Castro v. Michaels Stores, Inc.
OPINION. Signed by Judge Kevin McNulty on 1/24/2017. (seb)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEW JERSEY
Civ. No. 14-7563 (KM) (JBC)
IN RE: MICHAELS STORES, INC.,
FAIR CREDIT REPORTING ACT
Civ. No. 15-2547 (KM) (JBC)
Civ. No. 15-5504 (KM) (JBC)
MDL No. 2615
KEVIN MCNULTY, U.S.D.J.:
This putative class action arises out of alleged violations of the Fair
Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681 et seq., and its New Jersey and
California state counterparts. Defendants bring a challenge, inter alia, to
Plaintiffs’ standing on the grounds that the complaints fail to allege injury in
fact. For the reasons stated below, I agree that Plaintiffs have failed to establish
their Article III standing, and I will dismiss their complaints for failure to plead
subject matter jurisdiction under the Supreme Court’s recent decision in
Spokeo, Inc. v. Robbins, 136 S. Ct. 1540, 194 L. Ed. 2d 635 (2016). Because the
filing of these complaints preceded the decision in Spokeo, in fairness I have
ordered that this dismissal be without prejudice and granted leave to file
amended complaints within 30 days.
Plaintiffs Christina Graham, Gary Anderson, Michele Castro, Janice
Bercut, and Michelle Bercut applied for employment at Michaels Stores, Inc.
(“Michaels”) through an online employment application. One section of the
online application form disclosed that Michaels would be obtaining background
checks on the applicants and required applicants to authorize and consent to
those checks. Michaels in fact obtained consumer reports, known also as
background checks, which it used in making hiring decisions. All of the
Plaintiffs were hired by Michaels. They contend, however, that Michaels
violated the FCRA (and its state counterparts) because its disclosure of its
intent to obtain the background checks was insufficient.
Plaintiff Graham first filed an action, Civ. No. 14-7563, on December 4,
2014, in the District of New Jersey. Graham later amended her complaint,
adding Plaintiff Anderson, on February 5, 2015. Plaintiff Michele Castro filed a
similar complaint in Northern District of Texas on January 28, 2015, and later
amended that complaint to include plaintiff Janice Bercut.’ By order dated
April 9, 2015, the Judicial Panel on Multi District Litigation consolidated the
actions into MDL No. 2615 pursuant to 28 U.S.C.
§ 1407, and the
Castro/Bercut action was assigned civil number 15-2547. Plaintiff Michelle
Bercut filed an action on June 8, 2015 in the Superior Court of California,
which was removed by Michaels to the Northern District of California on June
23, 2015. That action was later consolidated with the MDL and transferred to
this Court on July 9, 2015, under civil number 15-5504.
Michaels filed motions to dismiss the currently operative complaints in
the three actions. (ECF nos. 38, 18, 22) In part, Michaels sought under Fed. R.
Civ. P. 12(b)(1) to dismiss the complaints for lack of subject matter jurisdiction.
Michaels challenged Plaintiffs’ standing, asserting that the complaints failed to
allege an injury-in-fact. For the reasons stated in my prior Memorandum
Opinion and Order (ECF no. 92),2 I stayed this action pending the United
On March 17, 2015, Castro accepted a Rule 68 offer from Michaels. Janice
Bercut did not accept a similar offer. (Civ. No. 15-2547, ECF no. 36 at 6)
Unless otherwise noted, citations to a single ECF docket entry refer to the lead
case in this MDL, Civ. No. 14-7563. Further, record items cited repeatedly will be
abbreviated as follows
Plaintiffs’ Consolidated Opposition to Defendant’s
Consolidated Motion to Dismiss All Centralized Civil Actions
Under MDL No. 2165 (ECF no. 102)
First Amended Complaint (ECF no. 1)
First Amended Complaint (Civ. No. 15-cv-2547, ECF no. 1)
States Supreme Court’s decision in the then-pending case of Spokeo, Inc. v.
On May 16, 2016, the Supreme Court issued its decision in Spokeo, Inc.
v. Robbins, 136 S. Ct. 1540, 194 L. Ed. 2d 635 (2016). On May 17, 2016, I
ordered the parties to reformulate and resubmit their motions to dismiss in
light of Spokeo. (ECF no. 94) Thereafter, on June 23, 2016, Michaels
submitted a consolidated motion to dismiss all of the complaints in this MDL
(ECF no. 99) under Fed. R. Civ. P. 12(b)(1) for lack of subject matter
jurisdiction and under Rule 12(b)(6) for failure to state a claim. Now before the
Court is that consolidated motion to dismiss. Because I dispose of the motion
on jurisdictional grounds, I do not reach the Rule 12(b)(6) issues.
LEGAL STANDARDS AND DISCUSSION
A. Rule 12(b)(1)
“A motion to dismiss for want of standing is
pursuant to Rule 12(b)(1), because standing is a jurisdictional matter.”
Constitution Party of Pa. v. Aichele, 757 F.3d 347, 357 (3d Cir. 2014) (citing
Ballentine v. United States, 486 F.3d 806, 810 (3d Cir. 2007)). Rule 12(b)(1)
challenges may be either facial or factual attacks. See 2 Moore’s Federal
§ 12.30[41 (3d ed. 2007); Mortensen v. First Fed. Say. & Loan Ass’n,
549 F.2d 884, 891 (3d Cir. 1977). A facial challenge asserts that the complaint
does not allege sufficient grounds to establish subject matter jurisdiction.
Iwanowa v. Ford Motor Co., 67 F. Supp. 2d 424, 438 (D.N.J. 1999). Where a
Rule 12(b)(1) motion is filed prior to any answer, it will be considered a facial
challenge to jurisdiction. Aichele, 757 F.3d at 358. A court considering such a
facial challenge applies the same standard that would apply on a motion to
Class Action Complaint (Civ. No. 15-cv-5504, ECF no. 1)
Previously pending before this Court was Plaintiffs’ motion to certify a class.
