Dalton v. Capital Assoc. Indus.

• Citation: 257 F.3d 409
• Decision Date: 04 April 2001
• Docket Number: No. 00-2337,00-2337
• Parties: (4th Cir. 2001) RICHARD J. DALTON, Plaintiff-Appellant, v. CAPITAL ASSOCIATED INDUSTRIES, INCORPORATED; GEORGE E. SHELTON,III; WAYNE L. LEHTO; JOHN B. GUPTON,Defendants-Appellees. Argued:
• Court: United States Courts of Appeals. United States Court of Appeals (4th Circuit)

Page 409

257 F.3d 409 (4th Cir. 2001)

RICHARD J. DALTON, Plaintiff-Appellant, v. CAPITAL ASSOCIATED INDUSTRIES, INCORPORATED; GEORGE E. SHELTON,III; WAYNE L. LEHTO; JOHN B. GUPTON,Defendants-Appellees.

No. 00-2337

UNITED STATES COURT OF APPEALS FOR THE FOURTH CIRCUIT

Argued: April 4, 2001

Decided: July 16, 2001

Appeal from the United States District Court for the Eastern District of North Carolina, at Raleigh. W. Earl Britt, Senior District Judge. [Copyrighted Material Omitted]

[Copyrighted Material Omitted] COUNSEL ARGUED: R. Frost Branon, Jr., Charlotte, North Carolina, for Appellant. Samuel Reid Russell, III, PATTERSON, DILTHEY, CLAY & BRYSON, L.L.P., Raleigh, North Carolina, for Appellees. ON BRIEF: Ronald C. Dilthey, PATTERSON, DILTHEY, CLAY & BRYSON, L.L.P., Raleigh, North Carolina, for Appellees.

Before WILLIAMS, MICHAEL, and MOTZ, Circuit Judges.

Affirmed in part, vacated in part, and remanded by published opinion. Judge Michael wrote the opinion, in which Judge Williams and Judge Motz joined.

OPINION

MICHAEL, Circuit Judge:

Capital Associated Industries, Inc. (CAI) erroneously reported to Richard Dalton's prospective employer that he had been convicted of felony assault. Dalton sued CAI and three of its employees under the Fair Credit Reporting Act (FCRA), 15 U.S.C. SS 1681e(b) and 1681k, for following inadequate procedures in reporting his criminal history. Dalton also asserted several state law claims against the defendants. The district court threw out all of Dalton's claims, with some dismissed under Rule 12(b)(6) and some disposed of on summary judgment under Rule 56. This appeal deals only with the summary judgment and focuses mainly on whether there are triable issues on Dalton's claims that CAI's failure to follow FCRA-mandated procedures led it to issue a false report on his criminal record. We vacate the award of summary judgment to CAI on Dalton's FCRA claims because he has proffered evidence that reveals disputed issues of material fact. We affirm the grant of summary judgment on all other claims.

I.

Because Dalton was the nonmovant in the summary judgment proceedings, we recite the facts in the light most favorable to him, drawing all justifiable inferences in his favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). In early May 1998 Dalton had a job interview with Sumitomo Electric Lightwave Corp. (Sumitomo) at its offices in Research Triangle Park, North Carolina. Dalton, who was seeking the position of West Coast Regional Sales Manager, filled out an employment application during his visit with the company. The application form asked whether Dalton had been convicted of a felony in the past seven years. In 1993 Dalton was charged in Colorado with second degree assault, a felony, but he ultimately pled guilty to third degree assault, a misdemeanor. Accordingly, he truthfully stated on the application that he had not been convicted of a felony. At the end of the interview Sumitomo offered Dalton the sales manager position "contingent upon . . . successful completion of educational employment and criminal background investigations."

To conduct the criminal background check on Dalton, Sumitomo engaged CAI, a North Carolina-based employers' association that provides a variety of services for its members, including background investigations on job applicants. Sumitomo specifically asked CAI to investigate whether Dalton had a criminal record anywhere in the Denver, Colorado, area, where Dalton had lived until shortly before his interview. CAI did not perform the criminal records investigation itself. Rather, it engaged SafeHands, Inc. to perform the task. CAI had been using SafeHands to do criminal background investigations for about a year and had found the firm to be reliable. But SafeHands did not perform the Dalton check either; SafeHands hired Guaranty Research Services, Inc. (GRS). GRS, from its own offices, ran a statewide computer search of criminal records for all Colorado counties. This search revealed that Dalton had a criminal record in Jefferson County. Because the computer database did not reveal the nature of the charge, a GRS employee called the Jefferson County clerk's office. A clerk told the GRS employee that Dalton had been convicted of third degree assault, which the clerk erroneously said was a felony. GRS sent this information -that Dalton had been convicted of a felony, third degree assault -to SafeHands without taking any steps to verify its accuracy. SafeHands, in turn, sent it to CAI, which delivered it to Sumitomo. Neither CAI nor SafeHands took any independent steps to verify the substance of GRS's criminal history report on Dalton.

