stating that § 15 1681b(b)(2) “has been interpreted as applying exclusively to users”
How later courts described this case
- stating that § 15 1681b(b)(2) “has been interpreted as applying exclusively to users”
- stating that “[n]othing in the text of § 21 1681b(b)(3)(A) excludes defendant, as a CRA, from its scope”
- adding that “[c]onspicuous means readily noticeable”
- stating 20 that “investigative reports are a subcategory or specific type of consumer report”
Written by the judges who cited it.
The opinion
1
2
3
4 UNITED STATES DISTRICT COURT
5 NORTHERN DISTRICT OF CALIFORNIA
6
7 BENJAMIN JUSTER, Case No. 21-cv-07555-EMC
8 Plaintiff,
ORDER GRANTING IN PART AND
9 v. DEFERRING IN PART DEFENDANTS’
MOTIONS TO DISMISS
10 WORKDAY, INC., et al.,
Docket Nos. 26, 29
11 Defendants.
12
13
14 Plaintiff Benjamin Juster has filed a class action against Defendants Workday, Inc. and
15 HireRight, LLC (“HR”). In or about June 2021, Workday gave an employment offer to Mr. Juster
16 conditioned on a background check. Workday had HR do the background check. According to
17 Mr. Juster, Defendants violated the Fair Credit Reporting Act (“FCRA”) as well as California’s
18 Investigative Consumer Reporting Agencies Act (“ICRAA”) because they failed to give him
19 proper disclosures about the background check. Mr. Juster also asserts violations of other state
20 law – e.g., a violation of California Labor Code § 432.3 which prohibits an employer from seeking
21 earnings history information about an applicant.
22 Currently pending before the Court are two 12(b)(6) motions: one filed by Workday and
23 the other by HR. Having considered the parties’ briefs and accompanying submissions, as well as
24 the oral argument of counsel, the Court hereby GRANTS in part and DEFERS in part the motions
25 to dismiss.
26 I. FACTUAL & PROCEDURAL BACKGROUND
27 Workday hired Mr. Juster in June 2021. The offer letter stated that the employment was at
1 meaning either you or Workday may terminate your employment at
any time, for any reason or no reason, with or without notice. There
2 is no promise by Workday that your employment will continue for a
set period of time or that your employment will be terminated only
3 under particular circumstances.
4 RJN, Ex. A (offer letter). The offer letter also stated that “[t]he offer of employment set forth in
5 this Letter is contingent upon . . . (ii) your consent to, successful completion of, and passing of all
6 applicable background checks.” RJN, Ex. A.
7 For the background checks, Workday and/or HR gave Mr. Juster three different
8 disclosures. These three disclosures shall hereinafter be referred to as the FCRA Disclosure, the
9 ICRAA Disclosure, and the Other Disclosures.1 See RJN, Exs. B-D (three disclosures). In the
10 SAC, Mr. Juster largely focuses on the FCRA Disclosure – specifically, because it includes the
11 following statement:
12 The background report(s) may contain information concerning your
character, general reputation, personal characteristics, mode of
13 living, or credit standing. The types of background information
that may be obtained include, but are not limited to: criminal
14 history; litigation history; motor vehicle record and accident history;
social security number verification; address and alias history; credit
15 history; verification of your education, employment and earnings
history; professional licensing, credential and certification checks;
16 drug/alcohol testing results and history; military service; and other
information.
17
18 RJN, Ex. B (FCRA Disclosure) (emphasis added).2
19 According to Mr. Juster, the reference above to earnings history is improper because
20 California Labor Code § 432.3 provides, inter alia, that “[a]n employer shall not, orally or in
21
1 Workday has submitted a request for judicial notice (“RJN”), asking the Court to consider four
22
documents: the offer letter to Mr. Juster, plus three different disclosures given to Mr. Juster about
the background check. Workday asserts that it is appropriate for the Court to consider these
23
documents, even though they are outside the four corners of the complaint, based on the
incorporation-by-reference doctrine. See Khoja v. Orexigen Therapeutics, Inc., 899 F.3d 988,
24
1002 (9th Cir. 2018) (noting that the “incorporation-by-reference is a judicially created doctrine
that treats certain documents as though they are part of the complaint itself[;] [t]he doctrine
25
prevents plaintiffs from selecting only portions of documents that support their claims, while
omitting portions of those very documents that weaken – or doom – their claims”). Mr. Juster
26
does not oppose the RJN (but notes that he did not have in his possession at the time he drafted his
pleading a copy of the Other Disclosures). Accordingly, the Court has considered the documents.
27
1 writing, personally or through an agent, seek salary history information, including compensation
2 and benefits, about an applicant for employment.”3 Cal. Lab. Code § 432.3 (b).
3 Mr. Juster contends that the reference to earnings history also renders the FCRA
4 Disclosure improper for purposes of the FCRA and the ICRAA, which require, inter alia, that
5 clear and conspicuous disclosures be provided.
6 Finally, Mr. Juster asserts that Workday violated his rights by (1) improperly terminating
7 him based on his conviction history (which was revealed through the background check),4 and (2)
8 having him sign a confidentiality agreement that effectively prevents him from speaking to
9 prospective employers about information that is not, in fact, confidential.
10 Based on, inter alia, the above allegations, Mr. Juster asserts the following claims for
11 relief:
12 (1) As to Workday only, violation of California Business & Professions Code §
13 16600 which provides that “every contract by which anyone is restrained from
14 engaging in a lawful profession, trade, or business of any kind is to that extent
15 void.” Cal. Bus. &Prof. Code § 16600.
16 (2) As to Workday only, violation of California Labor Code § 432.3 which
17 provides, inter alia, that “[a]n employer shall not, orally or in writing,
18 personally or through an agent, seek salary history information, including
19 compensation and benefits, about an applicant for employment.” Cal. Lab.
