Ernst v. Dish Network, LLC et al
Filing
104
ORDER & OPINION re: 72 MOTION for Summary Judgment filed by Dish Network Service, LLC, Dish Network, LLC, 76 MOTION for Summary Judgment filed by Scott Ernst. For the reasons discussed above, the Summary Report is a "consumer report" for purposes of the FCRA. Accordingly, Plaintiff's motion for summary judgment is GRANTED, and Dish's motion for summary judgment is DENIED. The Clerk is directed to close the motions at docket numbers 72 and 76. The parties shall appear for a status conference on October 3, 2014, at 11:10 a.m., when they shall inform the Court how they intend to proceed. SO ORDERED. (Signed by Judge Lorna G. Schofield on 9/22/2014) (ama)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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SCOTT ERNST, individually and as a
:
representative of a putative class,
:
Plaintiff,
:
:
-against:
:
DISH NETWORK, LLC, et al.,
:
Defendants. :
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9/22/14
12 Civ. 8794 (LGS)
ORDER & OPINION
LORNA G. SCHOFIELD, District Judge:
Scott Ernst, the named Plaintiff in this putative class action, was a satellite dish
installation technician employed by non-party Superior Satellite, Inc. (“Superior”). Defendants
Dish Network L.L.C. and Dish Network Service L.L.C. (collectively “Dish”) provide satellite
television and installation services. Plaintiff alleges that Dish procured a credit report about him
from Defendant Sterling Infosystems Inc. (“Sterling”), a consumer reporting agency, without his
consent and without the proper disclosures. He further alleges that the report was used to
terminate Plaintiff without Dish providing him with a copy of the report and a summary of his
rights in violation of the Fair Credit Reporting Act (the “FCRA”), 15 U.S.C. § 1681. Plaintiff
also asserts that Sterling violated the FCRA by providing outdated information and refusing to
provide Plaintiff with its source of information upon request.
Having completed the first phase of discovery, Dish and Plaintiff now cross-move for
summary judgment on a single potentially dispositive issue -- whether the type of document
obtained by Dish concerning Plaintiff (the “Summary Report”) is a “consumer report” within the
meaning of the FCRA and therefore subject to its strictures. For the reasons discussed below,
Plaintiff’s motion is granted because the Summary Report is a consumer report as defined by the
FCRA.
BACKGROUND
The facts are taken from the parties’ Rule 56.1 statements and the exhibits submitted in
connection with the motions, and are undisputed except as otherwise noted.
When customers purchase Dish services, Dish installs a satellite dish at the customers’
residences using its own employees or its network of third-party contractors. Installation and
service call assignments are assigned through Dish’s work order management system called
“ETA Direct.”
In the fall of 2010, Dish implemented a customer safety program that required third-party
contractors to obtain a background report on any technician who entered the home of a Dish
customer. Only third-party technicians who received a rating of “low risk” as a result of the
background report were eligible to receive Dish work assignments or enter the homes of Dish
customers. Dish worked with Defendant Sterling to develop a template for the information to be
provided to third-party contractors in the reports about their technicians. Dish did not receive a
copy of the full background reports. Instead, Dish received for each technician a Summary
Report that contained only the following information: the company where the individual worked
or was seeking employment; an order number based on the request for a background report; the
date the background check request order was opened; the date the order was closed; the
individual’s first and last name; the last four digits of the individual’s social security number; the
individual’s status in ETA Direct; the type of report that the third-party contractor ordered for the
individual; and the individual’s risk rating. The risk rating was one of three designations -- “high
risk,” “low risk,” or “review.”
Dish established the criteria that triggered these labels. The items in the background
report that resulted in a “high risk” rating in the Summary Report included:
Violent crimes -- “Assault, Terroristic Threats, Stalking, Harassment”
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Property crimes -- “Identity theft, Theft of property, Forgery”
Sex crimes -- “Rape, Child pornography, Indecent liberties with a minor, Voyeurism” and
“Sex offenders – registered or those who fail to register”
Drug crimes -- “DUI – drug, Drug Trafficking/manufacture . . . Prescription fraud,
Possession of controlled substance”
Alcohol-related crimes -- “DUI – alcohol, Contribute to a minor, Drunk in public”
“Miscellaneous -- Escape, Perjury, Conspiracy, Evading police officer, Espionage,
Accessory . . . Disorderly Conduct, Breach of Peace”
“Habitual Crim[inal] Offender” -- Any three unrelated misdemeanor convictions
Vehicular violations – “DUI Misdemeanor; Fail to Stop and Render Aid/Hit and Run;
Fleeing Police Officer; Reckless Driving; Manslaughter/ Felony/Homicide Involving a
Vehicle; Racing; Speed Contest; Theft of Vehicle,” as well as having three or more “prehire” moving violations, including “Driver License Not in Possession; Failure to Use
Signal ” etc.
