Labor & Employment Law Daily No standing for fired city attorney’s FCRA claims against city, its law firm, or consumer reporting agency
Monday, September 10, 2018

No standing for fired city attorney’s FCRA claims against city, its law firm, or consumer reporting agency

By Kathleen Kapusta, J.D.

A discharged city attorney who alleged that her former municipal employer, its law firm, and a consumer reporting agency violated their obligations under the Fair Credit Reporting Act in procuring, using, and furnishing her consumer report did not have Article III standing to bring her suit in federal court, the Eighth Circuit ruled. It vacated the district court’s orders dismissing her claims against the city and law firm for failure to state a claim and granting judgment on the pleadings for the consumer reporting agency. The case was remanded with instructions that her complaint be dismissed for lack of jurisdiction (Auer v. Trans Union, LLC, September 6, 2018, Colloton, S.).

Several days after the employee accepted appointment as city attorney, she signed a form authorizing the city to complete a background check. As part of that check, the city’s police department obtained her credit report from a consumer reporting agency. A little over a month later, she was terminated.

Law firm retained, lawsuit filed. The employee then filed claims against the city for wrongful termination, and requested that it provide her with records related to her employment and discharge, including her complete personnel file. In response, the city retained a law firm and provided it with the employee’s authorization form and credit check. The firm then contacted the employee, told her it had received her consumer information pursuant to her records request, and offered to furnish the information to her.

Lower court proceedings. After receiving the law firm’s correspondence, the employee sued the city, the firm, and the consumer reporting agency, alleging that they violated numerous obligations under the FCRA. The city and law firm moved to dismiss her claim and also requested the court’s permission to destroy any of her consumer information that remained in their possession. Granting the motion, the court also ordered the city and law firm to surrender all physical copies of the consumer report to the court and destroy all electronic copies. Separately, it granted judgment on the pleadings for the consumer reporting agency.

[Notably, the former city attorney alleged in separate litigation that she was fired in retaliation for complaining of sex discrimination and in violation of due process rights; she also appealed that suit but was unable to persuade the Eighth Circuit that the lower court had erred in granting summary judgment in the city’s favor. Three weeks into her employment as city attorney, she had sent a "Notice and Demand" to the city council president, the city manager, and the city’s HR director accusing the city manager of sex harassment. An investigation concluded that "no harassment based upon sex occurred" and the city manager fired her, after which she attended a city council meeting and accused the city manager of violating state and local law. The council voted unanimously to approve the firing decision, and the council president told local news reporters that insubordination was the reason behind the termination (Auer v. City of Minot).]

Article III standing. On appeal, the court addressed the threshold question whether the employee had Article III standing to bring her suit in federal court. She claimed the city violated several procedural requirements of the FCRA including that it procured her consumer report without making “a clear and conspicuous disclosure” that her “consumer report may be obtained for employment purposes;” that it did not obtain her written authorization; that it procured and used her report for purposes that were not authorized by the FCRA; and that it furnished her report to the law firm for an unauthorized purpose and without obtaining the required certification. These violations, she alleged, caused her to suffer “injury to her privacy, reputation, personal security, the security of her identity information and loss of time spent trying to prevent further violations of her rights under the FCRA.”

Consent. However, the appeals court pointed out, she consented to the city’s background check and so she failed to plead an intangible injury to her privacy sufficient to confer Article III standing. And while she pleaded that she did not “authorize or consent (in writing or otherwise) to the procurement and use” of her consumer report “for any purpose,” this conclusory allegation, said the court, was belied by her well-pleaded allegation that she completed the city’s authorization form, “so we need not accept the denial as true.” As to her claim the city used her report for unauthorized purposes, there was no well-pleaded allegation that it acted beyond her consent and her “unadorned, the-defendant-unlawfully-harmed-me accusation[s]” were not entitled to the assumption of truth.

Other claimed injuries. Nor did she establish Article III standing on the basis of her other claimed injuries of reputational harm, compromised security, and lost time. Her naked assertion of reputational harm, devoid of further factual enhancement, fell short of plausibly establishing injury; she did not allege that her identity information had been stolen or accessed by any person other than the defendants within the scope of her consent; and while she pleaded that she lost time “trying to prevent further violations of her rights under the FCRA,” plaintiffs “cannot manufacture standing merely by inflicting harm on themselves based on their fears of hypothetical future harm that is not certainly impending,” the court reasoned.

Claims against law firm. The FRCA required the law firm to certify it would use her report for a permissible purpose before procuring it from the city, the employee argued, alleging that the firm did not provide the city with this certification and used her report for unauthorized purposes. But she consented to the background check, the court again observed, and signed a form authorizing “representatives of the City of Minot” to obtain her credit records and other personal information. And the firm was a representative of the city, so disclosure to the firm was covered by her consent.

She also claimed that the law firm and consumer reporting agency failed to take “reasonable measures” to dispose of her consumer information. However, she did not allege that the law firm or agency disposed of her consumer information in an unreasonable manner. Rather, she claimed that by retaining her information, the law firm and agency violated the statute and regulations. Without more, however, this did not establish a privacy injury.

Consumer reporting agency. Turning to her allegations that the agency failed to comply with the panoply of procedural requirements set forth in the FCRA before furnishing her report to the city, the court found she suffered no injury because she gave the city consent to obtain her report. Thus, whether or not it met all of its statutory obligations before furnishing the report, no concrete harm came of the transaction.

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