Anderson et al v. Wells Fargo Bank, N.A.
Filing
21
ORDER granting in part and denying in part 11 Motion to Dismiss; denying 11 Motion to Strike. Signed by Chief Judge Jeffrey L. Viken on 7/17/17. (SB)
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
WESTERN DIVISION
CIV. 17-5010-JLV
STEPHANIE ANDERSON,
PHETSAMONE “MAO” DARY,
MORIAH DEMERS, CHAD ENGELBY,
THOMAS ENGLISH, DEANNA HOBBS,
KEN JOHNSON, BRIAN KRUSCHKE,
JEFFREY DALLMAN, KATHRYN
EASTMAN, and ALAN HAYDEN,
ORDER
Plaintiffs,
vs.
WELLS FARGO BANK, N.A.,
Defendant.
BACKGROUND
Multiple plaintiffs filed this action against defendant Wells Fargo Bank,
N.A.
(Docket 6).
Each plaintiff was an employee of defendant who was fired
in approximately the last five years because of the plaintiff’s criminal
background information.
Id. at pp. 3, 6, 12, 16, 22, 23, 25, 29-30, 32-33, 36
& 39-40; see Docket 12 at p. 8.
against defendant.
Id.
Plaintiffs’ complaint1 advances 31 claims
The court has jurisdiction pursuant to 28 U.S.C.
§ 1332 because there is complete diversity between the parties and the
amount in controversy exceeds $75,000.
1This
complaint.
Id. at p. 2.
Federal question
order refers to plaintiffs’ amended complaint simply as plaintiffs’
jurisdiction pursuant to 28 U.S.C. § 1331 provides the court with jurisdiction
over plaintiffs’ claims grounded in federal law.
Id.
The complaint includes several state law causes of action.
plaintiff alleges a fraud and deceit claim.
Each
Id. at pp. 4-5, 10-11, 14-15, 18-19,
21-24, 27-28, 30-31, 34-35, 37-38 & 41-42.
Aside from Mr. Engelby, each
plaintiff brings a claim for punitive damages.
Id. at pp. 5-6, 11, 15, 19-20,
24-25, 28, 21-32, 35, 39 & 43.
Five plaintiffs assert promissory estoppel
claims against defendant: Ms. Anderson, Mr. Dary, Ms. Demers, Ms. Eastman
and Mr. Hayden.
Id. at pp. 4, 8, 17, 37 & 41.
Only Mr. Dary alleges
fraudulent inducement and fraudulent concealment claims against
defendant.
Id. at pp. 8-10.
The complaint also sets forth violations of federal law in connection
with each plaintiff.
Plaintiffs collectively allege defendant violated the Fair
Credit Reporting Act (“FCRA”) because it “failed to comply with the procedural
protections and requirements of the FCRA when it used the consumer reports
of Plaintiffs, and thousands of other employees, to make adverse employment
decisions resulting in their termination.”
Id. at p. 43.
The plaintiffs claim
defendant’s conduct in firing them violated the Racketeer Influenced and
Corrupt Organizations Act (“RICO”), 18 U.S.C. § 1962(c), and constituted a
conspiracy to violate RICO, 18 U.S.C. § 1962(d).
Id. at pp. 49-68.
The core
of plaintiffs’ RICO claims is defendant fired them for the “purpose of
terminating employees en masse, reducing payroll, eliminating earned and
2
accrued employee bonuses and benefits, and depressing the relevant job
market, all under the fraudulent pretext of compliance with federal
regulation.”
Id. at p. 61.
Defendant filed a motion to dismiss some of plaintiffs’ claims.
11).
(Docket
Defendant asserts the court should dismiss plaintiffs’ FCRA claim
under Federal Rule of Civil Procedure 12(b)(1) because plaintiffs lack standing
to bring their FCRA claim.
Id. at p. 3.
Defendant argues plaintiffs’ FCRA
and RICO claims should be dismissed under Rule 12(b)(6) because they are
time-barred.
Id.
According to defendant, Mr. English and Mr. Dallman’s
state law claims are also time-barred, warranting Rule 12(b)(6) dismissal.
Id.
Aside from timeliness, defendant argues the court should dismiss plaintiffs’
RICO claims under Rule 12(b)(6) because they fail to state a claim upon which
the court can grant relief.
Id.
Defendant alternatively moves the court to
strike plaintiffs’ complaint under Rule 12(f) to the extent it “fails to contain a
short and plain statement of the claims upon which the Plaintiffs are seeking
relief . . . .”
Id. at p. 4 (citing Fed. R. Civ. P. 8(a)).
DISCUSSION
I.