“Ineligible” -- “At Time of MVR [Motor Vehicle Record]: License Not Valid; License
Currently Suspended, Expired; Provisional or Restricted License; Learner’s Permit
(NOTE: These particular violations may not preclude the candidate permanently but
he/she is Ineligible at that time). Risk [rating is] High until the issue is cleared and new
MVR is rated Low Risk.” [emphasis in original]
Dish did not require its third-party contractors to terminate employees who were rated
“high risk,” but did not permit them to register in ETA Direct or act as Dish technicians.
Superior hired Plaintiff, Scott Ernst, as a technician in the fall of 2009. During the
relevant time, Superior was a third-party contractor for Dish, providing installation services to
Dish customers in six states, and 99% of Superior’s work was for Dish. Dish had no ownership
interest in Superior, and Plaintiff never received any income from Dish.
When Superior hired Plaintiff, Superior did not require employees to undergo background
checks. In April 2011, Dish informed Superior that it must obtain background reports on all
third-party contractor technicians who provided services to Dish. Dish did not request that
Superior send it a background report directly. On November 28, 2011, Superior sent a request to
Sterling for a background report on Plaintiff. The background report revealed that Plaintiff had
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prior criminal convictions that resulted in his being rated “high risk” in the Summary Report sent
to Dish. Plaintiff’s boss informed him that he would no longer be able to work on Dish
assignments, but that he could remain with Superior and perform other work such as retail sales.
Plaintiff did not wish to perform retail sales and left Superior on December 9, 2011.
Dish never received the full background report concerning Plaintiff. The full report that
Superior received was seven pages long and contained detailed information about Plaintiff
including his current and previous addresses, a detailed criminal records search, a detailed motor
vehicle report, a sexual offender database search, a social security trace and a rating of “high
risk.”
LEGAL STANDARD
The standard for summary judgment is well established. Summary judgment is
appropriate where the record before the Court establishes that there is no “genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a). A genuine dispute as to a material fact exists “if the evidence is such that a reasonable jury
could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248 (1986). The Court must construe the evidence in the light most favorable to the nonmoving
party and must draw all reasonable inferences in the nonmoving party’s favor. See id. at 255.
DISCUSSION
The issue on this motion -- whether the Summary Report Dish received is a “consumer
report” under the FCRA -- is a question of statutory interpretation and therefore a question of law.
The material facts, recounted above, are not in dispute. Applying the language of the statute, the
Summary Report is a consumer report under the FCRA because it communicated information
bearing on Plaintiff’s character, general reputation, or mode of living, and the information was
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collected and expected to be used for “employment purposes.” Consequently, Plaintiff is entitled
to summary judgment on this issue.
I.
The Text of the Statute
When interpreting a statute, a court “must begin with the language employed by Congress
and the assumption that the ordinary meaning of that language accurately expresses the legislative
purpose.” United States v. DiCristina, 726 F.3d 92, 96 (2d Cir. 2013) (quoting United States v.
Kozeny, 543 F.3d 166, 171 (2d Cir. 2008)). “Where the statute’s language is plain, the sole
function of the courts is to enforce it according to its terms.” Id. (internal quotation marks
omitted). “Statutory enactments should, moreover, be read so as to give effect, if possible, to
every clause and word of a statute.” Id. (quoting Duncan v. Walker, 533 U.S. 167, 174 (2001)).
If the meaning of a statute is ambiguous, the court may resort to legislative history to determine
the statute’s meaning. See Puello v. Bureau of Citizenship & Immigration Servs., 511 F.3d 324,
327 (2d Cir. 2007). But in so doing, a court must “construct an interpretation that comports with
[the statute’s] primary purpose and does not lead to anomalous or unreasonable results.” Id.
(quoting Connecticut ex rel. Blumenthal v. United States Dep’t of the Interior, 228 F.3d 82, 89
(2d Cir. 2000)).
The FCRA protects consumers with regard to the collection and dissemination of personal
information collected by consumer reporting agencies. See generally 15 U.S.C. § 1681. The
statute permits a consumer reporting agency to furnish a consumer report under limited
enumerated circumstances, including “to a person which it has reason to believe . . . intends to
use the information for employment purposes.” Id. at § 1681b(a)(3)(B). The statute prescribes
conditions for furnishing and using a consumer report for employment purposes. Id. at §
1681b(b). Separate conditions apply to the consumer reporting agency that generates the report, a
person who “procure[s]” or “cause[s] a consumer report to be procured,” and a person who takes
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adverse employment action based on the report. Id. The Complaint asserts three claims against
Dish arising from its alleged failure to satisfy the conditions applicable to persons in the latter
two categories.
