Kirchner v. Shred-It USA, Inc. et al

Filing 44

MEMORANDUM AND ORDER signed by Senior Judge William B. Shubb on 11/25/2014 DENYING 29 First Advantage LNS Screening Solutions, Inc.'s MOTION to dismiss. (Kirksey Smith, K)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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MICHAEL KIRCHNER, an individual,
on behalf of himself and all
others similarly situated,
Plaintiff,

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CIV. No. 2:14-1437 WBS EFB

MEMORANDUM AND ORDER RE:
MOTION TO DISMISS

v.
SHRED-IT USA INC., a Delaware
Corporation; FIRST ADVANTAGE LNS
SCREENING SOLUTIONS, INC., and
Does 1 through 10,
Defendants.

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Plaintiff Michael Kirchner brought this putative class-

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action lawsuit against defendants Shred-it USA (“Shred-it”) and

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First Advantage LNS Screening Solutions, Inc. (“First

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Advantage”), in which he alleges that defendants failed to comply

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with federal credit reporting laws while conducting pre-

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employment background checks.

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with Shred-it.

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dismiss plaintiff’s First Amendment Complaint (“FAC”).

Plaintiff has reached a settlement

Before the court is First Advantage’s motion to

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I.

Alleged Facts

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Plaintiff applied for a job with Shred-it on April 13,

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2011.

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process, plaintiff received and signed a one-page form entitled

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“USA – Notice, Authorization and Release for a Consumer Report.”

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(Id. ¶ 14, Ex. A.)

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(FAC ¶ 14 (Docket No. 17).)

As part of the application

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

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allegedly obtained and reviewed his personnel file with Shred-it.

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(FAC ¶¶ 31, 47.)

Upon doing so, he allegedly discovered that

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First Advantage had provided Shred-it with a consumer report on

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him.

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violated the FCRA by furnishing Shred-it with a consumer report

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on plaintiff without first obtaining a certification from Shred-

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it stating that Shred-it “has complied” with its statutory

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obligations “with respect to the consumer report.”

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II.

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(Id. ¶ 16.)

Plaintiff alleges that First Advantage

(Id. ¶ 39.)

Legal Standard
On a motion to dismiss under Federal Rule of Civil

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Procedure 12(b)(6), the court must accept the allegations in the

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complaint as true and draw all reasonable inferences in favor of

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the plaintiff.

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overruled on other grounds by Davis v. Scherer, 468 U.S. 183

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(1984); Cruz v. Beto, 405 U.S. 319, 322 (1972).

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motion to dismiss, a plaintiff must plead “only enough facts to

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state a claim to relief that is plausible on its face.”

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Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007).

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“plausibility standard,” however, “asks for more than a sheer

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possibility that a defendant has acted unlawfully,” and where a

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plaintiff pleads facts that are “merely consistent with a

See Scheuer v. Rhodes, 416 U.S. 232, 236 (1974),

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To survive a

Bell

This

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defendant’s liability,” it “stops short of the line between

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possibility and plausibility.”

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

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Ashcroft v. Iqbal, 556 U.S. 662,

Plaintiff seeks statutory and punitive damages for

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violations of the FCRA, (FAC ¶¶ 31, 47), which requires him to

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

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requirements of [the FCRA].”

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added).

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

15 U.S.C. § 1681n(a) (emphasis

In Safeco Insurance Company of America v. Burr, the

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

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intentional or reckless.

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

Recklessness consists of “action entailing an

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unjustifiably high risk of harm that is either known or so

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obvious that it should be known.”

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internal quotation marks omitted).

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subject to FCRA does not act in reckless disregard of it unless

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the action is not only a violation under a reasonable reading of

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the statute’s terms, but shows that the company ran a risk of

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violating the law substantially greater than the risk associated

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with a reading that was merely careless.”

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defendant’s violation of the FCRA is not reckless simply because

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its understanding of a statutory obligation is “erroneous”;

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instead, a plaintiff must allege, at a minimum, that the

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defendant’s reading of the FCRA is “objectively unreasonable.”

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Id.

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Id. at 68 (citation and
In other words, “a company

Id. at 69.

A

In applying this standard, the Supreme Court considered

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whether the defendant’s interpretation “has a foundation in the

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statutory text” and whether the defendant had “guidance from the
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courts of appeals or the Federal Trade Commission (FTC) that

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might have warned it away from the view it took.”

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Noting “a dearth of guidance and . . . less-than-pellucid

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statutory text,” the Court declined to find the defendant’s

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interpretation objectively unreasonable.

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the Court observed that the presence or absence of subjective bad

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faith made no difference “where, as here, the statutory text and

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relevant court and agency guidance allow for more than one

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reasonable interpretation.”

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Id. at 69-70.

Id. at 70.

Finally,

Id. at 70 n.20.

Safeco’s analysis strongly suggests that the issue of

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whether a defendant’s reading of the FCRA was “objectively

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unreasonable” is a question of law.1

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Oil Prods. Co., 678 F.3d 486, 490-01 (7th Cir. 2012) (stating

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that the Safeco Court “treated willfulness as a question of

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law”).

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the case for further factual development because, as a matter of

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law, “Safeco’s misreading of the statute was not reckless.”

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Safeco, 551 U.S. at 71.

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analogized this inquiry to the “clearly established” inquiry

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required under its qualified immunity precedents--an inquiry that

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is legal in nature.

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U.S. 194, 202 (2001)).

