Opinion
Case No. 17-C-0585
12-23-2019
Kiran Kumar Chandra SHEKAR, on behalf of himself and all others similarly situated, Plaintiff, v. ACCURATE BACKGROUND, INC., Defendant.
James A. Francis, John Soumilas, Jordan M. Sartell, Francis & Mailmain PC, Philadelphia, PA, David M. Marco, Larry P. Smith, SmithMarco PC, Chicago, IL, for Plaintiff. John W. Drury, Pamela Quigley Devata, Seyfarth Shaw LLP, Chicago, IL, for Defendant.
James A. Francis, John Soumilas, Jordan M. Sartell, Francis & Mailmain PC, Philadelphia, PA, David M. Marco, Larry P. Smith, SmithMarco PC, Chicago, IL, for Plaintiff.
John W. Drury, Pamela Quigley Devata, Seyfarth Shaw LLP, Chicago, IL, for Defendant.
DECISION AND ORDER
LYNN ADELMAN, District Judge Kiran Kumar Chandra Shekar alleges that the defendant, Accurate Background, Inc., furnished a consumer report to his potential employer without complying with certain procedural requirements of the Fair Credit Reporting Act ("FCRA"). See 15 U.S.C. § 1681k(a). Before me now is Shekar's motion to certify a class consisting of all consumers about whom Accurate furnished reports for employment purposes without complying with the procedural requirements at issue.
I. BACKGROUND
For purposes of this case, it is undisputed that Shekar is a "consumer" and that Accurate is a "consumer reporting agency" within the meaning of the FCRA.
In October 2015, Shekar applied for a position as a software developer through Randstad Technologies, a staffing agency. Randstad made Shekar a contingent offer of employment with one of its clients, Harland Clarke, which he accepted on October 22, 2015. Randstad then requested that Accurate perform a background check on Shekar. On November 2, 2015, Accurate furnished its report to Randstad. This report qualified as a "consumer report" for purposes of the FCRA. At the time that Accurate furnished its report to Randstad, it did not provide notice to Shekar that it was doing so.
Accurate's background report stated that, on September 8, 2015, Shekar was convicted of a misdemeanor count of disorderly conduct in Brown County, Wisconsin. In fact, however, Shekar was never convicted of a misdemeanor; by the time of the conviction, the misdemeanor charge had been reduced to a non-criminal ordinance violation. As of the date of the background report, the records available from the Brown County Clerk of Court reflected that the charge was amended to an ordinance violation in September 2015. Thus, the report that Accurate furnished to Randstad contained out-of-date information.
On November 6, 2015, Randstad sent Shekar a letter informing him that, because the background report showed that he had recently been convicted of a crime, Harland Clarke was considering rescinding the employment offer. The letter enclosed a copy of the report, informed Shekar of his rights under the FCRA, and stated that Shekar had five days to advise Randstad of any inaccurate or incomplete information in the report or to explain why the information in the report should not disqualify him from the position. The letter also advised Shekar that the report had been prepared by Accurate (who at that time used the name "Hirease") and that he had the right to dispute the accuracy and completeness of the information in the report.
Immediately after receiving Randstad's letter, Shekar disputed the "misdemeanor" status of his conviction with Accurate. On November 9, 2015, Accurate corrected the report to remove the misdemeanor designation. Nevertheless, on November 11, 2015, Randstad withdrew its offer of employment to Shekar because, by then, Harland Clarke had already filled the software-developer position with a candidate referred to it by a different staffing agency.
Following these events, Shekar commenced the present action under the FCRA against Accurate. He alleges that Accurate violated a provision of the FCRA that applies when a consumer reporting agency furnishes information to a third party for employment purposes, 15 U.S.C. § 1681k(a). In relevant part, this provision states that a consumer reporting agency that furnishes such a report that contains "items of information on consumers which are matters of public record and are likely to have an adverse effect on a consumer's ability to obtain employment" must do one of two things: either notify the consumer at the time it furnishes information for employment purposes that it has furnished the information (along with the name and address of the person receiving the information), or "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." Id. Shekar alleges Accurate both failed to give him the required notice at the time it furnished its report to Randstad and failed to maintain strict procedures to insure that the public-record information it provided was complete and up to date. Shekar further alleges that Accurate's failure to comply with § 1681k(a) was willful and that therefore he may recover statutory damages under one of the FCRA's civil-enforcement provisions, 15 U.S.C. § 1681n(a).
