Taylor v. First Advantage Background Services Corp.
Docket: Case No. 15-cv-02929-DMR
Court: District Court, N.D. California; September 13, 2016; Federal District Court
The court granted Plaintiff Christopher Taylor's motion for partial summary judgment regarding Defendant First Advantage Background Services Corp.'s negligent violation of the Fair Credit Reporting Act (FCRA) reinvestigation requirements. The court denied Defendant's motion for partial summary judgment on Taylor's claim under FCRA § 1681e(b), asserting that inaccuracies in reporting criminal convictions stemmed from the Minnesota Department of Public Safety rather than Defendant's procedures. Additionally, the court rejected Defendant's argument that there was insufficient evidence to demonstrate willful misconduct.
The factual background reveals that Taylor, an IT professional, applied for a job through IDC Technologies, which offered him a position contingent upon a background check conducted by First Advantage. The background check erroneously reported four criminal convictions belonging to Dwayne Taylor, not Christopher Taylor. Although both share the same birth month and day, they were born in different years and have different names. Defendant's process involved a search of its national criminal file database but did not include obtaining court records. After Taylor contested the accuracy of the report, disputes regarding two felony and two misdemeanor convictions were only partially recorded by Defendant. Ultimately, upon removing the felony convictions, Defendant failed to correct the report concerning the misdemeanors, leading IDC to rescind Taylor’s job offer.
Plaintiff initiated a lawsuit against IDC and First Advantage on June 24, 2015, but dismissed all claims against IDC with prejudice on May 27, 2016. Subsequently, both parties filed motions for partial summary judgment on July 18, 2016. Summary judgment can be granted when there are no genuine disputes regarding material facts, with the moving party bearing the burden of proof. The court must view evidence favorably for the non-movant and cannot weigh evidence or assess witness credibility. To counter a motion for summary judgment, the non-moving party must present substantial evidence beyond mere assertions to demonstrate a genuine issue of material fact. The law also recognizes that when conflicting narratives are presented, a court should not accept the version of facts that is clearly contradicted by the record. Partial summary judgment can be granted for specific claims or defenses, and each party's motions must be evaluated individually. The Fair Credit Reporting Act (FCRA) was enacted to ensure fair credit reporting and protect consumer privacy, assigning specific duties to consumer reporting agencies to handle consumer information responsibly.
CRAs (Consumer Reporting Agencies) have specific obligations under the Fair Credit Reporting Act (FCRA) to ensure the accuracy of consumer reports and to conduct reasonable reinvestigations of disputed information. Under 15 U.S.C. § 1681e(b), CRAs must follow reasonable procedures to assure the maximum possible accuracy of consumer information. Liability for inaccuracies hinges on the reasonableness of the CRA’s procedures, as established in Guimond v. Trans Union Credit Info. Co.
Additionally, 15 U.S.C. § 1681i(a)(1)(A) mandates that CRAs conduct a reasonable reinvestigation of disputed information within 30 days of being notified by a consumer, either directly or through a reseller. They must determine the accuracy of the disputed information or delete the item if found inaccurate.
Consumers can pursue private legal action for willful or negligent noncompliance with the FCRA. Under 15 U.S.C. § 1681n, willful noncompliance can lead to damages, including actual damages or statutory damages ranging from $100 to $1,000, along with punitive damages and attorney fees. A showing of willfulness requires proof of reckless disregard for statutory duties, meaning the CRA took actions that posed a significantly greater risk of legal violation than mere carelessness. Notably, actual damages are not required to prove willful violations, as established in Robins v. Spokeo, Inc. If willful violations are proven, statutory damages are applicable for each violation.
Negligent noncompliance under the Fair Credit Reporting Act (FCRA) holds any individual liable for failing to meet requirements concerning consumers, with damages comprising actual losses and possible attorney's fees if the consumer prevails in court. Negligence is defined by common law standards, requiring conduct consistent with that of a reasonably prudent person. A plaintiff must demonstrate actual damages to claim negligent noncompliance, which can include emotional distress as a result of inaccurate credit reporting or inadequate investigation of disputes, even without a denial of credit. The Ninth Circuit mandates objective evidence to support claims of emotional distress, relying on testimony or circumstantial inference for compensatory damages.
