Benson v. Wells Fargo Bank, N.A.
ORDER granting in part and denying in part 5 Motion to Dismiss; granting in part and denying in part 15 Motion to Compel; granting in part and denying in part 20 Motion to Amend. Signed by Chief Judge Jeffrey L. Viken on 6/26/17. (SB)
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
CHARLES SCOTT BENSON,
WELLS FARGO BANK, N.A.,
This is an action plaintiff Charles Scott Benson brought against
defendant Wells Fargo Bank, N.A. (Docket 1). Defendant filed a motion to
dismiss counts nine and ten of plaintiff’s first amended complaint. (Docket 5).
Plaintiff filed a motion for leave to file a second amended complaint.
(Docket 20). Plaintiff also filed a motion to compel defendant’s payment of the
fees associated with defendant’s deposition of plaintiff’s expert witness.
FACTUAL AND PROCEDURAL BACKGROUND
Plaintiff applied for a job with defendant’s home mortgage division on
September 25, 2007. (Docket 1-1 at p. 3). Recruiters affiliated with defendant
had been in contact with plaintiff about the job since October 2006. Id. at
pp. 1-2. Plaintiff indicated to the recruiters he had a misdemeanor theft
conviction from several years earlier. Id. at pp. 2-4. In his job application
plaintiff disclosed his conviction. Id. at pp. 3-4. The recruiters told plaintiff his
conviction would not affect his employment. Id. Defendant completed a
background check of plaintiff, offered him a job and he started work in
November 2007. Id.
In January 2011, defendant screened the backgrounds of many of its
employees. Id. at p. 5. Defendant states it conducted the screenings to comply
with recently-enacted federal law. (Docket 6 at p. 2). The screening of plaintiff
revealed the conviction he disclosed in his original job application. (Docket 1-1
at p. 5). Defendant believed the Financial Institutions Reform, Recovery and
Enforcement Act (“FIRRE”), 12 U.S.C. § 1829(a), required terminating plaintiff.
(Docket 1-1 at p. 5). FIRRE prohibits a person convicted of a crime involving
dishonesty from working in plaintiff’s position at a federally insured institution.
12 U.S.C. § 1829(a); (Docket 1-1 at p. 5). Defendant terminated plaintiff’s
employment on February 15, 2011. (Docket 1-1 at p. 5).
Plaintiff filed his original complaint against defendant in South Dakota
state court on March 18, 2011. (Docket 14-3). The complaint revolved around
defendant firing plaintiff and included nine counts: breach of contract,
promissory estoppel, fraudulent inducement, fraudulent concealment, fraud
and deceit, negligent misrepresentation, intentional infliction of emotional
distress, negligent infliction of emotional distress and punitive damages. Id. at
pp. 5-11. On June 6, 2016, the state court granted plaintiff leave to file an
amended complaint, and he filed his first amended complaint on June 13,
2016. (Docket 1-1).
Plaintiff’s first amended complaint introduces two new counts. Id. at
pp. 12-32. At count nine of the first amended complaint plaintiff sets forth a
claim based on violations of the Fair Credit Reporting Act (“FCRA”), 15 U.S.C.
§ 1681. (Docket 1-1 at pp. 12-16). Plaintiff claims defendant “failed to comply
with the procedural protections and requirements of the FCRA when it used
the consumer reports of [p]laintiff and hundreds of other employees to make
adverse employment decisions resulting in their termination.” Id. at p. 12.
59. Years after hiring Plaintiff, Defendant ordered a background
check, which is a consumer report, from First Advantage
Background Services Corp. ("First Advantage"), which is a
consumer reporting agency . . . .
66. . . . Defendant failed to provide a clear and conspicuous written
disclosure in a document that consists solely of that disclosure to
Plaintiff, that a consumer report may be obtained for employment
67. Defendant further failed to obtain a valid authorization to
procure a consumer report for employment purposes from Plaintiff.
68. Defendant further failed to provide Plaintiff with the required
notice and a copy of the consumer report upon which it based its
decision to take adverse employment action against Plaintiff,
within the timeframes required under the FCRA.
69. Defendant further failed to provide Plaintiff with a written
summary of his FCRA rights prior to taking adverse employment
action against him.
70. Defendant terminated Plaintiff without providing any advance
notice of such adverse action.
Id. at pp. 13-14. Paragraphs 66 and 67 delineate violations of the FCRA’s
disclosure and authorization requirements in 15 U.S.C. §§ 1681b(b)(2)(A)(i)-(ii).
This section provides that when a consumer report is procured for employment
purposes, the consumer must first authorize the procurement in writing and
receive “a clear and conspicuous disclosure . . . in a document that consists
solely of the disclosure” before the report is obtained. Id. Paragraphs 68 and
69 of plaintiff’s first amended complaint assert violations of the FCRA’s
“[c]onditions on use [of consumer reports] for adverse actions . . . .” 15 U.S.C.
§ 1681b(b)(3) (bold omitted). These conditions require the consumer to receive
a copy of the credit report and a description of the consumer’s rights before
“any adverse action based in whole or in part on the report” may occur.
15 U.S.C. §§ 1681b(b)(3)(A)(i)-(ii).
The first amended complaint’s tenth count sets forth a claim based on
violations of the Racketeer Influenced Corrupt Organizations Act (“RICO”),
18 U.S.C. §§ 1962, 1964. (Docket 1-1 at pp. 16-32). Plaintiff alleges defendant
hired him and numerous other people with criminal records disqualifying them
from their jobs, and defendant deliberately failed to obtain consent from the
Federal Deposit Insurance Corporation (“FDIC”) as federal law required. Id. at
pp. 17-18; see 18 U.S.C. § 1829. Plaintiff asserts defendant’s termination of
his employment was part of a “Background Checks Project” (“Project”)
defendant instituted to terminate “employees en masse . . . under the auspices
of compliance with federal regulation . . . .” (Docket 1-1 at p. 21). During this
Project, plaintiff claims defendant “explicitly instructed the operative group for
the Background Checks Project not to share [the project’s] information, or the
fact that the Project was actually a ‘business decision,’ with lower level
management and rank-and-file employees.” Id. at pp. 21-22 (emphasis in
Plaintiff states the Project constituted a pattern of racketeering activity
affecting interstate commerce carried out by a “higher-level group” of
defendant’s employees. Id. at p. 24. According to plaintiff, the purpose of the
Project was “terminating employees in mass, reducing payroll, eliminating
earned and accrued employee bonuses and benefits, and depressing the
relevant job-market, under the fraudulent pretext of compliance with federal
regulation.” Id. Plaintiff alleges defendant made “affirmative fraudulent
representations” regarding federal law requiring termination of employees and
“deliberately conceal[ed] and omit[ted] material facts to [p]laintiff” so it could
advance its scheme. Id. at p. 28.
“[S]tanding is an essential and unchanging part of the case-orcontroversy requirement of Article III [of the United States Constitution.]”
Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992). “Standing . . . is a
jurisdictional requirement, and thus ‘can be raised by the court sua sponte at
any time during the litigation.’ ” Pucket v. Hot Springs Sch. Dist. No. 23-2, 526
F.3d 1151, 1156-57 (8th Cir. 2008) (quoting Delorme v. United States, 354
F.3d 810, 815 (8th Cir. 2004)). “The [standing] doctrine limits the category of
litigants empowered to maintain a lawsuit in federal court to seek redress for a
legal wrong. In this way, the law of Article III standing . . . serves to prevent
the judicial process from being used to usurp the powers of the political
branches, and confines the federal courts to a properly judicial role . . . .”
Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016) (internal citations
omitted) (internal quotation marks omitted).
“The ‘irreducible constitutional minimum’ of standing consists of three
elements.” Id. (quoting Lujan, 504 U.S. at 560). “The 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 likely to be redressed by a favorable judicial
decision.” Id. (citations omitted). “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 (1975)). “In assessing a
plaintiff’s Article III standing, we must ‘assume that on the merits the plaintiffs
would be successful in their claims.’ ” Am. Farm Bureau Fed’n v. U.S. Envtl.
Prot. Agency, 836 F.3d 963, 968 (8th Cir. 2016) (quoting Muir v. Navy Fed.
Credit Union, 529 F.3d 1100, 1106 (D.C. Cir. 2008)).
The second and third elements of standing tend to be straightforward,
but the injury element is harder to pin down. The United States Supreme
Court recently ruled on the injury element in Spokeo. Spokeo clarified the
requirements that the injury suffered is “concrete and particularized . . . .”
Spokeo, 136 S. Ct. at 1548 (citing Lujan, 504 U.S. at 560) (internal quotation
marks omitted). A particularized injury “affect[s] the plaintiff in a personal and
individual way[,]” as opposed to an injury affecting an undifferentiated
collection of people. Id. (citations omitted). A concrete injury is one that
“actually exist[s].” Id. It can be a tangible injury, such as physical pain, or it
can be intangible, like curtailing someone’s right to free speech. Id. at 1549
(citing Pleasant Grove City v. Summum, 555 U.S. 460 (2009)). Spokeo
acknowledged Congress can create statutes providing people rights, which, if
violated, may result in an Article III injury. Id.; see, e.g., Fed. Election Comm’n
v. Akins, 524 U.S. 11, 20-25 (1998) (holding that certain voters’ “inability to
obtain information” Congress chose to make accessible to them yielded an
Article III injury). However, Spokeo held “Article III standing requires a
concrete injury even in the context of a statutory violation. . . . [A plaintiff]
could not, for example, allege a bare procedural violation, divorced from any
concrete harm, and satisfy the injury-in-fact requirement of Article III.”
Spokeo, 136 S. Ct. at 1549.
