Martin v. First Advantage Background Servs. Corp.

• Decision Date: 13 July 2012
• Docket Number: Civ. No. 11–3357 (MJD/LIB).
• Citation: 877 F.Supp.2d 754
• Parties: Mahlon MARTIN, Plaintiff, v. FIRST ADVANTAGE BACKGROUND SERVICES CORP., and Wells Fargo Bank, NA, Defendants.
• Court: U.S. District Court — District of Minnesota

877 F.Supp.2d 754

Mahlon MARTIN, Plaintiff,

v.FIRST ADVANTAGE BACKGROUND SERVICES CORP., and Wells Fargo Bank, NA, Defendants.

Civ. No. 11–3357 (MJD/LIB).

United States District Court,

D. Minnesota.

July 13, 2012.

Daniel Gray Leland and Joni M. Thome, Baillon Thome Jozwiak Miller Wanta, LLP, for Plaintiff.

Jenny L. Sautter, Meagher & Geer, PLLP, and Jason A. Spak, Picadio Sneath Miller & Norton, PC, for Defendant First Advantage Background Services Corp.

Joseph G. Schmitt and David A. James, Nilan Johnson Lewis, PA, for Defendant Wells Fargo Bank, NA.

MEMORANDUM OF LAW & ORDER

MICHAEL J. DAVIS, Chief Judge.

I. Introduction

This matter is before the Court on motions to dismiss by Defendants First Advantage Background Services Corporation and Wells Fargo Bank, NA. [Docket Nos. 4 and 6.] The Court heard oral argument on April 13, 2012.

II. Background

Plaintiff began working for Defendant Wells Fargo Bank, NA (“Wells Fargo”) as a contract worker in May 2009. In July 2009 he was laid off, but in August 2009 he was hired by Wells Fargo's default/collections department. Plaintiff consented to criminal background checks when he was hired for both of those positions, and the results of those checks were unremarkable.

In October 2010, Plaintiff accepted a new position as a TeleSales Specialist in Wells Fargo's home mortgage department. In January 2011, Plaintiff consented to another background check. A criminal background report (“report”) was prepared by Defendant First Advantage Background Services Corporation (“First Advantage”). The report contained the following entry relating to records obtained from Ramsey County District Court:

+------------------------------------------------------------------------+
                ¦Case Number ¦    ¦62–TX–97–041983                                       ¦
                +------------+----+------------------------------------------------------¦
                ¦Type        ¦    ¦MISDEAMENOR                                           ¦
                +------------+----+------------------------------------------------------¦
                ¦Date Filed  ¦    ¦6/27/1997                                             ¦
                +------------+----+------------------------------------------------------¦
                ¦Charge      ¦    ¦IMPERSONATING A OFFICER                               ¦
                +------------+----+------------------------------------------------------¦
                ¦Offense Date¦    ¦                                                      ¦
                +------------+----+------------------------------------------------------¦
                ¦Arrest Date ¦    ¦5/29/1997                                             ¦
                +------------+----+------------------------------------------------------¦
                ¦Disposition ¦    ¦10/9/1998 GUILTY                                      ¦
                +------------+----+------------------------------------------------------¦
                ¦Sentence    ¦    ¦GUILTY: 09/15/1997                                    ¦
                +------------+----+------------------------------------------------------¦
                ¦            ¦    ¦JAIL: 1 YEAR                                          ¦
                +------------+----+------------------------------------------------------¦
                ¦            ¦    ¦PROBATION: 1 YEAR/UNSUPERVISED                        ¦
                +------------+----+------------------------------------------------------¦
                ¦            ¦    ¦NOTE: CASE DISMISSED 10/09/1998                       ¦
                +------------------------------------------------------------------------+
                

(Spak Aff. [Docket No. 13], Ex. 1.)

On February 4, 2011 Plaintiff met with his supervisor at Wells Fargo, and she informed him that his employment was terminated as a result of the information contained in the report. She gave Plaintiff a letter entitled “Letter 1—Team members ineligible for continued employment due to background check results” and which stated that “a record was found making [Plaintiff] ineligible for employment with Wells Fargo.” (Compl. [Docket No. 1–1] ¶ 26.)

Wells Fargo did not give Plaintiff notice of the report or a chance to respond to it before his termination. Plaintiff sought more information about his termination from Wells Fargo's human resources department. When he learned that the termination was based on a 1997 criminal conviction, he retrieved documents from the Ramsey County District Court indicating that, after Plaintiff was charged, the case was stayed for one year, and that at the end of that year, the charge was dismissed. (Martin Decl. [Docket No. 18], Ex. a.) There is no indication that Plaintiff was ever found guilty, sentenced to one year in jail, or incarcerated for any length of time. Plaintiff alleges that he faxed the relevant records to Wells Fargo, explaining that he was not disqualified from employment.

