Groshek, Cory v. Great Lakes Higher Education Corporation

Filing 37

ORDER denying 10 Motion to Dismiss; overruling 32 Appeal of Magistrate Judge Decision to District Court; and ordering defendant to supplement its response to Interrogatory No. 2 to provide the names and contact information of job applicants for whom it has requested a credit report on or after March 5, 2010. Signed by District Judge James D. Peterson on 11/16/2015. (jls)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF WISCONSIN

CORY GROSHEK,

v.

Plaintiff,

OPINION & ORDER
15-cv-143-jdp

GREAT LAKES HIGHER
EDUCATION CORPORATION,
Defendant.

Plaintiff Cory Groshek has sued defendant Great Lakes Higher Education Corporation
in a proposed class action for allegedly violating the Fair Credit Reporting Act (FCRA), 15
U.S.C. § 1681 et seq. Groshek seeks statutory damages rather than actual damages, but
statutory damages are available only for willful violations. Great Lakes has moved to dismiss
Groshek’s class action complaint, contending that it fails to adequately plead willfulness.
Dkt. 10. The court concludes that the complaint adequately alleges willfulness, and the
motion to dismiss will be denied.
Great Lakes has also objected to the magistrate judge’s order granting Groshek’s
motion to compel discovery. Dkt. 32. The court will overrule the objection.

ALLEGATIONS OF FACT
At this point in the case, the court accepts Groshek’s well-pleaded factual allegations
as true and draws all reasonable inferences from those facts in his favor. Transit Exp., Inc. v.
Ettinger, 246 F.3d 1018, 1023 (7th Cir. 2011).
Groshek applied for a job with Great Lakes in February 2014. In Groshek’s
application, he authorized Great Lakes to conduct a background check on him and to procure

his credit report. The document that Groshek signed contained the following statement: “I
release all parties for all liability for any damage that may result from furnishing information,
including my providing my birth date to Verifications, Inc. [a third-party consumer reporting
agency] if requested, and this authorization to Great Lakes and Verifications, Inc.” Dkt. 1-3.
After Groshek signed the document, Great Lakes obtained Groshek’s credit report on
February 20, 2014. The following week, Groshek learned that Great Lakes had obtained his
credit report. Dkt. 29-1, at 5-6.
On March 5, 2015, Groshek timely filed this proposed class action lawsuit alleging
that Great Lakes willfully violated the FCRA by obtaining his credit report without first
providing him with a proper consumer credit report disclosure. Because the FCRA is a federal
statute, the court has subject matter jurisdiction under 28 U.S.C. § 1331.

ANALYSIS
The FCRA requires anyone who procures a consumer report for employment purposes
to first provide the consumer with “a clear and conspicuous disclosure . . . in a document that
consists solely of the disclosure, that a consumer report may be obtained for employment
purposes.” 15 U.S.C. § 1681b(b)(2)(A). The statutory provision expressly allows the
consumer’s written authorization for the report to be on the disclosure document. But by the
terms of the statute, the document must otherwise consist “solely” of the disclosure. Willful
violations of the FCRA include both knowing and reckless actions. Safeco Ins. Co. of Am. v.
Burr, 551 U.S. 47, 57-60 (2007).

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A. Motion to dismiss
To survive a motion to dismiss pursuant to Rule 12(b)(6), a complaint must contain
sufficient facts to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556
U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)).
Groshek’s claim is plausible if he “pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged.” Id. But legal
conclusions and “[t]hreadbare recitals of the elements of a cause of action, supported by mere
conclusory statements” are insufficient. Adams v. City of Indianapolis, 742 F.3d 720, 728 (7th
Cir. 2014) (internal citations and quotation marks omitted).
To violate the FCRA willfully, Great Lakes must have acted intentionally or at least
recklessly, with an “unjustifiably high risk of harm that is either known or so obvious that it
should be known.” Safeco, 551 U.S. at 68 (internal citations and quotation marks omitted).
Recklessness in this context requires more than a careless reading or a reasonable
misinterpretation of the FCRA; it requires objectively unreasonable action. Id. at 69.
There is no appellate authority and district courts have split on whether including a
liability release in a consumer credit report disclosure constitutes a violation of the FCRA.
The courts holding that liability releases violate the FCRA rely on a plain reading of the
statutory text and emphasize that the law mandates “a clear and conspicuous disclosure . . .
in a document that consists solely of the disclosure.” 15 U.S.C. § 1681b(b)(2)(A); see Groshek
v. Time Warner Cable, Inc., No. 15-cv-157, 2015 WL 4620013, at *2 (E.D. Wis. July 31,
2015); Speer v. Whole Food Mkt. Grp., Inc., No. 14-cv-3035, 2015 WL 1456981, at *3 (M.D.
Fla. Mar. 30, 2015); Milbourne v. JRK Residential Amer., LLC, No. 12-cv-861, 2015 WL
1120284, at *6-7 (E.D. Va. Mar. 11, 2015); Miller v. Quest Diagnostics, 85 F. Supp. 3d 1058,