Rule 12(b)(1) motion to dismiss
“[S]tanding is an essential and unchanging part of the case-or-controversy
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
3
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
4
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.
Defendant argues the court should dismiss plaintiffs’ FCRA claim because
they lack standing. (Dockets 19 at pp. 18-23). For the FCRA allegation, the
core issue is whether plaintiffs set 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.
5
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
*4-11 (D.N.J. Jan. 24, 2017); Fisher v. Enterprise Holdings, Inc., No.
15-CV-00372, 2016 WL 4665899, at *2-4 (E.D. Mo. Sept. 7, 2016).2 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
2Defendant
cites many cases finding no concrete injury in FCRA violations.
(Docket 12 at pp. 20-22).
6
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.
The Spokeo Court itself explained the background of Congress passing the
FCRA:
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]3 by “consumer reporting agenc[ies]”4
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
3“The
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
household purposes;
(B) employment purposes; or
(C) any other purpose authorized under section 1681b of this title.’
15 U.S.C. § 1681a(d)(1).”
4“
‘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).”
7
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.
The sections at issue in this case are 15 U.S.C. §§ 1681b(b)(2)(A) &
1681b(b)(3)(A). (Docket 6 at pp. 43-49). 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
person.
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
8
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-CV-60364, 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.”
The
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.
The
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., concurring)).
9
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
10
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 495.
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.
11
Defendant argues it did not violate the FCRA’s disclosure and
authorization requirements because plaintiff was not confused by the disclosure
form. (Docket 12 at pp. 21-22). 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 6 at p. 47). 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),
provides:
[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.
12
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. 10-11. 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. (Docket 12 at
p. 20). “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
13
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 12 at p. 23). 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”). Braitbertg, 836
F.3d 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
14
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. 2017).
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. 10-13. 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
15
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 plaintiffs allege a concrete injury under the FCRA, the court finds
they have Article III standing.
II.
Rule 12(b)(6) motion to dismiss
Under Rule 12(b)(6), a 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 time-barred.”
16
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)).
Defendant’s brief in support of its motion has a chart setting out the dates
of the termination for each plaintiff’s employment. (Docket 12 at p. 8). The
court finds it helpful to use the following chart:
Chart of Dates
Plaintiff
Stephanie Anderson
Phetsamone “Mao” Dary
Moriah Demers
Chad Engelby
Thomas English
Deanna Hobbs
Ken Johnson
Brian Kruschke
Jeffrey Dallman
Kathryn Eastman
Alan Hayden
Termination date
February 6, 2012.
(Docket 6 at p. 3).
February 7, 2012.
(Docket 6 at p. 6).
October 16, 2012.
(Docket 6 at p. 16).
February 6, 2012.
(Docket 6 at p. 22).
Not later than 2012.
(Docket 6 at p. 23).
May 23, 2012.
(Docket 6 at p. 25).
2011.
(Docket 6 at pp. 29-30).
2011.
(Docket 6 at pp. 32-33).
May 23, 2012.
(Docket 6 at p. 12).
March 2012.
(Docket 6 at p. 36).
May 8, 2012.
(Docket 6 at pp. 39-40).
Duration between
termination and
complaint5
4 years and 11 months
4 years and 11 months
4 years and 3 months
4 years and 11 months
4 years and 2 months
4 years and 8 months
5 years and 2 months
5 years and 2 months
4 years and 8 months
4 years and 10 months
4 years and 8 months
Id.
5This
reference to a “complaint” relates to the plaintiffs’ initial complaint
filed on February 2, 2017. (Docket 1).
17
a.
FCRA claims
The FCRA statute of limitations is set forth at 15 U.S.C. § 1681p and
provides:
An action to enforce any liability created under this subchapter may be
brought in any appropriate United States district court, without regard to
the amount in controversy, or in any other court of competent jurisdiction,
not later than the earlier of—
(1) 2 years after the date of discovery by the plaintiff of the violation
that is the basis for such liability; or
(2) 5 years after the date on which the violation that is the basis for
such liability occurs.
“Traditionally, in federal-question cases, [the United States Court of
Appeals for the Eighth Circuit has] applied the discovery rule as the default
statute-of-limitations rule in the absence of a contrary directive from Congress.”
McDonough v. Anoka Cty., 799 F.3d 931, 940 (8th Cir. 2015). “[T]he general
approach under the discovery rule [is] that a limitations period begins to run
when a claimant discovers the facts that give rise to a claim and not when a
claimant discovers that those facts constitute a legal violation.” Mack v.