(ECF no. 33) I administratively terminated that motion, but noted that it may be
restored to the Court’s docket by letter from the parties following the Supreme Court’s
decision in Spokeo. To date, no such letter has been filed, no doubt because the
parties are awaiting a decision on these motions to dismiss before proceeding.
dismiss under Rule 12(b)(6). In re Horizon Healthcare Services Inc. Data Breach
Litigation, No. 15-2309, slip op. at 13 (3d Cir. Jan. 20, 2017). Thus wellpleaded factual allegations are taken as true, and reasonable inferences are
drawn in the plaintiff’s favor. Id. The complaint will be dismissed for lack of
standing only if it nevertheless appears that the plaintiff will not be able to
assert a colorable claim of subject matter jurisdiction. Cardio—Med. Assocs.,
Ltd. v. Crozer—Chester Med. Ctr., 721 F.2d 68, 75 (3d Cir. 1983); Iwanowa, 67
F. Supp. 2d at 438. The court may consider documents relied upon by the
complaint and attached to it, but must construe such documents, like the
allegations of the complaint, in the light most favorable to the plaintiff. Gould
Elecs., Inc. v. United States, 220 F.3d 169, 176 (3d Cir. 2000).
B. Article III Standing
Under Article III of the U.S. Constitution, a plaintiff seeking to establish
standing to sue must demonstrate: “(1) an injury-in-fact, (2) a sufficient causal
connection between the injury and the conduct complained of, and (3) a
likelihood that the injury will be redressed by a favorable decision.” In re
Nickelodeon Consumer Privacy Litig., 827 F.3d 262, 272 (3d Cir. 2016) (quoting
Finkelman v. Nat’l Football League, 810 F.3d 187, 193 (3d Cir. 2016)). “The
plaintiff, as the party invoking federal jurisdiction, bears the burden of
establishing these elements.” Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547,
194 L. Ed. 2d 635 (2016) (citing FW/PBS, Inc. v. Dallas, 493 U.S. 215, 231, 110
S. Ct. 596, 107 L. Ed. 2d 603 (1990)). “Where, as here, a case is at the pleading
stage, the plaintiff must ‘clearly.
allege facts demonstrating’ each element.”
Id. (quoting Warth v. Seldin, 422 U.S. 490, 518, 95 5. Ct. 2197, 2215, 45 L. Ed.
2d 343 (1975)).
Here, as in Spokeo, the particular component of standing at issue is
injury-in-fact. Id. To allege injury-in-fact, “a plaintiff must claim the invasion of
a concrete and particularized legally protected interest resulting in harm that is
actual or imminent, not conjectural or hypothetical.” Nickelodeon, 827 F.3d at
272 (quoting Finkelman, 810 F.3d 187, 193) (internal quotations omitted). A
harm is “concrete” only if it is “defacto’; that is, it must actually exist”; it
cannot be merely “abstract.” Id. (quoting Spokeo, 136 S. Ct. at 1548).
A harm need not be tangible, however, to be “concrete.” To determine
whether an “intangible” harm amounts to an injury-in-fact, a court “should
consider whether the purported injury ‘has a close relationship to a harm that
has traditionally been regarded as providing a basis for a lawsuit in English or
American courts.” IcL (quoting Spokeo, 136 S. Ct. at 1549) “Congress’s
judgment on such matters is ‘also instructive and important,’ meaning that
Congress may ‘elevat[e] to the status of legally cognizable injuries concrete, de
facto injuries that were previously inadequate in law.” Id. (quoting Spokeo, 136
S. CL at 1549) (alteration in original).
Spokeo teaches, however, that a mere wave of the Congressional hand is
not enough to render an abstract injury concrete. Allegations of a “bare
procedural violation, divorced from any concrete harm” cannot satisfy the
Article III injury-in-fact requirement. Spokeo, 136 S. Ct. at 1549 (citing
Summers v. Earth Island Inst., 555 U.S. 488, 496, 129 S. Ct. 1142, 173 L. Ed.
2d 1 (2009) (“[D]eprivation of a procedural right without some concrete interest
that is affected by the deprivation
is insufficient to create Article III
standing.”)); Nickelodeon, 827 F.3d at 274 (citing id. at 1550). In other words,
not every bare violation of a procedural right granted by statute is inherently
injurious; to constitute an injury-in-fact, such a violation must result in a
concrete harm. That requirement persists even where a statute “purports to
authorize [a] person to sue to vindicate [a statutory procedural] right.” Id.;
Raines v. Byrd, 521 U.S. 811, 820 n.3, 117 S. Ct. 2312, 138 L. Ed. 2d 849
“A harm is “particularized” if it “affect[s] the plaintiff in a personal and
individual way.” Nickelodeon, 827 F.3d at 272 (quoting Lujan v. Defenders of Wildlife,
504 U.S. 555, 560 n.1, 112 S. Ct. 2130, 119 L. Ed. 2d 351 (1992)). It is undisputed
that the purported injury in this case is particularized; Michaels procured a consumer
report on each plaintiff, allegedly without first making a proper “stand-alone”
(1997) (“It is settled that Congress cannot erase Article III’s standing
requirements by statutorily granting the right to sue to a plaintiff who would
not otherwise have standing.”).
Spokeo’s Application of the Article III Injury-inFact Element to FCRA Procedural Violations
In Spokeo, the plaintiff, Robins, sued Spokeo, an online “people search
engine” that uses computerized searches to conduct background checks.
Robins alleged that Spokeo had violated the FCRA when it inaccurately
reported his personal information to its customers. Spokeo challenged Robins’s
standing to sue. The Ninth Circuit held that Robins had adequately alleged an
injury-in-fact. The court based its holding on the twin observations that Robins
had an individualized, “personal interest in the handling of his credit
information” and that “Spokeo violated his statutory rights.” Robins v. Spokeo,
Inc., 742 F.3d 409, 4 13—14 (9th Cir. 2014) (emphasis in original).
