Civil Action No. 17-1633
District Judge David S. Cercone
REPORT AND RECOMMENDATION
It is respectfully recommended that the Motion to Dismiss Count II filed by Defendant FedEx Ground Package System, Inc. (ECF No. 20) be granted and Count II as asserted against FedEx be dismissed without prejudice. It is further recommended that Mr. Dahy be granted leave to file an amended complaint, if he chooses, in accordance with this Report and Recommendation.
A. Relevant Facts
This class action lawsuit is brought under the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. §§ 1681a-1681x, by Plaintiff Sidi Mohamed Abderrahmane Dahy against Defendants FedEx Ground Package System, Inc. ("FedEx") and First Advantage Background Services Corp. ("First Advantage"). Mr. Dahy initially filed a complaint in the Court of Common Pleas of Allegheny County, Pennsylvania on November 17, 2017. FedEx timely removed the case to this court on December 18, 2017, based upon removal of class action lawsuits, 28 U.S.C. § 1453, and because the case arises under federal law, 28 U.S.C. § 1331. ECF No. 1. Mr. Dahy's two-count Complaint alleges violations of 15 U.S.C. § 1681b(b)(2)(A) in Count I, and 15 U.S.C. § 1681b(b)(3)(A) in Count II. ECF No. 1-1. FedEx moves to dismiss Count II for failure to state a claim upon which relief can be granted under Federal Rule of Civil Procedure 12(b)(6). ECF No. 20.
On November 8, 2015, Mr. Dahy applied for employment with FedEx by submitting a preliminary application. Compl. ¶¶ 21-22. On November 19, 2015, Mr. Dahy appeared in person at a FedEx location in Virginia, where he completed an application, and met with a FedEx representative about a full-time driver position paying $20 per hour. Compl. ¶ 22. On the same day, Mr. Dahy spoke with two representatives of FedEx. Compl. ¶ 23. Mr. Dahy also passed FedEx's required drug screen and medical examination. Compl. ¶¶ 24 & 25. When Mr. Dahy turned in his medical report on November 19, 2017, the FedEx representative congratulated him on passing the examination and indicated that Mr. Dahy was likely to obtain employment with FedEx. Compl. ¶ 25.
On November 20, 2015, FedEx ordered a background check on Mr. Dahy from First Advantage that included a "'Social Security Number Validation.'" Compl. ¶ 26. First Advantage "complies and maintains files on consumers," and "sells this information as consumer reports to various customers who access the First Advantage reports in order to make employment decisions, including whether to hire, terminate, transfer, or promote an employee or prospective employee." Compl. ¶ 8. "Based upon the hiring criteria developed or designated by FedEx Ground, First Advantage adjudicates FedEx Ground applicants' background reports by deeming the applicant 'Eligible for Hire' or 'In-Eligible for Hire.'" Compl. ¶ 27.
On November 23, 2015, First Advantage completed Mr. Dahy's Background Report;, electronically delivered the report to FedEx; and, on behalf of FedEx, mailed a letter and copy of the Background Report to Mr. Dahy. Compl. ¶¶ 28 & 33 (Ex. A to Complaint (ECF No. 1-1, at 32-38) ("material portion" of Letter and Background Report). First Advantage's Background Report adjudicated Mr. Dahy as "Ineligible" for hire. Compl. ¶ 30; Ex. A. at 5, 7 (ECF No. 1-1, at 36, 38).
The November 23, 2015 letter sent to Mr. Dahy included a copy of the Background Report, a summary of rights under the FCRA and state law, and a rehabilitation questionnaire (Form XF-400). Compl. ¶ 34; Ex. A. at 1 (ECF No. 1-1, at 32). The November 23, 2015 letter was the first opportunity Mr. Dahy was given to review the Background Report. Compl. ¶ 36. The Background Report also stated as follows:
• Please carefully review the Report. A qualification determination may be based in whole or in part on the information in the Report.
• If you believe that any information in the Report is inaccurate or incomplete, please contact the consumer reporting agency that provided the Report at the above address/telephone number within five (5) business days of your receipt of this letter.
Ex. A. at 1 (ECF No. 1-1, at 32). There is no allegation in the Complaint that Mr. Dahy completed the Rehabilitation Questionnaire (Form XF-400) or contacted FedEx or First Advantage to discuss inaccurate or incomplete information. Mr. Dahy alleges that FedEx adopted First Advantage's adjudication of Ineligible for Hire "without any further process being provided to [Mr. Dahy] and took adverse action against [him] based upon that adjudication." Compl. ¶ 31.