Based on the parties’ briefing and the court’s view of this case, the court
must determine standing in relation to plaintiff’s FCRA claims only. See
Dockets 28, 29 & 32. For the FCRA allegations, the core issue is whether
plaintiff sets forth violations of substantive rights sufficient to constitute a
concrete injury or whether he asserts “a bare procedural violation, divorced
from any concrete harm . . . .” Spokeo, 136 S. Ct. at 1549
The court notes this precise issue divides many United States District
Courts. Compare Thomas v. FTS USA, LLC, 193 F. Supp. 3d 623, 629-37 (E.D.
Va. 2016); Banks v. Cent. Refrigerated Servs., Inc., No. 2:16-CV-356, 2017 WL
1683056, at *3 (D. Utah May 2, 2017), with In re Michaels Stores, Inc., Fair
Credit Reporting Act (FCRA) Litigation, MDL No. 2615, 2017 WL 354023, at *47
11 (D.N.J. Jan. 24, 2017); Fisher v. Enterprise Holdings, Inc., No. 15-CV00372, 2016 WL 4665899, at *2-4 (E.D. Mo. Sept. 7, 2016).1 In Thomas and
Banks, the courts concluded the FCRA violations before them set forth
concrete injuries because they involved substantive rights. See Thomas, 193 F.
Supp. 3d at 637 (“Section 1681b(b)(3), like § 1681b(b)(2)(A), provides the
consumer with a legally cognizable right to specific information.”); Banks, 2017
WL 1683056, at *3 (noting “[s]everal courts have recognized that multiple
sections of the FCRA provide consumers with a [substantive] right to
information”). In contrast, the courts in In re Michaels Stores and Fisher
determined the FCRA claims did not constitute more than procedural rights,
which alone do not amount to concrete injuries. See In re Michaels Stores,
Inc., 2017 WL 354023, at *7 (“I respectfully disagree with Thomas’s conclusion
that the disclosure requirements set forth in § 1681b(b)(2)(A)(i) are substantive
rather than procedural.”); Fisher, 2016 WL 4665899, at *4-5.
In reaching its conclusion about the nature of the rights the FCRA
confers, Thomas started, “as Spokeo instructs, [by] look[ing] 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 [the plaintiff] constitute
concrete injuries that satisfy the case or controversy requirement.” Thomas,
193 F. Supp. 3d at 631.
brief on standing collects many cases finding no concrete
injury in FCRA violations. (Docket 29 at pp. 5-6 n.5).
The Spokeo Court itself explained the background of Congress passing
The FCRA seeks to ensure “fair and accurate credit reporting.”
§ 1681(a)(1). To achieve this end, the Act regulates the creation
and the use of “consumer report[s]”2 by “consumer reporting
agenc[ies]”3 for certain specified purposes, including credit
transactions, insurance, licensing, consumer-initiated business
transactions, and employment. See §§ 1681a(d)(1)(A)-(C); § 1681b.
. . . [T]he FCRA applies to companies that regularly disseminate
information bearing on an individual’s “credit worthiness, credit
standing, credit capacity, character, general reputation, personal
characteristics, or mode of living.” § 1681a(d)(1).
The FCRA imposes a host of requirements concerning the creation
and use of consumer reports. . . . [T]he Act requires consumer
reporting agencies to “follow reasonable procedures to assure
maximum possible accuracy of” consumer reports, § 1681e(b); to
notify providers and users of consumer information of their
responsibilities under the Act, § 1681e(d); to limit the
circumstances in which such agencies provide consumer reports
“for employment purposes,” § 1681b(b)(1); and to post toll-free
numbers for consumers to request reports, § 1681j(a).
Spokeo, 136 S. Ct. at 1545.
Act defines the term ‘consumer report’ as: ‘any written, oral, or
other communication of any information by a consumer reporting agency
bearing on a consumer’s credit worthiness, credit standing, credit capacity,
character, general reputation, personal characteristics, or mode of living 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 to be used primarily for personal, family, or
(B) employment purposes; or
(C) any other purpose authorized under section 1681b of this title.’
15 U.S.C. § 1681a(d)(1).”
‘The term ‘consumer reporting agency’ means any person which, for
monetary fees, dues, or on a cooperative nonprofit basis, regularly engages in
whole or in part in the practice of assembling or evaluating consumer credit
information or other information on consumers for the purpose of furnishing
consumer reports to third parties, and which uses any means or facility of
interstate commerce for the purpose of preparing or furnishing consumer
reports.’ § 1681a(f).”
The sections at issue in this case are 15 U.S.C. §§ 1681b(b)(2)(A) &
1681b(b)(3)(A). (Docket 1-1 at p. 13); see supra 3-4. Section 1681b(b)(2)(A)
stated in full reads:
[A] person may not procure a consumer report, 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 (which authorization may be made on the document
referred to in clause (i)) the procurement of the report by that
The Thomas court held § 1681b(b)(2)(A) establishes two rights. Thomas,
193 F. Supp. 3d at 631-32. “First, it establishes a right to specific information
in the form of a clear and conspicuous disclosure,” which is supported by “the
textual command that the disclosure be clear and conspicuous.” Id. at 631.
“Second, [it] establishes a right to privacy in one’s consumer report that
employers may invade only under stringently defined circumstances.” Id. at
631-32. Thomas held those rights “are clearly substantive, and neither
technical nor procedural.” Id. at 632; see Demmings v. KKW Trucking, Inc.,
No. 14-CV-494, 2017 WL 1170856, at *8 (D. Or. Mar. 29, 2017) (“The Court
finds persuasive these, and other cases that similarly hold that the Sections
1681b(b)(2)(B) and (b)(3)(B) and similar provisions of the FCRA establish
substantive informational and privacy rights held by the consumer.”); Mix v.
Asurion Ins. Servs. Inc., No. CV-14-02357, 2016 WL 7229140, at *6 (D. Ariz.
Dec. 14, 2016) (“Violations of FCRA that unfairly deprive a consumer of
relevant information, or obtain consent for a background check without a
statutorily-proper disclosure, implicate the harms Congress identified in FCRA,
and thus cause concrete harms.”); Moody v. Ascenda USA Inc., No. 16-CV60364, 2016 WL 5900216, at *5 (S.D. Fla. Oct. 5, 2016) (holding
§ 1681b(b)(2)(A) confers substantive rights); Meza v. Verizon Commc'ns, Inc.,
No. 16-CV-0739, 2016 WL 4721475, at *3 (E.D. Cal. Sept. 9, 2016) (same).
In Syed v. M-I, LLC, the United States Court of Appeals for the Ninth
Circuit adopted the view that § 1681b(b)(2)(A) is a grant of substantive rights.
853 F.3d 492, 499 (9th Cir. 2017). The Ninth Circuit held:
Syed alleges more than a “bare procedural violation.”
disclosure requirement at issue, 15 U.S.C. § 1681b(b)(2)(A)(i),
creates a right to information by requiring prospective employers to
inform job applicants that they intend to procure their consumer
reports as part of the employment application process.
authorization requirement, § 1681b(b)(2)(A)(ii), creates a right to
privacy by enabling applicants to withhold permission to obtain the
report from the prospective employer, and a concrete injury when
applicants are deprived of their ability to meaningfully authorize
the credit check. By providing a private cause of action for
violations of Section 1681b(b)(2)(A), Congress has recognized the
harm such violations cause, thereby articulating a “chain[ ] of
causation that will give rise to a case or controversy.” See Spokeo,
136 S. Ct. at 1549 (quoting Lujan, 504 U.S. at 580 (Kennedy, J.,
The court is aware other courts have come to the opposite conclusion:
that § 1681b(b)(2)(A) consists of procedural rights the violation of which does
not amount to an Article III injury. See In re Michaels Stores, Inc., 2017 WL
354023, a *7-8; Landrum v. Blackbird Enters., LLC, No. CV 16-0374, 2016 WL
6075446, at *3-4 (S.D. Tex. Oct. 3, 2016). The court respects the well-
reasoned rulings in In re Michaels Stores and Landrum. But the court
disagrees with their analysis of the FCRA.
“In determining whether an intangible harm constitutes injury in fact,
both history and the judgment of Congress play important roles.” Spokeo, 136
S. Ct. at 1549. The FCRA’s backdrop the Ninth Circuit explained in Syed
supports concluding § 1681b(b)(2)(A) grants substantive rights. In 1996,
Congress amended the 26-year-old FCRA with the specific concern that
“prospective employers were obtaining and using consumer reports in a
manner that violated job applicants’ privacy rights.” Syed, 853 F.3d at 496
(citing S. Rep. No. 104-185 at 35 (1995)). “The disclosure and authorization
provision codified at 15 U.S.C. § 1681b(b)(2)(A) was intended to address this
concern by requiring the prospective employer to disclose that it may obtain
the applicant's consumer report for employment purposes and providing the
means by which the prospective employee might prevent the prospective
employer from doing so—withholding of authorization.” Id. (citing S. Rep. No.
104-185 at 35)). Section 1681b(b)(2)(A) advances Congress’ broader goals of
“ensuring accurate credit reporting, promoting efficient error correction, and
protecting privacy.” Id. at 496-97. By enacting the FCRA, Congress found
there “is a need to insure that consumer reporting agencies exercise their grave
responsibilities with fairness, impartiality, and a respect for the consumer’s
right to privacy.” 15 U.S.C. § 1681(a)(4). As time moved forward and
technology developed, the “modern information age has shined a spotlight on
information privacy, and on the widespread use of consumer credit reports to
collect information in violation of consumers’ privacy rights.” Syed, 853 F.3d at
Turning to § 1681b(b)(2)(A) with this background in mind, it is clear the
statute takes the consumer’s personal information and grants the consumer
substantive protections regarding its release. To protect the consumer’s
personal information, § 1681b(b)(2)(A) grants the consumer a right to
information in a disclosure form and a right to privacy an employer “may
invade only under stringently defined circumstances.” See Thomas, 193 F.