The Supreme Court reversed. It found that the Ninth Circuit had failed to
properly consider whether the claimed violation of the FCRA statute resulted in
concrete harm. Applying general Article III standing principles, the Court stated
that a plaintiff “cannot satisfy the demands of Article III by alleging a bare
procedural violation” of the FCRA, because “[a] violation of one of the FCRA’s
procedural requirements may result in no harm.” Spokeo, 136 S. Ct. at 1550.
Accordingly, the Court vacated the Court of Appeals’ judgment and remanded
with instructions to address “whether the particular procedural violations
alleged in this case entail a degree of risk sufficient to meet the concreteness
Plaintiffs’ Pleadings and Article III Standing
a. The stand-alone disclosure requirement
The plaintiffs in our case, like Robins, have alleged a bare procedural
violation of the FCRA. In particular, they allege a violation of what they call the
“stand-alone disclosure requirement.” The FCRA requires that the employer’s
intent to obtain a background check be disclosed conspicuously, in a
dedicated, stand-alone document:
[A]n employer or prospective employer cannot “procure, or cause a
consumer report to be procured, for employment purposes with
respect to any consumer, unless—
(i) a clear and conspicuous disclosure has been made in
writing to the consumer at any time before the report is
procured or caused to be procured, in a document that
consists solely of the disclosure, that a consumer report may
be obtained for employment purposes; and
(ii) the consumer has authorized in writing.
procurement of the report by that person.
FCRA, 15 U.S.C.
§ 1681b(b)(2)(A) (emphasis added).
The complaints here allege that Michaels’ only disclosure of its intent to
obtain consumer reports for employment purposes was contained in each
plaintiff’s online job application. The disclosure allegedly appears in the middle
of the application, not in a stand-alone document. In addition, the disclosure
allegedly contains extraneous information, further violating the stand-alone
requirement. (P1. Opp. 7)
In essence, then, the allegations setting forth the elements of a statutory
violation are: (1) Plaintiffs completed the online job application on Michaels’
website; (2) the application failed to comply with the FCRA’s (and/or a state
counterpart’s) stand-alone disclosure requirement; and (3) for each plaintiff,
Michaels procured a consumer report from an outside consumer reporting
agency. It follows, say the Plaintiffs, that Michaels violated 15 U.S.C.
168 lb(b)(2)(A)(i)—(ii) because it failed to make a proper disclosure and therefore
failed to obtain proper authorizations before procuring the consumer reports.
The New Jersey state law counterpart has a similar stand-alone disclosure
requirement. See N.J. Stat. Ann. § 56:1 l-31(c)(1) (mirroring the text of the FCRA).
Graham and Anderson’s complaint alleges an FCRA violation only under 15
U.S.C. § 1681b(b)(2)(A)(i). (Graham Cmplt. ¶J 63—67) The remaining Plaintiffs,
however, also allege a violation under subsection (b)(2)(A)(ii). (Castro Cmplt. ¶ 59
(“Defendant violated the FCRA by procuring consumer reports relating to Plaintiffs and
other putative class members without proper authorization. See 15 U.S.C. §
Plaintiffs allege a violation of what I have called the purely formal
requirements of FCRA. They do not factually allege any harm aside from the
statutory violation itself. As I noted in my prior Memorandum Opinion and
Order staying the matter pending a decision in Spokeo:
Plaintiffs here concede that they do not plead any concrete harm;
their claims are based on a bare violation of the FCRA. A decision
in Spokeo that a bare violation of a federal statute fails to confer
standing would therefore dispose of the pending motions, because
this court would lack jurisdiction to continue.
(ECF no. 92).
In light of Spokeo, bare procedural violations of the FCRA, such as the
violation of the stand-alone requirement alleged here, do not constitute an
injury-in-fact. For the reasons expressed herein, I join the ranks of the courts
that have so held.
168 lb(b) (2) (A) (ii).”); Bercut Cmplt. ¶ 71 (“The two signature boxes contained within
Defendants Application state above the box: ‘Signature (by typing in this field, you are
electronically signing this form.)’ and do not purport to authorize the procurement of a
consumer report. As a result, and because Defendant failed to make a [stand-alone
disclosure], Defendant violated the FCRA by procuring consumer reports relating to
Plaintiff and other putative class members without proper authorization.”)).
A single, passing reference to an invasion of privacy appears in the preliminary
statements of two of the three complaints: “Plaintiffs and other putative class members
have been injured, including, without limitation, by having their privacy and statutory
rights invaded in violation of the FCRA.” (Castro Cmplt. ¶ 9; Bercut Cmplt. ¶ 8) These
two complaints make no further mention of, let alone an explanation of, any invasion
Cases holding that failure to comply with the stand-alone disclosure
requirement does not in itself constitute an injury-in-fact include the following: Tyus v.
United States Postal Serv., No. 15-CV-1467, 2017 WL 52609, at *6 (E.D. Wis. Jan. 4,
2017) (absent some additional allegation of harm, a failure to comply with the FCRA’s
stand-alone disclosure requirement is not a “concrete” injury); Lee v. Hertz Corp., No.
15-CV-04562-BLF, 2016 WL 7034060, at *5 (N.D. Cal. Dec. 2, 2016) (same); Kirchner
v. First Advantage Background Serzis. Corp., No. CV 2: 14-1437 WBS EFB, 2016 WL
6766944, at *3 (E.D. Cal. Nov. 14, 2016) (same); Shoots v. iQor Holdings US Inc., No.
15-CV-563 (SRN/SER), 2016 WL 6090723, at *5_8 (D. Minn. Oct. 18, 2016) (same);
Nokchan v. Lyft, Inc., No. 15-CV-03008 JCS, 2016 WL 5815287, at *6 (N.D. Cal. Oct.
5, 2016) (same); Landrum v. Blackbird Enterprises, LLC, No. CV H- 16-0374, 2016 WL
6075446, at *4 (S.D. Tex. Oct. 3, 2016) (same); Fisher v. Enter. Holdings, Inc., No.