Equable Ascent Fin., L.L.C., 748 F.3d 663, 665-66 (5th Cir. 2014) (per curium)
(applying the discovery rule to the FCRA) (citing Merck & Co., Inc. v. Reynolds,
559 U.S. 633, 644-48 (2010)); see also Rocheleau v. Elder Living Const., LLC,
814 F.3d 398, 401 (6th Cir. 2016) (applying Mack and the discovery rule to the
FCRA).
18
Plaintiffs’ FCRA claim spotlights two specific violations of the statute:
15 U.S.C. §§ 1681b(b)(2) & (3). (Docket 6 at pp. 46-48). The court quoted these
sections earlier in discussing standing and will restate them here in analyzing
the statute of limitations. Section 1681b(b)(2) sets standards an employer must
follow in obtaining authorization to procure a consumer report:
[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 person.
Section 1681b(b)(3) places responsibilities on employers when taking adverse
employment action based on a consumer report:
In 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.
“In the context of § 1681b(b)(2)(A) background report issues, courts have
held that ‘a plaintiff discovers the facts giving rise to her claim when she learns
that the defendant actually procured the background report after she signed the
allegedly deficient disclosure form.’ ” Wirt v. Bon-Ton Stores, Inc., 134 F. Supp.
3d 852, 858 (M.D. Pa. 2015) (quoting Moore v. Rite Aid Headquarters Corp., No.
13-1515, 2015 WL 3444227, at *8 (E.D. Pa. May 29, 2015)). An employer
19
violates § 1681b(b)(3) by taking adverse employment action based on a consumer
report without providing a copy of the report and a written description of the
employee’s rights. Consequently, a plaintiff “discovers [the] facts [that]
constitute a legal violation” of § 1681b(b)(3) when she becomes aware a
defendant relied on her consumer report to fire her without giving her the report
or a written description of her rights. Mack, 748 F.3d at 665-66.
Defendant argues the face of plaintiffs’ complaint shows their FCRA claim
is barred by the statute of limitations. (Docket 12 at pp. 8-11). Defendant
asserts “all FCRA claims became foreclosed—at the latest—two years from the
date Wells Fargo notified each Plaintiff that his or her employment was being
terminated.” Id. at p. 11.
Plaintiffs allege their FCRA claim is timely. (Docket 16 at pp. 3-4). They
contend “[t]here is no possible way for a lay person to have discovered the FCRA
violations committed by Wells Fargo at the time of the terminations . . . .” Id. at
p. 4. Plaintiffs assert “[m]any [of them] were not even informed that a conviction
rendered them ineligible [for employment], and many of the Plaintiffs did not
have a disqualifying conviction on their criminal records.” Id.
i.
§ 1681b(b)(2)
With respect each plaintiff’s § 1681b(b)(2) allegation, the statute of
limitations begins to run when each plaintiff learned defendant obtained his or
20
her consumer report.6 See Wirt, 134 F. Supp. 3d at 858. The court examines
each plaintiff’s claim on this issue.
1.
Stephanie Anderson
The complaint’s factual allegations for Ms. Anderson state:
On February 6, 2012, she was informed in person that she was
being fired on the spot, and that a criminal background check,
pursuant to the SAFE Act, connected her to an alleged crime. . . .
On February 13, 2012, Wells Fargo sent a written notification to
Anderson through the U.S. Mail, stating “Wells Fargo regrets to
inform you that based on their hiring criteria, they are unable to
consider you for further employment opportunity with its
organization.”
(Docket 6 at p. 3).
These statements make clear Ms. Anderson learned
defendant procured her background information no later than the date of her
termination, February 6, 2012.
Id.
Because she filed her FCRA claim on
February 2, 2017,7 more than two years after she was fired, her claim is
time-barred.
15 U.S.C. § 1681p.
2.
Phetsamone “Mao” Dary
The complaint includes the following allegations regarding Mr. Dary:
Wells Fargo employees assured him at the initial hiring interview
that the prior criminal charge was not a problem, and that it would
not affect his employment. . . . Dary had 10 productive and
successful years of employment, prior to being fired and escorted
out the door for the same minor offense that he told Wells Fargo
about 10 years earlier. . . . Dary was terminated on February 7,
2012. . . . In an effort to rectify the situation and return to
6Plaintiffs’
argument that a lay person would not know of a FCRA violation
is unavailing. (Docket 16 at p. 4). The issue is when a plaintiff discovered the
facts that constitute a FCRA violation, not when a plaintiff becomes aware of a
violation of federal law. See Mack, 748 F.3d at 665-66.
7The
court uses the date of plaintiffs’ initial complaint for statute of
limitations purposes.
21
employment with Wells Fargo, Dary traveled three and a half hours
back to his original home county to beg the Clerk of Courts to dig
through the archives to get the paperwork showing that there was
no conviction and that it had been expunged.
(Docket 6 at p. 6).