Whether the Summary Report is a “consumer report” is critical because the answer
determines whether Dish (or anyone) owed Plaintiff duties under the FCRA concerning the
Summary Report. In the definition section, the FCRA defines “consumer report,” in relevant
part, as:
[i] any written . . . communication of any information by a consumer reporting
agency [ii] bearing on a consumer’s credit worthiness, . . . character, general
reputation, personal characteristics, or mode of living [iii] which is used or expected
to be used or collected in whole or in part for the purpose of serving as a factor in
establishing the consumer’s eligibility for -- (A) credit or insurance . . . [or] (B)
employment purposes . . . .
Id. at § 1681a(d)(1). The definition can be divided into “three fundamental elements.” Yang v.
Gov’t Employees Ins. Co., 146 F. 3d 1320, 1323 (11th Cir. 1998). The first element is the
“communication” element, which requires that a consumer reporting agency communicate
information. Id. The second element is the “information” element, which requires that the
information communicated bear on the consumer’s “credit worthiness, character, general
reputation, personal characteristics, or mode of living.” Id. The third element is the “purpose
clause.” Id. The “purpose clause” requires that the information communicated must be “used or
expected to be used or collected in whole or in part” for one of the enumerated purposes, which in
this case is for “employment purposes.” See id.
The parties do not dispute the communication element, or that Sterling is a “consumer
reporting agency,” see 15 U.S.C. § 1681a(f) (defining “consumer reporting agency”), or that
Plaintiff is a “consumer,” see id. at § 1681a(c) (defining “consumer”). In this case, only the last
two elements -- the information and purpose elements of the consumer report definition -- are at
issue.
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II.
The Information Element
The Summary Report conveys information bearing on Plaintiff’s character, general
reputation, personal characteristics, or mode of living, and accordingly meets the information
element of the FCRA.
The FCRA’s information element requires that the information in the report bear “on a
consumer’s credit worthiness, credit standing, credit capacity, character, general reputation,
personal characteristics, or mode of living.” Id. at § 1681a(d)(1). The information element “does
not seem very demanding,” as “almost any information about consumers arguably bears on their
personal characteristics or mode of living.” Trans Union Corp. v. F.T.C., 245 F.3d 809, 813
(D.C. Cir. 2001) (internal quotation marks omitted); see also Hoke v. Retail Credit Corp., 521
F.2d 1079, 1081 (4th Cir. 1975) (a consumer report “is virtually any information communicated
by a consumer reporting agency” for any one of the purposes enumerated).
The Summary Report, based on the background report issued by Sterling to Superior,
labeled Plaintiff as “high risk.” The “high risk” label is facially disparaging and bears on
Plaintiff's character and reputation. “High risk” is also a shorthand term, defined and understood
by both Dish and Sterling, to convey information about prior criminal activity as well as driving
information. Dish provided Sterling with criteria that triggered the “high risk” label, including
assault, rape, theft, child pornography and drug trafficking. These and almost all of the other
criteria that would result in a “high risk” rating bear on Plaintiff’s “character, general reputation,
[and] personal characteristics.” 15 U.S.C. § 1681a(d)(1). The only exceptions relate to not
having a fully valid driver’s license, which bear on Plaintiff’s “mode of living.” See, e.g.,
Klonsky v. RLI Ins. Co., No. 11 Civ. 250, 2012 WL 1144031, at *3 (D. Vt. April 4, 2012)
(information beyond basic identifying information conveys information about personal
characteristics and mode of living); see also Holmes v. Telecheck Int’l, Inc., 556 F. Supp. 2d 819,
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832 (M.D. Tenn. 2008) (finding that code-based system of classifying check writers for
merchants from “Code 0” to “Code 4” -- where each code indicates whether or not check should
be accepted based on writer’s risk factor-- conveys information under FCRA). Consequently, the
Summary Report conveys information bearing on Plaintiff’s character, general reputation,
personal characteristics, or mode of living.
Dish, citing Manso v. Santamarina and Associates, argues that the report cannot be said to
bear on Plaintiff’s character since the lack of a valid driver’s license could have caused the “high
risk” label. No. 04 Civ. 10276, 2005 WL 975854, *7 (S.D.N.Y. Apr. 26, 2005) (“Neither
speeding nor driving without a seatbelt is an offense that would commonly be described as
reflecting upon one’s moral character or reputation.”). This argument fails. First, as noted in
Klonsky, whether or not an individual has a valid driver’s license might not bear on his character,
but it might describe his “mode of living,” which is broad and undefined. 2012 WL 1144031 at
*3 (disagreeing with holding in Manso); see also Hoke, 521 F.2d at 1081 (finding character and
mode of living clause “virtually limitless”).