4:15-CV-00372 AGF, 2016 WL 4665899, at *4 (E.D. Mo. Sept. 7, 2016) (same); Smith
v. Ohio State Univ., No. 2:15-CV-3030, 2016 WL 3182675, at *1, 4 (S.D. Ohio June 8,
b. “Informational Injury” and “Invasion of Privacy”
In an attempt to salvage standing post- Spokeo, the plaintiffs argue that
the alleged FCRA violations caused them two types of concrete harm: (1)
informational injury, and (2) invasion of privacy. (P1. Opp. 13—28) Of course,
statements in briefs cannot serve to amend a deficient complaint.’ Here,
however, Plaintiffs rely on post-Spokeo cases adopting the position that certain
alleged violations of 168 lb(b)(2)(A) “necessarily entail” these two additional
harms. E.g., Meza v. Verizon Commc’ns, Inc., No. 1:16-CV-0739 AWl MJS, 2016
WL 4721475, at *4 (E.D. Cal. Sept. 9, 2016) (“[P]hrases such as ‘informational
injury’ or ‘right to privacy’.
need not be expressly stated in the Complaint
[because] [t]he nature of the violations of 1681b(b)(2)(A) alleged in the
Complaint necessarily entail an ‘informational injury’ and an invasion of the
‘right to privacy.”’). To the extent that a fact arises by necessary implication, it
may be regarded as inherent to the Complaint. I respectfully disagree, however,
with the reasoning of the cases on which the Plaintiffs rely.
2016) (same); but see Moody v. Ascenda USA Inc., No. 16-CV-60364-WPD, 2016 WL
5900216 (S.D. Fla. Oct. 5, 2016) (a failure to comply with the FCRA’s stand-alone
disclosure requirement is a “concrete” injury where plaintiffs alleged informational
injury and invasion of privacy); Meza v. Verizon Commc’ns, Inc., No. 1:1 6-CV-0739 AWl
MJS, 2016 WL 4721475, at *3 (E.D. Cal. Sept. 9, 2016) (same).
I do not fault anyone, of course, for failing to anticipate the precise reasoning of
Spokeo. For clarity, however, I note that it was only in a footnote to an earlier brief
that Janice Bercut characterized her complaint as alleging an informational injury.
(Civ. No. 15-2547, ECF no. 36 at 8—9 n.6) Plaintiffs Graham and Anderson did not
make a similar argument in their earlier opposition, though they make it now. (See
Civ. No. 14-7563, ECF no. 41 at 8—10) All Plaintiffs now raise the invasion of privacy
argument for the first time.
See, e.g., Pennsylvania ex. rel Zimmerman v. PepsiCo, Inc., 836 F.2d 173, 181
(3d Cir. 1988) (“It is axiomatic that the complaint may not be amended by the briefs in
opposition to a motion to dismiss.”); Talley v. United States, No. 11-1180, 2014 WL
282680, at *5 (D.N.J. Jan. 24, 2014) (holding that “a complaint cannot be amended
through the brief of a party in opposition to a motion to dismiss”).
i. Informational Injury
The Supreme Court has held that “a plaintiff suffers an ‘injury in fact’
when the plaintiff fails to obtain information which must be publicly disclosed
pursuant to a statute.” Fed. Election Comm’n v. Akins, 524 U.S. 11, 21, 118 S.
Ct. 1777, 1784, 141 L. Ed. 2d 10 (1998) (citing Public Citizen v. Department of
Justice, 491 U.S. 440, 449, 109 S. Ct. 2558, 105 L. Ed. 2d 377 (1989)). Spokeo,
citing Akins and Public Citizen, reaffirmed this principle. Nickelodeon, 827 F.3d
at 273—74 (“[U]nlawful denial of access to information [statutorilyl subject to
disclosure” alone sufficiently constitutes injury-in--fact to confer Article III
standing.) (citing Spokeo, 136 S. Ct. at 1549—50). In Akins, a group of voters
challenged the Federal Election Committee’s refusal to require the disclosure of
information allegedly mandated by the Federal Election Campaign Act of 1971.
524 U.S. at 20—25. In Public Citizen, two advocacy organizations sought
information allegedly subject to disclosure under the Federal Advisory
Committee Act. 491 U.S. at 447. The Court found that plaintiffs had standing
to sue in both cases.
The goal of the stand-alone requirement is a substantive one: to ensure
that certain information is in fact conveyed clearly to job applicants. The means
chosen to implement that goal, however, are purely formal: the portion of the
statute at issue prescribes the physical format that the disclosure must take.
The means and goals are not perfectly correlated. Thus a noncompliant
disclosure that did not appear in a stand-alone document, but in flashing red
letters a foot high, could nevertheless be unmissable. (Or alternatively a
conspicuous disclosure in a stand-alone document could be phrased so
unclearly that it failed to warn the reader.) Defendants’ argument, boiled down,
is that a concrete injury entails, at a minimum, that the statutory violation in
fact denied the plaintiff information to which the plaintiff was entitled.
On this basis, our cases are clearly distinguishable from Akins and Public
Citizen. There, the plaintiffs alleged that they did not actually receive the
substantive informational content to which they were entitled. In contrast,
Plaintiffs concede that they received a disclosure containing the requisite
information; they object only to its form.”
Plaintiffs nevertheless contend that they have suffered an informational
injury because they have been deprived of disclosure “in the manner prescribed
by law,” i.e., as a stand-alone document. (P1. Opp. 19; emphasis added) I am
unpersuaded, because I think the argument virtually erases the distinction
between a merely procedural violation and a substantive injury-in-fact.
Plaintiffs rely primarily on the reasoning in Thomas v. FTS USA, LLC, No.