Mr. Dahy states that the adjudication of Ineligible was based on First Advantage's inability to "verify" Mr. Dahy's Social Security number. Compl. ¶ 30; see Ex. A. at 7 ("A Social Security Number verification search has been completed and discrepancies were found. Social Security number does not match the Social Security number on file at the bureau"). The Background Report, in a section titled "Social Security Verification" states "Record Judged" at "20/Nov/2015 04:07:25 PM." Compl. ¶ 39. Mr. Dahy alleges that the Background Report "was not accurate" in reporting to FedEx that First Advantage could not verify that Mr. Dahy's Social Security number belonged to him. Compl. ¶ 29. Mr. Dahy alleges that this statement is "incorrect" and that the Social Security number provided by Mr. Dahy belongs to Mr. Dahy. Compl. ¶ 29.
Mr. Dahy alleges that FedEx violated 15 U.S.C. § 1681b(b)(3)(A). Section 1681b(b)(3)(A) sets forth requirements for furnishing consumer reports for employment purposes to persons before an adverse action is taken against them. Compl. ¶ 60 (quoting 15 U.S.C. § 1681b(b)(3)(A)). Mr. Dahy alleges that the "purpose of § 1681b(b)(3)(A) is to provide a prospective or current employee a sufficient amount of time to review the consumer report, correct any inaccuracies, to notify the prospective employer of these inaccuracies before an adverse action is taken and generally to discuss the contents of the report with the prospective employer." Compl. ¶ 61.
Mr. Dahy alleges that the November 23, 2015 letter with attachments sent to Mr. Dahy by First Advantage on behalf of FedEx, was a "notice intended to comply with 15 U.S.C. § 1681b(b)(3)." Compl. § 32. Mr. Dahy further alleges that "he had already been adjudicated 'In-Eligible for Hire' by FedEx Ground based upon" the Background Report by the time he received the November 23, 2015 letter. Compl. ¶ 35. Mr. Dahy alleges that the Background Report's adjudication of "Ineligible," was adopted by FedEx on November 20, 2015 at 4:07:25 PM, when First Advantage issued a "Record Judged" statement on Mr. Dahy's Social Security Verification. Compl. ¶ 39. Mr. Dahy alleges that "[a]t that point, an 'adverse action' had been taken by FedEx Ground" resulting in an "effective final decision to bar [Mr. Dahy] from employment." Compl. ¶ 40. Mr. Dahy explains his allegation as follows:
Thus, the date of the 'adverse action' against Plaintiff was the date that First Advantage first created and instantly 'adjudicated' his application. First Advantage stated on Plaintiff's report 'In-Eligible for Hire.' See Exhibit A. FedEx Ground accepts and follows the First Advantage eligibility determination without any independent investigation or exercise of discretion. The adjudication is, in effect, FedEx Ground's final hiring decision, and it takes place before any notice is provided under Section 1681b(b)(3).
Compl. ¶ 41.
B. Legal Standard
When reviewing a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), the court must "accept all factual allegations as true, construe the complaint in the light most favorable to the plaintiff, and determine whether, under any reasonable reading of the complaint, the plaintiff may be entitled to relief." Eid v. Thompson, 740 F.3d 118, 122 (3d Cir. 2014) (quoting Phillips v. County of Allegheny, 515 F.3d 224, 233 (3d Cir.2008)). "As explicated in Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), a claimant must state a 'plausible' claim for relief, and '[a] claim has facial plausibility when the pleaded factual content allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.'" Thompson v. Real Estate Mortg. Network, 748 F.3d 142, 147 (3d Cir. 2014). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Iqbal, 556 U.S. at 678. "Factual allegations must be enough to raise a right to relief above the speculative level." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). A plaintiff "need only put forth allegations that raise a reasonable expectation that discovery will reveal evidence of the necessary element." Fowler v. UPMC Shadyside, 578 F.3d 203, 210 (3d Cir.2009).
FedEx moves for dismissal of Count II as a matter of law arguing that Mr. Dahy has failed to state a claim of a violation of section 1681b(b)(3). Mr. Dahy argues that he has stated a claim of a violation of Section 1681b(b)(3) based on his allegations that FedEx failed to provide him with the required statutory notice before FedEx took an adverse action against him. Pl. Br. Supp. at 9.
1. Applicable Law
Section 1681b of Title 15 is titled "Permissible purposes of consumer reports" and the relevant portion of the statute Mr. Dahy sues under states as follows:
(b) Conditions for furnishing and using consumer reports for employment purposes
. . .
(3) Conditions on use for adverse actions
(A) In general — Except as provided in subparagraph (B), in using a consumer report for employment purposes, before taking any adverse action based in whole or in part on the report, the person intending to take such adverse action shall provide to the consumer to whom the report relates—
(i) a copy of the report; and
(ii) a description in writing of the rights of the consumer under this subchapter, as prescribed by the Bureau under section 1681g(c)(3) of this title.