Supp. 3d at 631-32. If an employer does not secure the consumer’s disclosure
authorization as the statute requires, the employer may “unfairly deprive a
consumer of relevant information, or obtain consent for a background check
without a statutorily-proper disclosure, [which] implicate[s] the harms
Congress identified in FCRA, and thus cause[s] concrete harms.” Mix, 2016
WL 7229140, at *6. “It is clear from the statute’s legislative history that
Congress intended that the FCRA be construed to promote the credit industry’s
responsible dissemination of accurate and relevant information and to
maintain the confidentiality of consumer reports. To that end, it was Congress’
judgment, as clearly expressed in §§ 1681b(b)(2) and (3), to afford consumers
rights to information and privacy.” Thomas, 193 F. Supp. 3d at 633.
Defendant argues it did not violate the FCRA’s disclosure and
authorization requirements because plaintiff was not confused by the
disclosure form. (Docket 29 at p. 6). The fundamental point is that
defendant’s deviation from the statute’s disclosure standards did not vitiate
plaintiff’s authorization for defendant to obtain his background information.
However, the “proper inquiry is whether a procedural violation [of
§ 1681b(b)(2)(A)] creates a ‘risk of real harm.’ ” Mix, 2016 WL 7229140, at *5
(quoting Spokeo, 136 S. Ct. at 1549-50). The court finds an employer “does
create a real risk of harm” when it uses “a disclosure that, because it is merely
one section of a larger document, results in ‘information overload’ which
inhibits a consumer’s ability to agree to a background check with full
knowledge of their rights and the potential consequences.” Id. “Drawing all
reasonable inferences in favor of the non-moving party,” Syed, 853 F.3d at 499,
the court finds plaintiff’s allegations that the disclosure was “wordy” and not in
a “stand-alone document” sufficiently show the disclosure created a risk of real
harm. (Docket 1-1 at p. 15). Plaintiff’s claims grounded in § 1681b(b)(2)(A)
allege a concrete injury under Article III.
The second section of the FCRA at issue in this case, § 1681b(b)(3)(A),
[I]n using a consumer report for employment purposes, before
taking any adverse action based in whole or in part on the report,
the person intending to take such adverse action shall provide to
the consumer to whom the report relates: (i) a copy of the report;
and (ii) a description in writing of the rights of the consumer under
this subchapter, as presented by the Bureau under section
1681g(c)(3) of this title.
Thomas held this section “delineates substantive rights” because it “provides
a consumer with a right to certain information (the consumer report and a
description of rights conferred by the FCRA) before an employer takes adverse
action based on that report. By requiring that the consumer receive the
foregoing information before adverse action is taken, the statute provides the
consumer with a right to review the report and discuss it with his putative or
current employer before adverse action is taken against him.” Thomas, 193 F.
Supp. 3d at 632 (emphasis in original) (citing H.R. Rep. No. 10-486, 103d
Cong. 2d Sess. 30-31 (1994)).
The FCRA background outlined above applies to § 1681b(b)(3)(A) just as
it does § 1681b(b)(2)(A). See supra pp. 12-13. The reasoning underlying the
court’s determination § 1681b(b)(2)(A) grants substantive informational and
privacy rights “is applicable not only to the disclosure requirements of
§ 1681b(b)(2)(A) but also to the notice requirements of § 1681b(b)(3)(A) . . . .”
Mix, 2016 WL 7229140, at *6. Specifically, § 1681b(b)(3)(A) provides a
consumer with a substantive right to information prior to adverse employment
action. See Thomas, 193 F. Supp. 3d at 632. Plaintiff’s claims grounded in
§ 1681b(b)(3)(A) constitute an Article III concrete injury.
Defendant claims because the information regarding plaintiff’s
background was accurate, he fails to allege a concrete injury. (Dockets 29 at
pp. 3-4 & 32 at p. 3). “But the broad principle that the holding in Thomas
rests on—that the violation of statutory rights may in itself be a concrete
injury—is not limited to situations where the violation of those rights results in
the dissemination of false information.” Mix, 2016 WL 7229140, at *5.
Focusing on whether there is a risk of real harm, “[i]n the context of
employment-related background checks, information that is true but amenable
to contextual explanation, delivered without time to provide that explanation,
does create a risk of real harm.” Id. (citing Thomas, 193 F. Supp. 3d at 638).
The crux of the injury here is not whether the information is accurate, it is
defendant depriving plaintiff of his right to information before being fired.
Defendant argues that finding plaintiff’s FCRA claims constitute injuries
is inconsistent with the United States Court of Appeals for the Eighth Circuit
decision Braitberg v. Charter Commc’ns, Inc., 836 F.3d 925 (8th Cir. 2016).
(Docket 29 at p. 4). Braitberg involved a cable company’s retention of Mr.
Braitberg’s personal identifying information after he canceled his cable
services, which violated the Cable Communications Policy Act (“CCPA”). Id. at
926-27. Mr. Braitberg claimed a violation of his privacy rights because the
CCPA provides “[a] cable operator shall destroy personally identifiable
information if the information is no longer necessary for the purpose for which
it was collected and there are no pending requests or orders for access to such
information [by the subscriber] or pursuant to a court order.” 47 U.S.C.
§ 551(e); see Braitberg, 836 F.3d at 927. The Eighth Circuit held Mr. Braitberg
lacked standing because he “identifies no material risk of harm from the
retention; a speculative or hypothetical risk is insufficient. Although there is a
common law tradition of lawsuits for invasion of privacy, the retention of
information lawfully obtained, without further disclosure, traditionally has not
provided the basis for a lawsuit in American courts.” Braitberg, 836 F.3d at
930. The United States Court of Appeals for the Third Circuit interprets
Braitberg “as creating a requirement that a plaintiff show a statutory violation
has caused a ‘material risk of harm’ before he can bring suit . . . .” In re
Horizon Healthcare Servs. Inc. Data Breach Litig., 846 F.3d 625, 637 (3d Cir.
The court finds its determination that plaintiff alleges a concrete injury
under the FCRA is consistent with Braitberg. First, the court disagrees with In
re Horizon’s view of Braitberg. In discussing Mr. Braitberg’s failure to identify a
“material risk of harm,” the Eighth Circuit was not raising the standing bar—it
was explaining why the CCPA claim was “ ‘a bare procedural violation, divorced
from any concrete harm.’ ” Braitberg, 836 F.3d at 930 (quoting Spokeo, 136 S.
Ct. at 1549). Even if In re Horizon’s interpretation is correct, plaintiff meets
that standard here because he sufficiently showed risk of harm to his
informational and privacy rights granted via § 1681b(b)(2)(A) and
§ 1681b(b)(3)(A). See supra pp. 12-16. Second, Braitberg deals with the CCPA,
not the FCRA. The court grounds its conclusion regarding the substantive
rights the FCRA confers in the statute’s backdrop and text, so Braitberg’s
holding does not directly apply to this case. And third, Braitberg involves the
retention of information lawfully obtained. The core of this case is plaintiff’s
information was obtained in violation of informational and privacy rights
granted by the FCRA. The retention of information in Braitberg was an
extension of the status quo, and the acquisition of information in this case was
a disruption of a status quo where plaintiff’s FCRA protections were intact.
Because plaintiff alleges a concrete injury under the FCRA, the court
finds he has Article III standing.
II. DEFENDANT’S MOTION TO DISMISS COUNTS NINE AND TEN
Defendant moves to dismiss counts nine and ten of plaintiff’s first
amended complaint, the FCRA and RICO claims, because they are not timely.
(Docket 6 at pp. 5-10). Defendant argues under Federal Rule of Civil Procedure
12(b)(6) the court should dismiss counts nine and ten for failure to state a
claim upon which the court can grant relief. Id. at pp. 4-5.
Under Rule 12(b)(6), plaintiff must plead “enough facts to state a claim to
relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544,
570 (2007). Two “working principles” underlie Rule 12(b)(6) analysis. See
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). First, courts are not required to
accept as true legal conclusions “couched as . . . factual allegation[s]” in the
complaint. See id. “Threadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice.” Id. (quoting
Twombly, 550 U.S. at 555) (internal quotation marks omitted). The court does,
however, “take the plaintiff’s factual allegations as true.” Braden v. Wal-Mart
Stores, Inc., 588 F.3d 585, 594 (8th Cir. 2009). Second, the plausibility
standard is a “context-specific task that requires the reviewing court to draw
on its judicial experience and common sense.” Iqbal, 556 U.S. at 678 (citation
omitted). The complaint is analyzed “as a whole, not parsed piece by piece to
determine whether each allegation, in isolation, is plausible.” Braden, 588
F.3d at 594.
“A court may dismiss a claim under Rule 12(b)(6) as barred by the
statute of limitations if the complaint itself establishes that the claim is time18
barred.” Illig v. Union Elec. Co., 652 F.3d 971, 976 (8th Cir. 2011) (citing
Jessie v. Potter, 516 F.3d 709, 713 n.2 (8th Cir. 2008)).
i. Count Nine: Fair Credit Reporting Act
For plaintiff’s FCRA claim4 to be timely, defendant points out it would
need to relate back to the original complaint under Federal Rule of Civil
Procedure 15. (Docket 6 at pp. 5-6). This is because the date of the first
amended complaint is after any applicable statute of limitations period was
exceeded. Id. at p. 7. Defendant contends the claims in plaintiff’s initial
complaint relate to facts separate from the facts plaintiff alleges in his FCRA
claim. Id. at p. 6. Defendant argues the initial complaint’s facts connected to
violations of common law duties, and the FCRA claim connects to new facts
concerning whether defendant provided proper disclosure and notice before
terminating plaintiff’s employment based on a consumer report. Id. Defendant
also asserts this argument shows it did not have adequate notice from the
original complaint that plaintiff might later raise a FCRA claim. Id.