20 Code § 432.3(b).
21 (3) As to Workday only, unlawful use of conviction history in violation of
22
3 In his papers, Mr. Juster also refers to California Labor Code § 1197.5, which is about equal pay.
23
See, e.g., Cal. Lab. Code § 1197.5(a)-(b) (providing that, with certain exceptions, “[a]n employer
shall not pay any of its employees at wage rates less than the rates paid to employees of the
24
opposite sex [or of another race or ethnicity] for substantially similar work, when viewed as a
composite of skill, effort, and responsibility, and performed under similar working conditions”).
25
There is a provision in § 432.3 related to § 1197.5. See id. § 432.3(j) (“Consistent with Section
1197.5, nothing in this section shall be construed to allow prior salary to justify any disparity in
26
compensation.”). Although Mr. Juster makes reference to § 1197.5, his case is fundamentally
predicated on § 432.3, not § 1197.5.
27
1 California Government Code § 12952. See, e.g., Cal. Gov’t Code § 12952(d)
2 (providing that “[a]n employer that intends to deny an applicant a position of
3 employment solely or in part because of the applicant’s conviction history shall
4 make an individualized assessment of whether the applicant’s conviction
5 history has a direct and adverse relationship with the specific duties of the job
6 that justify denying the applicant the position”).
7 (4) As to both Defendants, failure to make proper disclosures with respect to
8 procurement of a consumer report, in violation of the FCRA.
9 (5) As to both Defendants, failure to obtain proper authorization for the
10 procurement of a consumer report, in violation of the FCRA.
11 (6) As to both Defendants, failure to make proper disclosures in violation of
12 California’s ICRAA.
13 (7) As to Workday only, a derivative claim for violation of § 17200.
14 (8) As to HR only, a derivative claim for violation of § 17200.
15 (9) As to Workday only, breach of contract or, in the alternative, promissory
16 estoppel.
17 (10) As to Workday only, breach of the implied covenant of good faith and fair
18 dealing.
19 (11) As to Workday only, a violation of the California Private Attorneys General
20 Act (“PAGA”).
21 II. DISCUSSION
22 A. Legal Standard
23 Federal Rule of Civil Procedure 8(a)(2) requires a complaint to include “a short and plain
24 statement of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). A
25 complaint that fails to meet this standard may be dismissed pursuant to Federal Rule of Civil
26 Procedure 12(b)(6). See Fed. R. Civ. P. 12(b)(6). To overcome a Rule 12(b)(6) motion to dismiss
27 after the Supreme Court’s decisions in Ashcroft v. Iqbal, 556 U.S. 662 (2009), and Bell Atlantic
1 . . . suggest that the claim has at least a plausible chance of success.’” Levitt v. Yelp! Inc., 765
2 F.3d 1123, 1135 (9th Cir. 2014). The court “accept[s] factual allegations in the complaint as true
3 and construe[s] the pleadings in the light most favorable to the nonmoving party.” Manzarek v. St.
4 Paul Fire & Marine Ins. Co., 519 F.3d 1025, 1031 (9th Cir. 2008). But “allegations in a
5 complaint . . . may not simply recite the elements of a cause of action [and] must contain sufficient
6 allegations of underlying facts to give fair notice and to enable the opposing party to defend itself
7 effectively.” Levitt, 765 F.3d at 1135 (internal quotation marks omitted).5 “A claim has facial
8 plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable
9 inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. “The
10 plausibility standard is not akin to a probability requirement, but it asks for more than a sheer
11 possibility that a defendant has acted unlawfully.” Id. (internal quotation marks omitted).
12 B. FRCA Claims
13 The Court focuses first on the FCRA claims as these federal claims are the basis for the
14 Court’s subject matter jurisdiction.6 If the federal claims are not viable, then there would be only
15 state law claims remaining, and the Court could in the exercise of its discretion decline
16 supplemental jurisdiction. See generally 28 U.S.C. § 1367(c) (addressing circumstances in which
17 a court may decline to exercise supplemental jurisdiction).
18 1. Overview of the FCRA
19 The purpose of the FCRA is
20 to require that consumer reporting agencies adopt reasonable
procedures for meeting the needs of commerce for consumer credit,
21 personnel, insurance, and other information in a manner which is
fair and equitable to the consumer, with regard to the confidentiality,
22 accuracy, relevancy, and proper utilization of such information in
accordance with the requirements of this title.
23
24
25
5 A court “need not . . . accept as true allegations that contradict matters properly subject to
judicial notice or by exhibit.” Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir.
26
2001).
27
6 There appears to be only federal question, not diversity jurisdiction. See SAC ¶¶ 1, 3 (alleging
1 15 U.S.C. § 1681(b).
2 Consumer reporting agency is defined as
3 any person which, for monetary fees, dues, or on a cooperative
nonprofit basis, regularly engages in whole or in part in the practice
4 of assembling or evaluating consumer credit information or other
information on consumers for the purpose of furnishing consumer
5 reports to third parties, and which uses any means or facility of
interstate commerce for the purpose of preparing or furnishing
6 consumer reports.
7 Id. § 1681a(f).
8 In turn, consumer report is defined as
9 any written, oral, or other communication of any information by a
consumer reporting agency bearing on a consumer’s credit
10 worthiness, credit standing, credit capacity, character, general
reputation, personal characteristics, or mode of living which is used
11 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
12 eligibility for –
13 (A) credit or insurance to be used primarily for personal, family, or
household purposes;
14
(B) employment purposes; or
15
(C) any other purpose authorized under section 604 [15 U.S.C. §
16 1681b].
17 Id. § 1681a(d).
18 One specific type of consumer report is also identified in the FCRA – i.e., an investigative
19 consumer report. See Walker v. Fred Meyer, Inc., 953 F.3d 1082, 1090 (9th Cir. 2020) (stating
20 that “investigative reports are a subcategory or specific type of consumer report”). The FCRA
21 defines an investigative consumer report as follows:
22 a consumer report or portion thereof in which information on a
consumer’s character, general reputation, personal characteristics, or
23 mode of living is obtained through personal interviews with
neighbors, friends, or associates of the consumer reported on or with
24 others with whom he is acquainted or who may have knowledge
concerning any such items of information.