15 U.S.C. § 1681b(b)(3)(A). This section "requires that an employer 'provide job applicants with their background report, summary of rights, and a "real opportunity" to contest the contents of the background report before the employer relies on the report to take an adverse action against the applicant.'" Wright v. Lincoln Prop. Co., No. CV 15-3483, 2017 WL 386602, at *3 (E.D. Pa. Jan. 27, 2017) (quoting Moore v. Rite Aid Hdqtrs Corp., No. CIV.A. 13-1515, 2015 WL 3444227, at *4 (E.D. Pa. May 29, 2015). "The notice requirement contained in § 1681b(b)(3) is referred to as a 'pre-adverse action notice' and was intended 'to afford employees time to discuss reports with employers or otherwise respond before adverse action is taken.'" Wright, 2017 WL 386602, at *3 (quoting Goode v. LexisNexis Risk & Info. Analytics Grp., Inc., 848 F. Supp. 2d 532, 537 (E.D. Pa. 2012).
An "adverse action occurs when the decision is carried out, when it is communicated or actually takes effect, and an actor has until that time to take the necessary steps to comply with the FCRA's requirements." Burghy v. Dayton Racquet Club, Inc., 695 F.Supp.2d 689, 703 (S.D. Ohio 2010). Relevant to employment decisions under the FCRA the "term 'adverse action' - . . . (B) means- . . . (ii) a denial of employment or any other decision for employment purposes that adversely affects any current or prospective employee." 15 U.S.C. § 1681a(k)(1)(B)(ii). The "catch-all" provision defines "adverse action" as "an action taken or determination that is . . . made in connection with an application that was made by, or a transaction that was initiated by, any consumer" and "adverse to the interests of the consumer." 15 U.S.C. § 1681a(k)(1)(B)(iv). "While seemingly expansive, these definitions are constrained by the scope of the notice requirement which applies only to the persons who are 'intending' to take an adverse action." Muir v. Early Warning Systems, LLC, Civ. Act. No. 16-521 (SRC), 2016 WL 4967792, *4 (D.N.J. Sept. 9, 2016) (citing Obabueki v. Int'l Bus. Machs. Corp., 145 F.Supp.2d 371, 392 (S.D.N.Y. 2001)).
"'The FCRA "expressly allows for the formation of an intent to take adverse action before complying with Section 1681b(b)(3), as it states that "the person intending to take" adverse action must provide the report and description of rights' prior to taking the adverse action." Manuel v. Wells Fargo Bank, NA, 123 F. Supp. 3d 810, 822 (E.D. Va. 2015) (quoting Javid v. SOS International, LTD, 2013 WL 22886046, *4 (E.D. Va. 2013), quoting Obabueki, 145 F.Supp.2d at 392 (quoting 15 U.S.C. § 1681b(b)(3) (emphasis added))); see also Muir, 2016 WL 4967792, *4 (statute limiting notice requirement to those "intending" to take adverse action "means that the statute must allow for a method by which such intent may be formed"). "The formation of such intent, therefore, cannot be the adverse action." Javid, 2013 WL 22886046, *4; Moore v. Rite Aid Hdqtrs Corp., 33 F. Supp. 3d 569, 574 (E.D. Pa. 2014) ("For this reason, an internal decision to rescind an offer, standing alone, cannot be considered an adverse action").
FedEx asserts that before it took an adverse action against Mr. Dahy it complied with the statutory requirement of notice and sent Mr. Dahy a compliant pre-adverse action notice, as evidenced by Mr. Dahy's Complaint and attached Exhibit. The notice included a copy of the consumer report, Mr. Dahy's relevant rights under the FCRA, and informed Mr. Dahy to contact First Advantage or FedEx if he wished to dispute any information in the background report because "a qualification determination may be based on whole or in part on the information in the Report." ECF No. 1-1, at 32. FedEx asserts that Mr. Dahy's allegation that the FedEx took an adverse employment action against him when First Advantage adjudicated him ineligible is based on implausible, fact-free allegations. Therefore, FedEx argues that Count II should be dismissed as a matter of law.
Mr. Dahy argues that FedEx's argument inappropriately asks the Court at the motion to dismiss stage to make a factual determination as to whether the adjudication of ineligible is an adverse action or an intent to take an adverse action, and whether the content of the November 23, 2015 letter "confirms that [FedEx's] process complies" with the FCRA. Pl. Br. Supp. at 10, 11. The Court disagrees that an inappropriate issue of fact is being determined at this stage and finds that the relevant law compels the conclusion, under the allegations plead in the Complaint, that First Advantage's adjudication of ineligible, based on criteria provided by FedEx, is the intent to take an adverse action, not an adverse action. In addition, the November 23, 2015 letter with attachments is the "pre-adverse action notice" required by the statute, and the contents of the letter inform Mr. Dahy of the process he must follow to contest any inaccuracies in the consumer report. Therefore, as discussed below the Court concludes that Mr. Dahy has failed to state a claim that FedEx violated section 1681b(b)(3) of the FCRA.
a. The Adjudication of Ineligible
Focusing just on the adjudication by First Advantage the Court agrees with the District Court in Williams v. First Advantage that "an adjudication cannot itself be an adverse action, because it is, in effect, an evaluation that results in a decision to take adverse action." Williams v. First Advantage LNS Screening Sols., Inc., 155 F. Supp. 3d 1233, 1246 (N.D. Fla. 2015). The plaintiff in Williams brought his section 1681b(b)(3) claim against the consumer reporting agency itself, not the employer. The Williams Court explained that a consumer reporting agency "has no intent to do anything adverse to a consumer when it inputs information it has gathered into an adjudication matrix any more than a teacher has an intent to take an adverse action against a student when she sits down to grade a student's exam." Id.