Defendant relies on the decision Alibris v. ADT LLC, No. 9:14-CV-81616,
2015 WL 5084231 (S.D. Fla. Aug. 28, 2015), from the United States District
Court for the Southern District of Florida to support its argument. (Docket 6 at
pp. 7-10). In Alibris, the defendant revoked a job offer to Mr. Alibris based on
information revealed in a background check of Mr. Alibris. Alibris, 2015 WL
in analyzing standing the court referred to plaintiff’s FCRA
“claims,” the remaining analysis will refer to a single FCRA “claim” for clarity
because it is an individual cause of action in the complaint.
5084231, at *2-3. Mr. Alibris brought a suit in state court alleging common
law claims and later filed an amended complaint adding a FCRA claim. Id.
The court found the FCRA claim did not relate back because the facts in the
first complaint differed too much from the facts in the FCRA claim. Id. at *7.
The Alibris court determined Mr. Alibris failed to file his FCRA cause of action
within the statute of limitations. Id. at *7-8.
In response plaintiff argues the state court resolved the timeliness of his
FCRA claim when it granted him leave to file his first amended complaint.
(Docket 11 at pp. 3-4). Plaintiff contends the principle that “[a]fter removal, the
federal court takes the case up where the State court left it off” prevents this
court from analyzing the FCRA claim’s timeliness in the context of defendant’s
motion to dismiss. Id. at p. 3 (citing Granny Goose Foods, Inc. v. Bhd. of
Teamsters and Auto Truck Drivers Local No. 70 of Alameda Cty., 415 U.S. 423,
436 (1974)) (internal quotation marks omitted). Plaintiff claims the proper
context for defendant’s timeliness argument is a motion to dissolve or modify
the state court’s order pursuant to 28 U.S.C. § 1450. Id. at p. 4.
Addressing the substance of defendant’s argument on the FCRA claim’s
timeliness, plaintiff asserts the claim relates back under Federal Rule of Civil
Procedure 15(c)(1)(B) because it “arose out of the conduct, transaction, or
occurrence set out—or attempted to be set out—in the original pleading . . . .”
Id. at p. 5 (quoting Fed. R. Civ. P. 15(c)(1)(B)) (internal quotation marks
omitted). Plaintiff notes that courts liberally construe Rule 15(c), and he
argues his original complaint sufficiently placed defendant on notice of a FCRA
claim down the line. Id. at pp. 6-8.
Defendant argues the state court’s determination that plaintiff may
amend his complaint does not determine whether plaintiff’s new claims relate
back to his original complaint. (Docket 13 at pp. 1-3). Defendant’s reply
emphasizes the original complaint’s lack of notice of an FCRA claim based on
the distinct set of facts underlying the FCRA cause of action. Id. at pp. 3-4.
Defendant contends plaintiff’s FCRA claim cannot be considered part of a
“scheme” originally pled or a “natural offshoot” of the prior complaint. Id. at
1. Rule 15
The court rejects plaintiff’s argument that the state court already
addressed the relation back issue. Plaintiff characterizes defendant’s motion to
dismiss as a “test [of] the sufficiency of the pleadings in the First Amended
Complaint[,]” which “does not allow for collateral attack upon the issue of
timeliness . . . .” (Docket 11 at p. 4). Under plaintiff’s view, defendant’s motion
is an effort to get this court to re-evaluate a settled state court ruling after
removal to federal court. Id.
The law on Rule 15 does not support plaintiff’s position. Courts
determine whether a plaintiff may amend a complaint under Rule 15(a) and
courts evaluate relation back of the amendment under Rule 15(c).
Under Rule 15(a), a plaintiff may amend a complaint as a matter of right
if the amendment occurs within a specified time period after service of the
complaint. Fed. R. Civ. P. 15(a)(1)(A)-(B). Beyond that time period the plaintiff
must obtain the defendant’s consent or the court’s leave. Fed. R. Civ. P.
15(a)(2). Courts freely permit amended complaints as justice requires. See
Friedman v. Farmer, 788 F.3d 862, 869 (8th Cir. 2015) (“A district court
‘should freely give leave [to amend] when justice so requires.’ ”) (citing Fed. R.
Civ. P. 15(a)). But courts also ask whether denying leave to amend is proper
because of the plaintiff’s “undue delay, bad faith, or dilatory motive, repeated
failure to cure deficiencies by amendments previously allowed, undue prejudice
to the non-moving party, or futility of the amendment.” Hammer v. City of
Osage Beach, 318 F.3d 832, 844 (8th Cir. 2003) (internal quotation marks
A court asks entirely different questions in determining whether an
amendment relates back to an original complaint. See Fed. R. Civ. P. 15(c).
When a plaintiff’s amended complaint introduces a new claim, the court must
determine whether the new claim “arose out of the conduct, transaction, or
occurrence set out—or attempted to be set out—in the original pleading . . . .”
Fed. R. Civ. P. 15(c)(1)(B). “To arise out of the same conduct, transaction, or
occurrence, the claims must be tied to a common core of operative facts.”
Taylor v. United States, 792 F.3d 865, 869 (8th Cir. 2015) (internal quotation
marks omitted) (citations omitted). “New claims must arise out of the same set
of facts as the original claims, and [t]he facts alleged must be specific enough
to put the opposing party on notice of the factual basis for the claim.” Id.
(internal quotation marks omitted) (quoting Mandacina v. United States, 328
F.3d 995, 1000 (8th Cir. 2003)); see Mack v. Marquand, No. CIV. 09-5079,
2011 WL 4529343, at *7 (D.S.D. Sept. 28, 2011) (“Under Rule 15[(c)], the
central inquiry is whether adequate notice of the matters raised in the
amended pleading has been given to the opposing party within the statute of
limitations by the general fact situation alleged in the original pleading.”)
(internal quotation marks omitted) (citing Slayton v. Am. Express Co., 460 F.3d
215, 228 (2d Cir. 2006)). “Since the purpose of Rule 15(c) is to permit cases to
be decided on their merits, it has been liberally construed.” Alpern v. UtiliCorp
United, Inc., 84 F.3d 1525, 1543 (8th Cir. 1996).
Courts conduct different inquiries and face different questions when
addressing Rule 15(a)5 and Rule 15(c) matters. “The addition of new claims to
an amended pleading does not alone defeat relation back; the question instead
is whether the initial pleading provided a defendant with adequate notice of the
potential new claims.” See Quaak v. Dexia, S.A., 445 F. Supp. 2d 130, 137 (D.
Mass. 2006) (citation omitted). The many cases where courts permit
amendment and later find no relation back serve as strong examples of this
point. See, e.g., Taylor, 792 F.3d at 870-71. It is possible for the facts of a
the leave to amend issue arose in state court, the state court
did not apply a Federal Rule of Civil Procedure. See Docket 14-2. But the
point remains that the state court did not have a Rule 15(c) relation back issue
before it. Although the state court applied South Dakota law in ruling on
plaintiff’s leave to amend his complaint, this analysis is not altered by that
distinction because the South Dakota standard for amending a complaint is
comparable to the federal standard. See SDCL § 15-6-15(a); see also Berbos v.
Krage, 754 N.W.2d 432, 434 (S.D. 2008) (“Motions to amend engage the sound
discretion of the trial court; thus decisions to grant or deny will not be
disturbed absent a clear abuse of discretion resulting in prejudice to the
nonmovant.”) (internal quotations marks omitted) (citations omitted).
case to make the Rule 15(a) and Rule 15(c) analyses overlap.6 This is not that
case, and plaintiff has not shown it is.
Plaintiff’s position also does not find support in the state court record.
During the state court’s hearing on plaintiff’s request to amend his complaint,
counsel for plaintiff stated “[n]ow the main consideration, as the Court knows,
is whether or not granting plaintiff’s motion for leave to amend would cause
prejudice to defendant Wells Fargo.” (Docket 14-2 at p. 3). In making its
ruling, the state court framed the issue the following way: “the statute and the
case law in South Dakota, as I’ve indicated a couple of times here, is liberal in
allowing the amendment of a complaint to proceed unless there’s been a
showing of prejudice.” Id. at p. 21. The state court’s written order granting
leave to amend consists of one page and does not indicate the court considered
any issues about the amendment’s timeliness. (Docket 14-1). The record
demonstrates the state court did not consider whether the new claims in
plaintiff’s first amended complaint were timely because they properly related
back. Based on statements from plaintiff’s counsel and the state court in its
oral ruling, the only issue resolved at the hearing was whether plaintiff may
amend his complaint. See Docket 14-2.
example, a court could deny leave to amend on the basis of an
amendment being futile because the amendment could not possibly relate back
and be timely. That scenario is not applicable because the plaintiff was
granted leave to amend. (Docket 14-2).
2. Relating back
The FCRA has two applicable statutes of limitations: “2 years after the
date of discovery by the plaintiff of the violation that is the basis for such
liability . . . [or] 5 years after the date on which the violation that is the basis
for such liability occurs.” 15 U.S.C. § 1681p. Neither party argues against
plaintiff’s termination date, February 15, 2011, serving as the basis for
potential liability under the FCRA and the date the statute of limitations clock
started. If Plaintiff’s FCRA claim relates back, it is timely under either statute
of limitations because plaintiff filed his original complaint on March 18, 2011,
approximately one month after defendant terminated his employment. (Docket
14-3). The issue now becomes whether plaintiff’s FCRA claim relates back to
his original complaint. The specific question is whether the FCRA cause of
action “asserts a claim or defense that arose out of the conduct, transaction, or
occurrence set out—or attempted to be set out—in the original pleading . . . .”