Second, all or virtually all of the remaining information that would trigger a “high risk”
rating undoubtedly bears on Plaintiff’s character, such as a drug trafficking or a drunk driving
arrest. The report in this case, unlike the one in Manso, was not limited to identifying
information and driving information. A “high risk” rating on the Summary Report in effect says
that, except in the narrow circumstance that Plaintiff does not have a fully valid driver’s license,
he has done something highly improper that impugns his moral character.
The “high risk” label in this case bears on Plaintiff’s character and reputation, as well as
his mode of living. The report therefore satisfies the “information element” of a consumer report
under the FCRA.
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III.
The “Purpose Clause”
The third element of the definition of consumer report requires that the report was used,
expected to be used, or collected for, among other things, employment purposes. It was.
As an initial matter, the text of the “purpose clause” in § 1681a(d)(1) is in the
passive voice. It requires information “which is used or expected to be used or collected
in whole or in part for the purpose of serving as a factor in establishing the consumer’s
eligibility for-- (A) credit or insurance . . . [or] (B) employment purposes . . . .” The actor
who is using, expecting to use or collecting the report is neither limited nor specified.
This means that if anyone uses, expects to use or collects the information for employment
purposes, the statutory definition of “consumer report” is satisfied. “Under the plain
language of the FCRA, a ‘communication of information’ is a ‘consumer report’ if any
one of the three components [collection, expectation of use, or actual use for employment
purposes] in the Purpose clause is met.” Yang, 146 F.3d at 1325 (emphasis in original).
Here the information was collected by Sterling, was expected to be used and actually was
used, by both Dish and Superior. The only remaining question is whether Plaintiff's
information was collected and used for “employment purposes.”
The FCRA defines “employment purposes” in the context of a consumer report as “a
report used for the purposes of evaluating a consumer for employment, promotion, reassignment,
or retention as an employee.” 15 U.S.C. § 1681a(h). Here, the information in the Summary
Report was collected, expected to be used and actually used to evaluate Plaintiff for reassignment
or retention as an employee. Sterling, the consumer reporting agency, collected the information
in the Summary Report at Superior’s request. Superior was required to obtain the information as
part of Dish’s consumer program, and Dish required a Summary Report to verify compliance
with the program. Superior and Dish would have allowed Plaintiff to work in Dish customer
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homes if Sterling’s report on Plaintiff had labeled him “low risk.” The report labeled him “high
risk,” so Plaintiff was prevented from working in Dish homes. Because Plaintiff was not allowed
to work in Dish homes, he ultimately was offered the option of being reassigned to sales or
leaving his job. Thus, both Superior and Dish expected the Summary Report to be used for
employment purposes, and it actually was used for employment purposes, ultimately leading to
Plaintiff’s resignation.
Dish argues that the report must be related to a consumer transaction and must be obtained
for a consumer purpose. The statutory definition of “consumer report” contains no such
requirement. Although a “consumer report” must contain certain information about a “consumer”
and be collected or used for specified purposes relating to a “consumer,” the term is defined
broadly as “an individual” and thus, on its face, encompasses any natural person. See 15 U.S.C. §
1681a(c).
Dish makes a series of arguments that essentially reduce to one -- that the Summary
Report is not a consumer report under the FCRA because Dish itself did not use the Summary
Report for its employment purposes, but rather used the report for its customers’ safety in dealing
with its sub-contractor’s employee. Accordingly, Dish denies that it had an employment purpose
in obtaining the Summary Report and denies that it had an employment relationship with
Plaintiff. These arguments are unavailing. Contrary to Dish’s arguments, the statutory definition
of “consumer report” does not require use for an “employment purpose” by Dish. As discussed
above, the statute requires that the information be collected or used for “employment purposes”
without specifying who is using or collecting the information. Superior used the information in
the Summary Report for an “employment purpose,” namely for “reassignment or retention as an
employee.” 15 U.S.C. § 1681a(h). Consequently, the Summary Report meets the definition of a
“consumer report.”