Here, First Advantage was under the direction of FedEx when it used criteria provided by FedEx to render the adjudication. FedEx "retained ultimate authority to rescind or not make  offers of employment." Id. at 1247. Mr. Dahy does allege that it was FedEx who effectively rendered a final adverse employment action when First Advantage communicated the adjudication to FedEx. Again, however, the Court agrees with the Williams' Court conclusion that the "communication of the results of an adjudication to the employer is, like the adjudication itself, akin to an internal decision or intermediate step in a multi-stage decision-making process, not an adverse action." Williams, 155 F. Supp. 3d at 1247.
When an "adjudication results from the application of criteria established by the employer; in some sense, the employer has formed the intent to take adverse action through the adjudication process but does not actually know that it has formed that intent until it receives the results of the adjudication." Williams, 155 F. Supp. 3d at 1247. Thus, whether an employer gathers and evaluates information in a consumer report itself or the employer "relies on a recommendation by a [consumer reporting agency] makes no difference and does not transform an internal 'evaluation that results in a decision to take adverse action' into an adverse action." Muir, 2016 WL 4967792, at *4 (quoting Williams, 155 F. Supp. at 1246. Once the employer receives the results the only conclusion that can be made is that the employer has now formed the internal intent to take adverse action. Costa v. Family Dollar Stores of Virginia, Inc., 195 F. Supp. 3d 841, 846 (E.D. Va. 2016) (act of coding applicant as not recommended is formation of intent to take adverse action that triggers notice requirement). Accordingly, the Court finds that First Advantage's adjudication of ineligible is not an adverse action, but is instead an intent to take adverse action.
Furthermore, an employer may "rely on a [consumer reporting agency] to conduct adjudications pursuant to guidelines it provides the [consumer reporting agency] and rely on those adjudications to form an intent to take adverse action." Williams, 155 F. Supp. 3d at 1247. "Nothing in the FCRA . . . prevents employers from affirming a [consumer reporting agency's] recommendation." Muir, 2016 WL 4967792, *5 (citing Williams, 155 F.Supp. 3d at 1247). As the Williams Court explained, "[t]his is because the purpose of the pre-adverse action notice requirement is not to eliminate such rubber stamping by employers, but rather to slow it down and allow consumers time to address any errors in the consumer report before action is actually taken." Williams, 155 F. Supp. 3d at 1247 (citing Brown v. Lowe's Companies, Inc., 52 F. Supp. 3d 749, 756 (W.D.N.C.2014)). Under this view, even if FedEx "rubber stamps" First Advantage's adjudication, FedEx cannot be deemed to have undertaken an adverse action so long as it complies with providing proper FCRA notice.
b. Pre-Adverse Action Notice
"[A]n employer's formation of intent to take adverse action based on a consumer report triggers § 1681b(b)(3)(A), which then requires notice to the consumer before the employer actually takes such adverse action." Costa, 195 F. Supp. 3d at 844-45. Here, the contents of FedEx's November 23, 2015 Pre-Adverse Action Notice demonstrate that FedEx complied with the statutory requirement of providing Mr. Dahy with a copy of his background report and a summary of rights, as well as an opportunity to contest inaccurate information by advising Mr. Dahy to contact First Advantage or FedEx if he wanted to dispute any information in the background report because "a qualification determination may be based on whole or in part on the information in the Report." ECF No. 1-1, at 32. Mr. Dahy makes no allegations that he disputed the information in the background report or that "the five-day period provided for in the initial notice letter was not a 'real opportunity' for [him] 'to contest the adjudication.'" Moore, 33 F. Supp. 3d at 575 (quoting Goode, 848 F. Supp. 2d at 540). Nor does Mr. Dahy allege that had he disputed information in the background report that such action would be futile. Under the allegations plead, neither the adjudication of ineligible, nor FedEx's adoption of the adjudication had any effect on Mr. Dahy's opportunity to challenge information in his background report and possibly avoid an ultimate adverse action. The "timing of the pre-adverse action notice" occurring after First Advantage's adjudication and FedEx's adoption of the adjudication "is precisely the timing envisioned by the FCRA." Williams, 155 F. Supp. 3d at 1247.