Fed. R. Civ. P. 15(c)(1)(B).
“[I]f plaintiff attempts to allege an entirely different transaction by
amendment, Rule 15(c)(1)(B) will not authorize relation back.” 6A C. Wright, A.
Miller & M. Kane, Federal Practice and Procedure, § 1497 (2010). “For
example, amendments alleging the separate publication of a libelous
statement, the breach of an independent contract, the infringement of a
different patent, or even a separate violation of the same statute may be subject
to the defense of statute of limitations because of a failure to meet the
transaction standard.” Id. “On the other hand, amendments that merely . . .
expand or modify the facts alleged in the earlier pleading meet the Rule
15(c)(1)(B) test and will relate back.” Id.
“Because the rationale of the relation-back rule is to ameliorate the effect
of the statute of limitations, rather than to promote the joinder of claims . . . ,
the standard for determining whether the amendments qualify under Rule
15(c) is not simply an identity of transaction test. Although not expressly
mentioned in the rule, the courts also inquire into whether the opposing party
has been put on notice regarding the claim . . . raised by the amended
pleading.” Id. “[A] failure of notice will prevent relation back.” Id.
“To say that notice is key does not answer the question what level of
notice is sufficient . . . . It has been suggested that the requisite notice must
be given by the content of the original pleadings. Other cases have taken a
broader view and have held that it is sufficient if the opposing party was made
aware of the matters to be raised by the amendment from sources other than
the pleadings. This position seems sound since it is unwise to place undue
emphasis on the particular way in which notice is received.” Id. “[T]he better
approach is to determine whether the adverse party, viewed as a reasonably
prudent person, ought to have been able to anticipate or should have expected
that the character of the originally pleaded claim might be altered or that other
aspects of the conduct, transaction, or occurrence set forth in the original
pleading might be called into question.” Id.
Rule 15(c)(2) “relaxes, but does not obliterate, the statute of limitations;
hence relation back depends on the existence of a common core of operative
facts uniting the original and newly asserted claims.” Mayle v. Felix, 545 U.S.
644, 659 (2005) (internal quotation marks omitted). Understanding the rule
this way “is consistent with the purpose of relation back: to balance the
interests of the defendant protected by the statute of limitations with the
preference expressed in the Federal Rules of Civil Procedure in general, and
Rule 15 in particular, for resolving disputes on their merits.” Krupski v. Costa
Crociere S. p. A., 560 U.S. 538, 550 (2010).
A central issue in this analysis is what facts constitute the “common core
of operative facts.” Taylor, 792 F.3d at 869 (citing Mayle, 545 U.S. at 664).
Based on the briefing, defendant’s view is the common core of operative facts
consists of defendant choosing to hire and then fire plaintiff. See Docket 6 at
pp. 5-10. Plaintiff does not clearly state his position on what makes up the
core of operative facts, but his briefing suggests a view that many more aspects
of defendant’s conduct surrounding plaintiff’s termination are within the core
facts, including the process defendant followed when screening plaintiff just
before firing him. See Docket 11 at pp. 5-8.
Plaintiff’s position is too expansive. The most central fact in plaintiff’s
original and amended complaints is the termination of his employment. See
Dockets 1-1 & 14-3. Plaintiff invites the court to view nearly any claim arising
from his termination as a claim relating back under Rule 15(c). Under
plaintiff’s argument, it is difficult to see how his FCRA claim would relate back,
but a claim alleging defendant fired him because of his religion—based on facts
gathered in discovery—would not relate back. See 42 U.S.C. § 2000e-2(a)(1).
Both the FCRA and religious discrimination claims would implicate plaintiff’s
employment and defendant’s conduct in terminating plaintiff, but the religion
claim is too attenuated to meet even a “liberally construed” Rule 15(c). See
Alpern, 84 F.3d at 1543.
In Palmer v. Homecomings Financial LLC, the United States District
Court for the District of Columbia refused to adopt an interpretation of Rule
15(c) similar to what plaintiff advances here. 677 F. Supp. 2d 233, 237-39
(D.D.C. 2010). After Ms. Palmer refinanced her home mortgage loan with
Homecomings Financial LLC (“Homecomings”), she sued Homecomings for
violating Section 6 of the Real Estate Settlement Procedures Act (“RESPA”).7 Id.
at 235. Ms. Palmer amended her complaint to include a violation of RESPA
Section 8.8 Id. at 236-37. Although both violations related to the same
refinancing agreement, the Palmer court held the Section 8 claim did not relate
back because the facts underlying it were not close enough to the facts of the
Section 6 claim. Id. at 238-39. “The ‘conduct, transaction, or occurrence’
language of Rule 15(c) cannot be interpreted so broadly as to apply to all of the
parties’ actions regarding the refinancing agreement.” Id. at 238 (citing Mayle,
545 U.S. at 660-64).
Section 6 requires mortgage lenders to disclose to loan
applicants whether the servicing of the loan may be assigned, sold, or
transferred to any other person at any time while the loan is outstanding and
imposes specific notice requirements when such a transfer occurs.” Id. at 238
(citing 12 U.S.C. § 2605).
Section 8 claim has two parts: “(i) giving kickbacks to mortgage
brokers for the referral of business in violation of [12 U.S.C.] § 2607(a) and (ii)
splitting settlement charges with brokers for services not actually performed in
violation of § 2607(b).” Id. at 236.
The Palmer court compared Ms. Palmer’s theory to a habeas petitioner
who argues for relation back of an amendment because the amendment and
the original pleading both connect to the criminal trial giving rise to the habeas
petition. Id. at 238-39. The Supreme Court foreclosed such a position in
Mayle. Mayle, 545 U.S. at 660-64 (“An approach of that breadth . . . views
‘occurrence’ at too high a level of generality.”) (internal quotation marks
omitted)). The court finds both the Palmer and Mayle situations useful in
refusing to adopt plaintiff’s expansive interpretation of Rule 15(c). The Rule
“does not obliterate the statute of limitations . . . .” Mayle, 545 U.S. at 659.
At the same time, defendant’s Rule 15(c) view is too restrictive. As noted
above, defendant relies on the Alibris case to argue plaintiff’s FCRA claim is
grounded in a new set of facts. Alibris, 2015 WL 5084231; see supra Section
II.a.i. (explaining the facts of Alibris). The facts of Alibris and this case are
similar. See Alibris, 2015 WL 5084231, at *2-8. The Alibris court highlighted
that the United States Court of Appeals for the Eleventh Circuit held “Rule
15(c) [is] to be used for a relatively narrow purpose . . . .” Id. at *7 (quoting
Farris v. United States, 333 F.3d 1211, 1215 (11th Cir. 2003)). The court finds
applying Rule 15(c) as the Alibris court did would not be consistent with the
duty to “liberally construe” the rule as the Eighth Circuit directs.9 See Alpern,
84 F.3d at 1543. Interpreting Rule 15(c) otherwise risks the inverse of the flaw
court is not necessarily holding there is a divide between the Eighth
and Eleventh Circuits on this point of Rule 15(c). The court’s limited finding
here is the Alibris court’s application of Rule 15(c) is distinct from Eighth
Circuit law. See Alpern, 84 F.3d at 1543.
identified in Mayle: viewing “conduct, transaction, or occurrence” with too great
an emphasis on specificity. See Mayle, 545 U.S. at 660-64.
In determining this case’s core of operative facts, the court strikes what it
finds is the proper balance between defendant’s interest in defending itself
against timely lawsuits only, and the preference of Rule 15 for resolving a case
on its merits. See Krupski, 560 U.S. at 550. The core of operative facts in this
case includes defendant’s conduct related to obtaining and using plaintiff’s
prior misdemeanor conviction as a basis for terminating his employment. With
the filing of plaintiff’s original complaint, “[d]efendant was on notice that it was
under attack for the full range of its conduct with respect to its” acquisition
and use of plaintiff’s background information as a reason for firing him. See
Quaak, 445 F. Supp. 2d at 137. The “full range” of defendant’s conduct
includes the process by which it screened plaintiff and re-discovered his earlier
conviction. See id. Plaintiff’s FCRA claim alleges defendant’s process of
acquiring plaintiff’s criminal background information violated federal law.
(Docket 1-1 at pp. 12-16). That claim “do[es] not come from out of the blue.”
Quaak, 445 F. Supp. 2d at 137. Although the original complaint does not
mention the FCRA, it does discuss the federal statute FIRRE as part of what
led to plaintiff’s termination. (Docket 14-3 at pp. 5, 7-8). This undercuts
defendant’s claim it was on notice for only common law causes of action like
those in the original complaint. The “facts provable under the amended
complaint arose out of the conduct alleged in the original complaint[, so]
relation back is mandatory.” Mack, 2011 WL 4529343, at *7 (internal
quotation marks omitted) (citing Slayton, 460 F.3d at 227).
Plaintiff does not employ an “entirely distinct set” of facts to support his
FCRA claim. See id. (internal quotation marks omitted) (citing Slayton, 460
F.3d at 227). An example of a distinct set of facts would be a new claim that
defendant fired plaintiff on the basis of his religion in violation of 42 U.S.C.
§ 2000e-2(a)(1). That claim shares the operative fact of plaintiff’s termination,
but the facts necessary to prove it are separate from defendant’s conduct in
relying on plaintiff’s earlier misdemeanor conviction to fire him.
Plaintiff’s FCRA claim is timely because it relates back under Rule 15(c).
ii. Count Ten: Racketeer Influenced Corrupt Organizations Act
1. Relating back
Defendant advances a parallel argument asserting plaintiff’s RICO claim
should be dismissed because it is not timely. (Docket 6 at pp 10-12).
