Benson v. Wells Fargo Bank, N.A., CIV. 16-5061-JLV

• Decision Date: 26 June 2017
• Docket Number: CIV. 16-5061-JLV
• Parties: CHARLES SCOTT BENSON, Plaintiff, v. WELLS FARGO BANK, N.A., Defendant.
• Court: U.S. District Court — District of South Dakota

CHARLES SCOTT BENSON, Plaintiff, v. WELLS FARGO BANK, N.A., Defendant.

CIV. 16-5061-JLV

UNITED STATES DISTRICT COURT DISTRICT OF SOUTH DAKOTA WESTERN DIVISION

June 26, 2017

ORDER

INTRODUCTION

This is an action plaintiff Charles Scott Benson brought against defendant Wells Fargo Bank, N.A. (Docket 1). Defendant filed a motion to dismiss counts nine and ten of plaintiff's first amended complaint. (Docket 5). Plaintiff filed a motion for leave to file a second amended complaint. (Docket 20). Plaintiff also filed a motion to compel defendant's payment of the fees associated with defendant's deposition of plaintiff's expert witness. (Docket 15).

FACTUAL AND PROCEDURAL BACKGROUND

Plaintiff applied for a job with defendant's home mortgage division on September 25, 2007. (Docket 1-1 at p. 3). Recruiters affiliated with defendant had been in contact with plaintiff about the job since October 2006. Id. at pp. 1-2. Plaintiff indicated to the recruiters he had a misdemeanor theft conviction from several years earlier. Id. at pp. 2-4. In his job application plaintiff disclosed his conviction. Id. at pp. 3-4. The recruiters told plaintiff his conviction would not affect his employment. Id. Defendant completed a background check of plaintiff, offered him a job and he started work in November 2007. Id.

In January 2011, defendant screened the backgrounds of many of its employees. Id. at p. 5. Defendant states it conducted the screenings to comply with recently-enacted federal law. (Docket 6 at p. 2). The screening of plaintiff revealed the conviction he disclosed in his original job application. (Docket 1-1 at p. 5). Defendant believed the Financial Institutions Reform, Recovery and Enforcement Act ("FIRRE"), 12 U.S.C. § 1829(a), required terminating plaintiff. (Docket 1-1 at p. 5). FIRRE prohibits a person convicted of a crime involving dishonesty from working in plaintiff's position at a federally insured institution. 12 U.S.C. § 1829(a); (Docket 1-1 at p. 5). Defendant terminated plaintiff's employment on February 15, 2011. (Docket 1-1 at p. 5).

Plaintiff filed his original complaint against defendant in South Dakota state court on March 18, 2011. (Docket 14-3). The complaint revolved around defendant firing plaintiff and included nine counts: breach of contract, promissory estoppel, fraudulent inducement, fraudulent concealment, fraud and deceit, negligent misrepresentation, intentional infliction of emotional distress, negligent infliction of emotional distress and punitive damages. Id. at pp. 5-11. On June 6, 2016, the state court granted plaintiff leave to file an amended complaint, and he filed his first amended complaint on June 13, 2016. (Docket 1-1).

Plaintiff's first amended complaint introduces two new counts. Id. at pp. 12-32. At count nine of the first amended complaint plaintiff sets forth a claim based on violations of the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. § 1681. (Docket 1-1 at pp. 12-16). Plaintiff claims defendant "failed to comply with the procedural protections and requirements of the FCRA when it used the consumer reports of [p]laintiff and hundreds of other employees to make adverse employment decisions resulting in their termination." Id. at p. 12. Plaintiff alleges:

59. Years after hiring Plaintiff, Defendant ordered a background check, which is a consumer report, from First Advantage Background Services Corp. ("First Advantage"), which is a consumer reporting agency . . . .

66. . . . Defendant failed to provide a clear and conspicuous written disclosure in a document that consists solely of that disclosure to Plaintiff, that a consumer report may be obtained for employment purposes.

67. Defendant further failed to obtain a valid authorization to procure a consumer report for employment purposes from Plaintiff.

68. Defendant further failed to provide Plaintiff with the required notice and a copy of the consumer report upon which it based its decision to take adverse employment action against Plaintiff, within the timeframes required under the FCRA.

69. Defendant further failed to provide Plaintiff with a written summary of his FCRA rights prior to taking adverse employment action against him.