3:13-CV-825, 2016 WL 3653878 (E.D. Va. June 30, 2016). In that case,
decided shortly after Spokeo, Thomas claimed that the defendant’s disclosure
of its intent to obtain a copy of his consumer report “was not a ‘clear and
conspicuous’ disclosure and that it [did] not contain a proper authorization,” in
violation of § 1681 b(b) (2) (A). Id. at *8. The defendants challenged Thomas’s
standing, because he alleged only “technical or procedural violations of the
F’CRA.” Id. at *6. Following Spokeo’s instructions, the court “look[ed] to the
common law and to the judgment of Congress, as reflected in the FCRA, to
determine whether the violations of that statute alleged by Thomas constitute
concrete injuries” sufficient to confer standing. Id. After a thorough
examination of the statutory text and legislative history, the court concluded
that, “[i!n Congress’ legislative judgment, where the disclosure does not satisfy
the[J requirements [that it be ‘clear,’ ‘conspicuous,’ and ‘in a document
Plaintiffs’ citation to Church v. Accretive Health, Inc., 654 F. Appx 990, (11th
Cir. 2016), is similarly inapposite. (P1. Opp. 25) In Church, the court held that a
plaintiff who alleged that a hospital violated the Fair Debt Collections Practices Act
(“FDCPA”) by omitting from a debt collection letter certain disclosures required by the
FDCPA suffered an injury-in-fact. Id. at 991, 995. Church, unlike Plaintiffs here,
alleged deprivation of informational content to which she was entitled.
Plaintiffs also cite Havens Realty Corp. v. Coleman, 455 U.S. 363, 102 S. Ct.
1114, 71 L. Ed. 2d 214 (1982), a case on which Akins relies. There, a black
discrimination tester was told an apartment was not available for rent. He knew from
other sources that it was available (a white tester had been told it was). The Court
found that the black applicant had standing because he was denied informational
content to which he was entitled under the Fair Housing Act.
consisting solely of the disclosure’], the consumer has been deprived of a fully
appreciable disclosure to which he or she is entitled under the FCRA.” Id. at
The Thomas court held further that even a deviation from the statutorily
specified form of the information suffices to confer standing. Id. at *9 (citing
Charvat v. Mutual First Fed. Credit Union, 725 F.3d 819, 824 (8th Cir. 2013)
(holding that deprivation of the proper form of information required by the
Electronic Fund Transfer Act (“EFTA”) confers standing); Manuel v. Wells Fargo
Bank, Nat. Ass’n, 123 F. Supp. 3d 810, 817—18 (E.D. Va. 2015) (same, under
the FCRA); Amason v. Kangaroo Express, 2013 WL 987935, at *3_*4 (N.D. Ala.
Mar. 11, 2013) (same, under the Fair and Accurate Credit Transactions Act)).
In the Thomas court’s view, “the rights created by
§ 168 lb(b)(2) are substantive
rights, and the breach of the statute [including its stand-alone disclosure
requirement] is not a ‘bare procedural violation’ of a technical requirement.” Id.
I respectfully disagree with Thomas’s conclusion that the disclosure
requirements set forth in
§ 1681 b(b) (2) (A) (i) are substantive rather than
procedural. Relatedly, I cannot hold, post- Spokeo, that Michaels’
nonconformance to disclosure formatting specifications constitutes an
“informational injury” sufficient to confer standing.
First, although it is sometimes difficult to distinguish between
substantive and procedural rights, I consider this case clear.’ Spokeo directed
A pellucid explanation of the distinction can be found in Land rum v. Blackbird
Enterprises, LLC, No. CV H-16-0374, 2016 WL 6075446 (S.D. Tex. Oct. 3, 2016). In
that case, holding that the lack of a stand-alone disclosure as required by §
168 lb(b)(2) is not a “concrete” injury, Judge Lake explained:
Whether a violation of a statutorily created right confers standing turns
on whether the right is substantive or merely procedural. Black’s Law
Dictionary defines a “procedural right” as “[a] right that derives from legal
or administrative procedure; a right that helps in the protection or
enforcement of a substantive right. Cf. substantive right.” (10th ed. 2014)
(emphasis added). A “substantive right,” on the other hand, is “[a] right
that can be protected or enforced by law; a right of substance rather than
the courts to look to (a) whether the right violated was one traditionally
recognized at law, and (b) whether Congress had elevated it to the status of a
legally cognizable, redressable injury. In re Horizon Healthcare Services Inc.
Data Breach Litigation, No. 15-2309, slip op. at 23 (3d Cir. Jan. 20, 2017)
(citing Spokeo, 136 S. Ct. at 1549). The right to know about and effectively
consent to a search of one’s personal background may well be considered
substantive. That the disclosure at issue be contained in a separate document,
however, does not correspond to any right traditionally recognized at law. Nor
is there is any indication that Congress, in requiring it, was elevating it to a
substantive right. It is no more than a procedural means to a substantive end.
The stand-alone requirement is no less procedural than a hypothetical
form.” Id. To the extent that a violation of the procedural right has no
effect on the substantive right, the bare procedural violation does not
cause an injury of the sort that, alone, would support standing.
Confusion understandably arises when the procedure is closely
intertwined with the substantive right.
In this case the procedure, a specified manner for disseminating
information, protects the underlying right to receive that information.
The distinction is a subtle one, and an analogy may prove helpful.
Consider a hypothetical statute requiring building managers to notify
occupants in the event of a fire in a timely manner via a loudspeaker
using specific language. Now imagine that, during a fire, a manager
effectively communicates a warning to an occupant in a timely manner
but does so in person, after which the occupant escapes unharmed. The
occupant was subjected to a bare, procedural violation. If, however,
another occupant was never warned but smelled smoke and safely exited
the building, the latter occupant was subject to a substantive violation of
his right to be timely notified, albeit without independent, “tangible”
harm. In the latter case, a statutory remedy would be appropriate. In the
former case, only the manner in which the warning was to be delivered
(i.e., the procedure) failed to meet statutory guidelines. The underlying
right, the right to be timely notified in the event of a fire, was honored.
The FCRA protects a consumer’s substantive right to be notified of the
procurement and use of a consumer report for employment purposes.