25
26 Id. § 1681a(e).
27 For purposes of the instant action, the main provisions of the FCRA that are relevant are §§
1 Section 1681b covers permissible purposes for consumer reports. Subsection (b) relates to
2 consumer reports for employment purposes specifically. Section 1681b(b)(2)(A) provides in
3 relevant part as follows:
4 [A] person may not procure a consumer report, or cause a consumer
report to be procured, for employment purposes with respect to any
5 consumer, unless –
6 (i) a clear and conspicuous disclosure has been made in writing
to the consumer at any time before the report is procured or
7 caused to be procured, in a document that consists solely of
the disclosure, that a consumer report may be obtained for
8 employment purposes; and
9 (ii) the consumer has authorized in writing (which authorization
may be made on the document referred to in clause (i)) the
10 procurement of the report by that person.
11 15 U.S.C. § 1681b(b)(2)(A) (emphasis added).
12 Section 1681d relates to investigative consumer reports. Section 1681d(a) provides in
13 relevant part as follows:
14 A person may not procure or cause to be prepared an investigative
consumer report on any consumer unless –
15
(1) it is clearly and accurately disclosed to the consumer that an
16 investigative consumer report including information as to his
character, general reputation, personal characteristics and mode
17 of living, whichever are applicable, may be made, and such
disclosure . . . (B) includes a statement informing the consumer
18 of his right to request the additional disclosures provided for
under subsection (b) of this section and the written summary of
19 the rights of the consumer prepared pursuant to section 609(c)
[15 U.S.C. § 1681g(c)] . . . .
20
21 Id. § 1681d(a) (emphasis added).
22 2. Workday
23 In the SAC, Mr. Juster contends that the FCRA Disclosure that Workday gave him did not
24 comply with § 1681b(b)(2)(A). Below is the text of the FCRA Disclosure:
25 Disclosure
26 Workday, Inc. (the "Company") may request from a consumer
reporting agency and for employment-related purposes, a "consumer
27 report(s)" (commonly known as "background reports") containing
services (including independent contractor or volunteer assignments,
1 as applicable).
2 . . . .
3 The background report(s) may contain information concerning your
character, general reputation, personal characteristics, mode of
4 living, or credit standing. The types of background information
that may be obtained include, but are not limited to: criminal
5 history; litigation history; motor vehicle record and accident history;
social security number verification; address and alias history; credit
6 history; verification of your education, employment and earnings
history; professional licensing, credential and certification checks;
7 drug/alcohol testing results and history; military service; and other
information.
8
Authorization
9 I hereby authorize Company to obtain the consumer reports
described above about me.
10
11 RJN, Ex. B (FCRA Disclosure) (emphasis added).
12 As noted above, § 1681(b)(2)(A) has three requirements: (1) there must be a “clear and
13 conspicuous” disclosure that a consumer report may be obtained for employment purposes; (2)
14 this disclosure must be standalone (i.e., the disclosure consists solely of the disclosure); and (3)
15 the consumer must authorize the procurement of the report (and the authorization may be included
16 in the standalone disclosure). According to Mr. Juster, Workday violated § 1681(b)(2) because
17 the FCRA Disclosure contained false and extraneous information about earnings history: “This
18 disclosure is incorrect on its face and contains extraneous information because [under California
19 Labor Code § 432.3] California employers are not permitted to obtain background reports that
20 include earnings history.” SAC ¶ 138. For the same reasons, Mr. Juster contends that Workday
21 failed to get proper authorization from him for the procurement of the consumer reports.
22 a. Clear and Conspicuous Disclosure
23 As an initial matter, Workday suggests that its FCRA Disclosure cannot have violated §
24 1681b(b)(2)(A) because Mr. Juster is complaining about false information but the statute says
25 nothing about a disclosure being “accurate.” Rather, the statute requires a “clear and conspicuous”
26 disclosure only. This is contrast to the statute related to investigative consumer reports which
27 does use the term “accurately.” See 15 U.S.C. § 1681d(a) (providing that an investigative
1 that an investigative consumer report including information as to his character, general reputation,
2 personal characteristics and mode of living, whichever are applicable, may be made”) (emphasis
3 added).
4 Although Workday’s position is not without any merit, it is problematic. The Ninth
5 Circuit has explained that “clear means reasonably understandable,” Walker, 953 F.3d 1082, 1091
6 (9th Cir. 2020) (adding that “[c]onspicuous means readily noticeable”) (internal quotation marks
7 omitted), and, arguably, something that is misleading is not reasonably understandable. Notably,
8 the Ninth Circuit adopted its definition of “clear” by looking to Rubio v. Capital One Bank, 613
9 F.3d 1195 (9th Cir. 2010), a case that dealt with the Truth in Lending Act (“TILA”), which also
10 contains a “clear and conspicuous” requirement. See Gilberg v. Cal. Check Cashing Stores, Ltd.
11 Liab. Co., 913 F.3d 1169, 1176 (9th Cir. 2019) (“We adopt our ‘clear and conspicuous’ analysis
12 from Rubio . . . , a TILA disclosure case.”). In Rubio, the Ninth Circuit held that a TILA
13 regulation “prohibits a Schumer Box [a table required by federal law] from making ‘misleading’
14 APR disclosures, where ‘misleading’ means a disclosure that a reasonable consumer will either
15 not understand or not readily notice. Put differently, an APR disclosure that is not ‘clear and
16 conspicuous’ is ipso facto ‘misleading.’” Rubio v. Capital One Bank, 613 F.3d 1195, 1200 (9th
