Litigation Update: FCRA Claim Against Paramount is Thrown Out

Angela Preston

Background Checks

Paramount Gets FCRA Claim Thrown Out

Finally, a voice of reason. Employers got some good news from a judge in the Northern District of California last week, when the court granted Paramount Picture’s motion to dismiss a class action claim for alleged Fair Credit Reporting Act (FCRA) violations. The case was one of the many class actions that have been flooding the federal courts, disputing the validity of the disclosure form used for running a background check. This wave of litigation has erupted over the past twelve months, putting employers on the defensive against FCRA claims seeking millions in statutory and punitive damages.  The judge’s decision to dismiss the case against Paramount is a welcome development, and may be a turning point for employers facing FCRA class actions of this type.

The plaintiff alleged that Paramount violated the FCRA’s requirements for disclosure of consumer reports. The specific code section, 15 U.S.C. § 1681b, provides that before conducting a background check, an employer must make a “clear and conspicuous disclosure”, “in a document that consists solely of the disclosure” (emphasis added). The plaintiff alleges that Paramount violated the above provision of the FCRA by including some extraneous information in its disclosure form—namely a certification that the information provided by the plaintiff was true and correct.

If this sounds like splitting hairs to you, suffice it to say that the court agreed. Citing a 1997 opinion[i] letter from the FTC, the court maintained that the one-sentence certification Paramount included in its disclosure form, while not technically part of the statutorily permitted authorization, was close enough. The court found that while Paramount may not have followed the exact letter of the law, its actions certainly did not rise to the level of willful disregard of the statute.  The court reasoned that the additional sentence served to “focus the consumer’s attention on the disclosure.”

[E]ven if inclusion of the certification in Paramount’s disclosure form did not comply with a strict reading of § 1681b(b)(2)(A)’s requirement that the document consist solely of the disclosure and the authorization, it is not plausible that Paramount acted in reckless disregard of the requirements of the FCRA by using this language.

The icing on the cake was the judge’s determination that there was nothing the Plaintiffs could do to amend the claim to refile or salvage their case.  Let’s hope that other courts hearing dozens of similar cases will follow Judge Chhabria’s lead.

Case Name: MICHAEL PEIKOFF, Plaintiff, v. PARAMOUNT PICTURES CORPORATION, Defendant Case No. 15-cv-00068-VC, U.S. District Ct. for the Northern District of California.

Case File Date: February 19, 2015

Dismissal Date: March 25, 2015

Cause of Action: Class Action, Fair Credit Reporting Act 15 USC 1681

Bottom Line: Finally a voice of reason from California’s Northern District. The court threw out an FCRA class action claim for alleged disclosure violations, finding that the additional language in the document did not constitute a willful violation of the statute and did not rise to the level of a violation. This is welcome news for employers facing similar claims for their background screening process.

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[i] See Letter from William Haynes, Attorney, Div. of Credit Practices, Fed. Trade Comm’n, to Harold Hawkey, Emp’rs Assoc. of N.J. (Dec. 18, 1997), 1997 WL 33791224.

 

Angela Preston
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Angela Preston

Vice President of Compliance & General Counsel at EmployeeScreenIQ
Angela Preston has more than 20 years as a licensed attorney and over 10 years in the background screening area. She serves on the Board of Directors of the National Association of Professional Background Screeners (NAPBS), is a member of the NAPBS Background Screening Credentialing Council (BSCC), and is actively involved in the Society for Human Resource Management (SHRM) and ASIS International. Angela is also a member of the Ohio State and Columbus Bar Associations. Angela has direct oversight and management of compliance programs, and will provide guidance in complex legal matters including state and federal legislation, EEO law, client education, adjudication, pre/adverse action process, NAPBS Accreditation and client and vendor contract management.
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