Schartel v. One Source Technology, LLC

Filing 38

Memorandum of Opinion and Order: Defendants' Motion to Dismiss the Complaint (Doc. 34 ) is DENIED. This matter is REMANDED to state court. Judge Patricia A. Gaughan on 10/14/16. (LC,S)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION

Kevin Schartel, et al.,
Plaintiff,
Vs.
One Source Technology, LLC,
Defendant.

)
)
)
)
)
)
)
)
)

CASE NO. 1:15 CV 1434
JUDGE PATRICIA A. GAUGHAN

Memorandum of Opinion and Order

INTRODUCTION
This matter is before the Court upon Defendants’ Motion to Dismiss the Complaint (Doc.
34). This case arises under the Fair Credit Reporting Act (“FCRA”). For the reasons that
follow, the motion is DENIED. The matter, however, is REMANDED to state court.
FACTS
Plaintiff, Kevin Schartel, brings this lawsuit on behalf of himself and other similarly
situated individuals, against defendant One Source Technology, LLC, alleging a violation of the
FCRA. Defendant provides background checks to employers, and employers use those reports to
make hiring decisions.
1

In 2014, plaintiff applied to work at Tri-M Group, LLC (“Tri-M”). In connection with
the potential employment, defendant performed a background check for Tri-M. In addition to
plaintiff’s criminal convictions, the report contained information about criminal charges that
were dismissed more than seven years prior to the date defendant ran the report. The report also
contains a number of properly reported convictions.1
According to the complaint, defendant maintains a policy of providing stale information
in violation of the FCRA. Plaintiff alleges that defendant provided the report to Tri-M within
five minutes of receiving Tri-M’s request. Plaintiff’s employment with Tri-M was not
successful. Thereafter, plaintiff filed this one-count class action complaint. Count one is a claim
for violation of 15 U.S.C. § 1681c(a), which prohibits the reporting of “outdated” information.
The Court previously stayed this matter pending the Supreme Court’s decision in Spokeo,
Inc. v. Robbins, 136 S.Ct. 1540 (2016). That case has now been decided and the Court lifted the
stay. Defendant moves to dismiss the Complaint for lack of jurisdiction and plaintiff opposes the
motion.
STANDARD OF REVIEW
“Whether subject matter jurisdiction exists is a threshold determination the Court must
make before proceeding further.” Ggnsc Stanford, LLC v. Gilliam, 2016 WL 4700135 (E.D. Ky.
Sept. 7, 2016) (citing United Liberty Life Ins. Co. v. Ryan, 985 F.2d 1320, 1325 (6th Cir. 1993)).
“A Rule 12(b)(1) motion can either attack the claim of jurisdiction on its face, in which case all

1

Defendant argues that the Court can consider the report on a
motion to dismiss because it is a document referenced and relied
upon in the complaint. Plaintiff does not dispute that the Court
may consider its contents.
2

allegations of the plaintiff must be considered as true, or it can attack the factual basis for
jurisdiction, in which case the trial court must weigh the evidence and the plaintiff bears the
burden of proving that jurisdiction exists.” Hutchins v. Laferte, 2016 WL 4534029 (W.D. Ky.
Aug. 25, 2016) (citing DLX, Inc. v. Kentucky, 381 F.3d 511, 516 (6th Cir. 2004)). Here,
defendant asserts a facial attack and, therefore, the Court will accept the truth of the allegations
set forth in the complaint.
ANALYSIS
Defendant argues that this case must be dismissed for lack of Article III standing.
According to defendant, the complaint contains no allegations of “concrete harm.” Defendant
claims that plaintiff does not allege that any of the information reported by defendant was
inaccurate. Nor does plaintiff expressly allege that any harm befell him as a result of
defendant’s release of this “outdated” information. Although plaintiff alleges that his
employment with Tri-M was “not successful,” he does not allege that the failure to secure
employment was in any way caused by the outdated information. In response, defendant argues
that he need not allege actual damages in order to satisfy Article III’s standing requirements.
Rather, the requirements are satisfied provided he suffered harm that is both “concrete” and
“particularized.” Plaintiff claims that the disclosure of outdated information caused him damage
in the form of privacy invasion. Because it has long been settled that privacy invasions satisfy
Article III’s requirements, the complaint cannot be dismissed.
As an initial matter, the Court notes that Spokeo did not change the requirements for
Article III standing. Thus, in order to establish standing, a plaintiff must have: (1) suffered an
injury in fact (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is

