Syed v. M-I, LLC et al

Filing 34

ORDER signed by Senior Judge William B. Shubb on 8/28/14 ORDERING that defendants' motion to dismiss be, and the same hereby is, GRANTED. Plaintiff has twenty days from the date this Order is signed to file an amended Complaint, if he can do so consistent with this Order. (Becknal, R)

1
2
3
4
5
6
7
8

UNITED STATES DISTRICT COURT

9

EASTERN DISTRICT OF CALIFORNIA

10
----oo0oo----

11
12
13

SARMAD SYED, an individual,
on behalf of himself and all
others similarly situated,
Plaintiffs,

14
15
16
17
18
19

CIV. NO. 1:14-742 WBS BAM
MEMORANDUM AND ORDER RE: MOTION
TO DISMISS

v.
M-I LLC, a Delaware Limited
Liablity Company; PRECHECK,
INC., a Texas Corporation;
and DOES 1-10,
Defendants.

20
21
22

----oo0oo---Plaintiff Sarmad Syed brought this putative class

23

action against defendants M-I, LLC (“M-I”) and PreCheck, Inc.

24

(“PreCheck”), in which he alleges that defendants failed to

25

comply with state and federal credit reporting laws while

26

conducting pre-employment background checks.

27

to dismiss the Complaint pursuant to Federal Rule of Civil

28

Procedure 12(b)(6) for failure to state a claim upon which relief
1

Defendants now move

1

can be granted.

2

I.

3

Factual and Procedural History
Plaintiff applied for a job with M-I on July 20, 2011.

4

(Compl. ¶ 17 (Docket No. 1).)

5

plaintiff filled out and signed a one-page form entitled “Pre-

6

Employment Disclosure and Release.”

7

which PreCheck allegedly prepared and provided to M-I, included

8

the following language:

9

(Id. ¶ 18.)

That form,

I understand that the information obtained will be
used as one basis for employment or denial of
employment.
I
hereby
discharge,
release,
and
indemnify prospective employer, PreCheck, Inc., their
agents, servants, and employees, and all parties that
rely on this release and/or the information obtained
with this release from any and all liability and
claims arising by reason of the use of this release
and dissemination of information that is false and
untrue
if
obtained
by
a
third
party
without
verification.

10
11
12
13
14
15

It is expressly understood that the information
obtained through the use of this release will not be
verified by PreCheck, Inc.

16
17

During the application process,

(Id.)

18

At some point “within the last two years,” plaintiff

19

allegedly obtained and reviewed his personnel file.

20

43.)

21

consumer credit report about him.

22

defendants procured this report unlawfully because the disclosure

23

appeared in a form that did not consist “solely of the

24

disclosure,” as required by state and federal law.

25

39.)

26

(Id. ¶ 26,

Upon doing so, he discovered that defendants had procured a
(Id.)

Plaintiff alleges that

(Id. ¶¶ 15,

Plaintiff filed this putative class action on May 19,

27

2014, and asserts that defendants’ failure to provide disclosures

28

on a separate form violates both the Fair Credit Reporting Act
2

1

(“FCRA”), 15 U.S.C. §§ 1681 et seq., and the California

2

Investigative Consumer Reporting Agencies Act (“ICRAA”), Cal.

3

Civ. Code §§ 1786 et seq.

4

plaintiff’s Complaint pursuant to Rule 12(b)(6) for failure to

5

state a claim upon which relief can be granted.

6

14.)

7

II.

(Docket Nos. 10,

Discussion

8
9

Defendants now move to dismiss

On a motion to dismiss under Rule 12(b)(6), the court
must accept the allegations in the complaint as true and draw all

10

reasonable inferences in favor of the plaintiff.

11

Rhodes, 416 U.S. 232, 236 (1974), overruled on other grounds by

12

Davis v. Scherer, 468 U.S. 183 (1984); Cruz v. Beto, 405 U.S.

13

319, 322 (1972).