However, the requirement that the notice be in the form of a stand-alone
disclosure is a procedural protection of that substantive right. Put yet
another way, a statutory right to information is substantive. A statutory
right to receive that information in a particular format is procedural.
Id. at *3_4
requirement that the disclosure be printed with double spacing or in a given
font. Indeed, if a disclosure that flunks the stand-alone test automatically
“counts as a concrete informational injury, then it is hard to imagine a
statutory violation that would not cause some form of informational injury.”
Groshek v. Great Lakes Higher Educ. Corp., No. 15-CV-143-JDP, 2016 WL
6819697, at *2 (W.D. Wis. Oct. 4, 2016). As I see it, although deviation from
such technical or procedural requirements may cause concrete harm, whether
the violation has caused such harm is situation-dependent.
Second, the authorities Thomas cites as precedent for its “informational
injury” theory predate Spokeo, and I do not think their rationales survive. The
only Court of Appeals case among them, Charvat v. Mut. First Fed. Credit Union,
725 F.3d 819 (8th Cir. 2013), involved an Electronic Fund Transfer Act
(“EFTA”) requirement that ATMs include both an “on machine” and an “on
screen” notice disclosing ATM transaction fees. Defendants’ ATMs displayed
only the “on screen” notice, to which the plaintiff apparently responded by
accepting the fee. The Eighth Circuit agreed with plaintiff, however, that the
omission of the “on machine” notice constituted informational injury sufficient
to confer standing. Charvat indeed tends to support the holding of Thomas, but
At the time of Thomas, some courts, including a Third Circuit panel, held that a
mere showing of a statutory violation is sufficient to confer standing in a case
involving statutory damages. E.g., Salvati v. Deutsche Bank Nat’l Trust Co., N.A., 575 F.
Appx 49, 56 (3d Cir. 2014) (non-precedential) (plaintiff suing under the FDCPA had
standing to sue for bare violation of the act because the act provided for statutory
damages); see also Sacchi v. Care One, LLC, No., 2015 WL 3966034 (D.N.J. June 30,
2015) (“A statute may permit recovery of statutory damages for statutory violations
even when the plaintiff had not suffered actual damages.”).
Plaintiffs contend that “the Third Circuit recently recognized Ethati Spokeo
changed nothing.” (P1. Opp. 10) (citing Nickelodeon, 827 F.3d 262) That is an
overstatement. More precisely, Nickelodeon noted that Spokeo did not alter the court’s
“prior analysis in Google,” 806 F.3d 125, regarding standing in the context of
violations of federal privacy law. Nickelodeon, 827 F.3d at 274. See also In re Horizon
Healthcare Services Inc. Data Breach Litigation, No. 15-2309, slip op. at 23—25 (3d Cir.
Jan. 20, 2017) (stating that “procedural” violation of FCRA might not confer standing
under Spokeo, but that the plaintiffs had pled a substantive privacy breach where lax
procedures had permitted the theft of laptops containing private information).
the Eighth Circuit itself has since held that its holding in Charvat was
superseded by Spokeo.’ Braitberg v. Charter Commc’ns, Inc., 836 F.3d 925,
929—30 (8th Cir. 2016).
Finally, it is of course true that a plaintiff alleging a “violation of a
procedural right granted by statute
need not allege any additional harm
beyond the one Congress has identified,” Spokeo, 136 S. Ct. at 1549 (emphasis
in original). That is essentially the principle vindicated in the recent case of In
re Horizon Healthcare Services Inc. Data Breach Litigation, No. 15-2309 (3d Cir.
Jan. 20, 2017) (where plaintiff sued under FCRA for data breach caused by
stolen laptops, standing did not require further dissemination of the stolen
information or identity theft).
Here, however, Plaintiffs do not even allege that they have suffered the
harm addressed by Congress’s promulgation of the stand-alone disclosure rule.
That harm would be an applicant’s failure to understand that he or she was
authorizing an employer background check.’ “The reason for requiring that
the disclosure be in a stand-alone document is to prevent consumers from
being distracted by other information side-by-side within the disclosure.”
¶ 29; Bercut Cmplt. ¶ 26 (quoting Federal Trade Commission
(“FTC”) opinion letter)) Where, as here, plaintiffs do not allege that they did not
Also superseded by Spokeo was another case relied on by Thomas, Manuel v.
Wells Fargo Bank, Nat. Ass’n, 123 F. Supp. 3d at 8 17—18. Manuel held that the
plaintiff demonstrated an injury-in-fact through his allegations that he was deprived of
the appropriate type of information under § 168 lb (b)(2)(A) when defendant’s
disclosure allegedly failed to satisfy the stand-alone requirement. Subsequent cases
have limited Manuel. See Nokchan v. Lyft, Inc., No. 15-CV-03008-JCS, 2016 WL
5815287, at *9 (N.D. Cal. Oct. 5, 2016) (“[I]n the wake of Spokeo, Manuel cannot be
read to stand for the broad proposition that violation of a disclosure requirement
under the FCRA, by itself, is sufficient to confer Article III standing on a plaintiff.”);
Groshek v. Great Lakes Higher Educ. Coip., No. 15-CV-143-JDP, 2016 WL 6819697, at
*2 (W.D. Wis. Oct. 4, 2016) (Manuel’s “expansive view of ‘informational injury’ is hard
to square with Spokeos reasoning.”).
Although Spokeo recognized that a “risk of real harm” can satisfy the
concreteness requirement, 136 S. Ct. at 1549, Plaintiffs allege no risk of harm deriving
from the alleged violations. They do not allege that they failed to read or understand
the disclosure. For what it is worth, all were subsequently hired by Michaels.
see the disclosure, or were distracted from it, the allegations amount to no
more than a bare procedural violation of the stand-alone requirement.’
Thus, Plaintiffs’ allegations do not confer standing on an informational
ii. Invasion of Privacy
Plaintiffs also contend that, by violating the stand-alone disclosure
requirement, Michaels invaded their privacy when procuring consumer reports,
contrary to the FCRA. (P1. Opp. 13—14) (citing 15 U.S.C.
person may not procure a consumer report.
