Employment Law Daily Failure to use middle name found unreasonable in FCRA suit against background check company
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Friday, September 16, 2016

Failure to use middle name found unreasonable in FCRA suit against background check company

By Lisa Milam-Perez, J.D. Because there was insufficient evidence of willfulness, punitive damages were unwarranted against LexisNexis, whose background check error left a job applicant in limbo for six weeks until his erroneous report could be cleared up, the Sixth Circuit held. The appeals court reversed in part a jury award in the job applicant’s favor on his Fair Credit Reporting Act (FCRA) claims, but it upheld the award in all other respects—including compensatory damages for lost wages, emotional distress, and harm to the applicant’s reputation—holding that, "although a close call," a reasonable jury could find negligence on the consumer reporting agency’s part (Smith v. LexisNexis Screening Solutions, Inc., September 13, 2016, Rogers, J.). Background check snafu. David Alan Smith worked as a delivery driver for a company for ten years before it was sold to another company. The new owner did not automatically hire the predecessor’s employees; they had to reapply. Smith applied for and was offered a position, but his employment was conditioned on a criminal background check. Smith authorized LexisNexis Screening Solutions, Inc., to prepare a background report and he gave his prospective employer his full name (including middle name), date of birth, address, and Social Security number. In turn, the employer gave to LexisNexis all of that information except the middle name—a critical omission, it turns out, because a "David Oscar Smith," SSN unknown, had been found guilty of criminal fraud in Florida. Smith’s job offer was rescinded based on the criminal background report, which erroneously divulged the other Smith’s crime to the would-be employer. Eventually LexisNexis cleared up the error, forwarded a corrected report to the employer, and the guiltless Smith began work six weeks later. But he sued LexisNexis for his troubles, alleging that it "failed to follow reasonable procedures that would assure maximum possible accuracy in the information it reported" to his future employer. A jury found in Smith’s favor, concluding that LexisNexis both negligently and willfully violated the FCRA. The district court denied motions for judgment as a matter of law, finding sufficient evidence from which the jury reasonably could conclude that LexisNexis’ failure to require employers to provide an applicant’s middle name, when available, and its failure to cross-reference the applicant’s credit report (which contained his middle initial) with LexisNexis’ criminal records databases were both negligent and willful—especially here, where there was an "obvious discrepancy" between the applicant’s middle initial appearing on his credit report, and the other Smith’s middle name as appeared on the criminal record. Not willful, but negligent. Agreeing with LexisNexis in one respect on appeal, the Sixth Circuit concluded the lower court should have granted judgment as a matter of law in LexisNexis’ favor on the willfulness claim. "A single inaccuracy, without more, does not constitute a willful violation of the FCRA," in its view, and a reasonable jury could not find otherwise. In this case, the mix-up was corrected once LexisNexis was made aware of the discrepancy, and the consumer reporting agency’s "dispute rate" of .2% indicated that the risk of such inaccuracies was almost nonexistent. But that did not absolve LexisNexis of a negligence finding. The language of the FCRA specifically mandates that consumer reporting agencies must follow "reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates." And here, faced with such a common name—there are more than 125,000 "David Smiths" living in the U.S., the appeals court noted—a "reasonably prudent CRA" would have sought additional identifying information, such as a middle name, in order to minimize the likelihood of error. Indeed, LexisNexis already included a field for middle names on the form provided to employers—indicating that the use of a middle name in background screening "is an inarguably reasonable procedure." Finally, the failure to cross-check the credit report against the criminal record, which would have revealed the discrepancy between the names, tipped the scales in favor of a negligence finding. Damages. And while punitive damages were not warranted in the absence of willfulness—the plaintiff, to no avail, had appealed the district court’s reduction in the jury’s punitive damages award from $300,000 to $150,000—there was support in the record for the jury’s $75,000 compensatory damages award ($2,640 in lost wages and $72,360 in non-economic damages). The appeals court pointed to testimony from Smith and his wife that his six-week stretch of unemployment threw his family into the red and left Smith suffering from depression. And while LexisNexis argued that the testimony was merely conclusory, and insufficient to justify emotional distress damages, the appeals court didn’t see it that way, and thought a reasonable jury might not, either. Also, the award was not too far afield from awards in similar cases.

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