Consumer Finance Insights
August 7, 2017

Seventh Circuit Affirms Spokeo Dismissal of FCRA Class Action

Last week, the Seventh Circuit affirmed the dismissal of two Fair Credit Reporting Act (FCRA) class actions on Spokeo grounds.  The cases, which were consolidated for appeal, were filed by the same plaintiff against two corporate defendants alleged to have provided credit-report disclosures that did not comply with the FCRA.  The Seventh Circuit affirmed dismissal of Groshek v. Time Warner Cable, Inc. and Groshek v. Great Lakes Higher Education Corp. (together, “Groshek“) because it concluded plaintiff failed to adequately allege any concrete injury.  The decision has strategic implications for defendants considering whether to seek dismissal of similar FCRA cases and for those planning defenses to certification motions.

As relevant to Groshek, the FCRA requires prospective employers who plan to pull a job applicant’s credit report as part of the application process to disclose this to the applicant.  Among other things, the disclosure must be “clear and conspicuous” and must appear in a document that consists only of the disclosure.  The applicant must also authorize the employer to pull the report.

In Groshek, plaintiff alleged that defendants’ disclosures appeared in forms that contained information extraneous to the disclosure.  Defendants moved to dismiss claiming plaintiff lacked standing because he had not suffered a concrete injury.  Citing Spokeo v. Robins, defendants argued that plaintiff’s only injury was the violation of a procedural right.

Plaintiff argued that he suffered a concrete injury because defendants’ alleged failure to provide him with a compliant disclosure was a failure to provide information required by the FCRA.  The Seventh Circuit rejected this argument because it concluded the alleged withholding of information was not the kind of injury the FCRA was designed to protect.  The Seventh Circuit held that the FCRA does not seek to protect individuals from the receipt of a non-compliant disclosure, rather, Congress’s purpose was to protect privacy by ensuring that job applicants only knowingly consent to the pulling of their credit reports.  Plaintiff also argued that he suffered a privacy injury because the defective disclosures meant he never provided valid authorization, and defendants’ procurement of his credit report was therefore an invasion of his privacy.  The Seventh Circuit rejected this argument as well, holding that plaintiff’s admission that he signed authorization forms coupled with his failure to allege that the non-conforming disclosure misled or confused him demonstrated that he suffered no invasion of privacy.

In deciding the case, the Seventh Circuit recognized the Ninth Circuit’s recent decision in Syed v. M-I, LLC, where the Ninth Circuit reversed the dismissal of a similar FCRA claim because of allegations that the plaintiff was confused by the disclosure and would not have signed it had it been clear.  The Seventh Circuit concluded Syed was inapposite because Groshek had not included any similar allegations, choosing instead to rest his case on the bare claim that the disclosure did not comply with the FCRA.

For defendants considering whether and how to seek dismissal of similar FCRA claims, Groshek provides persuasive authority that mere allegations of statutory failings are insufficient to establish concrete Article III injury.  Groshek demonstrates that, absent some claim that a procedural failing led to some specific injury, the plaintiff lacks standing.  But Groshek also potentially provides some assistance for defendants facing class certification motions in similar FCRA cases.  The distinction drawn by the Seventh Circuit between Syed and Groshek depends upon facts unique to the Syed plaintiff, and suggests that individualized issues related to standing could derail certification efforts in such cases.

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