17 Cir. 2010).
18 The problem for Mr. Juster is that, even if the Court takes a broad view of what “clear”
19 means, what is required by the FCRA is a “clear and conspicuous disclosure . . . that a consumer
20 report may be obtained for employment purposes.” 15 U.S.C. § 1681b(b)(2)(A)(i) (emphasis
21 added); see also id. § 1681a(d) (defining consumer report as “any written, oral, or other
22 communication of any information by a consumer reporting agency bearing on a consumer’s
23 credit worthiness, credit standing, credit capacity, character, general reputation, personal
24 characteristics, or mode of living”). Thus, the misleading nature of the APR disclosure in Rubio is
25 inapposite to the instant case. Here the purpose of the consumer report was clear. In addition, the
26 FCRA requires that the prospective employee give authorization for the procurement of that
27 report. See id. § 1681b(b)(2)(A)(ii). In other words, the point of the FCRA is to ensure that the
1 prospective employee can give knowing consent. As the Ninth Circuit has noted, Congress’s
2 concern was that
3 prospective employers were obtaining and using consumer reports in
a manner that violated job applicants' privacy rights. The disclosure
4 and authorization provision codified at 15 U.S.C. § 1681b(b)(2)(A)
was intended to address this concern by requiring the prospective
5 employer to disclose that it may obtain the applicant's consumer
report for employment purposes and providing the means by which
6 the prospective employee might prevent the prospective employer
from doing so – withholding of authorization.
7
8 Syed v. M-I, Ltd. Liab. Co., 853 F.3d 492, 496 (9th Cir. 2017); see id. at 497 (also noting that “the
9 provision promotes error correction by providing applicants with an opportunity to warn a
10 prospective employer of errors in the report before the employer decides against hiring the
11 applicant on the basis of information contained in the report”). The concern underpinning the
12 FCRA disclosure requirement was fulfilled here.
13 Mr. Juster nonetheless asserts that Workday gave a misleading disclosure because, by
14 asking for consent to obtain, e.g., earnings history information, it suggested it had the right to
15 obtain that information when, in fact, state law barred that inquiry. See SAC ¶ 39 (indicating that
16 the FCRA Disclosure was misleading because it “gave the appearance that the class could be
17 legally required to divulge and/or permit the disclosure of such information on the condition of
18 employment”). But even if the Court were to credit this theory, that is not the kind of misconduct
19 that the FCRA targets. In other words, that Workday was not legally permitted to obtain the
20 breadth of information that it claimed it could (as alleged) is not the kind of problem with which
21 the FCRA is concerned. If a disclosure is “overbroad” in nature, that does not prevent a
22 prospective employee from giving knowing consent; the prospective employee is not being misled
23 about what type of information the employer wants to get. Compare, e.g., Thomas v. FTS USA,
24 LLC, No. 3:13-cv-825, 2016 U.S. Dist. LEXIS 86061, at *18 (E.D. Va. June 30, 2016) (stating
25 that “the disclosure misleads consumers as to the sources from which their personal information
26 would be obtained [i.e., governmental agencies as opposed to consumer reporting agencies;] [t]hat
27 misdirection does not satisfy the clarity requirement of § 1681b(b)(2)(A)”). Indeed, if the
1 to refuse consent.
2 In his papers, Mr. Juster suggests still that he has a FCRA claim based on § 1681b(b)(1),
3 which provides as follows:
4 A consumer reporting agency may furnish a consumer report for
employment purposes only if –
5
(A) the person who obtains such report from the agency certifies to
6 the agency that –
7 . . .
8 (ii) information from the consumer report will not be used in
violation of any applicable Federal or State equal
9 employment opportunity law or regulation.
10 15 U.S.C. § 1681b(b)(1). However, this provision is irrelevant for purposes of the pending
11 motion. The provision does not address interaction between an employer and a prospective
12 employee but rather interaction between an employer and a consumer reporting agency.
13 Specifically, the provision addresses the responsibility that a consumer reporting agency has.
14 Here, that would be HR, but the Court is evaluating at this juncture only the obligations of
15 Workday, the employer.
16 b. Standalone Disclosure/Extraneous Information
17 Mr. Juster contends that Workday’s FCRA Disclosure also violated the FCRA because it
18 contained extraneous information. As noted above, the FCRA contains a requirement that a
19 disclosure be standalone (i.e., “consist[] solely of the disclosure”). Gilberg v. Cal. Check Cashing
20 Stores, Ltd. Liab. Co., 913 F.3d 1169, 1171 (9th Cir. 2019) (“The ordinary meaning of ‘solely’ is
21 ‘[a]lone; singly’ or ‘[e]ntirely; exclusively.’ Because [defendant’s] disclosure form does not
22 consist solely of the FCRA disclosure, it does not satisfy FCRA's standalone document
23 requirement.”). Even information that is “‘closely related’ to FCRA’s disclosure requirements . . .
24 may distract or confuse the reader” and therefore is not permitted. Id. at 1176. That being said,
25 the Ninth Circuit has acknowledged that the FCRA
26 requires a standalone "disclosure . . . that a consumer report may be
obtained for employment purposes," but does not further define the
27 term "disclosure" or explain what information can be considered
We now hold that beyond a plain statement disclosing "that a
1 consumer report may be obtained for employment purposes," some
concise explanation of what that phrase means may be included as
2 part of the "disclosure" required by § 1681b(b)(2)(A)(i). For
example, a company could briefly describe what a "consumer
3 report" entails, how it will be "obtained," and for which type of
"employment purposes" it may be used. Such information would
4 further the purpose of the disclosure by helping the consumer
understand the disclosure.
5
6 Walker, 953 F.3d at 1088-89 (emphasis added).
7 In its papers, Workday argues that the reference to earnings history (as being a type of
8 background information that may be obtained) cannot qualify as extraneous. Something is
9 extraneous when something other than the disclosure is provided as part of the FCRA-required
10 disclosure; but here what Workday did was provide a brief explanation of what a consumer report
11 is and what can be obtained. See Reply at 3 (arguing that “cases [cited by Mr. Juster] faulted the
12 inclusion of substantive terms in addition to the disclosure; they did not fault the inclusion of a
13 brief description of what the consumer report may entail”). The Court agrees with Workday’s
14 position. The Court therefore rejects Mr. Juster’s argument that there was extraneous information
15 in the FCRA Disclosure.
