- Court Rejects Technical Accuracy Approach, Holds that Duplicate Reporting of Otherwise Accurate Criminal History is Inaccurate Under § 1681e(b) of the FCRA
- June 23, 2010 | Author: Erik Grohmann
- Law Firm: Strasburger & Price, LLP - Frisco Office
Smith v. Hireright Solutions, Inc., 2010 U.S. Dist. LEXIS 46525 (E.D. Pa. May 11, 2010)
Facts: Plaintiff brought suit against Defendant Hireright Solutions, Inc. (“Hireright”), a consumer reporting agency (“CRA”) that specializes in maintaining consumer files containing public record information and selling such files to potential employers. The Plaintiff alleged that Hireright willfully violated § § 1681e(b) and 1681k of the FCRA by failing to notify him contemporaneously of the reporting of adverse criminal record history to potential employers, and for failing to maintain strict procedures designed to ensure that such information was complete, up-to-date and accurate. Specifically, Plaintiff claimed that Hireright on three separate occasions provided consumer reports with duplicate entries of the same criminal record to potential employers. Hireright moved to dismiss Plaintiff’s claims pursuant to Federal Rule of Civil Procedure 12(b)(6), which the Court denied.
•Reasonable Procedures. To establish a case of negligent noncompliance with § 1681e(b), a plaintiff must prove: 1) inaccurate information was included in a consumer’s credit report; 2) the inaccuracy was due to defendant’s failure to follow reasonable procedures to assure maximum accuracy; 3) injury to the consumer; and 4) the consumer’s injury was caused by the inclusion of the inaccurate entry.
•Inaccuracy. As to the accuracy prong of § 1681e(b), several circuit courts have adopted the “maximum possible accuracy approach” which holds that a credit entry can be “incomplete or inaccurate” within the meaning of the FCRA either “because it is patently incorrect, or because it is misleading in such a way and to such an extent that it can be expected to adversely affect credit decisions.” In contrast, the Sixth Circuit has adopted a “technical accuracy” standard which holds that a CRA satisfies its duty if it produces a report containing factually correct information about a consumer that is nonetheless misleading or incomplete in another respect. The court adopted the maximum accuracy approach over the technical accuracy approach.
•Punitive Damages. To show willful noncompliance, a plaintiff must prove that the defendants “knowingly and intentionally committed an act in conscious disregard for the rights of others, but need not show malice or evil motive.” The Supreme Court has clarified that reckless disregard of FCRA requirements also qualifies as willful violation within the meaning of § 1681n(a). Citing Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 71 (2007).
•Punitive Damages. When determining whether a CRA’s actions rise to the level of willfulness, the Supreme Court recently clarified that “a company subject to FCRA does not act in reckless disregard . . . unless the [challenged] action is not only a violation under a reasonable reading of the statute’s terms, but shows that the company ran a risk of violating the law substantially greater than the risk associated with a reading that was merely careless.” Thus, even if a CRA engages in an erroneous reading of the statute, it is not reckless unless it was objectively unreasonable. Where the reading has “a foundation in the statutory text . . . and a sufficiently convincing justification,” it is not an objectively unreasonable interpretation of the FCRA, even if the court reviewing the company’s reading disagrees. A reading will be unreasonable when “the business subject to the [FCRA] had the benefit of guidance from the courts of appeals or [a regulatory agency] . . . that might have warned it away from the view it took.” Citing Safeco, 551 U.S. at 69-70. Although Plaintiff’s complaint blanketly states that Defendant’s conduct was malicious, intentional, reckless, and grossly negligent, the Court can reasonably infer that Defendant’s repeated engagement in the same type of objectionable conduct without justification could, at a minimum, rise to the level of reckless disregard.
•Employment Purposes. Section 1681k(a) deals specifically with consumer reports in the employment context and creates heightened standards for procedures used to collect information for employment purposes. When a CRA furnishes a report that contains matters of public record likely to have an adverse effect upon a consumer’s ability to obtain employment, it is obligated to do one of two things: 1) notify the consumer contemporaneously with the transmission of the report to the user; or 2) “maintain strict procedures” designed to ensure the information is complete and up-to-date. In rejecting Hireright’s argument that Plaintiff’s complaint did not disclose the date of the report or the number of days that allegedly elapsed between the issuance of the reports and the required notification to Plaintiff, the Court held that the deficiency did not form an adequate basis on which to dismiss the claim. By simply stating that Plaintiff received a copy of his consumer report after it had already been provided to his prospective employer, the Court found that Plaintiff’s allegations -- albeit cursory -- showed the plausibility of a violation of § 1681k.