Shekar now seeks to certify a class of individuals on whom Accurate furnished background reports for employment purposes. He proposes the following class definition:
All individuals about whom Defendant's "AccurateNow" division (including its corporate predecessor) furnished a background report for employment purposes to a prospective employer that contained an item of public record information between April 25, 2012 and the present and to whom it did not send any notice under FCRA section 1681k(a)(1) at the time it prepared the report.
Pl.'s Br. at 5, ECF No. 43-1. Shekar represents that discovery has shown that this class definition encompasses 106,864 individuals.
II. DISCUSSION
To show that class certification is warranted, a plaintiff must satisfy the four prerequisites of Federal Rule of Civil Procedure 23(a) and show that the class may be certified as one of the "types" of classes described in Federal Rule of Civil Procedure 23(b). In the present case, it is possible that a class that meets the required elements of Rule 23(a) and 23(b) could be certified. However, as explained below, the class that Shekar has proposed to certify is overbroad, in that it "sweeps within it persons who could not have been injured by the defendant's conduct." Kohen v. Pac. Inv. Mgmt. Co. LLC , 571 F.3d 672, 678 (7th Cir. 2009). Accordingly, Shekar's motion for class certification will be denied.
A. The Requirements for Bringing a Claim for Violation of § 1681k(a) in Federal Court
The provision of the FCRA at issue provides as follows:
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
(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.
15 U.S.C. § 1681k(a). By its terms, this provision is violated whenever a consumer reporting agency furnishes a consumer report for employment purposes that contains matters of public record that are likely to have an adverse effect upon a consumer's ability to obtain employment and does not either: (1) notify the consumer that it is reporting the information and provide the consumer the name and address of the recipient of the information, or (2) maintain strict procedures designed to insure that the public-record information is complete and up to date. Notably, the terms of the statute do not suggest that a consumer reporting agency that fails to either provide notice or maintain strict procedures complies with the statute so long as the report it ultimately furnishes is complete and up to date. Rather, the statutory text provides that, regardless of whether the report is complete and up to date, a violation occurs if the consumer reporting agency furnishes a report without either sending notice or maintaining strict procedures. See Brown v. Lowe's Companies, Inc. , 52 F. Supp. 3d 749, 759 (W.D.N.C. 2014) ("[t]he statutory language in § 1681k(a) does not necessarily require an ‘inaccuracy’ "); Nat'l Consumer Law Ctr., Fair Credit Reporting , § 4.4.7.2 (9th ed.) ("A violation of this section should be entirely independent of the accuracy of the report, as it is a procedural requirement.").
Some district courts have concluded that a defendant does not violate § 1681k(a) if the report it furnishes is not incomplete or out of date. See, e.g. , Henderson v. Corelogic Nat'l Background Data, LLC , No. 3:12CV97, 2016 WL 4611570, at *4–5 (E.D. Va. Sept. 2, 2016) (collecting cases). I do not think that the decisions of these courts align with the statutory text. However, because I reach the same result as these courts by a different route, I will not discuss this issue in detail.
The FCRA civil-enforcement provision on which Shekar bases his claim likewise indicates that a consumer may succeed on a claim for statutory damages under § 1681k(a) without showing that the report was incomplete or out of date. Moreover, the provision does not require the consumer to show that he or she suffered any harm from the violation. Instead, the provision makes a consumer reporting agency liable for statutory damages whenever it "willfully fails to comply with any requirement imposed under this subchapter with respect to any consumer." 15 U.S.C. § 1681n(a). Under the terms of this provision, the defendant is liable based on its failure to comply with the statute with respect to the consumer regardless of whether the consumer suffered harm.