70. Defendant terminated Plaintiff without providing any advance notice of such adverse action.

Id. at pp. 13-14. Paragraphs 66 and 67 delineate violations of the FCRA's disclosure and authorization requirements in 15 U.S.C. §§ 1681b(b)(2)(A)(i)-(ii). This section provides that when a consumer report is procured for employmentpurposes, the consumer must first authorize the procurement in writing and receive "a clear and conspicuous disclosure . . . in a document that consists solely of the disclosure" before the report is obtained. Id. Paragraphs 68 and 69 of plaintiff's first amended complaint assert violations of the FCRA's "[c]onditions on use [of consumer reports] for adverse actions . . . ." 15 U.S.C. § 1681b(b)(3) (bold omitted). These conditions require the consumer to receive a copy of the credit report and a description of the consumer's rights before "any adverse action based in whole or in part on the report" may occur. 15 U.S.C. §§ 1681b(b)(3)(A)(i)-(ii).

The first amended complaint's tenth count sets forth a claim based on violations of the Racketeer Influenced Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1962, 1964. (Docket 1-1 at pp. 16-32). Plaintiff alleges defendant hired him and numerous other people with criminal records disqualifying them from their jobs, and defendant deliberately failed to obtain consent from the Federal Deposit Insurance Corporation ("FDIC") as federal law required. Id. at pp. 17-18; see 18 U.S.C. § 1829. Plaintiff asserts defendant's termination of his employment was part of a "Background Checks Project" ("Project") defendant instituted to terminate "employees en masse . . . under the auspices of compliance with federal regulation . . . ." (Docket 1-1 at p. 21). During this Project, plaintiff claims defendant "explicitly instructed the operative group for the Background Checks Project not to share [the project's] information, or the fact that the Project was actually a 'business decision,' with lower levelmanagement and rank-and-file employees." Id. at pp. 21-22 (emphasis in original).

Plaintiff states the Project constituted a pattern of racketeering activity affecting interstate commerce carried out by a "higher-level group" of defendant's employees. Id. at p. 24. According to plaintiff, the purpose of the Project was "terminating employees in mass, reducing payroll, eliminating earned and accrued employee bonuses and benefits, and depressing the relevant job-market, under the fraudulent pretext of compliance with federal regulation." Id. Plaintiff alleges defendant made "affirmative fraudulent representations" regarding federal law requiring termination of employees and "deliberately conceal[ed] and omit[ted] material facts to [p]laintiff" so it could advance its scheme. Id. at p. 28.

ANALYSIS

I. STANDING

"[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 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 preventthe judicial process from being used to usurp the powers of the political branches, and confines the federal courts to a properly judicial role . . . ." Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1547 (2016) (internal citations omitted) (internal quotation marks omitted).

"The 'irreducible constitutional minimum' of standing consists of three elements." Id. (quoting Lujan, 504 U.S. at 560). "The plaintiff must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision." Id. (citations omitted). "Where, as here, a case is at the pleading stage, the plaintiff must 'clearly . . . allege facts demonstrating' each element" Id. (quoting Warth v. Seldin, 422 U.S. 490, 518 (1975)). "In assessing a plaintiff's Article III standing, we must 'assume that on the merits the plaintiffs would be successful in their claims.' " Am. Farm Bureau Fed'n v. U.S. Envtl. Prot. Agency, 836 F.3d 963, 968 (8th Cir. 2016) (quoting Muir v. Navy Fed. Credit Union, 529 F.3d 1100, 1106 (D.C. Cir. 2008)).

The second and third elements of standing tend to be straightforward, but the injury element is harder to pin down. The United States Supreme Court recently ruled on the injury element in Spokeo. Spokeo clarified the requirements that the injury suffered is "concrete and particularized . . . ." Spokeo, 136 S. Ct. at 1548 (citing Lujan, 504 U.S. at 560) (internal quotation marks omitted). A particularized injury "affect[s] the plaintiff in a personal and individual way[,]" as opposed to an injury affecting an undifferentiated collection of people. Id. (citations omitted). A concrete injury is one that"actually exist[s]." Id. It can be a tangible injury, such as physical pain, or it can be intangible, like curtailing someone's right to free speech. Id. at 1549 (citing Pleasant Grove City v. Summum, 555 U.S. 460 (2009)). Spokeo acknowledged Congress can create statutes providing people rights, which, if violated, may result in an Article III injury. Id.; see, e.g., Fed. Election Comm'n v. Akins, 524 U.S. 11, 20-25 (1998) (holding that certain voters' "inability to obtain information" Congress chose to make accessible to them yielded an Article III injury). However, Spokeo held "Article III...