These statements indicate Mr. Dary learned defendant
procured his background information no later than the date of his termination,
February 2, 2012.
Id.
Because he filed his FCRA claim on February 6, 2017,
more than two years after he was fired, his claim is time-barred.
15 U.S.C.
§ 1681p.
3.
Jeffrey Dallman
The complaint states Mr. Dallman “was employed for a period of 12 years
prior to his termination in May 23, 2012. . . .
Wells Fargo subsequently fired
him based upon a conviction that took place 23 years ago.”
pp. 12-13).
(Docket 6 at
Based on these statements, Mr. Dallman learned defendant
procured his background information no later than the date of his termination,
May 23, 2012.
Id.
Because he filed his FCRA claim on February 2, 2017, more
than two years after he was fired, his claim is time-barred.
4.
15 U.S.C. § 1681p.
Moriah Demers
The complaint asserts Ms. Demers “received, on October 16, 2012[,] a
termination notice indicating that ‘as a result of the background screening, you
are ineligible for employment with Wells Fargo and your employment will be
terminated October 16, 2012.’ ”
(Docket 6 at pp. 16-17).
This statement
makes clear Ms. Demers learned defendant procured her background
22
information no later than the date of her termination, October 16, 2012.
Id.
Because she filed her FCRA claim on February 2, 2017, more than two years
after she was fired, her claim is time-barred.
5.
15 U.S.C. § 1681p.
Chad Engleby
The complaint’s factual allegations for Mr. Engleby advise:
Defendant deceived Plaintiff by informing him that the background
check by First Advantage revealed a criminal conviction which
prohibited his employment. . . . On February 6, 2012, Wells Fargo,
through the mail, informed Engelby that he was terminated because
he was “ineligible for employment with Wells Fargo.” Such
representation was willfully and intentionally done by Wells Fargo
knowing full well that the Plaintiff was eligible to continue with Wells
Fargo.
(Docket 6 at pp. 21-22).
These statements establish Mr. Engleby learned
defendant procured his background information no later than the date of his
termination, February 6, 2012.
Id.
Because he filed his FCRA claim on
February 2, 2017, more than two years after he was fired, his claim is
time-barred.
6.
15 U.S.C. § 1681p.
Thomas English
The complaint states Mr. English “was a highly successful employee when
he was abruptly fired over a criminal conviction that occurred 15 to 17 years
prior (1995) for which he received an expungment.”
(Docket 6 at p. 23).
The
complaint does not clearly state Mr. English’s termination date, but this
statement indicates it occurred no later than 17 years following his 1995
conviction, which is 2012.
Id.
Consequently, Mr. English learned defendant
23
procured his background information no later than 2012, and because he filed
his FCRA claim on February 2, 2017, more than two years after 2012, his claim
is time-barred.
7.
15 U.S.C. § 1681p.
Deanna Hobbs
The complaint asserts on “May 23, 2012, Wells Fargo informed Hobbs that
as a result of a background screening ‘[she was] ineligible for employment with
Wells Fargo and [her] employment [was] terminated 05-23-2012.’ ”
p. 26).
(Docket 6 at
This statement establishes Ms. Hobbs learned defendant procured her
background information no later than the date of her termination, May 23, 2012.
Id.
Because she filed her FCRA claim on February 2, 2017, more than two years
after she was fired, her claim is time-barred.
8.
15 U.S.C. § 1681p.
Ken Johnson
The complaint states defendant had a security screening of Mr. Johnson’s
background completed in 2011, and defendant “used Johnson’s 1979 arrest as
the sole basis for his termination.
Wells Fargo claimed that Johnson was not
eligible for hire pursuant to Section 19 of the Federal Deposit Insurance Act.”
(Docket 6 at p. 29).
Mr. Johnson does not clearly allege when he was fired, but
his statements regarding attempts to get his job back in 2011 indicate his
employment ended in that year.
Id.
Consequently, Mr. Johnson learned
defendant procured his background information no later than 2011, and
because he filed his FCRA claim on February 2, 2017, more than two years after
he was fired, his claim is time-barred.
15 U.S.C. § 1681p.
24
9.
Brian Kruschke
The complaint includes the following factual allegations for Mr. Kruschke:
In 2011, as Branch Manager of [a] Wells Fargo location, he started
hearing about Wells Fargo’s new background screening plan,
allegedly involving the SAFE Mortgage Act. Kruschke had no
reason to be concerned and had all of the employees screened. At
the time of this screening, Kruschke was making about $80,000 a
year. He had applied for and expected to become the Branch
Manager of the Level V, Minneapolis Wells Fargo. The new position
would have ranged from $120,000.00 a year to $150,000.00 a year.
