Wisconsin Cases May 14, 2020: Shekar v. Accurate Background, Inc.

Case Description

[613 F.Supp.3d 1118]

James A. Francis, John Soumilas, Jordan M. Sartell, Francis & Mailmain PC, Philadelphia, PA, David M. Marco, Larry P. Smith, SmithMarco PC, Chicago, IL, for Plaintiff.

John W. Drury, Pamela Quigley Devata, Seyfarth Shaw LLP, Chicago, IL, for Defendant.

DECISION AND ORDER

LYNN ADELMAN, District Judge

The plaintiff, Kiran Kumar Chandra Shekar, alleges that the defendant, Accurate Background, Inc., furnished a consumer report to his potential employer without complying with certain procedural requirements of the Fair Credit Reporting Act ("FCRA"). See 15 U.S.C. § 1681k(a). In a prior order, I denied the plaintiff's motion to certify a class of over 100,000 people on the ground that the proposed

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class consisted almost entirely of individuals who lacked standing to sue. See Shekar v. Accurate Background, Inc. , 428 F.Supp.3d 9 (E.D. Wis. 2019). The plaintiff now moves for leave to file an amended motion for class certification in which he proposes a narrower class.

I. BACKGROUND

As I explained in my prior order, after Shekar received an offer for employment as a software developer, the employer asked Accurate to provide a background report about him. The background report said that Shekar has been convicted of a misdemeanor count of disorderly conduct. This was inaccurate. Although Shekar had been charged with a misdemeanor count of disorderly conduct, the charge was reduced to an ordinance violation before Shekar was convicted. After the employer received the inaccurate background report, it rescinded Shekar's offer of employment.

Shekar then commenced the present action under the FCRA. He alleges that Accurate violated a provision of the FCRA that applies when a consumer reporting agency furnishes information to a third party for employment purposes, 15 U.S.C. § 1681k(a). In relevant part, this provision states that a consumer reporting agency that furnishes such a report that contains "items of information on consumers which are matters of public record and are likely to have an adverse effect on a consumer's ability to obtain employment" must do one of two things: either notify the consumer at the time it furnishes information that it has done so or "maintain strict procedures designed to insure that whenever public record information which is likely to have an adverse effect on a consumer's ability to obtain employment is reported it is complete and up to date." Id. Shekar alleges Accurate both failed to give him the required notice at the time it furnished its report to his potential employer and failed to maintain strict procedures to insure that the public record information it provided was complete and up to date.

In his original motion for class certification, Shekar proposed to represent a class comprising

[a]ll individuals about whom Defendant's "AccurateNow" division (including its corporate predecessor) furnished a background report for employment purposes to a prospective employer that contained an item of public record information between April 25, 2012 and the present and to whom it did not send any notice under FCRA section 1681k(a)(1) at the time it prepared the report.

ECF No. 43-1 at p. 11 of 38. The class definition encompassed 106,864 individuals. I denied the plaintiff's motion on the ground that it consisted almost entirely of claimants who did not have standing under Article III of the Constitution. The class definition did not limit the class to claimants whose reports were inaccurate. I concluded that a claimant whose report was accurate did not have standing because the defendant's furnishing an accurate report could not have caused the claimant to suffer concrete harm. See Spokeo, Inc. v. Robins , 578 U.S. 330, 136 S. Ct. 1540, 194 L.Ed.2d 635 (2016).

In my prior order, I observed that "it might be possible for Shekar to narrow his class definition by requiring, at the least, that the class include only those individuals whose reports contained incomplete or out-of-date information." Shekar , 428 F.Supp.3d at 18. Shekar now proposes to represent a more narrow class, which he defines as follows:

During the period beginning April 25, 2015 and continuing to the present, all natural persons residing in the United States and its Territories: (i) about whom Defendant prepared a consumer report for employment purposes, (ii) whose report contained one or more

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items of public record information, (iii) to whom Defendant did not send any notice under FCRA section 1681k(a)(1) at the time it prepared the report, (iv) who disputed the completeness or accuracy of the public record information included on their reports, and (v) whose disputes resulted in a correction to the public record information included on their reports.

