Hawkins v. S2Verify et al, No. 3:2015cv03502 - Document 60 (N.D. Cal. 2016)
Court Description: ORDER DENYING 42 MOTION TO DISMISS.(whalc2, COURT STAFF) (Filed on 1/11/2016)
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Hawkins v. S2Verify et al Doc. 60 1 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE NORTHERN DISTRICT OF CALIFORNIA 8 9 11 For the Northern District of California United States District Court 10 REGMON L. HAWKINS, on behalf of himself and all others similarly situated, 12 Plaintiff, 13 14 15 No. C 15-03502 WHA ORDER DENYING MOTION TO DISMISS v. S2VERIFY LLC, Defendant. / 16 17 18 INTRODUCTION A former job applicant brought this putative class action alleging that defendant violated 19 the Fair Credit Reporting Act. Now, defendant moves to dismiss two of the three claims under 20 Rule 12(b)(6). For the reasons stated below, defendant’s motion to dismiss is DENIED. 21 STATEMENT 22 The following facts are assumed to be true for the purposes of the present motion. 23 Defendant S2Verify LLC is a consumer reporting agency that provides consumer reports to 24 employers, landlords, and creditors. One of S2V’s specialities is providing consumer reports 25 for employment purposes, i.e. providing criminal background checks to employers for their use 26 in taking adverse employment action, such as termination, failure to hire, or failure to promote. 27 28 Plaintiff Regmon Hawkins is a former drug addict who had committed various petty theft crimes in order to sustain his drug habit. Plaintiff alleges he has completely transformed himself and has been clean and sober for approximately thirteen years. In 2013, plaintiff Dockets.Justia.com 1 applied to IPC Corporation for work as a security guard. IPC requested and obtained a 2 consumer report of plaintiff from S2V. IPC allegedly denied plaintiff’s employment application 3 on the basis of that report. The consumer report of plaintiff, however, contained numerous 4 inaccuracies as well as information that the FCRA mandates be excluded from reports. 5 Specifically, in violation of FCRA, the consumer report contained criminal record information 6 on multiple cases, none of which had resulted in a conviction and all of which took place more 7 than seven years prior. The report also included duplicate entries of several of plaintiff’s 8 criminal activities. In addition, before taking adverse action against plaintiff, S2V failed to 9 provide plaintiff with a copy of his report and a summary of his FCRA rights. Plaintiff asserts three claims against S2V on behalf of a putative class: (1) violation of 11 For the Northern District of California United States District Court 10 15 U.S.C. 1681e(b) and 1681k(a) for failing to “use reasonable procedures to assure maximum 12 possible accuracy of the information concerning the individual about whom the report relates” 13 and failing to use “strict procedures” to ensure that the public-record information reported is 14 complete and up to date; (2) violation of 15 U.S.C. 1681c(a)(2) and (5) for reporting old charges 15 that were dismissed and older than seven years; and (3) violation of 15 U.S.C. 1681n for acting 16 willfully. Now, defendant moves to dismiss plaintiff’s first and third claims under Rule 12(b)(6). 17 18 Defendant does not move to dismiss plaintiff’s second claim. This order follows full briefing 19 and oral argument. ANALYSIS 20 To survive a motion to dismiss, a complaint must state a claim for relief that is 21 22 “plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). Rule 8(a)(2) 23 requires only “a short and plain statement of the claim showing that the pleader is entitled to 24 relief.” 25 Plaintiff’s first claim alleges FCRA violations under 15 U.S.C. 1681e(b) and 1681k(a). 26 Section 1681e(b) requires that “[w]henever a consumer reporting agency prepares a consumer 27 report it shall follow reasonable procedures to assure maximum possible accuracy of the 28 2 1 information concerning the individual about whom the report relates.” Furthermore, Section 2 1681k(a) states: 3 4 5 6 7 8 A consumer reporting agency which furnishes a consumer report for employment purposes and which for that purpose compiles and reports items of information on consumers which are matters of public record and are likely to have an adverse effect upon a consumer’s ability to obtain employment shall— (1) at the time such public record information is reported to the user of such consumer report, notify the consumer of the fact that public record information is being reported by the consumer reporting agency, together with the name and address of the person to whom such information is being reported; or 9 11 For the Northern District of California United States District Court 10 12 13 (2) maintain strict procedures designed to insure that whenever public record information which is likely to have an adverse effect on a consumer’s ability to obtain employment is reported it is complete and up to date. For purposes of this paragraph, items of public record relating to arrests, indictments, convictions, suits, tax liens, and outstanding judgments shall be considered up to date if the current public record status of the item at the time of the report is reported. 14 Here, plaintiff has adequately pled violations of these sections of the FCRA. As to 15 Section 1681e(b), which requires a credit reporting agency to “follow reasonable procedures to 16 assure maximum possible accuracy,” the complaint specifically states that defendant “routinely 17 sells consumer reports based on information contained in its criminal history databases without 18 sufficient procedures to ensure that the reported information complies with the FCRA” (Compl. 19 ¶ 25). The complaint then describes defendant’s insufficient procedures in detail. Specifically, 20 plaintiff alleges that defendant improperly aggregates criminal history information without 21 conducting individualized verifications to determine accuracy, uses an inaccurate system called 22 the “National Criminal File Search” causing unreadable, repetitive, erroneous, and incomplete 23 criminal history information, and fails to use a proper computer algorithm to ensure stale 24 information is not reported (Compl. ¶¶ 26–29). 