16 3. HR
17 a. Section 1681b(b)(2)
18 As for HR, Mr. Juster contends that it too failed to provide proper disclosures for
19 procurement of a consumer report, and failed to obtain proper authorization for such, in violation
20 of § 15 U.S.C. § 1681b(b)(2)(A). As noted above, §1681b(b)(2)(A) provides in relevant part as
21 follows:
22 [A] person may not procure a consumer report, or cause a consumer
report to be procured, for employment purposes with respect to any
23 consumer, unless –
24 (i) a clear and conspicuous disclosure has been made in writing
to the consumer at any time before the report is procured or
25 caused to be procured, in a document that consists solely of
the disclosure, that a consumer report may be obtained for
26 employment purposes; and
27 (ii) the consumer has authorized in writing (which authorization
1 15 U.S.C. § 1681b(b)(2)(A).
2 In its motion to dismiss, HR points out that § 1681b(b)(2)(A) applies to a person who
3 “procure[s] a consumer report” or “cause[s] a consumer report to be procured.” Id. That would be
4 the employer, and not the consumer reporting agency. HR adds that § 1681b(b)(2)(A) should not
5 be broadly construed to cover a consumer reporting agency because there are other provisions in
6 the FCRA that impose obligations on consumer reporting agencies. Cf. Nelson v. Chase
7 Manhattan Mortg. Corp., 282 F.3d 1057, 1060 (9th Cir. 2002) (“The statute has been drawn with
8 extreme care, reflecting the tug of the competing interests of consumers, CRAs [consumer
9 reporting agencies], furnishers of credit information, and users of credit information. It is not for a
10 court to remake the balance struck by Congress, or to introduce limitations on an express right of
11 action where no limitation has been written by the legislature.”).
12 HR’s position has merit. Nelson weighs in its favor. Also, several district courts have
13 expressly held that § 1681b(b)(2)(A) does not apply to a consumer reporting agency.
14 For example, in Marchioli v. Pre-Employ.com, Inc., No. EDCV 16-2305-JGB(DTBx),
15 2017 U.S. Dist. LEXIS 81755 (C.D. Cal. Jan. 25, 2017), the district court noted first that “[t]he
16 [FCRA’s] definition of a ‘consumer reporting agency,’ as ‘any person which . . . assembl[es] or
17 evaluat[es] consumer . . . information . . . for the purpose of furnishing consumer reports to third
18 parties,’ frames the role of a CRA as a provider of information for the use of others.” Id. at *20-
19 21 (quoting 15 U.S.C. § 1681a(f)). The court then noted that § 1681b(b), which covers conditions
20 for furnishing and using consumer reports for employment purposes, has “‘three subsections that
21 set forth certain obligations for consumer reporting agencies and [certain obligations for] users
22 such as employers. . . . [E]ach of the subsections need not, and does not, prescribe obligations for
23 both agencies and users.’” Id. at *21 (emphasis added). Rather, § 1681b(b)(2) and (3) applies to
24 users only. See id. at *22 (noting that “[t]he most logical reading of the statute precludes liability
25 for CRAs under subsection (2) and (3)[;] [s]ince there is nothing in the Complaint to suggest that
26 PE acted as a ‘user’ of credit information and section 1681b(b)(2) and (3) only apply to ‘users,’
27 Plaintiff's claim against PE under those subsections fails as a matter of law”). In contrast, §
1 371, 393 (S.D.N.Y. 2001) (concluding that §§ 1681b(b)(2) and (3) “both affect users” whereas §
2 1681b(b)(1) “sets forth obligations that an agency must satisfy before furnishing a consumer
3 report”).
4 Courts that agree with Marchioli include:
5 • Lagrassa v. Jack Gaughen, LLC, No. 1:09-0770, 2011 U.S. Dist. LEXIS 38838, at
6 *28 (M.D. Pa. Mar. 11, 2011) (report and recommendation) (stating that “the
7 plaintiff claims that Acxiom, a consumer reporting agency, violated
8 §1681b(b)(2)(A),” but “it is clear that §1681b(b)(2)(A) applies to employers, and
9 not to consumer reporting agencies”), adopted by 2011 U.S. Dist. LEXIS 34323, at
10 *6 (M.D. Pa. Mar. 30, 2011) (concluding that magistrate judge “correctly found
11 that Plaintiff cannot argue a violation of § 1681b(b)(2) because that provision
12 applies only to users of a report, rather than agencies that furnish the report”)
13 (emphasis in original).
14 • Mattiaccio v. DHA Grp., Inc., 21 F. Supp. 3d 15, 21 (D.D.C. 2014) (stating that §
15 1681b(b)(2) “has been interpreted as applying exclusively to users”).
16 The authority above is persuasive. Mr. Juster points out that not all courts have agreed
17 with, e.g., Marchioli and Obabueki. This is true. But notably, he cites decisions where courts
18 have held that § 1681b(b)(3) is not limited to users of consumer reports but rather applies to both
19 users and furnishers of consumer reports. See, e.g., Goode v. Lexis Nexis Risk & Info Analytics
20 Grp., Inc., 848 F. Supp. 2d 532, 542 (E.D. Pa. 2012) (stating that “[n]othing in the text of §
21 1681b(b)(3)(A) excludes defendant, as a CRA, from its scope”). Goode does not lend any support
22 to Mr. Juster given that, in the SAC, he has asserted a violation of § 1681b(b)(2) only.
23 b. Section 1681b(b)(3)
24 In his papers, Mr. Juster suggests that he could amend his pleading to add in a claim for a
25 violation of § 1681b(b)(3). Mr. Juster’s contention that he has a viable claim against HR under §
26 1681(b)(3) is doubtful.
27 Section 1681b(b)(3)(A) provides in relevant part as follows:
any adverse action based in whole or in part on the report, the
1 person intending to take such adverse action shall provide to the
consumer to whom the report relates –
2
(i) a copy of the report; and
3
(ii) a description in writing of the rights of the consumer under this
4 subchapter, as prescribed by the Bureau under section
1681g(c)(3) 1 of this title.