ECF No. 54-1 at 4. According to Shekar, this class will contain approximately 4,300 people. He contends that nearly all members of the class will have standing because the defendant corrected an entry on each class member's report after the class member initiated a dispute, which, he contends, gives rise to an inference that the uncorrected report contained information that was not complete and up to date. Thus, says the plaintiff, unlike his original proposed class, the new proposed class will not contain a large number of class members whose reports were complete and up to date.

Accurate opposes Shekar's motion. First, it contends that Shekar should not be given a second chance to define a proper class. Accurate notes that Shekar could have proposed a narrower class in his original motion and that revisiting class certification will needlessly consume the court's and Accurate's resources. Second, Accurate contends that granting leave to file the amended motion would be futile because the amended class definition is still overbroad.

I consider these arguments below.

II. DISCUSSION

I first address whether Shekar forfeited his opportunity to represent a narrowed class by not proposing the narrower class definition in his original motion for class certification. Federal Rule of Civil Procedure 23(c)(1)(C) allows a district court to alter or amend an order granting or denying class certification at any time before entering final judgment. Thus, I have the power to grant the plaintiff leave to file an amended motion for class certification. However, the relevant question is whether I should exercise my discretion to deny such leave on the ground that Shekar has already had a full and fair opportunity to propose a class definition and has not demonstrated good cause for receiving a second opportunity. See Chapman v. First Index, Inc. , 796 F.3d 783, 785 (7th Cir. 2015) (holding that a district court has discretion to reject a second class definition when the plaintiff could have proposed it as part of his original motion for class certification).

In the scheduling order for this case, I set a deadline for the plaintiff to move for class certification. At the parties’ request, I extended that deadline several times, and ultimately the deadline for moving for class certification was May 17, 2019. The plaintiff complied with that deadline when he filed his original motion for class certification and proposed the overbroad class. In that motion, the plaintiff could have proposed his narrower class definition, either exclusively or as an alternative to certifying his preferred class. However, he chose to propose only the overbroad class. Thereafter, both the defendant and the court expended resources deciding the motion. Had the plaintiff proposed his narrower definition as part of his original motion, the defendant and the court could have addressed it in a single, efficient round of briefing and opinion-writing. Instead, by waiting for the court to decide the original motion and only then proposing a narrower class, the plaintiff asks the defendant and the court to expend their resources on the same issue a second time. Such an expenditure of resources would be warranted only if the plaintiff demonstrated a good reason for proceeding in this piecemeal, inefficient manner. See

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O'Boyle v. Real Time Resolutions, Inc. , 910 F.3d 338, 348 (7th Cir. 2018). Moreover, because the plaintiff's motion essentially asks me to modify the scheduling order's deadline for filing a motion for class certification, Federal Rule of Civil Procedure 16(b)(4) requires a showing of good cause.

In his motion, the plaintiff does not explicitly offer a good reason for waiting until now to propose the narrower class. However, the plaintiff might argue that his amended motion is appropriate because it responds to the court's concerns about the standing of absent class members. But the court's concerns were based on legal principles that existed at the time the plaintiff filed his original motion and which the plaintiff could have taken into account when crafting his class definition. See, e.g., Spokeo, Inc. v. Robins , 578U.S. 330, 136 S. Ct. 1540, 194 L.Ed.2d 635 (2016) ; Tyson Foods, Inc. v. Bouaphakeo , 577 U.S. 442, 136 S.Ct. 1036, 194 L.Ed.2d 124 (2016). Moreover, the defendant opposed the plaintiff's original motion for class certification on the ground that the class definition was too broad. Although the defendant raised this issue as one involving the merits of the FCRA claim rather than standing, the issue was otherwise the same: whether the proposed class was overbroad because it was made up almost entirely of claimants whose reports were accurate. See Br. in Opp. at 2, ECF No. 49 (noting that " every § 1681k(a) plaintiff or class member must also show that his or her report included a record that ... was incomplete or not up to date"). Thus, the plaintiff was on notice that the court might deem his original class overbroad and could have proposed to cure that problem in his original motion or in his supporting briefs.

For these reasons, the plaintiff has not made a strong case for being granted leave to file an amended motion for class certification. However, as I said in my prior order, it is possible that a class could be certified in this case, and it strikes me as unjust to preclude certification of a clearly appropriate class based on the named plaintiff's procedural misstep. But, as I am about to explain, the class definition in the plaintiff's amended motion for class certification is not clearly appropriate—it is still too broad. Therefore, I will not grant the plaintiff leave to file his amended motion. Instead, I will define what I believe to be an appropriate class and then grant the plaintiff an opportunity to either accept that definition or reject it and proceed with his individual claim only. See Chapman , 796 F.3d at 785 (noting that "the obligation to define the class falls on the judge's shoulders under Fed. R. Civ. P. 23(c)(1)(B)").