§ 168 lb(b)(2) (“[A] a
for employment purposes.
a clear and conspicuous disclosure has been made in writing.
a document that consists solely of the disclosure.”)) To be sure, an invasion of
consumers’ privacy was among the harms that Congress identified and sought
to prevent by passing the FCRA.’ The Third Circuit recognizes that “Congress
has long provided plaintiffs with the right to seek redress for unauthorized
disclosures of information that, in Congress’s judgment, ought to remain
private.” Nickelodeon, 827 F.3d 262 at 274 (citing Google, 806 F.3d at 134 &
n.19 (3d Cir. 2015)). And it recently reaffirmed that principle in In re Horizon
Healthcare Services Inc. Data Breach Litigation, No. 15-2309, slip op. at 23—25
(3d Cir. Jan. 20, 2017). Horizon was a data breach case under the FCRA, in
which the defendant, a credit reporting agency, allegedly permitted laptop
computers containing personal information to be stolen. The district court
dismissed the action for lack of standing, because there was no allegation that
Cf Feist v. Petco Animal Supplies, Inc., No. 3:16-CV-01369-H-DHB, 2016 WL
6902549, at *2 (S.D. Cal. Nov. 22, 2016) (noting Spokeo’s affirmation of Akins and
Public Citizen and holding that the plaintiffs sufficiently alleged injury-in-fact to
survive a motion to dismiss because they plausibly alleged that they may have been
confused or distracted by the length of the consent form).
The FCRA includes in its congressional findings “a need to insure that
a respect for
consumer reporting agencies exercise their grave responsibilities with
the consumer’s right to privacy.” 15 U.S.C. § 168 1(a)(4). See also Safeco v. Burr, 551
U.S. 47, 52, 127 S. Ct. 2201, 167 L. Ed. 2d 1045 (2007) (“Congress enacted FCRA..
to protect consumer privacy.”).
the information had been further disseminated, causing plaintiffs an injury in
fact. The Third Circuit reversed, holding that plaintiffs had alleged a violation of
their substantive right to have their personal information secured against
unauthorized disclosure. Private information had in fact been taken by third
parties without plaintiffs’ consent, said the court. That harm is one
traditionally recognized at law: unauthorized release of private information.
And it was one identified by Congress in FCRA. Slip. 0 at 23. That was
enough to confer standing.
The case here, however, is different. Everyone agrees that an applicant
would have standing under the FCRA if the employer simply obtained a credit
report without telling the applicant, and without the applicant’s consent, On
the other hand, the applicant’s consent, after being informed that the employer
would be seeking such a report, vitiates any claim of a privacy violation. Either
way, the issue hinges on whether the applicant received disclosure before
consenting. The employer’s procurement of a consumer report would not be
unauthorized (and thus an invasion of privacy) unless the applicant was in fact
denied disclosure. That Michaels did not comply with the stand-alone
requirement, unless it resulted in a deprivation of disclosure, adds nothing.
Plaintiffs’ theory collapses on itself; without the addition of nondisclosure in
fact, it is indistinguishable from a bare procedural violation.
Plaintiffs’ position amounts to a contention that a violation of the
standalone requirement automatically implies that the credit report is
unauthorized. That principle, if accepted, “would raise every technical violation
of [the FCRA] to the realm of a major substantive harm. This is a leap too far,
and is directly contradicted by Spokeo, which made clear that some subset of
violations are too small to implicate—on a standing level—the interests
protected by the larger statutory framework.” Shoots v. iQor Holdings US Inc.,
No. 15-CV-563 (SRN/SER), 2016 WL 6090723, at *4 (D. Minn. Oct. 18, 2016)
(citing Spokeo, 136 S. Ct. at 1550) (holding that plaintiff alleging violation of
the FCRA’s stand-alone disclosure requirement lacked standing). The
procedural/substantive distinction would lose all meaning if the court were to
find that plaintiffs have a substantive right to be free of every procedural
Spokeo aside, the logic of Plaintiffs’ argument is not compelling. Assume
that an employer provided an applicant with a disclosure (again, not on a
stand-alone document, but in flashing red letters a foot high); the applicant
read and understood that disclosure; and the applicant signed an
authorization. In such a case, it makes little sense to conclude that the
employer’s acquisition of a consumer report was done without consent, or that
Again, Plaintiffs rely primarily on Thomas and other decisions adopting its
reasoning. In Thomas, the plaintiff alleged, inter alia, that the “[diefendants invaded
the statutory right to confidentiality of his personal information by obtaining his
consumer report without first providing the required disclosure or obtaining his
written consent, as required by § 1681b(b)(2)(A).” Thomas, 2016 WL 3653878, at *11.
The court held that because “[t]he FCRA provides that an employer may not obtain an
applicant’s consumer report, thereby invading his or her statutory right of privacy,
unless the employer first obtains the consumer’s knowing and voluntary written
consent to secure that information, as required by § 168 lb(b) (2) (A),
unauthorized disclosure of personal information constitutes an invasion of the
statutory right to privacy and a concrete injury sufficient to confer Article III standing.”
Id. at *10_il.
Unlike the plaintiff in Thomas, Plaintiffs do not allege that they did not consent
to or authorize the background checks. However, other courts have extended the
reasoning in Thomas to cases with similar facts to this case, on the theory that the
lack of a stand-alone FCRA disclosure fatally undermines the validity of a subsequent
authorization. See Moody v. Ascenda USA Inc., No. ].6-CV-60364-WPD, 2016 WL
5900216 (S.D. Fla. Oct. 5, 2016) (recognizing a split among courts but finding Thomas
persuasive and holding that plaintiffs alleging invasion of privacy for violations of §
168 lb(b)(2)(A)(i)— (ii) had standing); see also Meza v. Verizon Commc’ns, Inc., No. 1:16CV-0739 AWl MJS, 2016 WL 4721475, at *3 (E.D. Cal. Sept. 9, 2016) (finding
Thomas’s analysis persuasive and therefore following that decision). I do not find the
reasoning in those cases persuasive, see infra.
