Class Action Decertified for Lack of Standing

A judge in the U.S. District Court for the Central District of California recently granted a defendant’s motion to decertify a class of plaintiffs for failing to meet the Article III standing requirements.  The underlying lawsuit involves alleged violations of FCRA and state law by defendant, a large, national retail chain, in the course of collecting background check information and making certain disclosures as part of the employment application process.

Plaintiffs alleged that the company violated FCRA and California’s Investigative Consumer Reporting Agency Act (ICRAA) by including extraneous information in disclosure forms and by inadequately disclosing their rights under the requirements of both regulatory schemes.  These alleged violations affected more than 6.5 million job applicants.

The standing requirement is jurisdictional and must be met at each stage of the litigation as it progresses, and here, plaintiffs’ reliance on mere allegations with nothing further to support standing requirements was fatal to their class certification.  Because the named plaintiffs lacked standing, the class was decertified.

Citing the Supreme Court’s Spokeo ruling that violation of a statutory right does not automatically support Article III standing to sue without a concrete injury in fact, the court found the named plaintiffs did not establish that defendant violated their statutory rights under FCRA and ICRAA when it collected plaintiffs’ background information.

With regard to one section of FCRA that requires certain disclosures to be made when an investigative consumer report has been procured or caused to be prepared, plaintiffs conceded during discovery that defendants did not procure investigative consumer reports during the employment application process.

As to plaintiffs’ allegation that defendant also violated FCRA by including extraneous information in the disclosure forms plaintiffs received when applying for employment in violation of their privacy and statutory rights, the court found plaintiffs failed to identify any injury in fact associated with this alleged statutory violation.  During deposition testimony, several named plaintiffs conceded they understood and consented to the possibility that the defendant might complete a background check during the application process.  Plaintiffs’ ICRAA claims failed on similar grounds.

The matter was remanded to state court for further proceedings.