c. Plaintiff Allegations, Arguments, and Supporting Law
Mr. Dahy confines his allegations to a very specific circumstance. He alleges that First Advantage's adjudication of Mr. Dahy as ineligible, which FedEx accepted as its own, is an adverse employment action as it is "the final step in the adjudication process" (Compl. ¶ 37), it "results in a denial of employment" (Compl. ¶ 38), and it is FedEx's "final hiring decision" (Compl. ¶ 41). Mr. Dahy alleges that FedEx provides First Advantage with certain criteria to use once a consumer report is generated. The criteria as applied to Mr. Dahy's consumer report resulted in an adjudication of ineligible. Mr. Dahy alleges that at this point an automatic process occurs by which First Advantage sends out a "purported" pre-adverse action notice under FedEx letterhead, when in reality the adverse action, the decision not to hire, has already occurred. Mr. Dahy's allegation that First Advantage's adjudication is a final adverse action because it requires no further input from FedEx is a direct challenge under the FCRA to the method employed by FedEx in using consumer reports when evaluating applicants for employment.
The logical outcome of Mr. Dahy's allegations is that an employer who provides criteria to a third party consumer reporting agency for evaluation of prospective applicants must provide section 1681b(b)(3) notice before the employer's criteria, as applied to an applicant's background report, results in or may result in an adjudication of ineligible. It is not clear that an employer such as FedEx would be able to comply with such a notice requirement and not still commit, under Mr. Dahy's argument, the same alleged "final adverse action" without proper notice.
For example, First Advantage might be able to in some sense "compare" FedEx's criteria to Mr. Dahy's consumer report, or "apply" the criteria preliminarily, to see if it appears as if the end result would be an adjudication of ineligible, but stop short of actually rendering the adjudication. The only difference from what happened in this case is that First Advantage would be refraining from rendering a formal adjudication of ineligible because, under Mr. Dahy's claim, that act of making the adjudication is an adverse action requiring notice. Thus, under this hypothetical "pre-rendering" of an adjudication scenario, to comply with the FCRA's notice requirement FedEx must issue, as it did in this case, a pre-adverse action notice to Mr. Dahy giving him an opportunity to respond. The Court can discern no meaningful distinction between the hypothetical and what happened in this case as the only difference would be that the notice would refer to the potential adverse action of a formal adjudication of ineligible. Not only does the scenario described above appear to be a distinction without a difference, it is doubtful it would satisfy Mr. Dahy as he would likely claim that the adverse action occurred the moment that First Advantage determined that an adjudication of ineligible inevitably would result. Mr. Dahy might even allege that First Advantage refrained from completing the logical next step in order to give the appearance of compliance with the FCRA. Thus, once again Mr. Dahy would claim that any notice is already too late.
Another alternative is to require that FedEx remove First Advantage from the process once the adjudication of ineligible appeared imminent and leave the providing of pre-adverse action notice to FedEx. Again, though, Mr. Dahy's allegation is that the adjudication itself is the adverse action and even if FedEx took over the process any purported notice after the adjudication (or imminent adjudication) will always be too late to comply with the FCRA.
In both Mr. Dahy's allegations and the hypothetical posed above, notice of an impending adverse action is based on the exact same information in Mr. Dahy's background report set against FedEx's hiring criteria. The Court concludes that there is no substantive difference between an adjudication of ineligible and a conclusion that an adjudication of ineligible is about to occur.
In Williams, the District Court came up with a slightly different hypothetical positing that "[a]n employer could, of course, hold off on issuing pre-adverse action notice—and hold off on forming an intent to take adverse action—until after conducting a review of adjudication results, but it need not do so." Williams, 155 F. Supp. 3d at 1247. Even if the employer "held off" on forming an intent, for whatever reason, a pre-adverse action notice would still inevitably have to be issued. Mr. Dahy would likely never agree that any such notice would be timely because it is again based on a negative adjudication that he defines as a final adverse action. The Williams Court disagreed and concluded that an employer's holding off to review adjudication results "is beside the point [and] does not transform the adjudication result or its communication to the employer into an adverse action, but merely ensures that a negative adjudication result will inevitably lead to an intent to take an adverse action." Id.
Mr. Dahy's complaint, however, does not appear to primarily concerned with an employer providing criteria to a consumer reporting agency who then applies the criteria to the consumer's report. The primary focus of the complaint as alleged is that once the process results in a negative adjudication, the employer's conduct in some manner demonstrates that it is a final adverse action. The argument an employer cannot succeed on a motion to dismiss such a claim by simply pointing to a pre-adverse action notice is straightforward. If a plaintiff alleges that the employer's action is a final adverse action it is implied that any notice delivered after the date of the alleged adverse action is a pretext designed to give the appearance of compliance with the FCRA. Whether the employer's conduct was a pretext, Mr. Dahy argues, cannot be decided on a motion to dismiss.