The plaintiff's new class definition encompasses all persons who meet five criteria: (1) the defendant prepared a consumer report for employment purposes about the person; (2) the person's report contained one or more items of public record information; (3) the defendant did not send the person a notice under § 1681k(a)(1) at the time it prepared the report; (4) the person disputed the completeness or accuracy of the public record information included on their report; and (5) the defendant corrected public record information in the report in response to the dispute. According to the plaintiff, this definition ensures that nearly every class member's report contained public record information that was either incomplete or not up to date. Thus, contends the plaintiff, nearly all class members will have suffered a concrete injury and will have Article III standing.

Notably, the plaintiff's class definition does not require the class member to have lost an employment opportunity because of the inaccuracy or to have suffered embarrassment or other reputational harm because of the inaccuracy. Undoubtedly, these would be concrete harms. Instead,

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the plaintiff asks me to assume that whenever a report about a person contains an inaccuracy, the person is subject to a risk of harm and therefore has suffered a concrete injury under Spokeo . I agree that a person has standing to sue when an inaccuracy in a report gives rise to a risk of that the person will lose an employment opportunity or suffer reputational harm. See Spokeo , 136 S. Ct. at 1549. However, as Spokeo also made clear, "not all inaccuracies cause harm or present any material risk of harm." Id. at 1550. The Court gave the example of an incorrect zip code, writing "[i]t is difficult to imagine how the dissemination of an incorrect zip code, without more, could work any concrete harm." Id.

In his amended motion for class certification, the plaintiff does not describe the nature of the incorrect information that was initially included in the reports of all 4,300 proposed class members. Thus, he does not propose to represent a class of persons whose reports (like his) inaccurately described a criminal conviction in a manner that made the conviction seem more severe than it was. Instead, he proposes to represent a class of all persons whose reports contained any type of inaccuracy, without regard to the nature of the inaccuracy or whether it created a material risk of harm. To be sure, under the class definition, the inaccuracy must relate to an item of public record information, but not all inaccuracies concerning public record information will create a material risk of harm. For example, a report identifying the wrong jurisdiction in which a conviction was obtained is unlikely to cause harm or a risk of harm.

Because not all inaccuracies cause harm or a material risk of harm, the court cannot infer from the fact that the defendant corrected an unidentified item of public record information in a claimant's report that the claimant suffered a concrete injury from the furnishing of the original, inaccurate report to a potential employer. This creates two related barriers to class certification. First, the class definition sweeps within it persons who could not have been injured by the defendant's conduct and therefore is too broad. See Kohen v. Pac. Inv. Mgmt. Co. LLC , 571 F.3d 672, 678 (7th Cir. 2009). Second, even if the class definition were not too broad, it would require the court to make potentially thousands of individualized inquiries into the seriousness of the inaccuracy in each class member's report so that those class members who lack standing could be filtered out before judgment is entered. The need to make these individualized inquiries would make the class action difficult to manage and prevent certification under Federal Rule of Civil Procedure 23(b)(3).

The plaintiff cites a recent decision from the Ninth Circuit in which the court found that a class of FCRA claimants had standing under a risk-of-harm theory. See Ramirez v. TransUnion LLC , 951 F.3d 1008 (9th Cir. 2020). However, in that case, the report of every class member contained the same inaccuracy: the credit reporting agency erroneously reported that each class member was on a terrorist-watch list. Id. at 1016. Thus, the court could determine whether every class member had

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standing in a single stroke by answering the question of whether falsely describing someone as a terrorist creates a risk of material harm. The court answered yes. See id. at 1025–26 (describing the "nature of the inaccuracy" as "severe" and contrasting it with inaccurately reporting "a zip code or other minor discrepancy"). Unlike in Ramirez , here the plaintiff does not propose to represent a class of persons whose reports contained the same inaccuracy. Rather, as discussed, he proposes to represent a class of persons whose reports contained potentially thousands of different kinds of inaccuracies. Sifting through the reports to separate the minor discrepancies from the discrepancies that exposed the class member to a real risk of harm would require individualized inquiries and render the class action unmanageable.