However, no person may bring a claim for relief in federal court unless that person has standing under Article III of the Constitution, even if Congress grants a right to sue to a plaintiff who would otherwise lack standing. See, e.g. , Spokeo, Inc. v. Robins , ––– U.S. ––––, 136 S. Ct. 1540, 1547–48, 194 L.Ed.2d 635 (2016). The "irreducible constitutional minimum" of standing consists of three elements. Id. at 1547 (quoting Lujan v. Defenders of Wildlife , 504 U.S. 555, 560, 112 S.Ct. 2130, 119 L.Ed.2d 351 (1992) ). The plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision. Id. To establish injury in fact, a plaintiff must show that he or she suffered "an invasion of a legally protected interest" that is "concrete and particularized" and "actual or imminent, not conjectural or hypothetical." Id. at 1548.
A plaintiff does not automatically satisfy the injury-in-fact requirement "whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right." Id. at 1549. Instead, " Article III standing requires a concrete injury even in the context of a statutory violation." Id. In this regard, "a bare procedural violation, divorced from any concrete harm," does not satisfy the injury-in-fact requirement of Article III. Id.
As applied to this case, the injury-in-fact requirement prevents a federal court from adjudicating a claim brought by a plaintiff for violation of § 1681k(a) who does not allege that the violation caused him to suffer concrete harm. In this context, concrete harm is something more than the defendant's failing to either send the consumer the notice specified in § 1681k(a)(1) or maintain the strict procedures specified in § 1681k(a)(2). This is so because a consumer reporting agency's failure to take either of these steps will not necessarily harm the consumer. Even if the agency fails to maintain strict procedures to insure that its reports are accurate and up to date, and even if it fails to provide notice to the consumer at the time a report is furnished, the furnished report could be complete and up to date. And if the report is complete and up to date, the violation of § 1681k(a) will have been harmless. In that event, the violation of § 1681k(a) will amount to no more than a "bare procedural violation." Spokeo , 136 S. Ct. at 1549–50 ; see also Nat'l Consumer Law Ctr., supra , § 4.4.7.3 (noting that a claim under § 1681k(a) based on an accurate report would likely fail for lack of standing under Spokeo ).
Shekar contends that if a consumer reporting agency violates § 1681k(a), a consumer will suffer an "informational injury" and therefore have standing even if the report is complete and up to date. See Reply Br. at 10 n.10, ECF No. 51-1. "Informational injury" generally means that "the deprivation of information is itself a concrete harm." Casillas v. Madison Ave. Assocs., Inc. , 926 F.3d 329, 337 (7th Cir. 2019). Here, Shekar evidently contends that the notice specified in § 1681k(a)(1) qualifies as information that a consumer is entitled to receive, and that a consumer's failing to receive the information is itself a concrete harm. However, a failure to receive information results in concrete harm only if the consumer either requests the information or could use the information to achieve a statutory purpose. See id. at 337–38 ; Robertson v. Allied Solutions, LLC , 902 F.3d 690, 694 (7th Cir. 2018) ("An informational injury is concrete if the plaintiff establishes that concealing information impaired her ability to use it for a substantive purpose that the statute envisioned."). Section 1681k(a) does not permit a consumer to request information. Nor does it entitle a consumer to notice every time a reporting agency furnishes a report about the consumer for employment purposes. Such notice is required only if the reporting agency does not maintain strict procedures to insure that the reported information is complete and up to date. Thus, the obvious statutory purpose of the notice provision is to help the consumer prevent an incomplete or out-of-date report from harming his or her employment prospects. If the furnished report is complete and up to date despite the reporting agency's failure to maintain strict procedures, then the failure to provide notice will be harmless, and the consumer could not use the information in the notice to achieve a statutory purpose. Accordingly, when a reporting agency furnishes a report that is complete and up to date, the agency's failure to give notice under § 1681k(a)(1) does not cause informational injury, even if the agency did not maintain strict procedures under § 1681k(a)(2).