14

must plead “only enough facts to state a claim to relief that is

15

plausible on its face.”

16

544, 570 (2007).

17

for more than a sheer possibility that a defendant has acted

18

unlawfully,” and where a complaint pleads facts that are “merely

19

consistent with a defendant’s liability,” it “stops short of the

20

line between possibility and plausibility.”

21

556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 557).

22
23

A.

Scheuer v.

To survive a motion to dismiss, a plaintiff

Bell Atl. Corp. v. Twombly, 550 U.S.

This “plausibility standard,” however, “asks

Ashcroft v. Iqbal,

Fair Credit Reporting Act
The elements of an FCRA claim depend on the relief that

24

a plaintiff seeks.

25

sustained as a result of an FCRA violation, he need only allege

26

that the defendant was negligent.

27

when a plaintiff seeks statutory and/or punitive damages, he must

28

allege that the defendant “willfully fail[ed] to comply” with the

When a plaintiff only seeks actual damages

3

15 U.S.C. § 1681o(a).

But

1

FCRA.

2

and punitive damages under § 1681n(a), (see Compl. ¶ 24), he must

3

allege that defendants’ violation of the FCRA was willful in

4

order to state a claim for relief.

Id. § 1681n(a).

5

Because plaintiff seeks only statutory

In Safeco Insurance Company of America v. Burr, the

6

Supreme Court held that the FCRA’s use of the term “willful”

7

requires a plaintiff to show that the defendant’s conduct was

8

intentional or reckless.

9

in turn, consists of “action entailing an unjustifiably high risk

551 U.S. 47, 57 (2007).

Recklessness,

10

of harm that is either known or so obvious that it should be

11

known.”

12

omitted).

13

act in reckless disregard of it unless the action is not only a

14

violation under a reasonable reading of the statute’s terms, but

15

shows that the company ran a risk of violating the law

16

substantially greater than the risk associated with a reading

17

that was merely careless.”

18

the Court held that a defendant’s violation of the FCRA is not

19

reckless simply because its understanding of its statutory

20

obligations is “erroneous”; instead, a plaintiff must allege, at

21

a minimum, that the defendant’s reading of the FCRA is

22

“objectively unreasonable.”1

23
24
25
26
27
28

1

Id. at 68 (citation and internal quotation marks
In other words, “a company subject to FCRA does not

Id. at 69.

Applying this standard,

Id.

As a general rule, whether a defendant’s conduct was
“willful” is a fact-intensive inquiry. See, e.g., Edwards v.
Toys “R” Us, 527 F. Supp. 2d 1197, 1210 (C.D. Cal. 2007)
(“Willfulness under the FCRA is generally a question of fact for
the jury.” (citations omitted)). However, Safeco strongly
suggests that the issue of whether a defendant’s reading of the
FCRA was “objectively unreasonable” is a question of law. For
instance, the Court held that there was no need to remand the
case for further factual development because, as a matter of law,
4

1

Here, plaintiff alleges that defendants’ conduct was

2

reckless because they “knew or should have known about their

3

legal obligations under the FCRA,” that “[t]hese obligations are

4

well established in the plain language of the FCRA and in the

5

promulgations of the Federal Trade Commission,” and that “any

6

reasonable employer or consumer reporting agency knows or easily

7

can discover these obligations.”

8

not cited any opinion of the FTC to support this contention--

9

perhaps because the FTC’s opinion letters suggest that the FCRA

(Compl. ¶ 22.)

Plaintiff has

10

may not be so clear-cut.