For these reasons, I will not grant the plaintiff leave to file his amended motion for class certification. However, as indicated, I think that a class can be certified in this case. During discovery, the plaintiff learned that, between April 25, 2015 and November 15, 2018, the defendant inaccurately identified the "level" of a criminal charge or conviction (i.e., whether it was a felony, misdemeanor, or ordinance violation) in 569 reports that were provided to potential employers. See ECF No. 43-8 at 9–11 (Response to Interrogatory No. 9). These 569 consumers are similarly situated to Shekar in that, like him, they were subjects of background reports that inaccurately described their alleged criminal charges in ways that made them seem more serious than they were. The question of whether these potential class members have standing can be answered in a single stroke: does inaccurately describing the charge level of a crime give rise to a material risk of harm? And I answer the question affirmatively. Describing a charge as a felony when it was actually a misdemeanor, or as a misdemeanor when it was actually an ordinance violation, creates a material risk that the subject of the report will suffer an employment loss or reputational harm. The higher charge level conveys the impression that the job seeker had engaged in more serious criminal activity than he did, which, in turn, could cause the employer to prefer a different candidate for the job.

Thus, I will grant the plaintiff the option of representing the following class:

During the period beginning April 25, 2015 and continuing to November 15, 2018, all natural persons residing in the United States and its Territories: (i) about whom Defendant furnished a consumer report for employment purposes, (ii) whose report contained one or more items of criminal record information, (iii) to whom Defendant did not send any notice under FCRA section 1681k(a)(1) at the time it furnished the report, (iv) who disputed the description of the charge level of the criminal record included on the report, and (v) whose disputes resulted in a correction to the description of the charge level.

This class meets the requirements of Federal Rule of Civil Procedure 23(a). First, the class is so numerous that joinder of all members is impracticable, as it is impracticable to join 569 individuals as plaintiffs.

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Second, there is a question of law or fact common to the class, namely, whether, during the class period, the defendant maintained strict procedures designed to insure that whenever public record information which is likely to have an adverse effect on a consumer's ability to obtain employment is reported it is complete and up to date. The record shows that the defendant's procedures during the class period were uniform, and thus whether they were sufficiently "strict" is a question that can be resolved in one stroke for all class members. See Def. Br. in Opp. at 13, ECF No. 49-1 (stating that "Accurate's strict procedures are applied uniformly and nationwide"). Third, Shekar's claim is typical of the claims of the class, in that the defendant misreported the charge level of his offense. Fourth, Shekar would fairly and adequately protect the interests of the class. Also, I find that Shekar's counsel meets the requirements of Rule 23(g) and may be appointed class counsel.

The class also satisfies Rule 23(b)(3). The questions of law or fact common to all class members predominate over any questions affecting only individual members. As discussed above, because the class as I have defined it contains only claimants whose reports contained the same or similar types of errors, this case is unlikely to present substantial individualized issues. Under the FCRA, statutory damages are available for willful violations, see 15 U.S.C. § 1681n, and thus individualized damages hearings will not be needed. Perhaps some class members will have substantial claims for actual damages that they will wish to pursue, but even if so, the common question of whether the defendant's procedures were sufficiently strict will predominate. Moreover, because the class consists of less than 600 people, the number of individualized damages hearings will be manageable. Finally, because of the small value of each individual claim, I find that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.

I will grant the plaintiff and his counsel 30 days to decide whether they wish to represent the class as I have defined it. If they do, I will enter an order certifying the class, appointing Shekar as the class representative, and appointing his counsel as class counsel. I will also set this matter for a status conference to schedule further proceedings, either on the class claim or, if Shekar declines to represent the class, on his individual claim.

III. CONCLUSION

For the reasons stated, IT IS ORDERED that the plaintiff's motion to file an amended motion for class certification (ECF No. 54) is DENIED .

IT IS FURTHER ORDERED that, on or before June 15, 2020 , Shekar and his counsel shall file a statement indicating whether they wish to represent the class that I have defined.

FINALLY, IT IS ORDERED that, on June 17, 2020 at 11:15 a.m. a telephonic status conference will be held for the purpose of scheduling further proceedings.