Frazier v. First Advantage Background Servs. Corp.

• Decision Date: 23 September 2019
• Docket Number: Civil Action No. 3:17cv30
• Court: U.S. District Court — Eastern District of Virginia
• Parties: MICHAEL FRAZIER, et al., for themselves and on behalf of all similarly situated individuals, Plaintiffs, v. FIRST ADVANTAGE BACKGROUND SERVICES CORP., Defendant.

MICHAEL FRAZIER, et al., for themselves and on behalf ofall similarly situated individuals, Plaintiffs, v. FIRST ADVANTAGE BACKGROUND SERVICES CORP., Defendant.

Civil Action No. 3:17cv30

UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA Richmond Division

September 23, 2019

MEMORANDUM OPINION

This matter comes before the Court on Defendant First Advantage Background Services Corporation's ("First Advantage") Motion to Dismiss. (ECF No. 39.) Plaintiffs¹ responded, (ECF No. 43), and First Advantage replied, (ECF No. 46). Plaintiffs also filed a Motion for Leave to File Supplemental Authority, (ECF No. 47), which First Advantage did not oppose. These matters are ripe for disposition. The Court dispenses with oral argument because the materials before it adequately present the facts and legal contentions, and argument would not aid the decisional process. For the reasons that follow, the Court will grant the Motion for Leave to File Supplemental Authority and the Motion to Dismiss.

I. Factual and Procedural Background

A. Summary of Allegations in the Second Amended Complaint²

Plaintiffs' three-count Second Amended Class Complaint (the "Second Amended Complaint"), (ECF No. 34), alleges violations of the the Fair Credit Reporting Act (the "FCRA"), 15 U.S.C. § 1681 et seq., by First Advantage. Plaintiffs' allegations flow entirely from circumstances surrounding their applications for employment with Wells Fargo.³ Reading the allegations favorably, Plaintiffs describe the hiring process as follows.

1. Wells Fargo Required Applicants to Obtain an Employee Background Check from First Advantage before Hiring

Plaintiffs applied for jobs with Wells Fargo on dates between August 17, 2012, (Donald Brasher), and April 10, 2015, (Nicholas Northington). (Second Am. Compl. ¶¶ 112, 100.) Plaintiffs allege that Wells Fargo asked First Advantage to "obtain a background check on each of the Plaintiffs," and that "[t]he application process was completed using First Advantage's Internet Portal." (Id. ¶ 3 (emphasis added).) Plaintiffs acknowledged that stipulated facts in the Manuel case and those alleged here establish that "Wells Fargo sent applicants to the FirstAdvantage portal . . . and that First Advantage then generated a consumer report[⁴] that was placed online [and] accessible by both First Advantage and Wells Fargo."⁵ (Id. ¶ 48.) (emphasis added).)

During the application process and before any report was generated, each plaintiff signed a disclosure authorizing First Advantage to obtain her or his consumer report. (Second Am. Compl. ¶ 30.) Plaintiffs allege that "First Advantage created a faux compliance scheme by drafting and providing within its own website a disclosure form it represented would satisfy the disclosure requirements" of the FCRA when, in fact, the form did not. (Id. ¶¶ 28, 29, 167.).

Plaintiffs dub this compliance scheme a ruse because First Advantage created a Disclosure Form that violated the FCRA, provided it to Wells Fargo, and then allowed Wells Fargo to certify compliance to First Advantage using the very same violative form that First Advantage had created. (Second Am. Compl. ¶ 208.) This non-compliant form allegedly resulted in an invalid, defective, and improper certification. (Id. ¶¶ 27, 171, 220.) Moreover, because First Advantage supplied this form for Wells Fargo, Plaintiffs allege that First Advantage "knew or should have known" that the form did not comply with the FCRA. (Id. ¶¶ 32, 172.)

2. First Advantage Authored the Defective Disclosure Form That Violates Consumers' Rights

Plaintiffs assert that because "First Advantage knew that Wells Fargo used the disclosure form First Advantage provided with little, if any, alteration, and Wells Fargo certainly did not alter any of the release language, First Advantage . . . caused Wells Fargo to fail to provide Plaintiffs with an [sic] FCRA-compliant disclosure of Wells Fargo's intent to obtain a consumer report about them." (Second Am. Compl. ¶ 186.) Plaintiffs add that, "[u]pon information and belief, First Advantage knowingly allowed Wells Fargo and comparable customer[s] to execute an ineffective certification that Wells Fargo would comply with the disclosure and authorization provisions of the FCRA." (Id. ¶ 207.)

