Banking and Finance Law Daily Rejected job applicant failed to show alleged FCRA violation caused concrete injury, so no Article III standing
Friday, July 13, 2018

Rejected job applicant failed to show alleged FCRA violation caused concrete injury, so no Article III standing

By Lorene D. Park, J.D.

Employing the Supreme Court’s analysis in Spokeo, Inc. v. Robins, the Ninth Circuit affirmed a district court’s conclusion that a job applicant lacked Article III standing to assert his Fair Credit Reporting Act (FCRA) claim against State Farm. Though he plausibly alleged that State Farm violated the Act by not providing required disclosures and a copy of his credit report before disqualifying him from its employment program, he failed to establish that the violation caused a concrete injury. To the contrary, State Farm established that the fact that he had a charged-off debt deemed uncollectible within the past 24-months alone was enough to disqualify him, making the alleged inaccuracies in the report and his excuses irrelevant. The appeals court also found that he waived any objection to State Farm’s evidence by not raising an objection below (Dutta v. State Farm Mutual Automobile Insurance Co., July 3, 2018, Vitaliano, E.).

State Farm’s hiring process. In March 2014, the applicant applied for a job with State Farm through its Agency Career Track (ACT) hiring program. As a preliminary step, he was required to sign an authorization for State Farm to obtain his consumer credit report. Those reports are critical in the decision-making process; State Farm examines the 24-month credit history of every applicant, viewing it as an indicator of his or her practical ability to market financial and insurance-related products and services. Relevant here, if the applicant’s credit report indicates a charged-off account greater than $1000, or three or more 90-day late payments, he is disqualified.

Rejected for poor credit history. According to the applicant, a state farm rep called him on March 11 and said that, because of a charged-off debt and two loan delinquencies, his application was rejected. The parties disputed whether she said the decision was final. Three days later, on March 14, the applicant received a pre-adverse action notice dated March 11 and a copy of his credit report. He followed the letter’s instructions and called to dispute the report’s accuracy. He explained that although the charged-off debt was dated February 28, 2014, which was within State Farm’s 24-month look-back period, he had not made a payment on that debt since 2010—well outside the 24-month period. As to the past delinquencies, he claimed he made payments "much earlier than what was reported." The next day a State Farm employee informed him by email that he was now deemed withdrawn from the ACT program.

FCRA claim tossed on procedural grounds. Filing suit, the applicant claimed State Farm violated the FCRA’s requirement that a prospective employer provide a job applicant with a copy of his consumer credit report, notice of his FCRA rights, and an opportunity to challenge inaccuracies "before taking any adverse action based in whole or in part on the report." Granting summary judgment for State Farm, the court did not reach the merits of the FCRA claim, finding that the applicant lacked Article III standing because he failed to establish an injury-in-fact.

Plaintiff waived evidentiary objection. On appeal, the applicant first challenged the district court’s reliance on information raised in a State Farm employee’s declaration attached to State Farm’s summary judgment reply papers. The declaration stated that the existence of the charge off within the 24-month ACT look back period alone disqualified him from employment.

Rejecting the applicant’s evidentiary challenge, the appeals court explained that he waived any objection to the declaration by taking no action in the district court. Local Rule 7-3(d) provides an aggrieved party the opportunity to object to the court’s consideration of newly submitted evidence, or to request leave to file a sur-reply brief. He did neither. It was not until his appeal that he raised the issue. His failure to object below waived his challenge to the evidence.

No injury-in-fact so no Article III standing. The appeals also found no error in the district court’s ruling that the applicant lacked standing to pursue his FCRA claims. Under the analysis in Spokeo, the fact that Congress created a statutory right does not automatically confer Article III standing, and a plaintiff seeking damages must plausibly allege both the violation and a "concrete" and "particularized" injury caused by the violation. Absent a concrete injury, the plaintiff lacks Article III standing, explained the appeals court.

Here, the applicant claimed State Farm violated the FCRA by providing the statutory notice three days after taking an adverse action against him in finding him ineligible for its ACT employment program. He also claimed there were incorrect and misleading entries in the credit report, and, in violation of Section 1681b(b)(3)(A), he was deprived of an opportunity to correct them. Based on this, he plausibly alleged a violation.

However, he failed to demonstrate that the alleged FCRA violation harmed him or presented a substantial risk of harm to him. He pegged his claim on the fact that the charged-off debt was inaccurately reported as occurring in February 2014 instead of sometime in 2010, when he stopped making payments. But the consumer report did not purport to establish when he stopped paying. The transaction date disqualifying him from the ACT program was the date that the creditor charged off the debt as uncollectible, and the applicant raised no challenge to that date.

In the end, it was the State Farm employee’s declaration that precluded him from showing more than a bare procedural violation with no concrete injury. That declaration made clear that the charge off within the 24-month ACT look-back period alone disqualified him from continuing in the ACT program. And that fact made all of the inaccuracies or explanations the applicant wanted to present to State Farm immaterial. Because he lacked a concrete injury, he lacked Article III standing, and summary judgment was affirmed.

The case is No. 16-17216.

Attorneys: James A. Francis (Francis & Mailman) for Bobby S. Dutta. Jennifer B. Zargarof (Sidley Austin) and Lisa Helen Cassilly (Alston & Bird) for State Farm Mutual Automobile Insurance Co.

Companies: State Farm Mutual Automobile Insurance Co.

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