Other cases cited by Plaintiffs are distinguishable because the violations alleged
there were more substantive. Firneno v. Radner Law Gip., PLLC, No. 2:13 CV- 10135,
2016 WL 5899762, at *4 (E.D. Mich. Sept. 28, 2016) (alleging the unauthorized
viewing and retention of personal credit and other information); Perrill v. Equifax Info.
*4 (W.D. Tex. Aug. 31, 2016)
Servs., L.LC, No. A-14-CA-612-SS, 2016 WL 4572212, at
(alleging defendant provided consumer reports to state comptroller without reason to
believe the comptroller had a permissible purpose in violation of 168 lb(a)).
it invaded the applicant’s privacy. Any lack of disclosure must be alleged
directly, and factually.
Here, Plaintiffs concede that they received a disclosure. (P1. Opp. 6—7)
They do not allege that they were confused or distracted by the format, or that
they did not know what they were authorizing. Nor do they deny that in fact
they completed the online application and authorized the background check.
Instead, they argue only that “Michaels’ acquisition of Plaintiffs’ consumer
was unlawful” because “Michaels’ disclosure did not comply with
the FCRA,” and was ipso facto “an invasion of Plaintiffs’ right to privacy.” (P1.
Opp. 13—14) This is precisely the type of “bare procedural violation” that is
insufficient to confer standing. See Spokeo, 136 S. Ct. at l549.’
C. Remand or Dismissal of Michelle Bercut’s Action
Plaintiffs argue that if the Court finds Plaintiffs to lack Article III
standing, Plaintiff Michelle Bercut’s action should not be dismissed. Instead,
Plaintiffs say, it must be remanded to the Superior Court of California, County
of Sonoma, where it was commenced. (P1. Opp. 28—30) In contrast, Defendants
See also Tyus v. United States Postal Serv., No. 15-CV-1467, 2017 WL 52609, at
*6 (E.D. Wis. Jan. 4, 2017) (no privacy injury where no allegations that “plaintiffs did
not understand or were confused by the disclosure forms because they were not
limited to the information required by the [FCRA’s] stand-alone disclosure
requirement”); Kirchner v. First Advantage Background Servs. Corp., No. CV 2:14-1437
WBS EFB, 2016 WL 6766944, at *3 (E.D. Cal. Nov. 14, 2016) (inclusion of extraneous
information on § 168 lb(b)(2) notice did not result in unauthorized invasion of privacy
where plaintiff was provided notice and opportunity to consent to release of consumer
report); Nokchan v. Lyft, Inc., No. 15—cv—03008--JCS, 2016 WL 5815287, at *5_6 (N.D.
Cal. Oct. 5, 2016) (no invasion of privacy where plaintiff consented to background
check, despite defendant’s alleged failure to provide a stand-alone disclosure);
Land rum v. Blackbird Enterprises, LLC, No. CV H-16-0374, 2016 WL 6075446, at *3_4
(S.D. Tex. Oct. 3, 2016) (plaintiff lacked standing where he did not allege that “he did
not know what he was authorizing or did not, in fact, authorize the report” due to
absence of stand-alone disclosure); Groshek v. Great Lakes Higher Educ. Corp., No. 15CV-143-JDP, 2016 WL 6819697, at *2 (W.D. Wis. Oct. 4, 2016) (no privacy injury
where plaintiff did not allege that compliance with FCRA’s stand-alone requirement
would have affected plaintiffs decision to authorize employer’s acquisition of a
urge this court to dismiss the case because, they contend, remand would be
futile. (Def. Reply, Civ. No. 14-07563, ECF no. 103 at 12—14)
Having found that this Court lacks subject matter jurisdiction over
Plaintiffs’ actions, I must remand this removed case to the California state
court. See 28 U.S.C.
§ 1447(c) (“If at any time before final judgment it appears
that the district court lacks subject matter jurisdiction, the case shall be
remanded.”) (emphasis added). The Third Circuit “has never recognized the
futility exception, and the Supreme Court has, in dicta, expressed a reluctance
to recognize such discretion under the removal statute.” Bromwell v. Michigan
Mutual Ins. Co., 115 F.3d 208, 213 (3d Cir. 1997) (citing International Primate
Protection League v. Administrators of Tulane Educ. Fund, 500 U.S. 72, 87
(1991)); see also Giordano v. Wachovia Securitites, LLC, No. 06-476 JBS, 2006
WL 2177036, at *5 (D.N.J. July 31, 2006) (Simandle, J.) (“Ordering a remand is
mandatory under 28 U.S.C.
§ 1447(c) even if remanding the case to state
court may be futile.”).
The standing issue here presents itself as a matter of initial pleading, but
it implicates class action practice. A cause of action for statutory damages in a
fixed amount, based on a procedural violation committed against a number of
persons in common, seems ideally suited for class action treatment. That is not
so obviously true where each plaintiff must demonstrate that he or she was
personally injured as a result of that procedural violation. If one applicant was
confused by the noncompliant disclosure, perhaps another was not. But that is
a problem for another day.
For the foregoing reasons, I conclude that Plaintiffs have failed to allege
facts which, if true, would establish that they individually possess Article III
standing. Accordingly, all three complaints are DISMISSED WITHOUT
Michaels adds that Michelle Bercut lacks standing to pursue her claims in the
California courts. I will not anticipate the California court’s ruling.
PREJUDICE for lack of subject matter jurisdiction. In addition, Michelle
Bercut’s case will be REMANDED to the Superior Court of California, County of
An appropriate Order follows. The effect of this order is stayed until
further order of the Court. Within 30 days, the plaintiffs may, if they wish, file
amended complaints; if so, the defendant may respond by answer or motion, as
Dated: January 24, 2017
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