Shekar contends that Robertson v. Allied Solutions, LLC , 902 F.3d 690 (7th Cir. 2018), stands for the proposition that the failure to give FCRA-required notice qualifies as informational injury even if the report to which the notice pertains is accurate. See Reply Br. at 10 n.10, ECF No. 51-1. But Robertson involved a different notice provision of the FCRA, 15 U.S.C. § 1681b(b)(3)(A), which requires an employer to provide specified information (including a copy of the report) to a consumer before it may take an adverse action against the consumer based on a consumer background report. See Robertson , 902 F.3d at 695. The statutory purpose of that provision is to provide the consumer with information that he or she may use to craft a response to the potential employer's concerns that are based on the report. Id. at 696–97. This purpose applies even when the report is entirely accurate, for then the consumer will still have an interest in trying to persuade the employer that the information in the report should not disqualify him or her from the employment opportunity. Thus, under § 1681b(b)(3)(A), a consumer can use the required information to achieve a statutory purpose even when the report is accurate. And, for this reason, deprivation of that information qualifies as informational injury for standing purposes. See id. at 694–97. But, as discussed, the notice under § 1681k(a)(1) cannot be used to achieve a statutory purpose when the furnished report is complete and up to date, for the sole purpose of requiring that notice is to enable the consumer to protect himself from the adverse effects of an incomplete or out-of-date report.
In short, a "bare procedural violation" of § 1681k(a) does not confer standing on a plaintiff. Instead, the plaintiff must allege that the violation caused him or her harm, which, at a minimum, requires the plaintiff to allege that the furnished report was incomplete or out of date.
B. Shekar's Proposed Class Definition is Too Broad
In the present case, Shekar adequately alleges that Accurate's violation of § 1681k(a)(1) caused him to suffer concrete harm. He alleges that the report provided to Randstad was not complete and up to date because it described his disorderly-conduct conviction as a misdemeanor rather than as an ordinance violation. He further alleges that this inaccurate information caused him to lose an employment opportunity with Randstad. Thus, Shekar has standing to pursue a claim for statutory damages.
However, the class that Shekar proposes to certify is not congruent with his individual claim. His class definition encompasses any individual about whom Accurate furnished a report without providing notice under § 1681k(a)(1). Under his definition, the class will include individuals who do not have standing, for an individual will satisfy the class definition even if the furnished report was complete and up to date and thus could not have caused concrete injury. In fact, under his definition, the class will consist almost entirely of individuals who suffered no injury. Shekar contends that his proposed class consists of 106,684 individuals. Br. at 19, ECF No. 43-1. However, according to Accurate, only 46 individuals who meet the class definition had incomplete or out-of-date information in their reports. Def. Br. at 5, ECF No. 49-1. Shekar does not directly attempt to rebut Accurate's count, but he does contend that Accurate corrected 4,327 reports during the class period. Pl. Br. at 10. Even assuming that each one of these corrections involved information that was incomplete or out of date, only about 4% of the class would have standing to sue.
In class actions, standing is determined with reference to the named plaintiff rather than the absent class members. That is, so long as one named plaintiff has standing, the standing of the absent class members need not be examined. See 1 Newberg on Class Actions , § 2:3 (5th ed.). However, it does not follow from this that, if the named plaintiff has standing, a court may certify a class composed primarily of absent class members who lack standing. A federal court has no power to award relief to claimants who lack standing, even if the claim arises in the course of a class action brought by a named plaintiff with standing. See Lewis v. Casey , 518 U.S. 343, 349, 116 S.Ct. 2174, 135 L.Ed.2d 606 (1996) ("[i]t is the role of courts to provide relief to claimants, in individual or class actions, who have suffered, or will imminently suffer, actual harm"); Tyson Foods, Inc. v. Bouaphakeo , ––– U.S. ––––, 136 S. Ct. 1036, 1053, 194 L.Ed.2d 124 (2016) (Roberts, J., concurring) (" Article III does not give federal courts the power to order relief to any uninjured plaintiff, class action or not."). Thus, although a class may be certified even if it contains some absent class members who lack standing, those class members must be filtered out as the suit proceeds, such as during the remedies phase. See 1 Newberg, supra , § 2:3 ("a well-defined class [might] nonetheless encompass some class members who have suffered no injury—this proposition is generally unproblematic as the non-injured parties can just be sorted out at the remedies phase of the suit.").
