GREEN BAY, Wis. (Legal Newsline) — A key U.S. Supreme Court decision has derailed a scheme that netted one so-called “professional plaintiff” more than $230,000 in individual settlements.
The plaintiff, Cory Groshek of Green Bay, Wis., applied for more than 500 jobs over the course of a year and a half, hoping to catch potential employers violating a disclosure requirement of the Fair Credit Reporting Act (FCRA) during the application process. According to court documents, if Groshek believed the process didn't strictly adhere to the federal statute, he would send letters threatening to bring a class action lawsuit on behalf of all recently hired employees unless the company agreed to pay him to settle.
If an employer refused, Groshek filed suit.
His plan was working successfully until in 2014, when he applied for a job with Time Warner Cable.
Time Warner wouldn’t settle and the case ended up in a U.S. district court in Wisconsin at the same time that the U.S. Supreme Court was considering a similar case involving FCRA claims, Spokeo Inc. v. Robins.
At issue in Spokeo was whether the plaintiff had standing to bring a claim over a procedural violation when the plaintiff suffered no concrete harm.
Similar cases pending in district courts, including Groshek’s, were stayed as a result of the high court's May remand of Spokeo to the Ninth Circuit Court of Appeals in San Francisco.
“It’s not unheard of but it’s rare and not the rule that cases in the federal court system get stayed in anticipation of a Supreme Court case,” Gerald L. Maatman, an employment attorney and a partner of Seyfarth Shaw, told Legal Newsline. “Spokeo was a little different than normal. Many, many judges in many, many courts stayed lawsuits.”
The FCRA statute was passed by Congress at a time when the use of consumer reports was becoming more common. These reports often included errors that could threaten the chances of someone applying for a job, a house or for credit. The FCRA requires an employer to make a “clear and conspicuous disclosure” that a consumer report may be obtained for employment purposes. It further states that the disclosure must be made in a separate and distinct document.
Recently, alleged violations of FCRA have become fodder for plaintiffs attorneys looking to bring class actions over a company’s hiring practices.
“If you asked me 36 months ago how many cases were out there, I could count them on one hand. Now there are dozens and dozens,” Maatman said. “That statute has become an important statute that class action lawyers have used. The Spokeo case ... would stick a dagger in the heart of many of those cases because they simply alleged a violation of the Fair Credit Reporting Act instead of a pocketbook injury.”
He said that "serial litigators" file multiple lawsuits "not because they necessarily want to get a job but to test the procedure."
In the case against Time Warner, Groshek claims that when he applied to the company in 2014 and received a conditional employment offer, he filled out a number of forms online, which included authorization for a background check. He claims the disclosure included extraneous information not related to the disclosure, which violates the statute. He hoped to turn the lawsuit into a class action on behalf of all recently hired Time Warner Cable employees.
His attempt was halted when, in a 6-2 vote in May, the U.S. Supreme Court held that the Ninth Circuit failed to consider both aspects of the injury-in-fact requirements in Spokeo, which dictates that an injury must be concrete and particularized. The appeals court had not considered whether a concrete injury existed, so the case was remanded for further proceedings.
A "bare procedural violation, divorced from any concrete harm, (cannot) satisfy the injury-in-fact requirement," the majority held.
As a result of the Spokeo remand, U.S. District Judge Pamela Pepper of the Eastern District of Wisconsin granted Time Warner’s motion to dismiss Groshek’s lawsuit, despite the plaintiff’s attempt to move the case forward.
Groshek argued that the Supreme Court decision "broke no new ground."
But Time Warner fired back that the Wisconsin federal court and others have dismissed these kinds of cases because "a bare procedural violation of a statute does not establish standing."
“Plaintiff ignores the impact of Spokeo because he cannot even articulate, much less show, that he sustained the type of concrete injury Spokeo requires," Time Warner attorneys wrote. "In fact, while plaintiff attempts to salvage his claim by arguing he suffered ‘privacy’ or ‘informational’ injuries, those purported ‘injuries’ are entirely hypothetical rather than concrete, and thus not cognizable after Spokeo.”
The company went on to say that even if such injuries were enough to bring a lawsuit, Groshek admitted in his deposition that he fully understood the form and chose to proceed with the application despite his belief that it violated federal law so that Time Warner Cable would get a consumer report. Lastly, he was offered a job — not prevented from getting one because of a credit report.
“At least until last week’s ruling in Spokeo, this has been a very successful business for Groshek, as he applied for 562 jobs over an 18-month period and secured more than $230,000 in individual FCRA settlements between November 2014 and the fall of 2015 alone,” court documents state, citing Groshek’s deposition.
Spokeo won’t only be applied to FCRA cases. Maatman said lawsuits involving other federal statutes, including the Telephone Consumer Protection Act (TCPA) — another magnet for class actions.
“Class actions are kind of booming right now. Spokeo is starting to have an impact,” he said. “A plaintiff always has to establish standing in any case.”
Where a plaintiff like Groshek was able to negotiate settlements because some employers believed it would cost less, that may not happen going forward without a claimant having more substantial evidence, he said.
Spokeo has created a clearer defense, giving employers an option other than paying a settlement," Maatman said. “The outcome is much more predictable.”