor that the five-day period for contesting the adjudication constituted a 'real opportunity.' The Complaint's closest assertion—that the notice system is designed to send pre-adverse action notices after LexisNexis evaluations—does not suffice to state a valid claim. The plaintiff also fails to explain why she did not dispute her LexisNexis report within the five-day window, which is critical for determining whether Rite Aid had an opportunity to address the dispute. The Court finds no allegations that the five days were inadequate or that the report's limited information hindered a meaningful response. Consequently, the claim regarding Rite Aid's failure to provide a pre-adverse action notice is dismissed without prejudice, granting the plaintiff leave to file an amended complaint within fifteen days if warranted by the facts.

Rite Aid's motion to dismiss is granted in part. The plaintiff's claim that Rite Aid failed to provide a complete copy of her LexisNexis background report, specifically the VAS, is dismissed with prejudice. This dismissal is based on the interpretation of Section 1681b(b)(3) of the FCRA, which requires employers to provide only the information received from consumer reporting agencies. Since the plaintiff alleges that LexisNexis did not supply the VAS to Rite Aid, the claim lacks merit.

Additionally, the plaintiff's claims for statutory and punitive damages under 15 U.S.C. 1681n, arising from the alleged willful violation of the FCRA, are dismissed without prejudice. The court allows the plaintiff to file an amended complaint within fifteen days regarding these claims if warranted by the facts. In summary, while some claims are dismissed without prejudice allowing for potential amendments, the specific claim regarding the VAS is conclusively dismissed. An appropriate order follows this decision.

The Class Action Complaint alleges that LexisNexis's adjudications led to the rejection of applicants by Rite Aid, constituting adverse actions as defined by 15 U.S.C. 1681a(l)(B)(ii). The Court finds no need to consider the broader 'catch-all' definition of adverse action under 1681a(k)(1)(B). The plaintiff claims that the statutory language and the precedent set in Goode v. LexisNexis, which recognized LexisNexis as a staffing agency that takes adverse actions based on background checks, supports their case. However, the Court distinguishes Goode from the current case on two grounds. 

First, Goode focused solely on LexisNexis's actions and did not examine the role of its employer-clients, such as Rite Aid, in making employment decisions. The Court noted that any entity taking adverse action must comply with 15 U.S.C. 1681b(b)(3), regardless of decision-making authority, reinforcing that LexisNexis's actions adversely impacted applicants for its clients. 

Second, the specifics of employer conduct differ between the two cases. In Goode, employers directed applicants to dispute reports with LexisNexis, while in the current complaint, no such direction is indicated. Additionally, in Goode, the plaintiffs faced delays in notification regarding disputes, affecting their ability to contest employment decisions. Thus, the Goode decision does not substantiate the plaintiff's claims against Rite Aid.