5
6 15 U.S.C. § 1681b(b)(3) (emphasis added). Given the language italicized above, § 1681b(b)(3) on
7 its face appears to be applicable to a user of a consumer report (i.e., a prospective employer), and
8 not a consumer reporting agency such as HR. See also Muir v. Early Warning Servs., LLC, Civil
9 Action No. 16-521 (SRC), 2016 U.S. Dist. LEXIS 126072, at *9-10 (D.N.J. Sep. 15, 2016)
10 (discussing the language and structure of § 1681b(b); also noting that “[a] Federal Trade
11 Commission Staff Report and advisory opinions further support the conclusion that subsections
12 (b)(2) and (b)(3) do not apply to CRAs”).
13 As noted above, the main case that held that a consumer reporting agency can be liable for
14 a violation of § 1681b(b)(3)(A) (i.e., not just an employer) is Goode. In Goode, the defendant
15 “operate[d] a proprietary system called ‘Esteem’ that ‘helps organizations identify applicants with
16 [a] history of theft or fraud.’” Id. at 534.
17 When a member requests information about a current or potential
employee, defendant searches its system for possible matches
18 between the employee's personal information and a record on file. If
a match is found, defendant "verifies" the match . . . . Once a match
19 is verified, defendant classifies the employee in accordance with
adjudication scores agreed upon by defendant and the member
20 ("adjudication"). If the employee falls below a certain threshold,
defendant assigns the employee a "noncompetitive" score.
21 Defendant then generates a "report" detailing the match and the
adjudication and sends the report to the inquiring member.
22
. . . . As an additional service, defendant sends . . . "pre-adverse
23 action letters" on members' letterhead to employees or potential
employees whose information results in a match. Defendant sends
24 the pre-adverse action letter to employees or potential employees
after it completes the adjudication and sends the report to the
25 member. . . . Several days after it sends the pre-adverse action letter,
defendant sends the employee a final "adverse action letter" on the
26 member's letterhead.
27 Id. at 535.
1 statute provides that, “before taking any ‘adverse action’ against an employee, the person taking
2 such action must send the employee a copy of the report and a notice of the consumer’s rights
3 under the FCRA.” Id. The purpose of the statute is “to afford employees time to discuss reports
4 with employers or otherwise respond before adverse action is taken.” Id. at 537 (internal
5 quotation marks omitted). The plaintiffs in Goode argued that the “defendant took an adverse
6 action against them when it verified an Esteem match and adjudicated them as noncompetitive,” as
7 this “occurred before defendant sent them the pre-adverse action letters.” Id. at 538.
8 The defendant argued that it could not be held liable for a violation of § 1681b(b)(3)(A)
9 because it was only a consumer reporting agency, and not an employer. The Goode court rejected
10 the argument. First, it noted that
11 [n]othing in the text of § 1681b(b)(3)(A) excludes defendant, as a
CRA, from its scope. The requirements of 15 U.S.C. §
12 1681b(b)(3)(A) apply to any "person intending to take such adverse
action." Under the FCRA, "'person' means any individual,
13 partnership, corporation, trust, estate, cooperative, association,
government or governmental subdivision or agency, or other entity."
14 § 1681a(b). Thus, defendant is a person and must comply with §
1681b(b)(3)(A).
15
16 Goode, 848 F. Supp. 2d at 542.
17 Second, the Goode court rejected the defendant’s contention that, as an agent of the
18 employer, it could not be held liable for a violation of the statute.
19 In support of this, defendant cites Weidman v. Federal Home Loan
Mortgage Corp., 338 F. Supp. 2d 571 (E.D. Pa. 2004) . In that case,
20 the plaintiffs sued Freddie Mac under § 1681m, a provision of the
FCRA that, like § 1681b(b)(3)(A), requires anyone taking an
21 adverse action to notify the consumer against whom the action is
taken. The Weidman plaintiffs argued that Freddie Mac had taken
22 an adverse action against them by assigning a "caution" label to their
loan application. The court held that Freddie Mac could not be
23 liable under the FCRA because it was statutorily barred from
extending credit and therefore barred from making any actual
24 decision about the consumer's loan application.
25 Weidman is distinguishable from the present case. The Weidman
court relied on the fact that the "caution" label was "intended to be
26 filtered by an autonomous decision-maker with the authority to offer
credit." In this case, plaintiffs have alleged a complete lack of
27 "filtering" by the employers. Defendant adjudicates employees
Complaint suggests that the member employer is involved in
1 analyzing the initial adjudication or any subsequent challenge to
the adjudication by an employee. Further, unlike Weidman, there is
2 no statutory bar preventing defendant in this case from making
employment decisions with respect to plaintiffs.
3
4 Id. at 542-43 (emphasis added). In short, the defendant took adverse action against the prospective
5 employee directly, and did not simply provide information for the employer who then took
6 adverse action.
7 In Mix v. Asurion Insurances Services, No. CV-14-02357-PHX-GMS, 2016 U.S. Dist.
8 LEXIS 172874 (D. Ariz. Dec. 14, 2016), the district court followed the Goode court’s lead. It
9 noted that
10 the degree of review and particular method of use undertaken by
[the employer] and every other . . . client [of the consumer reporting
11 agency] “is relevant to whether [the consumer reporting agency] has
1681b(b)(3) duties.” Goode, for example, highlighted that the
12 employer in that case "did not conduct any review of the
adjudication" by the CRA before making an employment decision,
13 such that the CRA's "adjudication of plaintiffs [was], quite literally,"
an adverse action. "[A]dverse action occurs when the decision is
14 carried out, when it is communicated or actually takes effect."
Goode explained that the CRA's "adjudication of plaintiffs . . .
15 actually [took] effect before [the CRA] sent out the pre-adverse
action letters because there was no real opportunity for plaintiffs to
16 contest the adjudication or change its outcome thereafter. This
scheme is missing the crucial last step . . . where the employer
17 makes a final decision based on both the report and any information
the employee uses to contest the report." An employer's degree of
18 review or particular use of the adjudicated report are thus relevant to
determine when a decision is carried out, communicated, or takes
19 effect such that the decision constitutes an adverse action.