In his complaint, the plaintiff asserts four claims: 1) negligent failure to ensure maximum possible accuracy; 2) willful failure to ensure maximum possible accuracy; 3) negligent failure to conduct a reasonable reinvestigation; and 4) willful failure to conduct a reasonable reinvestigation. He seeks partial summary judgment on the third claim, asserting the defendant's negligence in failing to reinvestigate inaccuracies in his credit file after being alerted by the plaintiff. The FCRA requires credit reporting agencies (CRAs) to properly reinvestigate upon notification of potential inaccuracies, considering all relevant consumer information and subsequently modifying or deleting inaccuracies based on the investigation's outcome.
To establish a claim for negligent violation under section 1681i, the plaintiff must prove: 1) the presence of inaccurate or incomplete information in his credit files; 2) direct notification to the defendant regarding the inaccuracy; 3) that the dispute was neither frivolous nor irrelevant; 4) the defendant's lack of response to the dispute; and 5) that this failure caused actual damages. The plaintiff claims he notified the defendant about inaccuracies related to four criminal convictions and that the defendant did not investigate two disputed misdemeanor cases, arguing that no reasonable jury could find the failure to reinvestigate anything but negligent. The plaintiff does not seek summary judgment on causation or damages, asserting no material factual disputes exist regarding the legal elements of his section 1681i claim.
Defendant's background report contained inaccuracies, specifically four criminal convictions incorrectly attributed to Plaintiff. The Ninth Circuit mandates a plaintiff asserting a claim under § 1681i to demonstrate a prima facie case of inaccurate reporting. Plaintiff disputed the inaccuracies with Defendant, prompting Defendant's obligation to conduct a reasonable reinvestigation, which it failed to do regarding two misdemeanor cases after Plaintiff's February 2015 dispute.
Defendant contests the motion for partial summary judgment, arguing it improperly seeks judgment on only a portion of the § 1681i claim and neglects to address causation and damages. Plaintiff acknowledges these genuine issues must be resolved by a jury but affirms his right to seek partial summary judgment, supported by Rule 56(a), which allows for motions on parts of claims or defenses.
Defendant cites unrelated cases to argue that Plaintiff has not raised genuine issues of material fact on damages. However, under the Fair Credit Reporting Act (FCRA), emotional distress claims require sufficient evidence. Plaintiff provided testimony indicating significant emotional distress, including feelings of anxiety, frustration, and helplessness, arising from the inaccuracies in the report and their impact on his personal and professional life.
Additionally, Defendant plans to assert a "reasonable procedures" defense, claiming unresolved factual issues render summary judgment inappropriate regarding this defense.
Defendant references multiple cases to support its claim that a "reasonable procedures" defense applies to allegations under 15 U.S.C. § 1681i. Plaintiff counters that Defendant waived this defense by failing to raise it in its initial answer and argues that no such defense is valid under the statute. According to the rules, affirmative defenses must be included in the first responsive pleading to provide fair notice to the plaintiff. Although the Ninth Circuit allows some flexibility, a defense can only be introduced later if it does not prejudice the plaintiff.
Defendant's assertion that its "reasonable procedures" defense is not an affirmative defense is rejected. Instead, it is classified as such, as it seeks to avoid liability regardless of whether the plaintiff proves all elements of the claim. The court provided Defendant an opportunity to demonstrate that it had previously asserted this defense but found no evidence of it in the record prior to the current motion. Additionally, Plaintiff argues that allowing this defense at such a late stage would prejudice him, as he was unaware of it and did not pursue relevant discovery.
Consequently, the court determines that Defendant has waived the "reasonable procedures" defense concerning Plaintiff's claim under § 1681i(a)(1), if it exists. The court grants Plaintiff's motion for partial summary judgment, noting that the evidence shows Defendant's background check contained inaccuracies, Plaintiff notified Defendant of these disputes, and Defendant failed to reinvestigate two disputed cases. The court concludes that a reasonable jury would view Defendant's failure to reinvestigate as negligent and reserves the issues of causation and damages for jury determination.
Defendant's motion for partial summary judgment argues that Plaintiff's claim under section 1681e(b) fails because the inaccuracies in Plaintiff's background report were not caused by Defendant. Defendant asserts that Plaintiff has not provided evidence of willfulness regarding alleged violations of sections 1681e(b) and 1681i. In summary judgment motions, the moving party, typically the defendant, must demonstrate either the lack of evidence for an essential element of the opposing party's claim or disprove that element through admissible evidence.
Regarding the section 1681e(b) claim, Defendant contends that inaccuracies in its report originated from the Minnesota Department of Public Safety (MDPS) and are not its responsibility. Liability under this section requires evidence that a Consumer Reporting Agency (CRA) prepared a report containing inaccurate information, which Plaintiff has provided. However, the Fair Credit Reporting Act (FCRA) does not impose strict liability; a CRA can avoid liability if it shows that it followed reasonable procedures despite the inaccuracies.