. . . Kruschke was informed that he could not come back to work.
Wells Fargo claimed that this was because of the SAFE Act and
FIRREA.
(Docket 6 at pp. 32-33).
Similar to Mr. Johnson, Mr. Kruschke does not assert
when defendant fired him, but the quotation above indicates it occurred no later
than 2011.
Id.
Mr. Kruschke learned defendant procured his background
information no later than 2011, and because he filed his FCRA claim on
February 2, 2017, more than two years after he was fired, his claim is
time-barred.
15 U.S.C. § 1681p.
10.
Kathryn Eastman
The complaint asserts Ms. Eastman “was fired by Wells Fargo in March of
2012 under the auspices of the SAFE Act and FIRREA. . . . Wells Fargo claimed
that she was no longer eligible to be employed because of a conviction for theft of
a hairbrush, thirty one years prior to termination”
(Docket 6 at p. 36).
This
means Ms. Eastman learned defendant procured her background information no
later than March 2012.
Id.
Because she filed her FCRA claim on February 2,
25
2017, more than two years after she was fired, her claim is time-barred.
15 U.S.C. § 1681p.
11.
Alan Hayden
The complaint states “[w]ithin two months of [Mr. Hayden’s] most recent
promotion, he was fired because of his misdemeanor conviction that he
specifically brought to Wells Fargo’s attention prior to the original hiring. . . .
Hayden was terminated on May 8, 2012.”
(Docket 6 at p. 40).
Mr. Hayden
learned defendant procured his background information no later than May 8,
2012, when defendant terminated his employment.
Id.
Because he filed his
FCRA claim on February 2, 2017, more than two years after he was fired, his
claim is time-barred.
15 U.S.C. § 1681p.
Based on the discussion above, the court finds the FCRA’s statute of
limitations bars each plaintiff’s FCRA claim alleging a violation of § 1681b(b)(2).
ii.
§ 1681b(b)(3)
As noted earlier, a plaintiff “discovers [the] facts [that] constitute a legal
violation” of § 1681b(b)(3) when she becomes aware a defendant relied on her
consumer report to fire her without giving her the report or a written description
of her rights. Mack, 748 F.3d at 665-66. The latest possible date for each
plaintiff to discover the facts underlying a § 1681b(b)(3) violation is the plaintiff’s
termination date. That is the point when a plaintiff learns defendant took
adverse employment action without providing a copy of the consumer report or a
written explanation of rights. The discussion above demonstrates each
26
plaintiff’s employment ended outside the FCRA’s statute of limitations. See
supra Chart of Dates at p. 17 & Section II.a.i.1-11 at pp. 20-25. Consequently,
the court finds plaintiffs’ FCRA claims based on violations of § 1681b(b)(3) are
time-barred. 15 U.S.C. § 1681p.
b.
RICO claims
“Civil RICO actions are governed by a four-year statute of limitations.”
Ass’n of Commonwealth Claimants v. Moylan, 71 F.3d 1398, 1402 (8th Cir.
1995) (citing Agency Holding Corp. v. Malley-Duff & Assocs., 483 U.S. 143, 156
(1987); see Waldner v. N. Am. Truck & Trailer, Inc., 277 F.R.D. 401, 406 (D.S.D.
2011) (“While the civil RICO statute does not contain a statute of limitations, the
Supreme Court has reasoned that civil RICO actions are subject to a four-year
statute of limitations.”).
“Federal courts . . . generally apply a discovery accrual rule when a statute
is silent on the issue, as civil RICO is here.” Rotella v. Wood, 528 U.S. 549, 555
(2000). In Waldner, the United States District Court for the District of South
Dakota held the “injury discovery rule” applies to the statute of limitations for
civil RICO actions. Waldner, 277 F.R.D. at 407. “The injury discovery rule has
two components.” Id. “First, the civil RICO limitations period ‘begins to run
when a plaintiff knows or should know of the injury that underlies his cause of
action.’ ” Id. (quoting Grimmett v. Brown, 75 F.3d 506, 510 (9th Cir. 1996)). A
plaintiff’s “discovery of the injury, not discovery of the other elements of a claim,
is what starts the clock.” Rotella, 528 U.S. at 555. The discovery is sufficient
if, from the plaintiff’s subjective perspective, she “actually knew of her injury,” or
27
“using a reasonable person standard, whether she should have known.”