20 Id. at *29-30 (emphasis omitted and added).
21 In the instant case, Mr. Juster claims that, even though HR is a consumer reporting agency
22 and not a prospective employer, he can now allege facts to support a violation of § 1681b(b)(3)(A)
23 as contemplated by Goode and Mix. He notes that the background report that HR prepared states,
24 on its face, that one of the services that HR provided for Workday was “Managed Adjudication
25 3.0.” See Fouts Decl., Ex. 1 (Background Rpt. at 1).7 He then asserts that he found online a copy
26
7 The Court takes note that the parties have submitted different versions of the background report.
27
HR’s version can be found at Exhibit 1 to the Fouts Declaration. Mr. Juster’s version can be
1 of HR’s Service Agreement. See Nakama Decl, Ex. D (HR Service Agreement). That agreement
2 contains the following provision:
3 If Subscriber elects to obtain [HR’s Managed Adjudication]
services, Subscriber shall provide HireRight with the criteria,
4 guidelines and instructions established by Subscriber for
determining whether the information in an Applicant`s Screening
5 Report satisfies Subscriber’s eligibility criteria ("Adjudication
Guidelines"). HireRight will apply Subscriber`s Adjudication
6 Guidelines to the Screening Report information reported by
HireRight and then provide to Subscriber a status that reflects the
7 outcome of such application ("Managed Adjudication Services");
provided, however, that HireRight will not apply any "does not
8 meet" or equivalent final adverse status, which ultimately must be
determined and applied by Subscriber. . . .
9
10 Nakama Decl., Ex. D (HR Service Agmt. ¶ 2(f)) (emphasis added). This provision is consistent
11 with information on HR’s website which describes Managed Adjudication as follows:
12 The completed background screening reports are manually reviewed
by a HireRight adjudicator using the employer’s designated hiring
13 guidelines. Reports that satisfy the employer’s guidelines are
identified as “meets company standards’’; all others are identified as
14 “pending” for the employer to review and determine adjudication
status. HireRight will not adjudicate any final adverse adjudication
15 status for employers. Employers are solely responsible for making
the final adverse employment decision regarding a candidate’s
16 suitability for hire.
17 Nakama Decl., Ex. C (HireRight Adjudication 3.0 Services) (emphasis added). Finally, Mr. Juster
18 points out that the second page of the background report that HR has submitted for the Court’s
19 review appears to provide an “Adjudication Results Summary.” One of the line items (“Court
20 Records”) has a red flag and states “Does Not Meet Company Standards.” See Fouts Decl., Ex. 1
21 (Background Rpt. at 2).8 According to Mr. Juster, HR violated § 1681b(b)(3)(A) because it
22 engaged in this adverse action without providing him first with a letter that would have enabled
23 him to address the issue. See Opp’n at 10.
24 The problem for Mr. Juster is that, based on the above, he does not have a viable claim for
25 a violation of § 1681b(b)(3)(A) under the Goode/Mix rubric. The information about HR’s
26
27
8 As noted above, Mr. Juster appears to have an earlier version of the background report. This
1 Managed Adjudication services states that HR does not make a final adverse adjudication but
2 rather reserves that decision for the employer. Moreover, nothing about the above indicates
3 whether HR sent a pre-adverse action letter to Mr. Juster and when. Goode and Mix are therefore
4 distinguishable.
5 Accordingly, based on the papers submitted, the Court is not persuaded that Mr. Juster
6 could plead a § 1681b(b)(3)(A) violation.
7 c. Sections 1681b(b)(1), 1681e(a), and 1681d(d)(2)
8 In addition to § 1681b(b)(3)(A), Mr. Juster seems to suggest that he could assert claims
9 based on other FCRA provisions. (In his papers, Mr. Juster suggests that he simply wants to
10 clarify that his pleading asserts these claims. However, that is not a fair characterization; at best,
11 two of the three FCRA provisions were mentioned in passing in the SAC.) There are three FCRA
12 provisions at issue:
13 • Section 1681b(b)(1).
14 • Section 1681e(a).
15 • Section 1681d(d)(2).
16 Each section is addressed briefly below.
17 i. Section 1681b(b)(1)
18 Section 1681b(b)(1) provides as follows:
19 A consumer reporting agency may furnish a consumer report for
employment purposes only if –
20
(A) the person who obtains such report from the agency certifies to
21 the agency that –
22 (i) the person has complied with paragraph (2) with respect to
the consumer report [addressing disclosures], and the person
23 will comply with paragraph (3) with respect to the consumer
report if paragraph (3) becomes applicable [addressing
24 adverse actions]; and
25 (ii) information from the consumer report will not be used in
violation of any applicable Federal or State equal
26 employment opportunity law or regulation; and
27 (B) the consumer reporting agency provides with the report, or has
1681g(c)(3) [1] of this title.
1
2 15 U.S.C. § 1681b(b)(1). Mr. Juster briefly mentions § 1681b(b)(1)(A) in ¶¶ 9 and 16 of the SAC.
3 To the extent Mr. Juster suggests he has a claim for a violation of § 1681b(b)(1)(A), the
4 allegations in his complaint do not support such. For example, in ¶ 11, he expressly alleges that
5 “HIRERIGHT receives the above-described certification from WORKDAY and other employer-
6 customers.” SAC ¶ 11. In ¶ 12, he also alleges that there was a “written certification entered into
7 between the parties.” SAC ¶ 12. There is nothing else to suggest that HR did not satisfy its
8 obligation to get a certification from Workday. Mr. Juster alleges: “HIRERIGHT actively assisted
9 WORKDAY and other employers in violating California equal opportunity employment law and
10 regulations, on behalf of the employers, by requesting individuals to sign authorizations that
11 permit disclosure of salary and earnings history in order to gain or obtain or maintain
12 employment,” SAC ¶ 12. Although Mr. Juster might argue that this may state a violation of state
13 law by providing such assistance, it does not state a violation of the FCRA.