In Magallon v. Robert Half International, relied on by Mr. Dahy, the Court expressed it this way:
[T]o comply with the statute, an employer who intends to take adverse action must give the applicant an opportunity to change the employer's mind. This opportunity must be real; a pro forma period between the preliminary and final decision does not satisfy the statute. For example, in Moore, the employer sent any applicant whose consumer report showed a criminal history an initial notice letter explaining the report "may result in your not being offered the job for which you are applying" and giving the applicant five days to respond. 33 F.Supp.3d at 571-72. The court held the letter did not entitle the employer to dismissal for failure to state a claim because "[a]n employer cannot satisfy § 1681b(b)(3) by formally designating some future point in time as the moment of 'final decision' if, in fact, that decision already has been made." Id. at 574.
Magallon v. Robert Half Int'l, Inc., 311 F.R.D. 625, 633-34 (D. Or. 2015); Pl. Br. Supp. at 10 & 3-4. At issue in Magallon was a motion for class certification where the named plaintiff alleged that defendant had never delivered to her either a pre-adverse action notice or a copy of her background report before defendant telephoned to deliver a final adverse action employment determination. Id. at 631. The Magallon Court merely set out the legal framework under section 1681b(b)(3), which stands only for the proposition that if an employer has rendered a final adverse action decision, the employer cannot rely on a letter issued after the final determination that purports to give the applicant an opportunity to respond, but in fact is not a real opportunity. Id. at 633-34 (quoting Moore, 33 F. Supp. 3d at 574).
The Magallon Court cited the Moore case, which Mr. Dahy also relies on to support his position. Pl. Br. Supp. at 3-4. Moore was rendered on a motion to dismiss and ultimately favors FedEx's position. Similar to the instant case, the plaintiff in Moore argued that the consumer reporting agency's adjudication was an adverse action relied upon by the employer as a final decision and, "thus, the initial notice letter sent by [the consumer reporting agency] arrived after, rather than before, an adverse action already had occurred." Id. The Moore Court stated that under these circumstances the mere "existence of an initial notice letter with an opportunity to provide additional information does not bar plaintiffs from claiming that the letter was sent after an adverse action already occurred." Id. at 575.
The Court reads the Moore opinion to mean that there are plausible scenarios where a plaintiff could allege that the employer rendered a final adverse employment action against them (in some manner) without complying with section 1681b(b)(3)'s notice requirement, and then after-the-fact issue a notice letter disingenuously purporting to provide the plaintiff with an opportunity to respond. The pretextual nature of such an after-the-fact letter occurs because the letter would be falsely designated a "future point in time as the moment of 'final decision'" when the employer has already, "in fact," rendered its final decision. Id. at 574. It was apparently clear in Moore that no such scenario was alleged by the plaintiff, as the Court explained that a claim could be stated if an argument such as plaintiff's were supported by allegations in the Complaint, but in Moore the Court quickly found that plaintiff's allegations did not support the claim. Id. at 574, 575.
The Moore Court granted the defendant's motion to dismiss concluding "that the allegations in plaintiff's Complaint are insufficient to plausibly claim that [the employer] took an adverse action at the time of plaintiff's adjudication by [the consumer reporting agency]." Moore, 33 F. Supp. 3d at 575. The Court concluded that not only did the plaintiff fail to assert facts to state a claim that the consumer reporting agency's adjudication was the employer's final decision, the plaintiff also failed to allege "that the five-day period provided for in the initial notice letter was not a 'real opportunity' for her 'to contest the adjudication.'" Id. The Moore Court's holding does not mean that an employer would never be able to succeed on a motion to dismiss for failure to state a claim where a plaintiff alleges that the employer took a final adverse action followed by an initial notice letter, as in fact, the defendant in Moore was successful in moving for dismissal of the claim against it.
After dismissal, the plaintiff in Moore sufficiently amended her claim alleging a violation of section 1681b(b)(3) to survive the defendant's motion to dismiss. Moore, 2015 WL 3444227 (Moore II). In Moore II, the Court noted that plaintiff was required to allege that the employer had relied on the consumer reporting agency's adjudication "as a final employment decision and that the five-day period provided for in the initial notice letter was not a real opportunity for her to contest the adjudication." Moore II, 2015 WL 3444227, *5. The Court found that the plaintiff had sufficiently alleged both that the employer had made a final employment decision and that the five-day period was insufficient (because the employer gave at most four days despite notice of five). Id. The Court disagrees with Moore II's opinion to the extent that it stands for a conclusion that alleging a negative adjudication is a final adverse action, without more, is sufficient to state a claim. As discussed in more detail below, the FCRA permits an employer to fully intend to take a final adverse action once it learns of a negative adjudication so long as it complies with the statute's requirements for notice and an opportunity to be heard. Thus, an employer who fills a position with another applicant before providing the first applicant with the statutorily required opportunity to be heard - even if the employer sent a timely pre-adverse action notice - is not complying with the statute because its actions show that it already had completed the adverse employment action. It is not difficult to come up with examples of allegations that would support a claim that the employer took a final adverse action followed by an initial notice letter.