Waldner, 277 F.R.D. at 407 (quoting Bendzak v. Midland Nat. Life Ins. Co., 440
F. Supp. 2d 970, 979 (S.D. Iowa 2006)) (internal quotation marks omitted).
“The second part of the ‘injury discovery’ rule is the ‘separate accrual rule,’
which provides that a new cause of action accrues for each new and independent
injury, even if the RICO violation causing the injury happened more than four
years before.” Id. (quoting Grimmett, 75 F.3d at 510). “But ‘non-independent
injuries will not cause a new limitations period to accrue.’ ” Id. (quoting
Misischia v. St. John’s Mercy Health Sys., No. 04-CV-1161, 2005 WL 1875035,
at *7 (E.D. Mo. Aug. 5, 2005)) (internal quotation marks omitted). “A new
predicate act does not necessarily create a new injury for the ‘separate accrual
rule.’ ” Id. (quoting Misischia, 2005 WL 1875035, at *7).
i.
Injury
The court must determine the injury underlying each plaintiff’s RICO
claim because that is the moment when the statute of limitations clock started.
As stated earlier, the core of plaintiffs’ RICO claim8 is that defendant fired them
for the “purpose of terminating employees en masse, reducing payroll,
eliminating earned and accrued employee bonuses and benefits, and depressing
the relevant job market, all under the fraudulent pretext of compliance with
federal regulation.”
(Docket 6 at p. 61).
8Use
According to plaintiffs, defendant’s
of “RICO claim” in this section primarily refers to count 30 of the
complaint, the substantive RICO claim. (Docket 6 at pp. 49-67). The court
separately addresses count 31, plaintiffs’ RICO conspiracy claim. Id. at
pp. 67-68; see infra Section II.b.iii.
28
scheme involved collaborating with its “agents and subcontractors” in order to
“induce Plaintiff[s] and other employees who fully disclosed convictions to accept
employment with Wells Fargo,” only to fire plaintiffs “behind a façade of
compliance with federal [law,]” and then deliberately concealed its conduct with
misrepresentations.
Id. at pp. 63-64.
Under this RICO claim, the injury each plaintiff suffered was being fired
based on defendant’s understanding of the plaintiff’s criminal background
information.
It is clear from the complaint that plaintiffs ground their RICO
cause of action in the termination of their jobs.
Id. at pp. 49-56, 61-64; see also
supra Section II.a.i.1-11 (detailing the complaint’s allegations surrounding each
plaintiff’s termination).9 As the complaint states, defendant made each plaintiff
directly aware of his or her termination, and that the termination was based on
the plaintiff’s criminal background information and defendant’s alleged
responsibilities under federal law. (Docket 6 at pp. 49-50); see supra Section
II.a.i.1-11. This is the root of plaintiffs’ RICO claim and shows their injuries
occurred when they were fired. Each plaintiff “actually knew of [his or] her
injury” on the date of termination. Waldner, 277 F.R.D. at 407. Because it is a
plaintiff’s “discovery of the injury, not discovery of the other elements of a claim
[that] starts the clock[,]” the statute of limitations began to run for each plaintiff
when he or she learned defendant fired him or her. Rotella, 528 U.S. at 555.
9Although
this citation relates to plaintiffs’ FCRA claim, the complaint’s
allegations connecting the firing of each plaintiff with defendant’s use of the
employee’s background information is applicable to the RICO injury analysis.
29
Even if the plaintiffs lacked actual knowledge of their injuries, they “should
have known” based on “a reasonable person standard . . . .” Waldner, 277
F.R.D. at 407. In a securities fraud case, the Eighth Circuit held notice under a
comparable standard can occur when “storm warnings . . . would alert a
reasonable person of the possibility of misleading information, relayed either by
an act or omission.” Great Rivers Co-op. of Southeastern Iowa v. Farmland
Indus., Inc., 120 F.3d 893, 896 (8th Cir. 1997). The United States District
Court for the Southern District of Iowa applied the Great Rivers “storm warnings”
reasoning to a civil RICO action and the reasonable person standard for
discovering an injury. Bendzak, 440 F. Supp. 2d at 980-81. Once plaintiffs
were fired and provided the explanation that defendant was complying with
federal law, they “should have known of [their] injur[ies,]” id., because they had
sufficient “storm warnings.” Great Rivers, 120 F.3d at 896. Reasonably
diligent people in plaintiffs’ situations would have taken some sort of
steps—contacting a lawyer or promptly researching defendant’s alleged federal
obligations—once they were fired and received defendant’s explanation. As
Bendzak highlighted, this finding is consistent with the United States Court of
Appeals for the Third Circuit’s observation that “the general purpose of civil RICO
[is] to encourage plaintiffs to actively investigate potential criminal activity, to
become ‘prosecutors, private attorneys general, dedicated to eliminating
racketeering activity.’ ” Mathews v. Kidder, Peabody & Co., Inc., 260 F.3d 239,
252 (3d Cir. 2001) (quoting Rotella, 528 U.S. at 557).