In the present case, there is more than a possibility that the class definition includes some absent class members who lack standing—it is virtually certain that almost the entire class lacks standing. Moreover, Shekar does not propose to filter out the class members who lack standing as the suit proceeds—he expects the court to adjudicate the claims of all class members and award them relief. Thus, the class definition is overbroad. Although the class may contain a few individuals who, like Shekar, lost employment prospects because of incomplete or out-of-date information in one of Accurate's reports, it primarily consists of individuals whose reports were complete and up to date and therefore could not have been injured by the alleged procedural violations. Accordingly, Shekar's motion for class certification will be denied. See Kohen , 571 F.3d at 677 ("if the [class] definition is so broad that it sweeps within it persons who could not have been injured by the defendant's conduct, it is too broad").
Here, I note that it might be possible for Shekar to narrow his class definition by requiring, at the least, that the class include only those individuals whose reports contained incomplete or out-of-date information. But in his current motion for class certification, Shekar has not expressed interest in representing such a narrowed class. Thus, I will not, sua sponte , consider whether a properly narrowed class could be certified.
Because Shekar's class definition includes primarily class members whose reports were not incomplete or out of date, I do not need to separately address whether, to have standing, a claimant must also allege that the incomplete or out-of-date information in a report had an adverse effect on his or her employment opportunities. Thus, at this point, I express no view on whether a properly narrowed class definition must be limited to claimants who suffered an employment loss because of the incomplete or out-of-date information in one of Accurate's reports.
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III. MOTION TO RESTRICT FILINGS
Finally, I address an administrative matter, which is that the parties have filed various materials relating to the plaintiff's motion for class certification in a manner that restricts them from public view. They also filed motions to keep the restrictions in place. I address those motions here.
In general, documents "that influence or underpin the judicial decision are open to public inspection unless they meet the definition of trade secrets or other categories of bona fide long-term confidentiality." Baxter Int'l Inc., v. Abbott Labs. , 297 F.3d 544, 545 (7th Cir. 2002). In this case, most of the restricted documents either originated from Accurate or are deposition transcripts relating to Accurate's corporate witnesses. Accurate asserts in its motions to restrict that these materials are confidential and, if publicly disclosed, could place it at a competitive disadvantage. However, Accurate's assertions are entirely conclusory and unsupported by declarations or affidavits from witnesses who establish the factual basis for Accurate's claim that these documents contain trade secrets. See ECF No. 48 at 2. Thus, I cannot find that these documents meet the Baxter confidentiality standard.
Nonetheless, the documents themselves were irrelevant to my decision on the motion for class certification, and I did not review them. For this reason, they may remain restricted. See City of Greenville, Ill. v. Syngenta Crop Protection, LLC , 764 F.3d 695, 698 (7th Cir. 2014) (the public has no right to access documents that "cannot conceivably aid the understanding of judicial decisionmaking"). However, if these documents become relevant to a judicial decision in the future, I will make them publicly available unless the defendant shows that they contain trade secrets—which means making a complete legal argument supported by citations to legal authority and to evidence in the record establishing that the information in the documents are bona fide trade secrets rather than simply matters that Accurate would prefer to keep private. See Baxter , 297 F.3d at 547 ("many litigants would like to keep confidential the salary they make, the injuries they suffered, or the price they agreed to pay under a contract, but when these things are vital to claims made in litigation they must be revealed").
The remaining restricted document is a confidential settlement agreement between Shekar, Randstad, and Harland Clarke relating to a separate lawsuit that Shekar filed against them. Again, however, no one has shown that this document satisfies the Baxter confidentiality standard. Obviously, the document is not a trade secret, and the parties have not cited a case holding that a private settlement agreement may be removed from the public record simply because the parties to that agreement preferred to keep it private. Still, the settlement agreement was not relevant to my decision on the motion for class certification, and I did not review it. Therefore, it may remain sealed for now. But if it becomes relevant to a judicial decision in the future, then the party who wishes to keep the agreement confidential must develop a complete legal argument showing that the settlement agreement meets the Baxter confidentiality standard.
IV. CONCLUSION
For the reasons stated, IT IS ORDERED that the plaintiff's motion for class certification (ECF No. 43) is DENIED .
IT IS FURTHER ORDERED that the parties' motions to restrict (ECF Nos. 42, 48 & 50) are GRANTED to the extent described above.