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1061 (W.D. Mo. 2015); Dunford v. Am. DataBank, LLC, 64 F. Supp. 3d 1378, 1388 (N.D.
Cal. 2014); Avila v. NOW Health Grp., Inc., No. 14-cv-1551, 2014 WL 3537825, at *2 (N.D.
Ill. July 17, 2014); Reardon v. Closetmaid Corp., No. 08-cv-1730, 2013 WL 6231606, at *1011 (W.D. Pa. Dec. 2, 2013); Singleton v. Domino’s Pizza, No. 11-cv-1823, 2012 WL 245965,
at *9 (D. Md. Jan. 25, 2012); and EEOC v. Video Only, Inc., No. 06-cv-1362, 2008 WL
2433841, at *11 (D. Or. June 11, 2008). A substantial majority of cases that have considered
the issue have gone Groshek’s way in concluding that the inclusion of the waiver on the
disclosure document is a violation of the FCRA.
But a few courts have held that including a liability release on the disclosure would
not violate the FCRA, at least not clearly so, emphasizing that there is a “dearth of case law
interpreting” the pertinent statutory language. Syed v. M-I LLC, No. 14-cv-742, 2014 WL
4344746, at *3 (E.D. Cal. Aug. 28, 2014); Burghy v. Dayton Racquet Club, Inc., 695 F. Supp.
2d 689, 695-96 (S.D. Ohio 2009). These courts reasoned that absent definitive judicial
guidance, the statute is less than perfectly clear, and a company’s interpretation of the FCRA,
even if technically inconsistent with the statutory language, cannot be characterized as
unreasonable. Another court reasoned that a one-sentence release was “not so great a
distraction as to discount the effectiveness of the disclosure.” Smith v. Waverly Partners, No.
10-cv-28, 2012 WL 3645324, at *5-6 (W.D. N.C. Aug. 23, 2012). 1
In the absence of binding appellate authority, the court will follow the approach taken
by the majority of district courts, based on the express language of the statue, which is the
1

Great Lakes also relies on Gardner v. Appleton Baseball Club, Inc., No. 09-cv-705, 2010 WL
1368663, at *1 (E.D. Wis. Mar. 31, 2010). But that case involves an unrelated provision of
the Fair and Accurate Credit Transactions Act, 15 U.S.C. § 1681c, and it evaluates the
sufficiency of a complaint that did not allege particularized facts about information displayed
on credit card receipts. Gardner is not sufficiently analogous to be persuasive.

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starting point for any statutory interpretation. Gross v. FBL Financial Services, Inc., 557 U.S.
167, 175 (2009) (“Statutory construction must begin with the language employed by
Congress and the assumption that the ordinary meaning of that language accurately expresses
the legislative purpose” (internal quotation marks omitted)). By the terms of the statute, the
required conspicuous disclosure about the report must consist solely of the disclosure, with the
only exception being the consumer’s authorization for the report. The statutory language is
the end of the analysis when the statutory language is unambiguous, as it is here. Robinson v.
Shell Oil Co., 519 U.S. 337, 340 (1997) (The “inquiry must cease if the statutory language is
unambiguous and the statutory scheme is coherent and consistent.” (internal quotation
marks omitted)). Including a sweeping waiver of the consumer’s rights on the disclosure is
inconsistent with 15 U.S.C. § 1681b(b)(2)(A).
The court also concludes that Groshek’s complaint adequately alleges that Great
Lakes acted willfully. Groshek’s complaint includes more than legal conclusions and
threadbare recitals of the elements. The complaint alleges that Great Lakes acted willfully not
only by providing him with a deficient disclosure, but also by certifying to the third-party
consumer reporting agency that its disclosure complied with the FCRA’s requirements. Dkt.
1, ¶¶ 21-34. The complaint also alleges that Great Lakes took these actions in the face of
unambiguous statutory language and long-standing judicial and regulatory guidance. Id. ¶ 33.
As Great Lakes points out, the guidance is not binding and it is not unequivocal, but at the
pleading stage, it is sufficient to raise the inference that Great Lakes was objectively reckless
in preparing and using a disclosure form that does not conform to the express terms of the
FCRA. It would greatly undermine the purposes of the FCRA if a defendant, after the fact of
a violation, could defeat an allegation of willfulness simply by coming up with some arguable