See, e.g., Branch v. Government Employees , Ins. Co., 286 F. Supp. 3d 771, 783-85 (E.D. Va. 2017) (employer informs plaintiff by telephone that employment offer is rescinded, and afterwards sends a pre-adverse action notice); Piverones v. Sodexho, Inc., 1:17-cv-446, ECF No. 1-1, at ¶¶ 86, 89 (W.D. Pa) (employer emails plaintiff to inform him that the company decided not to hire him, followed by a pre-adverse action notice two days later); Thomas v. FTS USA, LLC, 193 F. Supp. 3d 623, 628 (E.D. Va. 2016) (undisputed that employer informs plaintiff he is ineligible and is simply never given a copy of his background report or summary of rights); Magallon v. Robert Half Int'l, Inc., 311 F.R.D. 625, 631 (D. Or. 2015) (employer telephoned plaintiff to deliver final adverse employment action and employer never sent a pre-adverse action notice or background); Burghy v. Dayton Racquet Club, Inc., 695 F.Supp.2d 689, 703 (S.D. Ohio 2010) (plaintiff contends she was in fact terminated in person before the pre-adverse action notice was sent); Beverly v. Wal-Mart Stores, Inc., No. CIV.A. 3:07CV469, 2008 WL 149032, at *3 (E.D. Va. Jan. 11, 2008) (letter sent by employer at same time it sends background report clearly denies plaintiff employment without opportunity to dispute). --------
The Court also disagrees with the reasoning and conclusions in the Manuel v. Wells Fargo Bank opinion relied upon by Mr. Dahy. Pl. Br. Supp. at 11. In Manuel, the plaintiff was coded by the consumer reporting agency as ineligible, a pre-adverse action notice was sent, and, as in this case, the plaintiff alleged that the act of coding itself was an adverse action by the Wells Fargo and therefore the notice was too late. Manuel, 123 F. Supp. 3d at 823. The District Court found that there was evidence that weighed in favor of both plaintiff and Wells Fargo. Id. The evidence in favor of Wells Fargo included: (i) the case law clearly establishes that an employer must form an intent to take an adverse action before notice is provided to an applicant; (ii) Wells Fargo's pre-adverse action notice was in compliance with the FCRA; and (iii) recipients of the notice were given a meaningful opportunity to dispute the consumer report indicating that the hiring decision was not yet final. Id. Yet the Manuel Court explained that despite the evidence that favored Wells Fargo a fact issue remained:
Wells Fargo's use of the ineligibility code was the only communication that Wells Fargo made to First Advantage about the applicant unless the applicant disputed the background check after he received the "pre-adverse action notice." A reasonable jury could find that Wells Fargo's adverse hiring decision was final when it was first relayed to First Advantage because Wells Fargo was comfortable adhering to that decision without reviewing it if the individual did not file a dispute.
The Manuel's Court reasoning suggests that an employer must do more than comply with the FCRA. An employer can form the intent to take an adverse action, issue a FCRA-complaint pre-adverse action notice, and provide a meaningful opportunity to the applicant to contest information in the consumer report, but under Manuel, the employer's conduct could only be considered preliminarily FCRA compliant and may not be sufficient. According to the reasoning in Manuel an employer's FCRA-compliant and proper "intent to take an adverse action" may transform into a "final adverse action" if the applicant does not respond to the notice or otherwise contact the employer or consumer reporting agency. The Court finds no basis in the FCRA for this conclusion and agrees with FedEx that it inappropriately turns the question of whether an employer's conduct is an adverse action on whether an applicant acts on the opportunity to dispute the consumer report. See Def. Br. Supp. 12 n. 8.
In addition, the Court disagrees with the Manuel Court's reasoning that "if the individual did not file a dispute" and the employer proceeds with the ultimate adverse employment action then an issue of fact arises because the employer was "comfortable adhering to [the pre-adverse action] decision without reviewing it." Manuel, 123 F. Supp. 3d at 823. The Court disagrees that in the absence of a dispute an employer ever has the burden to review its initial adjudication before making it final. There is nothing in the FCRA that requires an employer who makes a pre-adverse determination to revisit the decision again if the applicant does not dispute the information. There is no FCRA requirement that the employer takes any further "review" of its adjudication solely to demonstrate that that it is "comfortable with its initial review" and therefore the initial review was not a final adverse action.
An employer sets its own criteria for hiring employees. This applies to a review of a consumer report. If that criteria results in a determination of "ineligible for hire" that of course means that the employer has a reason it believes is valid (or useful or expedient) to decide that it does not intend to hire such a person. But for the FCRA, an employer might decide to take a final adverse action immediately, just as an employer might do if an applicant fails a skills test or does not have a required level of education. However, because of the FCRA and its protections aimed at ensuring that consumer reports include accurate information, the employer cannot take a final adverse employment action based on information in the applicant's consumer report without first complying with the notice procedures of section 1681b(b)(3). If an applicant does not dispute the information in the report it should come as no surprise to anyone that the employer is comfortable with proceeding with a final adverse employment action without reviewing the information one more time. The Court is unable to find any statutory basis to require an employer to review the information again.
