A New Jersey District Court followed Spokeo’s Article III standing analysis and dismissed claims by three putative class representatives against Michaels Stores. Plaintiffs claimed that Michaels’ online employment application violated the Fair Credit Reporting Act (FCRA) and similar New Jersey and California state laws by failing to provide notice of the store’s intent to obtain a background check in a dedicated, stand-alone document. Plaintiffs conceded their applications contained a disclosure about Michaels’ intent to gather background information. Plaintiffs asserted, however, that since the disclosure did not comport with the FCRA “stand-alone requirement,” their consent was not properly obtained. Notably, Michaels had hired all three plaintiffs, and they did not allege any harm aside from the statutory violation.
The court stayed the case until the Supreme Court issued its May 16, 2016 Spokeo opinion, about which we posted on May 17, 2016. Tracking Spokeo, the court engaged in a thorough analysis of the “injury-in-fact” requirement of Article III standing. The court held that a violation of “the purely formal requirements” of FCRA such as the stand-alone disclosure, without any concrete harm, does not constitute an injury-in-fact. In so holding, the court joined the ranks of numerous post-Spokeo opinions (and compiled a list in footnote 8), including Nokchan v. Lyft, Inc., about which we posted on November 4, 2016.
In their effort to establish actual harm, plaintiffs claimed informational injuries and injury by invasion of privacy. Plaintiffs asserted that they suffered informational injury because they were deprived of the stand-alone disclosure the FCRA requires. In dismissing this allegation, the court distinguished between substantive rights (e.g., the right to be informed of and consent to a background check) and procedural rights (e.g., the location and form of the disclosure). Because plaintiffs did not allege that they did not see the disclosure or were distracted from it, their allegations did not establish an informational injury as recognized by other courts. Plaintiffs’ further assertion that their privacy was invaded because Michaels improperly obtained their consent to obtain background information was equally unsuccessful because plaintiffs were, in fact, informed that Michaels would collect background information. The employer’s procurement of a consumer report would be unauthorized – and thus an invasion of privacy – only if plaintiffs were in fact denied disclosure.
In its concluding comments, the court noted that the Spokeo standing issue in statutory fixed-damages cases based on procedural violations “implicates class action practice” because the individualized factual analysis required to establish each plaintiff’s injury-in-fact may be inconsistent with class action treatment for the remainder of the putative class members. “But that is a problem for another day.”
In Re: Michael’s Stores, Inc., Fair Credit Reporting Act (FCRA) Litigation, 2:14-cv-07563, MDL No. 2615 (N.J. Jan. 24, 2017)