11

Attorney, Div. of Credit Practices, Fed. Trade Comm’n, to Richard

12

W. Hauxwell, CEO, Accufax Div. (June 12, 1998), 1998 WL 34323756

13

(F.T.C.), at *1 (opining that “it is our position that the

14

disclosure notice and the authorization may be combined” under

15

certain circumstances); Letter from Cynthia Lamb, Investigator,

16

Div. of Credit Practices, Fed. Trade Comm’n, to Richard Steer,

17

Jones Hirsch Connors & Bull, P.C. (Oct. 21, 1997), 1997 WL

18

33791227 (F.T.C.), at *1 (“We believe that including an

19

authorization in the same document with the disclosure . . . will

20

not distract from the disclosure itself; to the contrary, a

21

consumer who is required to authorize procurement of the report

22
23
24
25
26
27
28

See Letter from William Haynes,

“Safeco’s misreading of the statute was not reckless.” 551 U.S.
at 71. It suggested that courts should consider whether a
plaintiff had “guidance from the courts of appeals or the Federal
Trade Commission (FTC) that might have warned it away from the
view it took.” Id. at 70. It emphasized that courts should not
consider the presence or absence of subjective bad faith in
conducting this analysis. Id. at 70 n.20. And perhaps most
tellingly, it analogized this inquiry to the “clearly
established” inquiry required under the Court’s qualified
immunity precedents--an inquiry that is legal in nature. See id.
at 70 (citing Saucier v. Katz, 533 U.S. 194, 202 (2001)).
5

1

on the same document will be more likely to focus on the

2

disclosure.”).

3

Plaintiff’s allegation that the “plain language of the

4

FCRA” should have apprised defendants of their obligations to

5

provide a disclosure on a separate form--and to certify that the

6

disclosure form complied with the FCRA--founders for similar

7

reasons.

8

identify, any decision of the Ninth Circuit or a district court

9

within the Ninth Circuit construing the phrase “consisting solely

The parties have not cited, and the court cannot

10

of the disclosure.”

11

Circuit suggests that defendant’s reading of the FCRA is not

12

objectively unreasonable.

13

The “dearth of authority” from the Ninth

Safeco, 551 U.S. at 70.

In addition, those district courts that have considered

14

whether a combined disclosure and release form violates the FCRA

15

have reached varying conclusions.

16

Corp., Civ. No. 2:08-1730, 2013 WL 6231606, at *10-11 (W.D. Pa.

17

Dec. 2, 2013) (holding that combined disclosure and liability

18

waiver violated FCRA), and Singleton v. Domino’s Pizza, Civ. No.

19

11-1823, 2012 WL 245965, at *9 (D. Md. Jan. 25, 2012) (same) with

20

Burghy v. Dayton Racquet Club, Inc., 695 F. Supp. 2d 689, 696

21

(S.D. Ohio 2009) (holding that combined disclosure and liability

22

waiver did not violate FCRA because the waiver was “not so great

23

a distraction as to discount the effectiveness of the disclosure

24

and authorization statements”) and Smith v. Waverly Partners,

25

Civ. No. 3:10-28, 2012 WL 3645324, at *5-6 (W.D.N.C. Aug. 23,

26

2012) (same); see also Avila v. NOW Health Grp., Inc., Civ. No.

27

14-1551, 2014 WL 3637825, at *2 (N.D. Ill. July 17, 2014) (noting

28

split in authority on this issue).
6

Compare Reardon v. Closetmaid

The inability of district

1

courts around the country to agree on whether a combined

2

disclosure and liability release violates the FCRA suggests that

3

the statute is “less than pellucid,” Safeco, 551 U.S. at 70, or

4

at least not as clear as plaintiff claims.

5

divergent positions taken by courts on this issue, the court

6

cannot conclude that defendants’ interpretation of the

7

requirement that the disclosure appear on a form consisting

8

“solely of the disclosure” is erroneous, let alone “objectively

9

unreasonable.”

10

And in light of the

See id.

Absent plaintiff’s allegation that defendant’s conduct

11

was objectively unreasonable, he is left with only bare

12

allegations that defendants’ conduct was “willful” and

13

“reckless.”

14

and conclusions” without factual content, are not sufficient to

15

state a claim that defendants’ conduct was willful.

16

U.S. at 555; see also Iqbal, 556 U.S. at 686-87 (emphasizing that

17

allegations related to a defendant’s state of mind must be based

18

on sufficient factual allegations to state a plausible claim for

19

relief).