In Ramos v. Genesis Healthcare, LLC, the Court found, under allegations very similar to the instant case and Manuel, that the employer's conduct complied with the FCRA. Ramos v. Genesis Healthcare, LLC, 141 F. Supp. 3d 341 (E.D. Pa. 2015). The Ramos Court concluded that the employer's internal decision did not constitute a final decision - it was "an internal determination of 'intent' to revoke the employment offer" and the employer provided "Ramos with a real opportunity to challenge the internal decision." Id. at 349. The Ramos decision is in accord with the conclusion reached here; however, rather than reject the Manuel Court's conclusion, the Ramos Court distinguished its case based on the fact that the employer engaged with Ramos after the pre-adverse action notice was issued. Id. at 349. While the Court agrees with the Ramos Court's conclusion that the employer's pre-adverse action notice complied with the FCRA, as explained above, the Court disagrees with the unsupported implication that a fact question would have arisen if Ramos had chosen not to take advantage of the opportunity to dispute his report. In contrast, it is safe to say that the Williams court would reject Manuel's conclusion. Williams, 155 F. Supp. 3d at n. 13 ("it is not improper for an employer to fully intend to carry out the adverse action absent a dispute by the consumer, or even to intend to carry out the adverse action notwithstanding the result of any dispute a consumer might initiate," and citing Manuel as a contrary decision).
There is no doubt that in the employment context prospective applicants whose background report contains inaccurate, misleading, or false information face a difficult task if such information results in a negative adjudication during a background check. The problem is primarily in the fact that an employer is permitted under the FCRA to move on rather quickly to a final adverse action after providing notice, while the consumer reporting agency that is responsible for accurate consumer reports is permitted a much longer time to make corrections and clear up mistakes. As noted by the Williams Court, "[t]o ask an employer to wait that long [2-3 weeks while the consumer reporting agency reviews reported problems in the background report] before moving on to other applicants—before taking adverse action—is unreasonable. And yet that appears to be precisely what the FCRA contemplates, as it allows CRAs 30 days to conduct reinvestigations in most instances." Williams, 155 F. Supp. 3d at1249, citing 15 U.S.C. § 1681i(a)(1). The solution to that problem is not provided for in the FCRA in the employment context at present.
Here, Mr. Dahy does not allege why he did not contact First Advantage or FedEx to challenge the information in his background report within the five-day period provided for by the initial notice letter. "An employer's response to a dispute, or lack thereof, is an important fact in determining whether a plaintiff can plausibly claim that his or her employer failed to provide a real opportunity to contest the contents of a consumer report." Moore, 33 F. Supp. 3d at 576. FedEx had no opportunity to respond because Mr. Dahy chose not take advantage of the notice to inform FedEx of any problem with his report. "Accordingly, to state a claim for relief, plaintiff must allege facts that prevented [him] from responding to the initial notice letter." Id. For the foregoing reasons, the Court finds that Mr. Dahy's Count II fails to state a claim upon which relief can be granted on this ground. Accordingly, it is recommended that FedEx's motion to dismiss Count II alleging that FedEx failed to provide a pre-adverse action notice in violation of section1681b(b)(3) be granted. It is further recommended that Count II as asserted against FedEx be dismissed without prejudice to Mr. Dahy being granted leave to file an amended complaint, if he chooses, in accordance with this Report and Recommendation.
3. Allegations that FedEx acted Willfully
Since the Court concludes that Mr. Dahy has failed to state a claim for a violation of section 1681b(b)(3), the Court need not at this time address FedEx's alternative motion for dismissal of Count II arguing that Mr. Dahy is unable to establish that FedEx acted willfully in its interpretation of the FCRA. But see Costa v. Family Dollar Stores of Virginia, Inc., 195 F. Supp. 3d at 847 (finding under similar allegations that even if 1681b(b)(3) violation occurred, employer's interpretation of § 1681b(b)(3)(A) is objectively reasonable and not a willful violation of the FCRA).
For the foregoing reasons it is respectfully recommended that that the Motion to Dismiss filed by FedEx (ECF No. 20) be granted and Count II as asserted against FedEx be dismissed without prejudice. It is further recommended that Mr. Dahy be granted leave to file an amended complaint, if he chooses, in accordance with this Report and Recommendation.
In accordance with the Magistrate Judges act, 28 U.S.C. § 636(b)(1)(B) and (C), and Rule 72.D.2 of the Local Rules of Court, the parties are allowed fourteen (14) days from the date of service of a copy of this Report and Recommendation to file objections. Any party opposing the objections shall have fourteen (14) days from the date of service of objections to respond thereto. Failure to file timely objections will constitute a waiver of any appellate rights. August 3, 2018
BY THE COURT
LISA PUPO LENIHAN
United States Magistrate Judge