25 Section 1681k(a) has two prongs, and a credit reporting agency can satisfy it by doing 26 one of two things, either (1) notifying the consumer that potentially adverse information is 27 being reported about him at the time it is being reported, or (2) maintaining strict procedures to 28 ensure the information being reported is complete and up to date. As to the first prong, plaintiff 3 1 specifically alleges that he only received notice that adverse information had been reported 2 about him after IPC had already made the decision not to hire him (based on that information). 3 On its face, this is a violation of the first prong, which requires that the consumer be notified “at 4 the time such public record information is reported to the user of such consumer report.” 5 Plaintiff has also adequately alleged that defendant violated the second prong by failing to 6 maintain strict procedures to ensure only complete and up to date information is reported. The 7 analysis relating to strict procedures is the same as that stated above, regarding defendant’s 8 alleged failure to maintain reasonable procedures. 9 Defendant argues that the complaint “fails to allege that any of this reported information was inaccurate in any manner” and thus defendant could not have violated Sections 1681e(b) 11 For the Northern District of California United States District Court 10 and 1681k(a)(2). Essentially, defendant argues that its inclusion of several duplicates of the 12 same criminal activity on plaintiff’s report is not inaccurate under these sections of the FCRA. 13 Not so. Our court of appeals has clearly held that “[a]n item on a credit report can be 14 incomplete or inaccurate . . . because it is patently incorrect, or because it is misleading in such 15 a way and to such an extent that it can be expected to adversely affect credit decisions.” Drew 16 v. Equifax Information Services, LLC, 690 F.3d 1100, 1108 (9th Cir. 2012) (internal quotation 17 omitted). At the Rule 12 stage, it is plausible that the inclusion of the same criminal activity 18 multiple times in a report could be misleading in a way that adversely affected IPC’s decision 19 regarding plaintiff’s employment. 20 Defendant relies heavily on an unpublished district court decision — Haro v. Shilo Inn, 21 Bend LLC, No. 08-6306, 2009 WL 2252105 (D. Ore. July 27, 2009) (Judge Ann Aiken). Haro 22 involved a background report that disclosed a charge for failing to register as a sex offender, 23 despite the fact that the charge had been dismissed due to mistaken identity. There, the court 24 granted defendant’s summary judgment motion because the report accurately stated that the 25 charge had been dismissed, even though it did not detail the reasons for the dismissal. Apart 26 from the fact that Haro is a non-binding district court decision ruled on at the summary 27 judgment stage, its facts are materially different from those in our case. Here, unlike in Haro, 28 plaintiff has alleged that defendant’s duplicate reporting of criminal activity could mislead an 4 1 employer. Haro did not address duplicate reporting. Defendant also relies on the decision 2 granting summary judgment in Moore v. First Advantage Enterprises Screening Corp., No. 12- 3 792, 2013 WL 1662959 (N.D. Ohio April 17, 2013) (Judge Donald Nugent). Similarly, Moore 4 applied the summary judgment standard and did not consider allegations of duplicate reporting 5 of criminal instances. 15 U.S.C. 1681n. A “willful” violation under the FCRA includes “not only knowing violations 8 of a standard, but reckless ones as well.” Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 57 (2007). 9 A defendant acts in reckless disregard if the defendant’s action “is not only a violation under a 10 reasonable reading of the statute’s terms, but shows that the company ran a risk of violating the 11 For the Northern District of California Plaintiff’s third claim alleges that defendant acted willfully in violating the FCRA under 7 United States District Court 6 law substantially greater than the risk associated with a reading that was merely careless.” Id. at 12 69. That is, the defendant must have taken action involving “‘an unjustifiably high risk of harm 13 that is either known or so obvious that it should be known.’” Id. at 68, (quoting Farmer v. 14 Brennan, 511 U.S. 825, 836 (1994)). 15 Here, plaintiff has adequately alleged willfulness. Specifically, the complaint alleges 16 that defendant “was well aware that it was subject to the mandates and requirements of the 17 FCRA and knew or should have known about its legal obligations under the FCRA” (Compl. 18 ¶43). Plaintiff further alleges that defendant “was at least reckless in failing to make an 19 appropriate and effective effort to ascertain the FCRA provisions governing its conduct and 20 implement procedures designed to comply with the FCRA’s mandates” (Compl. ¶47). 21 Defendant argues that even taking plaintiff’s allegations at face value, they merely 22 amount to technical violations insufficient to be willful under Section 1681n. Essentially, 23 defendant argues that the duplicate reporting of plaintiff’s criminal activity and the inclusion of 24 old and stale charges and convictions did not rise to the level of being objectively unreasonable. 25 In FCRA cases, however, “[t]he reasonableness of the procedures and whether the agency 26 followed them will be jury questions in the overwhelming majority of cases.” Guimond v. 27 Trans Union Credit Info. Co., 45 F.3d 1329, 1333 (9th Cir. 1995). Therefore, a jury will likely 28 have to decide the willfulness issue. Here, at the Rule 12 stage, plaintiff has sufficiently pled 5 1 that defendant’s violations and procedures were objectively unreasonable, reckless, and thus 2 willful. 3 Defendant also moves for judicial notice Exhibit 1, a document from the Federal Trade 4 Commission’s website titled “40 years of Experience With the Fair Credit Reporting Act: An 5 FTC Staff Report With Summary of Interpretations (July 2011).” This document is a summary 6 of interpretations from the FTC and is not a judicially noticeable “fact” under FRE 201. Thus, 7 although plaintiff did not oppose, defendant’s request for judicial notice is DENIED. 8 9 For the reasons stated above, defendant’s motion to dismiss is DENIED. Defendant’s request for judicial notice is DENIED. 11 For the Northern District of California United States District Court 10 CONCLUSION 12 IT IS SO ORDERED. 13 14 Dated: January 11, 2016. WILLIAM ALSUP UNITED STATES DISTRICT JUDGE 15 16 17 18 19 20 21 22 23 24 25 26 27 28 6
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