20

state a claim for actual damages, see 15 U.S.C. § 1681o(a), he

21

does not seek actual damages and has therefore has not stated a

22

plausible claim to relief under § 1681n(a). Accordingly, the

23

court must grant defendants’ motion to dismiss.2

24

B.

25
26
27
28

But these allegations, which consist only of “labels

Twombly, 550

Even if plaintiff’s allegations might be sufficient to

Supplemental Jurisdiction
Plaintiff asserts his ICRAA claim pursuant to 28 U.S.C.

2

Because the court dismisses this claim on alternate
grounds, it need not and does not reach the question of whether
plaintiff’s FCRA and/or ICRAA claims are barred by the applicable
statutes of limitations.
7

1

§ 1367, which authorizes federal courts to exercise supplemental

2

jurisdiction over state-law claims that are sufficiently related

3

to those claims over which they have original jurisdiction.

4

U.S.C. § 1367(a); United Mine Workers of Am. v. Gibbs, 383 U.S.

5

715, 725 (1966).

6

supplemental jurisdiction over a claim . . . if . . . the

7

district court has dismissed all claims over which it has

8

original jurisdiction.”

9

Varian Assocs., Inc., 114 F.3d 999, 1000 (9th Cir. 1997) (“[A]

10

federal district court with power to hear state law claims has

11

discretion to keep, or decline to keep, them under the conditions

12

set out in § 1367(c).”).

13

28

A district court “may decline to exercise

28 U.S.C. § 1367(c)(3); see also Acri v.

Factors courts consider in deciding whether to dismiss

14

supplemental state-law claims include judicial economy,

15

convenience, fairness, and comity.

16

Coll. of Surgeons, 522 U.S. 156, 172-73 (1997).

17

case in which federal law claims are eliminated before trial, the

18

balance of factors ... will point toward declining to exercise

19

jurisdiction over the remaining state law claims.”

20

County of San Diego, 84 F.3d 1162, 1171 (9th Cir. 1996),

21

overruled on other grounds by Acri, 114 F.3d at 1000.

22

City of Chicago v. Int’l
“[I]n the usual

Reynolds v.

Because the court will dismiss plaintiff’s FCRA claim,

23

only his state-law ICRAA claim remains.

24

identify any extraordinary or unusual circumstances suggesting

25

that the court should retain jurisdiction over plaintiff’s ICRAA

26

claim in the absence of any claim over which the court has

27
28
8

None of the parties

1

original jurisdiction.3

2

supplemental jurisdiction over plaintiff’s ICRAA claim pursuant

3

to 28 U.S.C. § 1367(c)(3).

4

The court therefore declines to exercise

IT IS THEREFORE ORDERED that defendants’ motion to

5

dismiss be, and the same hereby is, GRANTED.

6

twenty days from the date this Order is signed to file an amended

7

Complaint, if he can do so consistent with this Order.

8

Dated:

Plaintiff has

August 28, 2014

9
10
11
12
13
14
15
16
17
18
19
20
3

21
22
23
24
25
26
27
28

Plaintiff’s Complaint alleges only that the court “has
jurisdiction under 15 U.S.C. [§] 1681p” and does not allege any
other basis for jurisdiction. For instance, it does not allege
that the parties are from different states and that there is over
$75,000 in controversy. See 28 U.S.C. § 1332(a). It also does
not allege that the putative class of which plaintiff is a member
contains at least one member who is diverse from at least one
defendant and that there is over $5,000,000 in controversy. See
28 U.S.C. § 1332(d). Because plaintiff is the party invoking the
court’s jurisdiction, he bears the burden of showing that the
court has original jurisdiction over at least one of his claims.
Scott v. Breeland, 792 F.2d 925, 927 (9th Cir. 1986). In the
absence of any allegation to this effect, the court will not
exercise jurisdiction over his state-law claim.
9