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Calif. federal judge agrees to stay class action over FCRA violations, pending U.S. SC ruling

By Jessica Karmasek | Mar 24, 2016

Judge Beth Labson Freeman for the U.S. District Court for the Northern District of California, San Jose Division.

SAN JOSE, Calif. (Legal Newsline) - A California federal court recently decided to stay a class action lawsuit alleging violations of the Fair Credit Reporting Act, pending the U.S. Supreme Court’s ruling in Spokeo Inc. v. Robins.

Judge Beth Labson Freeman for the U.S. District Court for the Northern District of California, San Jose Division, in an order last month, granted a motion by defendant Hertz Corporation and its subsidiary, Dollar Thrifty Automotive Group, requesting the court stay the case against them.

The defendants argued the Supreme Court’s decision in Spokeo has the potential to deprive the plaintiffs -- Peter Lee and Latonya Campbell -- of standing and could, therefore, deprive the court of subject matter jurisdiction.

Freeman, in her Feb. 26 order, agreed that staying the matter was “appropriate.”

“Should the Supreme Court reverse the (U.S. Court of Appeals for the) Ninth Circuit’s decision in Spokeo, such a decision may have serious implications not only for Plaintiffs’ own individual standing, but also for the predominance and superiority requirements necessary for Rule 23(b)(3) class certification,” the judge wrote in the five-page order.

Rule 23(b)(3), in class action law, requires that judges not certify or authorize a class unless he or she finds that common issues of law or fact predominate.

Lee and Campbell filed a putative class action complaint in San Francisco County Superior Court on behalf of themselves and similarly situated persons against the defendants, alleging violations of the FCRA.

Lee and Campbell each allege that, in the course of the hiring process, the defendants failed to give them a consumer credit disclosure statement “in a document that consists solely of the disclosure,” as required under the federal law.

They also allege the defendants rescinded their conditional offers of employment following the results of a criminal background check, without giving them notice prior to taking “adverse action,” as required under the law.

The defendants removed the case to the Northern District of California on the basis of federal question jurisdiction.

The federal court sided with the defendants, saying the “possible damage” that may result from granting a stay is “minimal.”

Freeman didn’t seem to buy the plaintiffs’ argument that in the months until the Supreme Court decides Spokeo, memories will fade and witnesses may become “unfindable.”

“The allegations in this litigation primarily concern documents regarding Defendants’ compliance or non-compliance with the FCRA. Such documentary evidence can be preserved and may be discovered in the due course of litigation,” the judge wrote. “Moreover, to the extent Plaintiffs expect to rely on witnesses, the Court finds that the period of several months from now until Spokeo is decided is not substantial, and is unlikely to cause material harm.”

At issue in Spokeo is whether a person may bring a lawsuit when a company violates a federal privacy law.

In order to invoke the jurisdiction of federal courts under Article III, a plaintiff must have “standing,” or a legal right, to sue.

The petitioner, Spokeo Inc., argues the Supreme Court should dismiss the case because the plaintiff, Thomas Robins of Virginia, did not prove that the publication of inaccurate personal information in violation of the FCRA was a concrete “injury” under Article III.

Spokeo -- a “people search engine,” so to speak -- discloses to the public personally identifiable information, including contact information, marital status, age, occupation and economic health. Some of this information is subject to protection under federal privacy laws.

Robins sued Spokeo for willful violations of the FCRA, charging that the website disclosed inaccurate information about him that harmed his employment prospects and violated his rights under the federal law.

Spokeo sought to dismiss the case, claiming there was no “injury-in-fact.” But a federal district court rejected that argument, finding the allegation of the FCRA violation was sufficient for the case to go forward.

The Ninth Circuit agreed, again denying Spokeo’s motion to dismiss the case for lack of jurisdiction.

In particular, the Ninth Circuit found that Congress’ “creation of a private cause of action to enforce a statutory provision implies that Congress intended the enforceable provision to create a statutory right.”

If the Supreme Court rules in the coming weeks, or months, for the plaintiff in Spokeo, then it will likely preserve the status quo. A decision the other way, however, could curtail class actions seeking statutory damages.

Freeman’s decision to stay Lee v. Dollar Thrifty Auto. Group Inc. is, in no way, an anomaly. Dozens of federal district courts have recently stayed FCRA actions while the nation’s high court considers Spokeo.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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