Defendant claims it identified the erroneous convictions by searching its national database, populated with records from Experian, which in turn sourced its information from various agencies, including MDPS. Defendant maintains that it should not be held liable for inaccuracies attributed to MDPS, asserting that the inaccuracies undeniably originated from MDPS. However, a closer look reveals that Defendant's evidence is overstated. While it is true that the information came from Experian, which received it from MDPS, there is no conclusive evidence that the inaccuracies were indeed from MDPS. O’Connor's declaration suggests that MDPS mistakenly mixed Plaintiff’s identifiers with those of his brother, but this assertion lacks substantiation.
O’Connor lacks personal knowledge or competency to testify about the relevant facts. The O’Connor deposition reveals that the Defendant's national criminal file database obtains information from Experian, which in turn sourced data on the Plaintiff from the Minnesota Department of Public Safety (MDPS). However, the record merely notes "MN DPS" as the source for the convictions without attributing any errors to MDPS's processing of criminal records. The Defendant has not claimed any inaccuracies in the actual court conviction records. This case is distinct from precedents cited by the Defendant, such as Henson v. CSC Credit Servs., where a credit reporting agency (CRA) was found not liable under the Fair Credit Reporting Act (FCRA) for inaccuracies from a court’s Judgment Docket, as they are not expected to investigate beyond official records unless notified of potential inaccuracies. In contrast, the Defendant did not examine the court documents for the reported convictions and does not assert any mistakes in those records. The case of Stewart v. ABSO, Inc. similarly does not support the Defendant’s position, as it involved reliance on a report from a state-wide repository rather than a court record error, and the court did not require a determination on the CRA’s accuracy procedures due to a lack of demonstrated injury to the plaintiff. The Defendant also references Darrin v. Bank of Am. N.A. and Saenz v. Trans Union, LLC, where courts ruled that CRAs were not liable under section 1681e(b) for relying on credible information from reputable sources. Both cases are distinguishable from the current matter.
The Consumer Reporting Agency (CRA) relied on credible information from creditors in previous cases (Darrin and Saenz), where the courts upheld the CRA's entitlement to that data. However, in the current case, the Defendant did not obtain information directly from the original source regarding the Plaintiff's criminal convictions, namely the Hennepin County Courthouse. The court records for the convictions were confirmed to bear the name “Dwayne Taylor,” which is different from the Plaintiff's name, indicating a potential error in the Defendant's reporting.
The Plaintiff asserts that the CRA obtained data from Experian, which received it in bulk from the Minnesota Department of Public Safety (MDPS), and that both MDPS and Experian included warnings about the accuracy of the data. Furthermore, a researcher sent by the Defendant to the courthouse found no records matching the Plaintiff's name and date of birth, yet the Defendant failed to reconcile these findings with the reported convictions. Additionally, the Defendant had previously produced a background report for U.S. Bank based on the Plaintiff's fingerprints that did not list any criminal convictions, further complicating their defense.
The court noted that the reasonableness of the CRA’s procedures and whether they were followed should be determined by a jury, referencing the Ninth Circuit's guidance on this matter. Regarding the willful noncompliance claims under the Fair Credit Reporting Act (FCRA), the Defendant argued that their actions were reasonable and any violation was due to an isolated employee mistake. However, willfulness can be demonstrated through reckless disregard for statutory duties, which does not require proof of intent to harm but rather an intent to fail to comply with the FCRA. Courts have typically treated willfulness as a factual question for the jury, suggesting that the Plaintiff has sufficient grounds to contest the Defendant's summary judgment motion.
The motion to certify the appeal was denied in case No. 14-CV-05191-TEH, with the court ruling that the mixed nature of the willfulness inquiry—intertwining legal and factual issues—should be determined by a finder of fact. In the context of willful violations under 15 U.S.C. § 1681s-2(b) of the Fair Credit Reporting Act (FCRA), if a plaintiff establishes a prima facie case, the burden shifts to the furnisher to prove legal certainty that it complied with its obligations, thus creating a triable issue of fact regarding the reasonableness of its response.
The plaintiff claims to have sufficient evidence of willfulness on his § 1681e(b) claim based on several points: the defendant relied solely on data from two sources, despite warnings about accuracy; the defendant implemented procedures for accuracy but failed to follow them for the plaintiff’s report; records were matched using a misspelling of the plaintiff's name without evidence supporting the accuracy of such matches; the defendant found no matching records at the relevant courthouse; it did not review underlying court documents for records reported as matches; the reported convictions did not belong to the plaintiff; and prior reports on the plaintiff did not include the erroneous convictions.