14 ii. Section 1681e(a)
15 Section 1681e(a) provides as follows:
16 Every consumer reporting agency shall maintain reasonable
procedures designed to avoid violations of section 1681c of this title
17 and to limit the furnishing of consumer reports to the purposes listed
under section 1681b of this title. These procedures shall require that
18 prospective users of the information identify themselves, certify the
purposes for which the information is sought, and certify that the
19 information will be used for no other purpose. Every consumer
reporting agency shall make a reasonable effort to verify the identity
20 of a new prospective user and the uses certified by such prospective
user prior to furnishing such user a consumer report. No consumer
21 reporting agency may furnish a consumer report to any person if it
has reasonable grounds for believing that the consumer report will
22 not be used for a purpose listed in section 1681b of this title.
23 15 U.S.C. § 1681e(a) (emphasis added). Mr. Juster refers briefly to § 1681e(a) in his SAC. See
24 SAC ¶¶ 10, 18.
25 Based on the allegations in the SAC, it does not appear that Mr. Juster has a claim against
26 HR. Section 1681b defines the permissible purposes of consumer reports, and one of the
27 permissible purposes is a use of the information for employment purposes. See 15 U.S.C. §
1 person which it has reason to believe – (B) intends to use the information for employment
2 purposes”). There should be no real dispute that Workday did seek information about Mr. Juster
3 for employment purposes.
4 iii. Section 1681d(d)(2)
5 Section 1681d addresses investigative consumer reports. Subsection (d)(2) provides as
6 follows:
7 A consumer reporting agency shall not make an inquiry for the
purpose of preparing an investigative consumer report on a
8 consumer for employment purposes if the making of the inquiry by
an employer or prospective employer of the consumer would violate
9 any applicable Federal or State equal employment opportunity law
or regulation.
10
11 15 U.S.C. § 1681d(d)(2). The SAC contains no reference to § 1681d(d)(2). At most, it points to a
12 similar provision in the ICRAA – i.e., California Civil Code § 1786.20(c). See SAC ¶ 186; Cal.
13 Civ. Code § 1786.20(c) (“An investigative consumer reporting agency may not make an inquiry
14 for the purpose of preparing an investigative consumer report on a consumer for employment
15 purposes if the making of the inquiry by an employer or prospective employer of the consumer
16 would violate applicable federal or state equal employment opportunity law or regulation.”).
17 Mr. Juster argues still that he could amend to add in a § 1681d(d)(2) claim against HR
18 because (1) the statute clearly applies to a consumer reporting agency and (2) the statute prohibits
19 a consumer reporting agency from making an inquiry that would violate state law (such as
20 California Labor Code § 432.3 which prevents inquiry into earnings history information). But §
21 1681d(d)(2) is predicated on there being an “inquiry for the purpose of preparing an investigative
22 consumer report,” 15 U.S.C. § 1681d(d)(2), and, as noted above, “investigative consumer report”
23 has a specific definition under the FCRA:
24 a consumer report or portion thereof in which information on a
consumer’s character, general reputation, personal characteristics, or
25 mode of living is obtained through personal interviews with
neighbors, friends, or associates of the consumer reported on or with
26 others with whom he is acquainted or who may have knowledge
concerning any such items of information.
27
1 made, see SAC ¶ 147 (alleging that “[HR] conducted personal interviews of Plaintiff and ‘with
2 neighbors, friends, or associates of the consumer reported or on with others with whom he is
3 acquainted to obtain information’ of Plaintiff and Class Members”), the allegation is conclusory in
4 nature. Mr. Juster has simply parroted the language of § 1681a(e) and made no allegations as to
5 who was personally interviewed.
6 Accordingly, based on the papers submitted, Mr. Juster does not have a viable § 168d(d)(2)
7 claim.
8 4. Summary
9 For the foregoing reasons, the Court dismisses the FCRA claims as pled against Workday
10 and HR. Furthermore, the Court is doubtful as to whether Mr. Juster could amend his pleading to
11 assert a viable FCRA claim – particularly against Workday but even as to HR, with one possible
12 exception, i.e., a claim against HR under § 1681d(d)(2) (e.g., if an investigative consumer report
13 was provided). However, because futility is a high standard, the Court shall allow Mr. Juster to
14 amend his complaint to replead his FCRA claims against Workday and HR. In amending, Mr.
15 Juster must identify which FCRA provisions he claims have been violated. He must also make
16 nonconclusory allegations in support of the FCRA claims, and the Court reminds Mr. Juster that
17 he (and his counsel) have Rule 11 obligations to make factual allegations in good faith. In
18 addition, Mr. Juster should include in his allegations who Workday and/or HR allegedly asked for
19 earnings history information – whether Mr. Juster himself, a prior employer, or both.
20 C. State Law Claims
21 Because it is not clear at this time whether Mr. Juster has viable FCRA claims, the Court
22 defers ruling on Mr. Juster’s state law claims, both as to Workday and HR.
23 III. CONCLUSION
24 For the foregoing reasons, the Court grants Workday and HR’s motions to dismiss the
25 FCRA claims. The Court defers ruling on the motions to dismiss the state law claims. The Court
26 gives Mr. Juster leave to file an amended complaint so as to replead his FCRA claims, if he can do
27 so in good faith. The only amendment that the Court is permitting at this time is with respect to
1 The amended complaint shall be filed within four weeks of the date of this order. If Mr.
2 Juster chooses not to file an amended complaint, then he shall file (by the same date) a notice
3 confirming that he is not filing an amended pleading. If no amended complaint is filed, then the
4 Court shall consider whether to retain supplemental jurisdiction over the remaining state law
5 claims. If an amended complaint is filed, then Workday and HR shall have until three weeks after
6 filing of amended complaint to respond to that pleading, whether by answer or motion. If a
7 motion is filed, only the FCRA claims should be substantively addressed; Workday and HR,
8 however, may incorporate by reference the challenges made to the state law claims made in their
9 initial 12(b)(6) motions.
10 This order disposes of Docket Nos. 26 and 29.
11
12 IT IS SO ORDERED.
13
14 Dated: August 1, 2022
15
16 ______________________________________
EDWARD M. CHEN
17 United States District Judge
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