Defendant argues plaintiff bases his RICO claim on brand new facts and it
lacked notice of plaintiff alleging a new legal theory under RICO. Id. at pp. 1011. As he did with his FCRA claim, plaintiff contends the state court already
addressed the issue of his RICO claim’s timeliness when it granted him leave to
add the RICO count. (Docket 11 at pp. 3-4). The court rejects this argument
from plaintiff for the same reasons it rejected the argument with respect to his
FCRA claim: the state court did not consider whether his RICO claim was
timely. See supra Section II.a.i.1. The remainder of plaintiff’s argument that
his RICO count is not time-barred is identical to his argument on the FCRA
count. (Docket 11 at pp. 5-8). Plaintiff’s fundamental point is the RICO claim
relates back to the original complaint. Id.
The statute of limitations for a civil RICO action is four years. Agency
Holding Corp. v. Malley-Duff & Assocs., Inc., 483 U.S. 143, 156 (1987).
Plaintiff does not state at what time he believes his RICO cause of action began
to accrue, but his argument on whether his RICO claim relates back indicates
he believes it started the day defendant fired him. (Docket 11 at pp. 5-8).
Defendant claims the statute of limitations clock started when it fired plaintiff
on February 15, 2011. (Docket 6 at pp. 11-12). The court treats February 15,
2011, as the date the four-year statute of limitations clock began running.
Consequently, plaintiff’s RICO claim must relate back to his original complaint
under Rule 15(c) to be timely. The issue then is whether the added RICO count
“asserts a claim or defense that arose out of the conduct, transaction, or
occurrence set out—or attempted to be set out—in the original pleading . . . .”
Fed. R. Civ. P. 15(c)(1)(B).
The court need not restate the law on Rule 15(c). See supra Section
II.a.i.2. In discussing plaintiff’s FCRA claim, the court determined this case’s
core of operative facts includes defendant’s conduct related to using plaintiff’s
prior misdemeanor conviction as a basis for terminating his employment. See
id. The question is whether those facts sufficiently “unit[e] the original [claims]
and newly asserted [RICO] claim[,]” Mayle, 545 U.S. at 659, or whether “the
facts well pleaded” in the original complaint fail to “put [defendant] on notice.”
Maegdlin v. Int’l Ass’n of Machinists & Aerospace Workers, Dist. 949, 309 F.3d
1051, 1053 (8th Cir. 2002). As noted above, the original complaint placed
defendant on notice of legal action against its “full range” of conduct related to
acquiring plaintiff’s background information and using it to fire him. See
Quaak, 445 F. Supp. 2d at 137. The court finds a close reading of plaintiff’s
RICO claim reveals it relies on an “entirely distinct set” of facts and a legal
theory for which defendant lacked notice. See Mack, 2011 WL 4529343, at *7
(internal quotation marks omitted) (citing Slayton, 460 F.3d at 227). If
plaintiff’s FCRA claim tests how “liberally construed” the application of Rule
15(c) can be, plaintiff’s RICO claim goes beyond what that liberal interpretation
can bear. See Alpern, 84 F.3d at 1543.
Plaintiff’s RICO claim factually relates to his original complaint, but the
RICO claim arises out of conduct far beyond the complaint’s allegations. See
Maegdlin, 309 F.3d at 1053-54; La. Wholesale Drug Co., Inc. v. Biovail Corp.,
437 F. Supp. 2d 79, 86-87 (D.D.C. 2006) (“[W]hile factually connected, [the new
claim did] not arise out of the conduct alleged in the original complaint.”)
(internal quotation marks omitted), aff'd sub nom., Meijer, Inc. v. Biovail Corp.,
533 F.3d 857 (D.C. Cir. 2008). The first amended complaint introduces a new
allegation of defendant instituting a systematic scheme called the “Background
Check Project” in order to terminate employees en mass, reduce the payroll,
erase employees’ bonuses and benefits earned over years of work and damage
the job market. (Docket 1-1 at p. 27). To carry out the Project, plaintiff alleges,
defendant made repeated “affirmative fraudulent representations that Wells
Fargo was required by federal regulation to abruptly and irreversibly terminate
hundreds if not thousands of employees.” Id. at p. 28. Plaintiff claims
defendant directed these falsehoods to lower-level employees, the attorneys of
those employees, political entities and the media. Id.
Although the original complaint provided defendant notice plaintiff would
hold it accountable for the “full range” of its conduct, Quaak, 445 F. Supp. 2d
at 137, the widespread scheme alleged in the RICO count and the fraudulent
acts to perpetrate it fall outside that range. See Johnson Int’l Co. v. Jackson
Nat. Life Ins. Co., 812 F. Supp. 966, 971 (D. Neb. 1993) (“[T]he factual thrust of
the two theories of recovery is so different that a reasonably prudent person
would not have perceived exposure on the negligence theory of recovery when
served with the complaint on the contract theory of recovery.”) (citing Morgan
Distrib. Co. v. Unidynamic Corp., 868 F.2d 992, 994-95 (8th Cir. 1989)), aff’d
and remanded on other grounds, 19 F.3d 431 (8th Cir. 1994). The facts of
defendant obtaining plaintiff’s background information and terminating him on
the basis of its contents are in plaintiff’s RICO claim, but the court does not
find the “facts provable under [the RICO claim] arose out of the conduct alleged
in the original complaint . . . .” Mack, 2011 WL 4529343, at *7 (internal
quotation marks omitted) (citing Slayton, 460 F.3d at 227). To find otherwise
would stretch Rule 15(c) too far. It would be closer to obliterating than relaxing
the statute of limitations. See Mayle, 545 U.S. at 659.
When the original complaint alleges a vast scheme and a subsequent
cause of action provides a new avenue for liability, the relation back question is
closer. In Quaak, a securities litigation case, the defendant was on notice “for
the full range of its conduct with respect to its scheme to inflate the price of
[certain] stock.” 445 F. Supp. 2d at 137-38 (collecting similar cases). The
scope of conduct originally pled in Quaak is significantly broader than this
case. Plaintiff’s original complaint revolved around defendant obtaining and
using his prior misdemeanor conviction to fire him. (Docket 14-3). Compared
to Quaak, plaintiff’s original allegations are narrow. Although plaintiff still gets
the full benefit of Rule 15(c) and its liberal construction, his original complaint
binds him and limits what subsequent claims relate back.
Plaintiff’s RICO claim is not timely because it does not relate back under
III. PLAINTIFF’S MOTION TO AMEND HIS COMPLAINT
Plaintiff moved for leave to file a second amended complaint. (Docket
20). His proposed second amended complaint adds factual allegations, (Docket
22-2 at pp. 5-6), expands his FCRA claim to include details about the
Statement of Work contract (“SOW”) between defendant and First Advantage,
Id. at pp. 12-17, modifies his RICO claim, Id. at pp. 18-38, and adds a RICO
conspiracy count, Id. at p. 39. Plaintiff argues the possible reasons for not
permitting amendment to his complaint are not present in this case. (Docket
22 at p. 5). Plaintiff explains defendant has known of the “minor [factual]
additions” in the amendments and the modifications of current counts assist
resolving this case on its merits. Id. Plaintiff contends defendant cannot show
amendment at this stage would cause prejudice and plaintiff does not make the
motion “in bad faith, for a dilatory motive, or after repeated failures to cure
deficiencies by amendments previously allowed.” Id.
Defendant’s position is plaintiff’s motion should be denied because it is
dilatory and futile. (Docket 23 at pp. 5, 7). Defendant argues plaintiff had the
information necessary to plead the contents of his proposed second amended
complaint when he filed his first amended complaint. Id. at p. 6. Defendant
claims this demonstrates a “delay tactic to avoid dismissal . . . .” Id. According
to defendant, plaintiff’s proposed amendments are futile because his FCRA and
RICO claims are not timely. Id. at pp. 7-8. Defendant directs several
arguments toward showing plaintiff’s amendments to the FCRA claim are futile
because they fail to adequately state a claim. Id. at pp. 8-15. First, plaintiff’s
allegation regarding defendant acquiring criminal background information
beyond the timeframe the FCRA permits misstates the FCRA. Id. at pp. 8-11.
Second, plaintiff’s alleged FCRA violation could hold First Advantage liable but
not defendant. Id. at p. 9. Third, the information defendant acquired on
plaintiff’s criminal background falls within an exception in the FCRA. Id. at
pp. 11-13. And fourth, the SOW plaintiff discusses does not establish any
enforceable rights for him against defendant. Id. at pp. 14-15. Defendant then
highlights the deficiencies it sees in plaintiff’s RICO claim. Id. at pp. 15-17.
Those problems, defendant continues, cause plaintiff’s new RICO conspiracy
claim to fail. Id. at p. 17.
In response to defendant’s arguments, plaintiff contends the criminal
background information defendant obtained does not meet the applicable
exception under the FCRA. (Docket 25 at pp. 5-7). Plaintiff also clarifies that
his amendments discussing the SOW do not attempt to enforce rights under
the SOW, rather plaintiff includes the discussion to flesh out his FCRA claim.
Id. at p. 7.
Earlier the court set forth the law on granting leave to amend complaints
under Rule 15(a), so it need not restate the law here. See supra Section II.a.i.1.
“The Eighth Circuit Court of Appeals takes a ‘liberal viewpoint towards leave to
amend’ and leave ‘should normally be granted absent good reason for a
denial.’ ” Libertarian Party of S.D. v. Krebs, 312 F.R.D. 523, 525 (D.S.D. 2016)
(quoting Popp Telcom v. Am. Sharecom, Inc., 210 F.3d 928, 943 (8th Cir.