See Van Straaten v. Shell

The Court in Safeco held that there was no need to remand

Perhaps most tellingly, the Court

See id. at 70 (citing Saucier v. Katz, 533

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Some courts have treated the question of whether a
defendant’s conduct was “willful” as a factual inquiry, see,
e.g., Edwards v. Toys “R” Us, 527 F. Supp. 2d 1197, 1210 (C.D.
Cal. 2007) (citing cases treating willfulness as a question of
fact), but these cases either predate Safeco or are
distinguishable from the situation in Safeco and the one here
because the relevant statute they addressed was “not ambiguous or
susceptible to conflicting interpretations,” see id. at 1209.
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Accordingly, courts may consider whether a particular

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interpretation was “objectively unreasonable” upon a motion to

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dismiss.

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Grp., Inc., 848 F. Supp. 2d 532, 543-46 (E.D. Pa. 2012)

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(considering court cases and FTC guidance on the question of

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willfulness for purposes of a motion to dismiss); see also Long

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v. Tommy Hilfiger U.S.A., Inc., 671 F.3d 371, 378 (3d Cir. 2012)

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(affirming dismissal upon a motion to dismiss because a

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defendant’s interpretation “although erroneous, was at least

See, e.g., Goode v. LexisNexis Risk & Info. Analytics

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objectively reasonable”); Shlahtichman v. 1-800 Contacts, Inc.,

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615 F.3d 794, 803 (7th Cir. 2010) (same).

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III. First Advantage’s Motion to Dismiss Plaintiff’s

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Certification Claim

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15 U.S.C. § 1681b(b)(1) requires that a consumer

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reporting agency obtain certification from a person that the

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person “has complied with paragraph (2) with respect to the

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consumer report” before it may “furnish a consumer report for

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employment purposes.”2

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language regarding the need to obtain certification.

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therefore be “objectively unreasonable” under the Safeco standard

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There is no ambiguity in § 1681b(b)(1)’s
It would

Section 1681b(b)(1) provides in relevant part:

A consumer reporting agency may furnish a consumer report
for employment purposes only if-(A) the person who obtains such report from the agency
certifies to the agency that--

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(i) the person has complied with paragraph (2) with
respect to the consumer report, and the person will
comply with paragraph (3) with respect to the consumer
report if paragraph (3) becomes applicable . . .”
15 U.S.C. § 1681b(b)(1) (emphasis added).
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for a consumer reporting agency to fail to obtain a certification

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from an employer before furnishing to that employer a consumer

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report on an individual.

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See Safeco, 551 U.S. at 69.

Plaintiff alleges that First Advantage “intentionally

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or recklessly” violated 15 U.S.C. § 1681b(b)(1) by “furnishing

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consumer reports regarding Plaintiff and other class members for

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employment purposes to Shred-it . . . without first obtaining

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from Shred-it . . . a certification . . . as to each consumer

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report it furnished.”

(FAC ¶¶ 39, 43.)

Because the court must

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accept this allegation as true for purposes of this motion,

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Scheuer, 416 U.S. at 236, plaintiff has plausibly alleged that

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First Advantage’s actions were objectively unreasonable.

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First Advantage asks the court to consider several

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documents in an effort to show that First Advantage never

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furnished a report on plaintiff and that First Advantage obtained

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a certification from Shred-it.

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13; O’Connor Decl. Ex. A (Docket No. 29-4) (the “Kirchmen

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Report”); Marsh Decl. Ex. A (Docket No. 29-3) (the “First

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Advantage Enterprise Screening Corporation Master Agreement”).)

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However, a district court ruling on a motion to dismiss may only

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consider “a document the authenticity of which is not contested,

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and upon which the plaintiff’s complaint necessarily relies.”

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Parrino v. FHP, Inc., 146 F.3d 699, 706 (9th Cir. 1998),

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superseded by statute on other grounds as stated in Abrego Abrego

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v. The Dow Chem. Co., 443 F.3d 676, 681-82 (9th Cir. 2006).

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Plaintiff disputes the authenticity of the “First

(See First Advantage’s Mem. at 5-

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Advantage Enterprise Screening Corporation Master Agreement,”

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(see Pl.’s Objections (Docket No. 36)), and neither the “Kirchmen
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Report” nor the declaration that purports to authenticate it

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clarify whether that document simply misstates plaintiff’s name

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or was intended as a report on an entirely different person.

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(See O’Connor Decl. at 1, Ex. A.)

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exist as to the authenticity of both documents, the court cannot

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consider either of them for purposes of this motion.

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Accordingly, because disputes

Because all of First Advantage’s arguments for

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dismissal rely on these documents (see First Advantage’s Mem. at

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5-13), and the court must otherwise accept the truth of

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plaintiff’s allegations, the court must deny First Advantage’s

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motion to dismiss plaintiff’s claim of a § 1681b(b)(1)

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violation.3

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IT IS THEREFORE ORDERED that the motion of defendant

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First Advantage LNS Screening Solutions, Inc. to dismiss this

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action as against it be, and the same hereby is, DENIED.

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Dated:

November 25, 2014

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First Advantage also moves to dismiss plaintiff’s class
allegations on the basis that they define an impermissible “failsafe” class. (First Advantage’s Mem. at 13-19); see Young v.
Nationwide Mut. Ins. Co., 693 F.3d 532, 538 (6th Cir. 2012) (“[A]
‘fail-safe’ class is one that includes only those who are
entitled to relief . . . [and] allow[s] putative class members to
seek a remedy but not be bound by an adverse judgment--either
those class members win or, by virtue of losing, they are not in
the class and are not bound.” (internal quotation marks and
citations omitted)). Because the issue of class certification is
not presently before it, the court will deny First Advantage’s
motion with respect to this issue without prejudice. First
Advantage may assert its fail-safe arguments in opposition to a
motion for class certification or, if plaintiff fails to move for
certification, move to strike the class allegation pursuant to
Federal Rule of Civil Procedure 12(f) prior to trial.
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