30
ii.
Separate accrual and equitable tolling
Plaintiffs argue their complaint states new and independent injuries
providing them with “a new cause of action” even though “the RICO violation
causing the injury happened more than four years before.” Waldner, 277 F.R.D.
at 407. Plaintiffs allege “the racketeering charges in the [complaint] contain
numerous allegations that the predicate activity continued . . . at least well into
2013.” (Docket 16 at p.15). Plaintiffs further contend defendant’s refusal to
rehire Ms. Anderson and Mr. Dallman and its rehiring of Mr. Dary “without his
seniority, tenure and employment benefits accumulated” constitute independent
injuries for the purposes of the separate accrual rule. Id. at pp. 15-16.
Neither of plaintiffs’ arguments show the separate accrual rule applies.
“A new predicate act does not necessarily create a new injury for the ‘separate
accrual rule.’ ” Waldner, 277 F.R.D. at 407 (quoting Misischia, 2005 WL
1875035, at *7). Under Waldner, plaintiffs’ bare statement that predicate acts
underlying the RICO claim extended into 2013 does not sufficiently show an
independent injury. See id. Further, the Plaintiffs’ assertions regarding
defendant not rehiring Ms. Anderson and Mr. Dallman and eliminating Mr.
Dary’s seniority and past benefits advance the sort of “non-independent injuries
[that] will not cause a new limitations period to accrue.” Id. (citing (quoting
Misischia, 2005 WL 1875035, at *7) (internal quotation marks omitted). The
assertions tie back to the original injuries—the termination of Ms. Anderson, Mr.
Dallman and Mr. Dary’s employment—and fail to set forth a new injury. See id.
31
Plaintiffs contend the statute of limitations should be tolled. In Rotella
the Supreme Court reaffirmed “the understanding that federal statutes of
limitations are generally subject to equitable principles of tolling, and where a
pattern remains obscure in the face of plaintiff’s diligence in seeking to identify it,
equitable tolling may be one answer to the plaintiff’s difficulty . . . .” Rotella, 528
U.S. at 560 (internal citation omitted). To show they diligently sought to identify
defendant’s fraud, plaintiffs state they “have exercised reasonable diligence in
being able to bring this lawsuit and thus under Supreme Court standards, the
statute should be tolled for Plaintiffs.” (Docket 16 at p. 17). Stating they
exhibited diligence does not explain what actions plaintiffs took that the court
should consider to be diligent investigation. Even if defendant’s “pattern
remain[ed] obscure” to plaintiffs, the court finds they have not demonstrated
“diligence in seeking to identify it . . . .” Rotella, 528 U.S. at 561. “While
barring the action at this early stage based on the statute of limitations produces
a harsh result, the Supreme Court has made it clear that district courts should
not toll the statute of limitations in a civil RICO action where a plaintiff has not
exercised diligence in the discovery of her injury.” Bendzak, 440 F. Supp. 2d at
983.
Because plaintiffs discovered their injuries underlying the RICO claim
beyond the four-year statute of limitations, the court finds they are time-barred.
See Waldner, 277 F.R.D. at 407; supra II.a.i.1-11 at pp. 20-25; Chart of Dates at
p. 17.
32
iii.
RICO conspiracy
Plaintiffs also collectively allege defendant violated federal law by
conspiring to violate RICO. (Docket 6 at pp. 67-68). It is unlawful for any
person to conspire to violate a section of RICO. 18 U.S.C. § 1962(d). “Like the
statute of limitations under the other civil RICO provisions, the statute of
limitations for civil RICO conspiracy claims is four years.” Bendzak, 440 F.
Supp. 2d at 983 (citing Hodas v. Sherburne, Powers & Needham, P.C., 938 F.
Supp. 60, 65 (D. Mass. 1996)). “Moreover, the analysis for civil RICO conspiracy
claims is the same as that for civil RICO claims brought under 18 U.S.C.
§ 1962(c).” Id. Because the court finds plaintiffs’ RICO claim time-barred,
plaintiffs’ RICO conspiracy claim is also not timely. See id. (“For the reasons
discussed above, Bendzak’s civil RICO conspiracy claim, if there is one, is
time-barred . . . .”).
c.
Mr. English and Mr. Dallman’s state law claims
Defendant argues Mr. English and Mr. Dallman’s state law claims for
fraud and deceit should be dismissed as time-barred. (Docket 12 at pp. 12-14).
In discussing what statute of limitations to apply to these plaintiffs’ fraud claims,
defendant asserts the court must resolve a conflict of laws issue. Id. at
pp. 13-14. Defendant contends the conflict of laws inquiry leads to the court
applying statutes of limitations from states other than South Dakota. Id.