The plaintiff argues these facts could lead a reasonable jury to find that the defendant was aware or should have been aware of the risk of inaccuracy in the report and that its procedures were inadequate for ensuring maximum accuracy. In response, the defendant contends that the plaintiff's factual and legal assertions are incorrect and misinterprets the burden of proof necessary to defeat a summary judgment motion. The defendant also argues that the use of name variation logic is not inherently unreasonable and that case law does not require consumer reporting agencies to review underlying court records. However, the court finds the defendant's reliance on certain cases, including Stewart, to be misplaced, noting that those cases do not establish a legal requirement that CRAs must review underlying court records before reporting information. The court emphasizes that such rulings from other circuits are not binding.
The report examined included criminal records for “Debra Adams” and “Debra Jean Adams” while investigating “Deborah Adams.” The court determined that a reasonable jury might find that the defendant created an unjustifiable risk of harm by including convictions belonging to someone with a different first name from another state in the background report. Consequently, the court denied the defendant's motion for summary judgment regarding the plaintiff's claim of willful violation of section 1681e(b).
In the case of Smith v. LexisNexis Screening Solutions, the court evaluated whether there was enough evidence to suggest that the defendant willfully violated section 1681e(b). It concluded that a jury could find that the defendant’s failure to require middle names from employers posed an obvious risk of harm, especially given the commonality of the plaintiff's name. The mismatch between the provided credit report and the criminal records further demonstrated negligence that could be interpreted as recklessness. The court asserted that the risks could have been easily mitigated, and thus, there was sufficient evidence for the jury to determine willfulness.
The discussion on willfulness under the Fair Credit Reporting Act (FCRA) is typically a factual question for the jury. The plaintiff presented enough facts for a reasonable jury to conclude that the defendant acted willfully in violating section 1681e(b). Regarding a claim under section 1681i for failing to reinvestigate two misdemeanors on the plaintiff's report, the defendant sought summary judgment, arguing a lack of evidence for willfulness and claiming that its actions were merely negligent, bolstered by its annual FCRA training and quality control measures. The plaintiff countered by arguing that the defendant lacked effective quality control to ensure accurate logging of disputes and that the preparation of the report should have alerted the defendant to potential issues.
A plaintiff argues that the defendant acted with reckless disregard regarding the accuracy of dispute procedures, which led to erroneous misdemeanor attributions and wrongful felony convictions against the plaintiff. The plaintiff asserts that a reasonable jury could conclude that the defendant's dispute procedures were fundamentally flawed due to reliance on a single employee's transcription. This claim aligns with established legal precedents indicating that willfulness can be demonstrated by showing a reckless failure to adhere to statutory duties. Various court cases cited support the notion that willful violations occur when consumer reporting agencies (CRAs) implement inadequate policies or fail to thoroughly investigate disputes. For instance, prior rulings highlight instances where CRAs either overlooked clear evidence or relied on cursory automated processes, leading to potential recklessness. The defendant contends that it followed reasonable procedures for reinvestigation but may be barred from asserting this defense at the summary judgment stage, as it was not previously raised, potentially prejudicing the plaintiff. The defendant's argument is mainly based on limited statements from the O’Connor Supplemental Declaration, which outlines the mechanisms available for consumers to lodge disputes.
The court finds that the evidence presented by the Defendant is inadequate to prove that its procedures were not reckless under the Fair Credit Reporting Act (FCRA). A reasonable jury could conclude that the Defendant acted with reckless disregard during the reinvestigation of disputed criminal convictions. As a result, the Defendant's motion is denied.
A case management conference is set for October 5, 2016, at 1:30 p.m., with a joint case management statement due on September 28, 2016. The Plaintiff has dismissed all claims against IDC Technologies, Inc., leaving First Advantage as the sole defendant. The parties agree that First Advantage qualifies as a "consumer reporting agency" under the FCRA, and that the Plaintiff's background report is a consumer report.
The Defendant argues that the Plaintiff must prove all essential elements of his claim to move for partial summary judgment, referencing previous case law. However, the court distinguishes these cases, noting that they addressed full summary judgments rather than partial motions. The Defendant's assertion that the Plaintiff's claims are not valid is rejected, and the court does not address the Plaintiff's alternative argument regarding a "reasonable procedures" defense due to the Defendant waiving this affirmative defense. The Defendant's claims about misattributed records lack citation to evidence, leaving room for a jury to find the reliance on such information unreasonable.