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ambiguity in the FCRA’s statutory requirements. Safeco, 551 U.S. at 48 (“the ambitious
objective of FCRA’s statement of purpose . . . uses expansive terms to describe the adverse
effects of unfair and inaccurate credit reporting and the responsibilities of consumer reporting
agencies.”).
One final point: allegations about the mental state of a defendant, such as the
willfulness allegation here, must necessarily be based on the circumstantial information
available to the plaintiff. Pavlick v. Mifflin, 90 F.3d 205, 209 (7th Cir. 1996) (“Direct
evidence of knowledge is difficult—sometimes impossible—to obtain”). Under Twombly and
Iqbal, a plaintiff is not required to prove his case at the pleading stage; the plaintiff does not
even have to show that the allegations are probable. Iqbal, 556 U.S. at 678 (“The plausibility
standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer
possibility that a defendant has acted unlawfully.”). All that is required is that the plaintiff
alleges facts that make it plausible that the defendant has committed the alleged violation.
Groshek has alleged sufficient circumstantial facts concerning Great Lakes’s potential
willfulness to clear that low hurdle. Great Lakes’s motion to dismiss will therefore be denied.
B. Motion to compel pre-certification discovery
Groshek’s Interrogatory No. 2 asked Great Lakes to identify “all job applicants for
whom Great Lakes Higher Education Corporation requested a consumer report on or after
March 5, 2010, including name, address, telephone number(s) and e-mail address.” Dkt. 271, at 4. Great Lakes did not object to providing this information for some potential class
members, and it responded to Groshek’s interrogatory with names and contact information
for more than 900 potential class members. Dkt. 33, at 1. However, Great Lakes provided
the information about individuals for whom the company obtained a credit report in only the

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preceding two years, as opposed to the preceding five years as Groshek had requested. In
response, Groshek moved the court to compel production of names and contact information
dating back three more years. Dkt. 26. The magistrate granted Groshek’s motion. Dkt. 31
and Dkt. 34-1. Great Lakes timely objected to the magistrate’s order, Dkt. 32, and it argues
that because Groshek learned of the violation shortly after it happened, the class should be
constrained to a two-year time period.
Under Federal Rule of Civil Procedure 72(a), a party may object to a magistrate
judge’s order on a non-dispositive motion, which a district court judge may modify or set
aside if it is clearly erroneous or contrary to law. The magistrate judge’s order compelling
information about potential class members going back five years was neither clearly erroneous
nor contrary to law. Groshek is entitled to the discovery and the court will overrule Great
Lakes’s objection.
The FCRA provides that a plaintiff must file suit by either two years after the date
that he discovered the alleged violation, or five years after the date of the violation itself,
whichever period expires earlier. 15 U.S.C. § 1681p. A violation is not complete until the
employer obtains the credit report without proper disclosure. See id. § 1681b(b)(2). The
parties contest which time period is applicable in this case and how far back discovery must
reach. Compare Dkt. 26, with Dkt. 30. But all agree that the correct time period depends on
whether and when each potential class member learned of the violation.
At this point, Groshek does not yet know how many total class members there may
be, who they are, or whether they ever learned about a FCRA violation. At the very least,
Groshek is entitled to discovery about the number of individuals for whom Great Lakes
obtained a credit report within the five years preceding the filing of Groshek’s complaint,

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who also received a deficient disclosure at some point before Great Lakes ran each credit
report. This information is relevant to the size and scope of the potential class, even if the
potential members are later excluded from a certified class. See Fed. R. Civ. P. 26(b)(1).
The general rule is that the names and contact information of potential class members
are not discoverable before certification. Oppenheimer Fund, Inc. v. Sanders, 437 U.S. 340, 35254 (1978). However, Groshek may be entitled to this information if the names or contact
information had “any bearing . . . on issues in the case.” Id. at 352, 354 n.20 (“There may be
instances where this information could be relevant to issues that arise under Rule 23 [e.g.,
numerosity, commonality, and adequacy of representation], or where a party has reason to
believe that communication with some members of the class could yield information bearing
on these issues or other issues.”). The exception might well apply here, and for that reason
the magistrate’s ruling is not clearly erroneous.
The individuals for whom Great Lakes obtained a credit report after March 5, 2010,
are potential class members unless and until discovery reveals that they became aware of the
alleged violation more than two years before Groshek filed his complaint. Any later exclusion
of these potential class members will be attributable to the applicability of Great Lakes’s
statute of limitations defense, not because the substance of their claims lacks commonality
with the rest of the class. In the meantime, the best way to learn whether and when they each
learned of an alleged violation is by communicating with them. Other options, like asking the
third-party agency whether and when it sent notifications to class members, would not be as
effective because the critical information is the members’ own knowledge of the facts
comprising the potential violation of the FCRA. Great Lakes’ objection is overruled.

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ORDER
IT IS ORDERED that:
1. Defendant Great Lakes’s motion to dismiss the complaint, Dkt. 10, is DENIED.
2. Defendant’s appeal of the magistrate judge’s decision granting plaintiff Cory
Groshek’s motion to compel, Dkt. 32, is OVERRULED.
3. Defendant is ordered to supplement its response to Interrogatory No. 2 to provide
the names and contact information of job applicants for whom it has requested a
credit report on or after March 5, 2010.
Entered November 16, 2015.
BY THE COURT:
/s/
________________________________________
JAMES D. PETERSON
District Judge

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