An employer's written disclosure that it uses to obtain an employment-purposed consumer report "must be presented in a clear, conspicuous, standalone form." (Second Am. Compl. ¶ 206 (citing Manuel v. Wells Fargo Bank, Nat'l Ass'n., 123 F. Supp. 3d 810, 817-18 (E.D. Va. 2015); Reardon v. Closet Maid Corp., No. 2:08-cv-01730, 2013 WL 6231606 at *5 (W.D. Pa. Dec. 2, 2013)).) Plaintiffs allege that the disclosure form at bar improperly "was buried in a lengthy application and contained unnecessary, additional language including a purported release of Plaintiffs' . . . FCRA rights and thus was not contained in a stand-alone document consisting solely of the disclosure." (Id. ¶ 170.) This broad release-of-liability clause—on the same form— used "language [that] attempts to take clear 'advantage' of the use of consumer information, purporting to leave consumers with no legal power over the [Credit Reporting Agency ("CRA")], the information generated by the CRA, or how the information is potentially used against the consumer." (Id. ¶ 29.) This disclosure form, Plaintiffs contend, "deprived them of their FCRA-guaranteed rights that their employment-purposed consumer reports are only to be procured by a specific, stand-alone disclosure and authorization," and"resulted in their consumer reports being issued without the appropriate authorization for . . . access of the reports." (Id. ¶¶ 174-75.)

Plaintiffs assert that the lack of proper certification rendered First Advantage's action an unlawful violation of Plaintiffs' FCRA rights because First Advantage "had no statutory permission to provide Wells Fargo with a report about Plaintiffs." (Second Am. Compl. ¶¶ 177-78.) Plaintiffs allege that First Advantage injured them by invading their "right to privacy when it provided highly confidential personal information without a statutory basis for doing so." (Id. ¶ 181.) Plaintiffs maintain that this conduct is "precisely the type that Congress sought to prevent—protection of consumer privacy—with the restrictions it has imposed on access to consumers' sensitive, personal information." (Id. ¶ 188.) Plaintiffs allege that had they "known that First Advantage would violate the FCRA in revealing their background reports to Wells Fargo, Plaintiffs would never have agreed to what they now know to be Wells Fargo's ineffective authorization." (Id. ¶ 184.)

3. First Advantage Allegedly Acted Improperly as a User and Not Just as a CRA

Plaintiffs next allege that First Advantage works not only as a CRA, but also as a user of consumer information as defined under FCRA. "Separate and in addition" to the services rendered as a CRA, First Advantage "contracted to participate in the actual adjudication and adverse action process with Wells Fargo." (Second Am. Compl. ¶ 35.) Plaintiffs assert that First Advantage "used the consumer reports and 'adjudicated' Plaintiffs and the putative class members as eligible or ineligible for employment based on criteria specific to Wells Fargo." (Id. ¶ 37.) Plaintiffs maintain that First Advantage adjudicated the applicants before sending each Plaintiff's consumer report to Wells Fargo, "compar[ing] the results of its just-performed background check against [Wells Fargo's] . . . hiring criteria and attach[ing] to those results a'score,' such as 'eligible' or 'ineligible' for employment." (Id. ¶ 39.) Plaintiffs state this determination of eligibility for Wells Fargo constituted a "necessary" first step "in order for the consumer to be rejected for employment." (Id. ¶ 38.)

This scoring by First Advantage, Plaintiffs allege, amounts to a determination "that [each Plaintiff] could not be hired under Wells Fargo's hiring requirements based on his [or her] consumer report." (Id. ¶ 57.) Plaintiffs describe the division of labor during the background check as follows:

First Advantage initially used a consumer report for determining whether or not an applicant should be adjudicated as "ineligible" based on pre-defined Wells Fargo hiring criteria. Once First Advantage made that decision, it entered it within the applicant's file with the brand or code of "ineligible." While Wells Fargo then would have to later confirm and second that decision, the initial First Advantage adjudication was a necessary condition for the rejection of a consumer applicant and itself constituted an adverse action.

(Id. ¶ 5.) According to Plaintiffs, First Advantage's scoring combined with Wells Fargo's confirmation completed the "adverse action" against the consumer applicant. (Id.) Each step of the two-part evaluation—the first one taken by First Advantage and the second by Wells Fargo—"constituted part of an 'adverse action' taken against the consumer applicant." (Id. ¶ 38.) Plaintiffs allege that "Wells Fargo rarely does more than little with First Advantage's ineligible adjudication, adopting it wholesale and without alteration in nearly every instance."⁶ (Id. ¶ 42.) Wells Fargo merely "parrot[s] back" the First Advantage determination of ineligibility. (Id.) Plaintiffs allege that discovery will show that Wells Fargo "seldom" changes the determination, "meaning that a determination of ineligible by First Advantage will nearly always result in that applicant being denied employment at Wells Fargo." (Id. ¶ 44) (emphases added).) Finally,Plaintiffs aver that discovery will "further confirm that Wells Fargo believes so strongly in the adjudication grades assigned by First Advantage that it no longer considers an applicant that First Advantage adjudicates ineligible" as a possible hire. (Id. ¶ 45.)

Plaintiffs assert that this process transforms First Advantage into a user as well as a CRA. As such, Plaintiffs state that First Advantage failed to provide...