While Sumitomo was waiting for the results of the criminal records check, it proceeded to verify Dalton's employment history. Sumitomo discovered that he had significantly misstated his periods of employment with two prior employers. Dalton reported on his application that he had worked for Fiber Optic Network Solutions from January 1991 through January 1992; in fact, he had worked for that firm from June 1992 through December 1992. Dalton reported that he had worked for Telect, Inc. from 1989 through 1991, but in fact he had only worked there from February 1991 through December 1991. Based upon the results of the criminal and employment background checks, Sumitomo decided to withdraw its offer to Dalton, pending further investigation. On May 14, 1998, a Sumitomo representative called Dalton, informing him that the offer was being withdrawn because he had been convicted of a felony. (The representative did not mention the inaccurate employment history appearing in Dalton's application.) Dalton denied that he had been convicted of a felony, and the representative promised to call CAI to confirm the accuracy of the criminal records check. The Sumitomo representative called Dalton back a half-hour later and told him that CAI was standing by its report that he had a felony conviction. CAI, nevertheless, began to reinvestigate whether Dalton was a convicted felon.

The next day, May 15, 1998, Dalton called CAI directly to challenge the accuracy of its records check. CAI claims that by the time Dalton called, it had discovered that he was not a convicted felon. According to CAI, it told Dalton during this conversation that it had made a mistake. Dalton, on the other hand, claims that CAI told him that it was standing by its report. Regardless, sometime that day CAI discovered its mistake and contacted Sumitomo to correct the initial report. Wayne Lehto, a CAI representative, called the Jefferson County, Colorado, clerk's office. The clerk who answered the telephone told Lehto that Dalton had been convicted of third degree assault, which the clerk said was a felony. However, when Lehto pressed the clerk about whether third degree assault was really a felony, the clerk transferred Lehto to another court clerk. The second clerk informed Lehto (correctly) that third degree assault was a misdemeanor, not a felony. Lehto telephoned Sumitomo immediately, advising the company that CAI had made a mistake and that Dalton had only been convicted of a misdemeanor. According to Dalton, no one from Sumitomo or CAI ever told him that the mistake had been corrected.

Sumitomo spent the next few weeks reevaluating Dalton's employment application. A company representative again contacted Dalton's previous employers, this time for recommendations. Two of these prior employers said that they would not rehire Dalton. A Sumitomo human resources manager called Dalton about the inaccuracies in his employment history. According to the manager, he asked Dalton on two separate occasions to provide Sumitomo "with a written explanation of the discrepancies." Dalton did not respond. Because he failed to submit a written explanation, Sumitomo decided not to consider him any further for the regional sales manager position. On June 16, 1998, Sumitomo wrote Dalton as follows: "Based on the discrepancies in your background check and the length of time it is taking for you to provide clarifying information we will no longer consider you as a candidate for employment." Sumitomo eventually hired another person to fill the job.

Dalton sued CAI and three of its employees, claiming that they violated FCRA, committed libel per se, intentionally interfered with his prospective economic advantage, and violated the North Carolina Unfair Trade Practices Act (UTPA). The district court dismissed Dalton's UTPA claim and his FCRA claims against the three employees of CAI. Later, the district court granted summary judgment to CAI on Dalton's FCRA claims and summary judgment to all four defendants on Dalton's claims for libel and interference with prospective economic advantage. Dalton appeals the summary judgment order, but not the order dismissing his UTPA claim or his FCRA claims against the individual defendants. We review the district court's grant of summary judgment de novo. See Higgins v. E.I. DuPont de Nemours & Co., 863 F.2d 1162, 1167 (4th Cir. 1988).

II.

Congress enacted FCRA in 1970 out of concerns about abuses in the consumer reporting industry. See S. Rep. No. 91-517, at 3 (1969); 116 Cong. Rec. 35941 (1970) (statement of Sen. Proxmire); id. at 36570 (statement of Rep. Sullivan); see also Guimond v. Trans Union Credit Info. Co., 45 F.3d 1329, 1333 (9th Cir. 1995); St. Paul Guardian Ins. Co. v. Johnson, 884 F.2d 881, 883 (5th Cir. 1989); Hovater v. Equifax, Inc., 823 F.2d 413, 416-17 (11th Cir. 1987). Employers were placing increasing reliance on consumer reporting agencies to obtain information on the backgrounds of prospective employees. Congress found that in too many instances agencies were reporting inaccurate information that was adversely affecting the ability of individuals to obtain employment. As Representative Sullivan remarked, "with the trend toward . . . the establishment of all sorts of computerized data banks, the...