2000)). The court must determine whether denial of plaintiff’s proposed
amendments is proper because of plaintiff’s “undue delay, bad faith, or dilatory
motive, repeated failure to cure deficiencies by amendments previously allowed,
undue prejudice to the non-moving party, or futility of the amendment.”
Hammer, 318 F.3d at 844 (internal quotation marks omitted). “Likelihood of
success on the new claim or defenses is not a consideration for denying leave
to amend unless the claim is clearly frivolous.” Becker v. Univ. of Neb., 191
F.3d 904, 908 (8th Cir. 1999) (citing Gamma–10 Plastics, Inc. v. Am. President
Lines, Ltd., 32 F.3d 1244, 1256 (8th Cir. 1994)).
The court determined plaintiff’s RICO claim is not timely. See supra
Section II.a.ii.1. In light of that finding, the court denies as futile plaintiff’s
proposed amendments to his RICO claim and the addition of a RICO
conspiracy count. Plaintiff’s new RICO conspiracy claim rests on the same
facts as the first amended complaint’s RICO claim, so the court’s Rule 15(c)
analysis applies to the conspiracy count. (Docket 22-1 at p. 39); see supra
Section II.a.ii.1. “An amendment is futile if ‘the amended complaint could not
withstand a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil
Procedure.’ ” Libertarian Party, 312 F.R.D. at 525 (quoting Zutz v. Nelson, 601
F.3d 842, 850 (8th Cir. 2010)). Neither of plaintiff’s RICO counts survive the
Rule 12(b)(6) standard because neither is timely. See supra Section II.a.ii.1.
The amendments relating to the RICO claims are futile. Libertarian Party, 312
F.R.D. at 525.
Defendant asserts the amendment to plaintiff’s FCRA claim is a dilatory
tactic aimed at avoiding dismissal. (Docket 23 at pp. 5-6). “[I]t is common
practice for a party to seek leave to amend in response to a motion to dismiss.”
Ireland v. Anderson, No. 3:13-cv-3, 2014 WL 3732014, at *2 (D.N.D. July 25,
2014) (citing Jameson v. State Farm Mut. Auto. Ins. Co., 871 F. Supp. 2d 862,
869 (W.D.Mo. May 14, 2012)). “In fact, the Eighth Circuit . . . has stated that a
‘motion to amend a complaint may moot a pending motion to dismiss.’ ”
Dakota Provisions, LLC v. Hillshire Brands Co., 4:16-CV-04099, 2016 WL
7441628, at *3 (D.S.D. Dec. 27, 2016) (quoting Pure Country, Inc. v. Sigma Chi
Fraternity, 312 F.3d 952, 956 (8th Cir. 2002)). Defendant supports its
argument by pointing to the extended lifespan of this case and plaintiff’s
longstanding awareness of the facts included in the proposed amendment.
(Docket 23 at pp. 5-6). This is insufficient to show plaintiff’s actions are
dilatory or amendment will inflict prejudice on defendant. Considering the lack
of support for defendant’s argument and the Eighth Circuit’s “liberal viewpoint”
on granting leave to amend, the court finds plaintiff’s request is not dilatory.
See Popp Telecom, 210 F.3d at 943 (internal quotation marks omitted).
Defendant argues the amendment to plaintiff’s FCRA claim is futile
because the count fails to adequately state a claim. (Docket 23 at pp. 7-15).
Based on the finding above regarding the FCRA claim’s timeliness, the court
rejects defendant’s assertion that the amended FCRA claim is futile because it
is time-barred. (Docket 23 at pp. 7-8). Plaintiff proposes amending his FCRA
claim to include the following sentence at paragraph 73: “Defendant and First
Advantage procured consumer records, including records of non-convictions
older than seven (7) years, in violation of the FCRA.” (Docket 22-1 at p. 14).
Defendant contends this addition misstates the FCRA because the statute
permits reporting of “records of convictions of crimes which antedate the
report by more than seven years.” 15 U.S.C. § 1681c(a)(5); (Docket 23 at p. 9).
Defendant correctly reads the statute to permit reports of conviction records
dating more than seven years back. 15 U.S.C. § 1681c(a)(5). But defendant
misreads the proposed paragraph because it relates to “non-convictions older
than seven (7) years . . . .” (Docket 22-1 at p. 14) (emphasis added). A different
proposed amendment to the complaint mentions “reports detailing any prior
adverse criminal decisions . . . within seven (7) . . . years from the date of
execution of the SOW.” Id. at p. 13. This statement is less clear but seems to
relate to non-convictions. Some aspects of plaintiff’s FCRA claim do connect to
a prior conviction, but the proposed amendments do not bind themselves to
convictions as defendant argues. See id. at pp. 13-17.
Defendant claims only First Advantage could be held liable under the
allegations in paragraph 73. (Docket 23 at p. 9); 15 U.S.C. § 1681c(a).
Although 15 U.S.C. § 1681c(a) does govern restrictions on consumer reporting
agencies such as First Advantage, plaintiff’s proposed second amended
complaint expressly relies on §§ 1681n and 1681o to hold defendant liable.
(Docket 22-1 at p. 17). Those sections govern the civil liability of persons for
willful or negligent noncompliance. Defendant’s potential liability under
§§ 1681n and 1681o is straightforward and defendant does not present an
Even if plaintiff did rely on § 1681c as a path for liability, defendant still
may be liable under the statute. Two issues are embedded in this argument.
One is whether vicarious liability for a FCRA violation is consistent with the
FCRA. Another issue is what actions defendant or First Advantage took that
may support finding vicarious liability. As to the first issue, several courts
have addressed this question in cases with circumstances slightly different
from this one. See, e.g., Cole v. Am. Family Mut. Ins. Co., 333 F. Supp. 2d
1038, 1043-47 (D. Kan. 2004) (discussing cases where courts analyzed whether
court finds defendant’s argument on § 1681c misguided. Although
proposed paragraph 73 may set forth a violation of § 1681c, it is not clear
plaintiff intends as much. The heart of plaintiff’s FCRA claim is violations of
§§ 1681b(b)(2) and (3)—not § 1681c. The court fully addresses defendant’s
an employer could be held liable for violating the FCRA when its employee
obtained credit information contrary to the FCRA). The Eighth Circuit has not
addressed the issue of vicarious liability and the FCRA, and courts have come
to different results. See Jaycox v. GC Servs. Ltd. P’ship-Delaware, 440 F.
Supp. 2d 1065, 1066 (E.D. Mo. 2006) (“Courts are split on whether a plaintiff
can bring suit under the FCRA against an employer for the actions of its
employee based on a theory of apparent authority.”) (citing Jones v. Federated
Fin. Reserve Corp., 144 F.3d 961 (6th Cir. 1998) (finding vicarious liability
consistent with the FCRA)); Kodrick v. Ferguson, 54 F. Supp. 2d 788 (N.D. Ill.
1999) (finding vicarious liability not consistent with the FCRA)); see also Ellis v.
Penn. Higher Educ. Assistance Agency, No. CV 07-04498, 2008 WL 4351746,
at *3-5 (C.D. Cal. Sept. 23, 2008) (discussing thoroughly the FCRA and
Although the factual background of this case differs in some ways from
other cases addressing the FCRA and vicarious liability, it is not proper at this
stage of the litigation to resolve the question. The minimal briefing on the issue
at this point is not proportionate to its possible significance. The limited facts
before the court convince it “this [entire] issue would be more appropriately
considered on a factual record, rather than on this motion to dismiss. The
facts of the case may well shape the proper application of vicarious liability
theories.” Jaycox, 440 F. Supp. 2d at 1066 (citing Cole, 333 F. Supp. 2d at
1046-47 (“[V]icarious liability cannot be properly considered in a motion to
dismiss.”)). Plaintiff pled sufficient facts to show this aspect of his FCRA claim
is not futile, “and the [c]ourt will not confront this serious issue of first
impression on such a limited record.” Id.
The court comes to a parallel conclusion on defendant’s argument that
plaintiff’s criminal background information falls under an exception in the
FCRA. The FCRA excludes certain consumer reports from the standards it
imposes on disclosures and other matters detailed in the statute. See
15 U.S.C. § 1681a(y). Defendant claims the report on plaintiff’s criminal
background is covered by the exception for a “communication . . . made to an
employer in connection with an investigation of . . . compliance with Federal,
State, or local laws and regulations . . . .” 15 U.S.C. § 1681a(y)(1)(B). This
issue came before the United States District Court for the District of Minnesota
in Martin v. First Advantage Background Servs. Corp., 877 F. Supp. 2d 754,
760-61 (D. Minn. 2012). The Martin plaintiff pled FCRA violations and the
defendants moved to dismiss because they believed the background
information fit under this exception to FCRA’s reporting restrictions. Id. at
759-61. The Martin defendants claimed the FCRA’s exception on reporting
information in an effort to comply with federal law prevented the plaintiff from
holding them liable. Id.; see 15 U.S.C. § 1681a(y)(1)(B). The Martin court
decided “[a]lthough this issue may prove simple at the summary judgment
stage, the Court declines to grant Defendants’ motion to dismiss. . . . Whether
or not the report at issue in this case qualifies as a consumer report [or falls
under an exception] depends on the circumstances surrounding Wells Fargo’s
decision to obtain it.” Martin, 877 F. Supp. 2d at 761. The court finds
defendant’s argument on the exception in 15 U.S.C. § 1681a(y)(1)(B) is not
suitable for resolution in the context of a motion to dismiss.11 See Martin, 877
F. Supp. 2d at 761.
Defendant’s last argument for finding plaintiff’s FCRA claim futile is that
plaintiff fails to demonstrate he has enforceable rights under the SOW. (Docket
23 at pp. 14-15). Defendant takes issue with plaintiff’s amendment stating
defendant acted “in contravention of the FCRA and the SOW . . . .” (Docket 221 at p. 14). In response, plaintiff clarifies he “has not asserted a breach of
contract claim to enforce the SOW. The SOW is cited in the complaint to show
that Wells Fargo agreed to comply with the FCRA.” (Docket 25 at p. 7).