Plaintiff also filed a “Notice of Consumer Dispute” form with First Advantage, noting that the charge of impersonating an officer had been “vacated and dismiss[ed].” (Spak Aff. [Docket No. 13], Ex. 3.) First Advantage responded to Plaintiff in a letter which stated that their investigation had “confirmed the information” in the original report. (Spak Aff., Ex. 4.)

Plaintiff filed this suit in Hennepin County District Court, setting out five counts, all of which relate to violations of the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681 et seq. The first four counts, directed at First Advantage, are: failure to follow reasonable procedures to assure maximum possible accuracy in violation of FCRA (Count I); failure to follow strict procedures for use of public record information (Count II); failure to comply with obsolescence requirements (Count III); and failure to follow procedures in case of disputed accuracy (Count IV). Count V, failure to provide pre-adverse action disclosures, is directed at Wells Fargo. Defendants removed the case to this Court. Both Defendants have now moved for dismissal of Plaintiff's claims.

III. DiscussionA. Standard

Under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a party may move the Court to dismiss a claim if, on the pleadings, a party has failed to state a claim upon which relief may be granted. In reviewing a motion to dismiss, the Court takes all facts alleged in the complaint to be true. Zutz v. Nelson, 601 F.3d 842, 848 (8th Cir.2010).

To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face. Thus, although a complaint need not include detailed factual allegations, a plaintiff's obligation to provide the grounds of his entitlement to relief requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.

Id. (citations omitted).

In deciding a motion to dismiss, the Court considers “the complaint, matters of public record, orders, materials embraced by the complaint, and exhibits attached to the complaint.” PureChoice, Inc. v. Macke, Civil No. 07–1290, 2007 WL 2023568, at *5 (D.Minn. July 10, 2007) (citing Porous Media Corp. v. Pall Corp., 186 F.3d 1077, 1079 (8th Cir.1999)).

B. Whether the report in this case was a “Consumer Report” under the FCRA

1. Definition of “Consumer Report”

Each of the counts in Martin's complaint alleges a violation of FCRA, and all but one of those counts (Counts I–III and V) require a finding that the report prepared by First Advantage and relied upon by Wells Fargo is a “consumer report” under that Act.

The definition of a “consumer report” includes a report “by a consumer reporting agency bearing on a consumer's credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living,” when such a report is “used 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 eligibility for ... employment purposes.” 15 U.S.C. § 1681a(d)(1)(B). Certain reports are excluded from this definition. A communication which otherwise would be considered a “consumer report” is excluded if,

(B) the communication is made to an employer in connection with an investigation of—

(i) suspected misconduct relating to employment; or

(ii) compliance with Federal, State, or local laws and regulations, the rules of a self-regulatory organization, or any preexisting written policies of the employer;

(C) the communication is not made for the purpose of investigating a consumer's credit worthiness, credit standing, or credit capacity; and

(D) the communication is not provided to any person except—

(i) to the employer or an agent of the employer;

(ii) to any Federal or State officer, agency, or department, or any officer, agency, or department of a unit of general local government;

(iii) to any self-regulatory organization with regulatory authority over the activities of the employer or employee;

(iv) as otherwise required by law; or

(v) pursuant to section 1681f of this title.

15 U.S.C. § 1681a(y)(1).¹

There is little doubt that, without the operation of the exemption found in 15 U.S.C. § 1681a(y) (“the exemption”), the report prepared by First Advantage would be considered a consumer report under 15 U.S.C. § 1681a(d)(1)(B). The parties also agree that Wells Fargo did not obtain the report “for the purpose of investigating [Plaintiff's] credit worthiness, credit standing, or credit capacity” and that the report was provided only to Wells Fargo, Plaintiff's employer. See15 U.S.C. § 1681a(y)(1)(C)-(D).

A key issue in this case is therefore whether the report was made to Wells Fargo “in connection with an investigation of ... suspected misconduct related to employment; or compliance with Federal, State, or local laws and regulations, the rules of a self-regulatory organization, or any preexisting written policies of the employer.” 15 U.S.C. § 1681a(y)(1)(B). If it was, the exemption applies, and Plaintiff's claims on Counts I, II, III and V cannot succeed because the FCRA provisions which underlie those claims apply only to “consumer reports.”

2. Scope of the Exemption

Wells Fargo contends that its purpose in...