“A federal court exercising diversity jurisdiction is required to apply the
law of the forum when ruling on statutes of limitations.” Pinnacle Pizza Co., Inc.
33
v. Little Caesar Enters., Inc., 598 F.3d 970, 975 (8th Cir. 2010); Zutz v. Case
Corp., 422 F.3d 764, 774 (8th Cir. 2005) (“Federal courts sitting in diversity
apply the forum state’s statute of limitations.”). As noted earlier, the court has
diversity jurisdiction over plaintiffs’ state law claims. See supra Background at
pp. 1-2. Despite defendant’s argument on conflicting laws, the court is required
to apply the law of the forum, South Dakota, on the statute of limitations issue.
See Pinnacle Pizza, 598 F.3d at 975 (“The forum state in this case[ is] South
Dakota, . . . [t]herefore we must apply the South Dakota statute of limitations in
resolving this case.”).
The six-year statute of limitations in SDCL § 15-2-13(6) applies to Mr.
English and Mr. Dallman’s fraud and deceit claims. See Masloskie v. Century
21 Am. Real Estate, Inc., 818 N.W.2d 798, 803 (S.D. 2012) (apply SDCL
§ 15-2-13(6) to a fraud and deceit cause of action). Each plaintiff’s state law
claim accrued on the date of his termination. Mr. Dallman’s employment with
defendant ended May 23, 2012, and the court determined defendant fired Mr.
English at a time not later than 2012. See supra Chart of Dates at p. 17 &
Section II.a.i.3 & 6 at pp. 21-23. Plaintiffs filed their original complaint on
February 2, 2017, so plaintiffs’ claims needed to accrue no later than February 2,
2011. Mr. Dallman’s claim clearly accrued after February 2, 2011, and the
complaint does not establish Mr. English’s claim accrued before February 2,
2011. The court finds these plaintiffs’ state law claims for fraud and deceit are
not time-barred.
34
III.
Rule 12(f) motion to strike
In the alternative to its motion to dismiss, defendant argues the court
should strike plaintiffs’ complaint under Federal Rule of Civil Procedure 12(f).
(Docket 12 at pp. 23-25). Defendant asserts plaintiffs’ complaint “is directly
contrary to Rule 8’s purpose of promoting simplicity and brevity to clearly
present the issues involved in the litigation.” Id. at p. 24. Defendant contends
it “will be faced with the difficult, if not impossible, task of responding to each of
the factual assertions” in the complaint unless the court strikes the pleading.
Id.
Under Rule 12(f), “courts may strike from a pleading any insufficient
defense or any redundant, immaterial, impertinent, or scandalous matter.”
“Judges enjoy liberal discretion to strike pleadings under Rule 12(f).”
BJC
Health Sys. v. Columbia Cas. Co., 478 F.3d 908, 917 (8th Cir. 2007).
“Despite
this broad discretion . . . striking a party’s pleadings is an extreme measure, and,
as a result, . . . [m]otions to strike under Fed. R. Civ. P. 12(f) are viewed with
disfavor and are infrequently granted.”
Stanbury Law Firm v. IRS, 221 F.3d
1059, 1063 (8th Cir. 2000) (internal quotation marks omitted).
“[E]ven matters
that are not ‘strictly relevant’ to the principal claim at issue should not
necessarily be stricken, if they provide ‘important context and background’ to
claims asserted or are relevant to some object of the pleader’s suit.”
FDIC v.
Dosland, 298 F.R.D. 388, 393 (N.D. Iowa 2013) (quoting Stanbury, 221 F.3d at
1063).
35
Because the court grants defendant’s Rule 12(b)(6) motion to dismiss as to
plaintiffs’ FCRA and RICO claims, most of defendant’s purpose in its Rule 12(f)
motion to strike is satisfied.
Upon review of the plaintiffs’ remaining causes of
action, the court finds the “extreme measure” of striking plaintiffs’ pleading is
not proper.
See Stanbury, 221 F.3d at 1063.
Plaintiffs’ complaint provides
“important context and background” to the claims it advances against
defendant.
See id.
ORDER
Based on the above analysis, it is
ORDERED that defendant’s motion to dismiss (Docket 11) is granted in
part and denied in part.
Counts 29, 30 and 31—plaintiffs’ FCRA and RICO
claims—are dismissed without prejudice.
Mr. Dallman and Mr. English’s state
law claims—counts 9, 10, 15 and 16—are not dismissed.
strike is denied.
Dated July 17, 2017.
BY THE COURT:
/s/ Jeffrey L. Viken
JEFFREY L. VIKEN
CHIEF JUDGE
36
Defendant’s motion to
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