Plaintiff’s explanation shows he is not attempting to hold defendant liable
based on a violation of the SOW. Because plaintiff does not seek a remedy on
the basis of defendant allegedly violating the SOW, defendant’s arguments for
dismissal on this point are not applicable and do not show futility.
The court finds count nine, plaintiff’s FCRA claim, of the proposed
second amended complaint is proper under Rule 15(a).
III. PLAINTIFF’S MOTION TO COMPEL
Plaintiff filed a motion for the court to compel defendant to pay fees
related to defendant’s deposition of plaintiff’s expert. (Docket 15). Mark C.
in the Martin litigation the court issued a ruling granting in part
and denying in part defendants’ motion for summary judgment. Martin v. First
Advantage Background Servs. Corp., No. 11-3357, 2014 WL 1260392 (D. Minn.
Mar. 26, 2014) (referred to here as Martin II). The defendant in this case
cites Martin II to argue it cannot be liable due to the exception in 15 U.S.C.
§ 1681a(y)(1)(B). (Docket 23 at pp. 12-13). Martin is a useful comparison to
this case and Martin II is not because this case is at the motion to dismiss
stage, not the summary judgment stage where the record is more developed.
Riley is plaintiff’s “banking regulatory compliance expert . . . .” (Docket 16 at
p. 1). On April 29, 2016, defendant deposed him. Id. at pp. 1-2. Mr. Riley
traveled two hours to the deposition, which lasted eight hours. Id. at p. 2.
Leading up to the deposition, Mr. Riley reviewed documents for eight hours and
fifteen minutes and separately prepared with plaintiff’s counsel for eight hours.
(Docket 17-1 at p. 2). Defendant paid for Mr. Riley’s time traveling to the
deposition and the time at the deposition. (Docket 17-5). Defendant refuses to
pay for the eight hours and fifteen minutes of document review and the eight
hours Mr. Riley met with plaintiff’s counsel. (Docket 18). Plaintiff’s motion
seeks to compel payment for this remainder of Mr. Riley’s work. (Docket 16).
Plaintiff claims “Mr. Riley’s total invoiced time, including his preparation
time, is consistent with Eighth Circuit case law.” Id. at p. 4 (citing Hurst v.
United States, 123 F.R.D. 319, 321 (D.S.D. 1988)). Plaintiff asserts the
“approximately two-to-one ratio of preparation to deposition time . . . is wellwithin the recoverable range established by case precedent.” Id. at p. 5.
In response defendant relies on Rock River Commc’ns., Inc. v. Universal
Music Group, 276 F.R.D. 633 (C.D. Cal. 2011). Defendant argues Rock River
demonstrates the unfairness involved in requiring it to pay for Mr. Riley’s
preparation. (Docket 18 at pp. 4-5). Specifically, defendant alleges Federal
Rule of Civil Procedure 26(b)(4)(E) should account for defendant’s inability to
control how much time Mr. Riley spends preparing for his deposition. Id.
Defendant states “[a]t the very least, Wells Fargo should not be required to pay
for Riley’s eight-hour preparation session with Benson’s counsel . . . .” Id. at
Rule 26(b)(4)(E) of the Federal Rules of Civil Procedure provides “[u]nless
manifest injustice would result, the court must require that the party seeking
discovery: (i) pay the expert a reasonable fee for time spent in responding to
discovery . . . .” This rule necessarily includes the time an expert spends
reviewing records in preparation for his deposition. Hose v. Chicago and North
Western Transportation Co., 154 F.R.D. 222, 228 (S.D. Iowa 1994); see also
Hurst, 123 F.R.D. at 321 (the expert witness “is entitled to his hourly fee for
the time he spent preparing himself for the deposition and the time during
which he was deposed.”). The court finds Mr. Riley’s eight hours and fifteen
minutes reviewing documents is compensable time under Rule 26(b)(4)(E).
Hurst, 123 F.R.D. at 321.
Whether Mr. Riley’s eight hours working with plaintiff’s counsel is
compensable is a separate question. The Rock River court highlighted some
potentially unfair consequences of placing this type of cost on the party
deposing an adverse party’s expert. Rock River, 276 F.R.D. at 635-37. Rock
River correctly points out “[s]hifting expert fees for deposition preparation
creates what economists call an externality: the retaining party determines how
much deposition preparation it deems desirable, but the deposing party pays
for it. When benefit and cost are separated like this, the risk of unfairness is
great.” Id. at 636. However, interpreting Rule 26(b)(4)(E) this way suggests a
court should start with the assumption parties will violate Rule 1, which
requires parties to employ the Federal Rules of Civil Procedure “to secure the
just, speedy, and inexpensive determination of every action and proceeding.”
Fed. R. Civ. P. 1.
The court appreciates the Rock River perspective, but finds the approach
in Schmidt v. Solis stronger. Schmidt v. Solis, 272 F.R.D. 1, 2-3 (D.D.C. 2010).
According to the Schmidt court, “that a lawyer will prepare the expert and
consume some of her time is such a certainty that it should always be
considered as a form of ‘responding to discovery’ under the pertinent rule, and
should always be paid by the party who is taking the deposition, whatever her
motive, intent or purpose. This also advances the rule’s purpose of
discouraging needless deposition of experts.” Id. at 3. As to fairness, the
Schmidt court stated “[p]revention of unfairness . . . can be left to ascertaining
the reasonableness of what is being charged, and it would be in that context
that factors such as the complexity of the report and the time spent since
completing it would be considered.” Id. (citing Borel v. Chevron U.S.A. Inc.,
265 F.R.D. 275, 278 (E.D. La. 2010) (“[A]s long as such fees are reasonable . . .
an expert may be compensated for time spent preparing for a deposition.”)).
The court will not draw a bright line excluding an expert’s preparation with
counsel from costs the party conducting the deposition may need to cover
under Rule 26(b)(4)(E). See Schmidt, 272 F.R.D. at 2-3. Mr. Riley’s time
working with plaintiff’s counsel leading up to his deposition is compensable
under Rule 26(b)(4)(E). See id.
The issue then becomes whether Mr. Riley’s eight hours and fifteen
minutes of document review and eight hours meeting with plaintiff’s counsel is
reasonable under Rule 26(b)(4)(E), which would require defendant to reimburse
Mr. Riley for that time. “[A]n expert may not charge an excessive amount of
preparation time, and if an expert does so, a court may reduce that time to a
‘reasonable’ amount of time.” Handi-Craft Co. v. Action Trading, S.A., No. 4:02
CV 1731, 2003 WL 26098543, at *17 (E.D. Mo. Nov. 25, 2003) (citing N.Y. v.
Solvent Chem. Co., Inc., 210 F.R.D. 462, 471-72 (W.D.N.Y. 2002)). Courts
often exercise their discretion on this issue by reducing the time compensable
under the Rule to a reasonable amount. See, e.g., id. (determining two days
compensable and not the three days an expert spent preparing for a one-day
deposition); see Borel, 265 F.R.D. at 278 (determining one-and-a-half hours
preparation and not three hours compensable for a three-hour deposition).
The court finds the sixteen hours and fifteen minutes Mr. Riley prepared
for his eight-hour deposition is not reasonable. This case is complex, which
may require lengthy preparation, but plaintiff does not sufficiently show how
this case’s complexity justifies Mr. Riley’s extensive preparation with counsel.
See Handi-Craft, 2003 WL 26098543, at *17 (“While the court recognizes that
the instant litigation is complex and intricate, [the expert] does not indicate
why he needs such preparation time, save to say that it would enable him to
‘best represent [defendant’s] position and answer the likely questions at a
deposition.’ ”); see also Solvent, 210 F.R.D. at 466, 471-72
(determining three hours—not seventeen hours and forty-five minutes—
reasonable for a nine-hour deposition in a complex case).12 Considering this
the Solvent court provided a “caveat” about time an expert
spends preparing with her own counsel not being compensable, that does not
case’s complexity, the court finds a total of ten hours and fifteen minutes spent
preparing for Mr. Riley’s eight-hour deposition is reasonable. Rule 26(b)(4)(E)
mandates defendant reimburse Mr. Riley for the ten hours and fifteen minutes
he prepared for his deposition.
Based on the above analysis, it is
ORDERED that defendant’s motion to dismiss (Docket 5) is granted in
part and denied in part. The court does not dismiss plaintiff’s FCRA claim.
The court dismisses plaintiff’s RICO claim.
IT IS FURTHER ORDERED that plaintiff’s motion to amend his complaint
(Docket 20) is granted in part and denied in part. Plaintiff shall amend his
FCRA claim as proposed. The court denies all amendments related to plaintiff’s
RICO claim and RICO conspiracy claim.
IT IS FURTHER ORDERED that plaintiff’s motion to compel payment of
expert deposition costs (Docket 15) is granted in part and denied in part.
Defendant shall reimburse Mr. Riley for ten hours and fifteen minutes of
Dated June 26, 2017.
BY THE COURT:
/s/ Jeffrey L. Viken
JEFFREY L. VIKEN
change the analysis of what is reasonable. See Solvent, 210 F.R.D. at 466,
471-72. What preparation time is compensable and what compensable time is
reasonable are distinct issues.
Riley’s hourly rate is not in dispute. Defendant shall reimburse
him at the same rate it already did when paying for his travel time and time at
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