Labor & Employment Law Daily California federal court decertifies 6.5 million-member class in Walmart background check case
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Monday, October 28, 2019

California federal court decertifies 6.5 million-member class in Walmart background check case

By Marjorie Johnson, J.D.

Because the named plaintiffs failed to allege a sufficiently concrete injury, and instead only asserted “bare procedural violations” of the FCRA and California law, they lacked Article III standing and were disqualified from bringing their claims on behalf of a class.

Decertifying a class action suit asserting Walmart’s background checks failed to satisfy the notice requirements of the Fair Credit Reporting Act (FCRA) and California law, a federal district court in California ruled that the named plaintiffs lacked Article III standing. The record revealed that despite the procedural violations, plaintiffs knew that the company might run backgrounds check and gave consent since they wanted to be hired, and thus they failed to show that they suffered a concreate harm as required by the Supreme Court’s ruling in Spokeo, Inc. v. Robins . Though Walmart urged the court to instead grant summary judgment in the company’s favor, the court held that it was bound by federal statute and Ninth Circuit precedent requiring it to decertify the class and remand the action to state court, and took no position as to the plaintiffs’ ability to establish standing or certify a class under the relevant standards of California law(Pitre v. Wal-Mart Stores, Inc., October 18, 2019, Carter, D.).

Class certified. In January 2019, the district court granted the plaintiffs’ motion for class certification in this lawsuit alleging that Walmart’s background checks failed to satisfy the notice requirements of the FCRA and the California’s Investigative Consumer Reporting Agency Act (ICRAA). The named plaintiffs asserted that when they applied for jobs at Walmart, the retail giant procured credit and background reports which ran afoul of these statutes by willfully including extraneous information in disclosure forms and inadequately informing them of their rights.

Based on Walmart’s discovery responses, they claimed that the company procured background checks on over 6.5 million job applicants using deficient disclosure forms in the almost seven-year relevant time period. Their amended complaint alleged that the retailer violated both the FCRA and IRCAA by failing to make proper disclosure and that it also violated FRCA by failing to provide a proper summary of rights.

“Law of the case” inapplicable to standing analysis. In its class certification order, the court rejected Walmart’s assertion that the plaintiffs lacked Article III standing because some of the class members knew about the background check so did not have a concrete injury. Citing Spokeo, the court held the claim that Walmart accessed class members’ personal information in violation of their protected rights constituted a concrete harm rather than a “mere technical” violation of the FCRA. However, rejecting the plaintiffs’ urging that the “law of the case” doctrine now precluded reconsideration of the standing issue, the court found that application of this doctrine was “entirely inappropriate to the present Article III standing analysis.”

FCRA disclosure requirements. The plaintiffs lacked standing to pursue individual and class claims that Walmart made defective disclosures in violation of FCRA Section 1681b(b)(2)(A) since they were not standalone documents and contained extraneous information. Though they claimed an invasion of their “privacy and statutory rights,” they failed to identify a concrete injury stemming from this statutory violation.

“Bare procedural violation.”Spokeo clarified that a violation of a statutory right does not necessarily give rise to an injury in fact, even when the statute also confers a concomitant right of action. The Supreme Court noted that “a violation of one of the FCRA’s procedural requirements may result in no harm” and refused to find standing on the basis of a “bare procedural violation” of the FCRA and remanded to the Ninth Circuit to determine whether the plaintiff had alleged a concrete injury in fact.

Here, the named plaintiffs similarly alleged only a “bare procedural violation” and not a concrete injury. The procedural safeguards in Section 1681b(b)(2)(A) were ostensibly aimed at ensuring that consumer reports, “for employment purposes,” are only procured with the subject’s prior clearly informed authorization. However, each of the named plaintiffs testified that they understood that the company might run a background check, and because they hoped to be hired by Walmart, they consented to the potential background checks. Thus, they had the understanding—and gave the consent—that the FCRA disclosure requirement was intended to secure. The court reasoned that the category of “bare procedural violation” established by Spokeo “must certainly encompass the wrongdoing alleged here.”

ICRAA disclosures. For the same reasons, the plaintiffs also lacked standing to pursue their claim that Walmart’s disclosures violated ICRAA. They similarly alleged “bare procedural violations” of the California law, and while the state legislature could establish procedural safeguards on background checks, it could not allow plaintiffs to sue in federal court, in violation of Article III, on the basis of procedural violations unaccompanied by concrete injury.

Summary-of-rights requirement inapplicable. The plaintiffs also lacked standing with regard to their claim that Walmart violated the FCRA by failing to give a proper summary of rights pursuant to its disclosure requirements in Sections 1681d(a)(1) and 1681g(c). The statute differentiates between “consumer reports” and “investigative consumer reports,” and the summary-of-rights requirements only applied with regard to procurement of investigative consumer reports. This limitation was fatal since the plaintiffs admittedly were not contending that Walmart procured an investigative consumer report and therefore the provisions were inapplicable.

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