3

likely to be redressed by a favorable judicial decision.” Spokeo, 136 S.Ct. at 1547 (citing Lujan
v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992)). Here, the parties do not dispute that
elements two and three are satisfied. Rather, the parties dispute only whether plaintiff suffered
an injury in fact.
In order to satisfy the “injury in fact” requirement necessary to establish standing to sue,
a plaintiff must allege facts sufficient to show that he suffered “an invasion of a legally protected
interest that is concrete and particularized and actual or imminent, not conjectural or
hypothetical.” Spokeo, 136 S.Ct. at 1548 (citations and quotations omitted). There is no dispute
that plaintiff’s injury in this case satisfies the particularity requirement. To satisfy the “concrete”
element, an injury must be “real” and “not abstract.” And, while “tangible injuries” plainly
satisfy this requirement, “intangible injuries may also nevertheless be concrete.” Spokeo, 136
S.Ct. at 1549; See also, Thomas v. FTW USA, LLC, 2016 WL 3653878 at * 5 (E.D. Va. June 30,
2016). And, as noted in Spokeo, Congress cannot create Article III standing simply by the
enactment of a statute. To that end, “a bare procedural violation, divorced from any concrete
harm” will not satisfy constitutional standing. ” Spokeo, 136 S.Ct. at 1549. At the same time,
however, in cases where “harms may be difficult to prove or measure,” the “violation of a
procedural right granted by statute can be sufficient...[and] a plaintiff in such a case need not
allege any additional harm beyond the one Congress has identified.” Id.
In evaluating whether an intangible injury satisfies the ‘concreteness’ requirement, the
Spokeo Court offered two important considerations: (1) whether an alleged intangible
harm has a close relationship to a harm that has traditionally been regarded as providing a
basis for a lawsuit in English or American courts; and (2) the judgment of Congress,
which has the power to define injuries and articulate chains of causation that will give
rise to a case or controversy where none existed before.
Thomas, at * 5.
4

Upon review, the Court finds that defendant’s motion must be granted because plaintiff
alleged neither tangible nor intangible harm. Defendant argues that plaintiff’s allegation that he
was “not successful” in obtaining employment with Tri-M is not sufficient to establish standing.
According to defendant, notably absent from the complaint is any allegation that the disclosure
of the stale arrest records had any bearing on the success of his application. In response, plaintiff
does not expressly claim that this allegation is sufficient to allege actual damages. Regardless,
the Court finds that it does not. Although plaintiff alleges that he was not hired, he wholly fails
to allege that this resulted in any way from the wrongful disclosure of information.
Plaintiff argues extensively in his brief in opposition that he need not allege actual
damages in order to have Article III standing. Rather, plaintiff claims that the disclosure of stale
arrest records caused him to suffer intangible harm in the form of an invasion of his privacy. As
defendant points out, however, plaintiff alleges no such thing. In fact, the complaint is
completely devoid of any allegation regarding his privacy rights. Thus, assuming arguendo that
such “intangible” harm would be sufficient to satisfy Article III, plaintiff does not allege that
such harm befell him. An injury to his privacy rights simply cannot be implied in this case.
Here, plaintiff was convicted of a number of felonies, which defendant properly disclosed. The
Court will not “read into” the complaint an allegation that his privacy rights were somehow
harmed by the disclosure of dismissed charges related to those felonies. Accordingly, the Court
finds that plaintiff lacks standing because he fails to allege an injury in fact.
Defendant asks that the Court dismiss, rather than remand, this matter. According to
plaintiff, the Class Action Fairness Act warrants dismissal because Congress intended that large
class actions be heard in federal court. The Court rejects the argument. The mandatory language

5

of 28 U.S.C. § 1447(c) requires remand in the event the Court determines that it lacks subject
matter jurisdiction. Defendant points to no law in support of its position that an exception exists
where jurisdiction is premised on CAFA. To the contrary, at least one court has found that
remand is required where jurisdiction is premised on CAFA, but plaintiff lacks Article III
standing. Patton v. Experion Data Corp., 2016 WL 2626801 (C.D.Cal. May 6, 2016). See also
Polo v. Innoventions International, - F.3d.- (9th Cir. Aug. 18, 2016) (“The rule that a removed
case in which the plaintiff lacks Article III standing must be remanded to state court under §
1447(c) applies as well to a case removed pursuant to CAFA as to any other type of removed
case.”)2
In a footnote, defendant argues that dismissal is appropriate because remand would be
futile. According to defendant, Ohio adopted the same standing elements as those adopted by
the Supreme Court. As such, the Ohio state court would find that plaintiff lacks standing to
pursue his claims. Upon review, the Court rejects defendant’s argument that futility requires
remand. Again, 28 U.S.C. § 1447(c) is mandatory on its face and contains no exception for
futility. See, Coyne v. American Tobacco Co., 183 F.3d 488, 496 (6th Cir. 1999).
CONCLUSION
For the foregoing reasons, Defendants’ Motion to Dismiss the Complaint (Doc. 34) is
DENIED. This matter is REMANDED to state court.

2

The Court also notes that defendant did not remove this matter
based on CAFA.
6

IT IS SO ORDERED.

/s/ Patricia A. Gaughan
PATRICIA A. GAUGHAN
United States District Judge
Dated: 10/14/16

7