Think twice before bringing "stand-alone disclosure requirement" cases
In addition to creating a mechanism for consumers to reliably dispute and fix errors on consumer reports, the FCRA also contains a number of disclosure provisions which ensure that consumers are properly advised of their rights under the FCRA. One such disclosure provision is the “stand-alone disclosure requirement.”
In sum, if an employer intends to pull a background check the FCRA requires that the consumer consent in writing, and also requires that a “clear and conspicuous” disclosure be made in writing prior to the background check being pulled. The FCRA goes on to note specifically that this disclosure must be made in a document “that consists only of the disclosure, that a consumer report may be obtained for employment purposes.” See 15 U.S.C.A. 1681b(2).
Despite this clear legal requirement, a district court judge in the Eastern District of California ruled this week that consumers do not have “standing” to pursue a 1681b(2) claim in federal court unless they can prove the disclosure caused them actual confusion. See Beltran v. Waster Management, Inc., 2023 WL 3601490 at *2 (E.D.Ca. May 23, 2023).
So what is going on here? And what is the lesson that practitioners and consumers should draw?
Standing as you will recall, is a legal requirement stemming from the “case or controversy” requirement of Article III of the constitution. The caselaw has developed to require a “concrete injury” in order for standing to be present. Absent a “concrete injury” a lawsuit cannot proceed in federal court. Of course, in the FCRA’s “stand-alone disclosure” context, there will often be no injury other than the violation of a congressionally recognized right to certain information presented in a certain way. So the question becomes whether a violation of a congressionally granted right, in and of itself, is sufficient to confer Article III standing.
In Spokeo v. Robbins, 578 U.S. 330 (2016), the Supreme Court stated that while Congress has an important role in deciding which harms will confer standing, that the mere fact that a procedural right conferred by Congress has been breached will not be independently insufficient to confer standing:
Congress' role in identifying and elevating intangible harms does not mean that a plaintiff automatically satisfies the injury-in-fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right. Article III standing requires a concrete injury even in the context of a statutory violation. For that reason, Robins could not, for example, allege a bare procedural violation, divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III. See Summers, 555 U.S., at 496, 129 S.Ct. 1142 (“[D]eprivation of a procedural right without some concrete interest that is affected by the deprivation ... is insufficient to create Article III standing”); see also Lujan, supra, at 572, 112 S.Ct. 2130.
Spokeo, Inc. v Robins, 578 US at 341.
Interestingly, the Spokeo court also made it clear that information injuries could present concrete harm:
Just as the common law permitted suit in such instances, the violation of a procedural right granted by statute can be sufficient in some circumstances to constitute injury in fact. In other words, a plaintiff in such a case need not allege any additional harm beyond the one Congress has identified. See Federal Election Comm'n v. Akins, 524 U.S. 11, 20–25, 118 S.Ct. 1777, 141 L.Ed.2d 10 (1998) (confirming that a group of voters' “inability to obtain information” that Congress had decided to make public is a sufficient injury in fact to satisfy Article III); Public Citizen v. Department of Justice, 491 U.S. 440, 449, 109 S.Ct. 2558, 105 L.Ed.2d 377 (1989) (holding that two advocacy organizations' failure to obtain information subject to disclosure under the Federal Advisory Committee Act “constitutes a sufficiently distinct injury to provide standing to sue”)
Spokeo, Inc. v. Robins, 578 U.S. at 342. This section was of particular interest because the FCRA’s “stand-alone disclosure rule” is clearly in some way analogous to the informational injuries noted by the Court where Congress was qualified to confer standing.
To that end, in the aftermath of Spokeo, there was some hope that “stand-alone disclosure” cases could proceed, particularly when the Ninth Circuit came down with its decision on Syed v. M-I, L.L.C., 853 F.3d 492 (9th Cir. 2017). In Syed, the Court found that an informational injury sufficient to confer standing had occured where the consumer plead a violation of the “stand-alone disclsoure” requirement. However, the Seventh and Eight Circuits have since disagreed. See Groshek v. Time Warner Cable, Inc., 865 F.3d. 884 (7th Cir. 2017); Auer v. Trans Union, L.L.C., 902 F.3d 873 (8th Cir. 2018). Moreover, as the Beltran case makes clear, district courts within the Ninth Circuit have narrowed the holding in Syed, claiming that Syed requires not only a bare violation of the “stand-alone disclosure” requirement, but also an allegation that the consumer was actually confused about their rights, or harmed in some way by the illegal disclosure. See Bercut v. Michaels Stores, Inc., 2017 WL 2807515, at *5 (N.D. Cal. June 29, 2017); Esparaza v. Maryland Marketsource, Inc., 2020 WL 869225 (D. Md. Feb. 21, 2020); Arroyo v. J.R. Simplot Co., 2019 WL 2338518 (N.D. Cal. June 3, 2019); Arzaga v. Memorialcare Med. Group, 2019 WL 1557446 (C.D. Cal. Apr. 10, 2019); Williams v. TLC Casino Enterprises, 2018 WL 3484042 (D. Nev. July 19, 2018)); Williams v. Nichols Demons, Inc., 2018 WL 3046507 (N.D. Cal. June 20, 2018).
Moreover, in TransUnion v. Ramirez, 141 S.Ct. 2190 (2021) the Supreme Court would walk back its suggestion that information injuries as to matters designated by Congress to be of importance would confer standing:
For its part, the United States as amicus curiae, but not the plaintiffs, separately asserts that the plaintiffs suffered a concrete “informational injury” under several of this Court's precedents. See Federal Election Comm'n v. Akins, 524 U.S. 11, 118 S.Ct. 1777, 141 L.Ed.2d 10 (1998); Public Citizen v. Department of Justice, 491 U.S. 440, 109 S.Ct. 2558, 105 L.Ed.2d 377 (1989). We disagree. The plaintiffs did not allege that they failed to receive any required information. They argued only that they received it in the wrong format. Therefore, Akins and Public Citizen do not control here. In addition, those cases involved denial of information subject to public-disclosure or sunshine laws that entitle all members of the public to certain information. This case does not involve such a public-disclosure law. See Casillas v. Madison Avenue Assocs., Inc., 926 F.3d 329, 338 (CA7 2019); Trichell v. Midland Credit Mgmt., Inc., 964 F.3d 990, 1004 (CA11 2020). Moreover, the plaintiffs have identified no “downstream consequences” from failing to receive the required information. Trichell, 964 F.3d at 1004. They did not demonstrate, for example, that the alleged information deficit hindered their ability to correct erroneous information before it was later sent to third parties. An “asserted informational injury that causes no adverse effects cannot satisfy Article III.” Ibid.
TransUnion LLC v Ramirez, 2141 S Ct at 2214.
Thus, as the Beltran decision from earlier this week shows, practitioners should think long and hard about bringing “stand-alone disclosure” cases. Practically speaking, it is only in instances in which the consumer can show some additional harm occurred as a result of the illegal disclosure that bringing these cases is advisable.