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Dish reads the definition of “consumer report” to mean that information is subject to
FCRA protections only when the information is being used for employment purposes, and not
after it has been collected or used for employment purposes. In other words, Dish argues that a
document’s status as a “consumer report” is fluid depending on its use, who is using it and for
what purpose. The better interpretation is that the status of a consumer report is static: if a
writing acquires the status of a “consumer report,” based on its content and intended use, it is
thereafter subject to the FCRA. While the literal words of the statute may be susceptible to both
interpretations (a writing “which is used or expected to be used or collected in whole or in part
for the purpose of serving as a factor in establishing the consumer’s eligibility for . . .
employment purposes”), Dish’s reading must be rejected because it would lead to an absurd result
that is inconsistent with the primary goal of the statute. See United States v. Dauray, 215 F.3d
257, 264 (2d Cir. 2000) (“A statute should be interpreted in a way that avoids absurd results.”).
The Fifth Circuit rejected the interpretation Dish puts forward because the court “simply
c[ould ]not conclude that Congress intended such an illogical result.” St. Paul Guardian Ins. Co.
v. Johnson, 884 F.2d 881, 885 (1989). In St. Paul Guardian Insurance Co. v. Johnson, the court
held that an insurance company that obtained a credit report for a non-FCRA purpose (to
investigate an insurance claim) was still required to comply with the FCRA in handling the
report. Id. The court reasoned that because the report’s information originally had been collected
for a “purpose” under the FCRA, the report remained a “consumer report” as defined by the
FCRA, regardless of how the insurance company ultimately used the report. Id. The court
observed that an interpretation of “consumer reports” that turned on actual use would lead to an
“illogical result” and defeat the purpose of the statute: “If used for non-FCRA purposes a credit
report would be releasable [to a user] because it would not fall with[in] the FCRA definition of a
consumer report. If used for FCRA purposes, a credit report would likewise be releasable
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because it would meet the definition of consumer report.” Id. This interpretation was contrary to
the statute’s primary goal of “protect[ing] an individual from inaccurate or arbitrary information .
. . in a consumer report.” Id. at 883 (internal quotation marks omitted).
Even if Dish “did not ultimately use [Plaintiff’s] . . . report for one of the FCRA’s
enumerated purposes, the information in the report nevertheless was ‘collected in whole or in
part’ by a credit reporting agency for FCRA enumerated purposes. Thus, under a plain reading §
1681a(d), the report obtained by [Dish] is a ‘consumer report’ to which the provisions of the
FCRA apply.” Id. at 884; accord Bakker v. McKinnon, 152 F.3d 1007, 1012 (8th Cir. 1998)
(“Under the FCRA whether a credit report is a consumer report does not depend solely upon the
ultimate use to which the information contained therein is put, but instead, it is governed by the
purpose for which the information was originally collected in whole or in part by the consumer
reporting agency.”); Comeaux v. Brown & Williamson Tobacco Co., 915 F.2d 1264, 1274 (9th
Cir. 1990) (“If a consumer reporting agency provides a report based on a reasonable expectation
that the report will be put to a use permissible under the FCRA, then that report is a ‘consumer
report’ under the FCRA and the ultimate use to which the report is actually put is irrelevant to the
question of whether the FCRA governs the report’s use and the user’s conduct.”).
Dish cites one district court case holding that the FCRA applies only to an employee of
the employer that received the report. See Lamson v. EMS Energy Mktg. Serv., Inc., 868 F. Supp.
2d 804, 816 (E.D. Wis. 2012) (holding that an independent contractor could not sue under the
FCRA). The underlying logic of Lamson, however, is at odds with the disjunctive nature of the
statute and would lead to the same illogical results that the Fifth Circuit noted in St. Paul
Guardian Insurance Co. 884 F.2d at 885. As the Fourth Circuit has held, the definition of
“employment purpose” does not restrict the FCRA to an employee of the employer that received
the report. See Hoke, 521 F.2d at 1081-82 (finding employment purpose where credit report was
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obtained as part of doctor’s licensing procedure) (cited by Advanced Conservation Sys., Inc. v.
Long Island Lighting Co., 113 F.3d 1229, at *2 (2d Cir. 1997) (unpublished table opinion)
(finding employment purpose where public utility obtained and relied on credit report of plaintiff
to determine that his company should not be included in a directory of reliable service providers
whom utility customers might hire)).
For these reasons, the Summary Report satisfies the purpose element of the definition of
“consumer report.”
CONCLUSION
For the reasons discussed above, the Summary Report is a “consumer report” for purposes
of the FCRA. Accordingly, Plaintiff’s motion for summary judgment is GRANTED, and Dish’s
motion for summary judgment is DENIED. The Clerk is directed to close the motions at docket
numbers 72 and 76.
The parties shall appear for a status conference on October 3, 2014, at 11:10 a.m., when
they shall inform the Court how they intend to proceed.
SO ORDERED.
Dated: September 22, 2014
New York, New York
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