Sterling Testing Sytems Reporting Criminal Record Beyond 7 Years in Employment Report
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
GARY SERRANO, )
on behalf of himself and all others )
similarly situated, )
)
Plaintiff, ) Civil Action No. 07-4563
vs. )
)
STERLING TESTING SYSTEMS, INC., )
)
Defendant. ) CLASS ACTION
)
PLAINTIFF’S MEMORANDUM OF LAW IN SUPPORT OF HIS RESPONSE
IN OPPOSITION TO DEFENDANT’S MOTION TO DISMISS
Plaintiff Gary Serrano, through counsel, respectfully submits this memorandum of law in support of his response in opposition to Defendant Sterling Testing Systems, Inc.’s Motion to Dismiss Plaintiff’s Complaint pursuant to Fed. R. Civ. P. 12(b)(6) (“Motion”) (Docket No. 8). Defendant’s Motion should be denied because Plaintiff has properly pled a cognizable cause of action under the Fair Credit Reporting Act 15 U.S.C. §§ 1681, et seq. (“FCRA”).
Specifically, Plaintiff brings this class action claiming that Defendant violates the FCRA through its uniform practice of reporting outdated adverse information concerning arrests, which it is required to exclude from the reports it sells to employers and prospective employers. Unless a job’s annual salary is $75,000 or more, a consumer reporting agency (“CRA”) such as Defendant may not report any “records of arrest” or “[a]ny other adverse item of information” that antedates the report by more than seven years. See 15 U.S.C. §§ 1681c(a)(2) and (5), & 1681c(b)(3). Defendant does not deny that it sold a report to Plaintiff’s employer, SEPTA, which stated that “[t]his applicant has an arrest/incident on his/her criminal history that is NOT a conviction, and is over 7 years old.” (See Complaint ¶ 15) (emphasis added). Defendant further does not deny that at the time of the report it had no information concerning the salary of the SEPTA job at issue. Nor does Defendant deny it uses the above-quoted language concerning obsolete arrests uniformly on consumer reports sold to employers and prospective employers.
Rather, Defendant argues that Plaintiff’s Complaint should be dismissed allegedly because Defendant did not really report information concerning a “record of arrest,” but rather made a “salary related inquiry” to its client. This argument fails upon a plain text reading of the statutory language at issue, the specific interpretive guidelines of the Federal Trade Commission (finding even a suggestive reference to obsolete information on a credit report to be unlawful), as well as under a reading of the related case law and legislative intent of the FCRA.
As a back-up, Defendant also argues that the language “this applicant has an arrest/incident on his/her criminal history” is allegedly not an “adverse item of information.” This argument makes sense only in an Orwellian world where being arrested is a virtue. No reading of the FCRA, related case law, or legislative intent supports that conclusion.
Nor is Defendant persuasive in arguing that its business obligations require such an improper disclosure of obsolete arrest records. Assuming such a “business obligations” inquiry was relevant to this case (which it is not), Defendant’s business obligations can easily be satisfied without violating the FCRA, as will be discussed more fully below.
In sum, Defendant comes far short of meeting its burden of proving that Plaintiff cannot show that he would be entitled to relief under the facts pled in the Complaint. See Rocks v. City of Philadelphia, 868 F.2d 644, 645 (3d Cir. 1989). Accordingly, Defendant’s Motion should be denied.
I. FACTS
Plaintiff Gary Serrano is an adult individual and citizen of the Commonwealth of Pennsylvania who resides at 1670 Conklin Street, Philadelphia, PA 19124. At all times relevant hereto, Plaintiff was a “consumer” as that term is defined by 15 U.S.C. § 1681a(c). Complaint, ¶¶ 4, 7.
Defendant Sterling Testing Systems, Inc. (“Defendant” or “Sterling”) is a business entity that regularly conducts business in Philadelphia County, Pennsylvania, which has a principal place of business located at 249 West 17th Street, Floor 6, New York, NY 10011. At all times relevant hereto, Defendant was a “consumer reporting agency” as defined by 15 U.S.C. § 1681 a(f). Complaint, ¶¶ 5-6. Among other things, Defendant sells consumer reports to employers who wish to screen job applicants. On its Website, in a section entitled “Compliance,” Defendant represents that it complies with the Fair Credit Reporting Act. Complaint, ¶¶ 9-10.
The Complaint alleges that in or about February 2007, Plaintiff was hired by Edens Corporation, subcontracted by SEPTA, as a paratransit driver earning an hourly wage of $8.70 in a non-salaried position. The position for which Plaintiff applied carried a salary less than $75,000 per year. As part of its routine background checks on paratransit drivers, SEPTA requested through Edens Corporation that it be provided with information about the Plaintiff. In or about March 2007, Defendant sold a consumer report to Edens Corporation purportedly regarding the Plaintiff, though it erroneously contained information about Plaintiff’s brother, instead of the Plaintiff himself. Complaint, ¶¶ 20-23.
The Complaint further alleges that, following the erroneous information regarding Plaintiff, the consumer report prepared by Defendant concluded with the following language (the “Form Paragraph”):
This applicant has an arrest/incident on his/her criminal history that is NOT a conviction, and is over 7 years old. In accordance with Federal guidelines, we need to verify that this applicant will make at least $75,000 per year in order to make this information available to you. If you wish to receive this information, please let us know that the applicant meets this salary threshold by emailing SalaryConfirmation@sterlingtesting.com.
Complaint, ¶ 15. The Complaint alleges that the Form Paragraph is standard language contained in consumer reports prepared and sold by Defendant to employers and other entities. Complaint, ¶ 17.
The Complaint sets forth that when a consumer reporting agency produces a copy of a consumer’s file to the consumer or a third party, the consumer reporting agency is required to exclude adverse items of information, including records of arrest, which antedate the consumer report for more than seven years. The Complaint further alleges that adverse items of information, such as records of arrest, which antedate the consumer report by more than seven years may be included in a consumer report, but only for consumer credit reports used in connection with the employment of any individual at an annual salary which equals, or which may be reasonably expected to equal $75,000, or more (hereafter “the salary threshold requirement”). Complaint, ¶¶ 12-13.
The Complaint alleges that despite these clear and unambiguous requirements, Defendant sells adverse items of information, including records of arrest, which predate the consumer report by more than seven years, before Defendant confirms that the consumer credit report is being used in connection with the employment of an individual who meets the salary threshold requirement, via the Form Paragraph. The Complaint further alleges that Defendant thereby reports a consumer’s adverse history before it knows or would even have any reason to know whether the consumer meets the salary threshold requirement. Complaint, ¶¶ 14, 16.
II. LEGAL STANDARD
A claim will survive a Rule 12(b)(6) motion to dismiss if “stated adequately, it may be supported by showing any set of facts consistent with the allegations in the complaint.” Bell Atlantic Corp. v. Twombly, 127 S.Ct. 1955, 1969 (2007). As described by Judge Padova in a recent decision denying a motion to dismiss, “[i]n considering a Rule 12(b)(6) motion, ‘we do not require heightening pleading of specifics, but only enough facts to state a claim to relief that is plausible on its face.’ ” Erheart v. Lifetime Brands, Inc., 2007 WL 2141979 at * 755 (E.D. Pa. July 20, 2007) (quoting Twombly, 127 S. Ct. at 1960).
The court must determine whether the plaintiff may be entitled to relief under any reasonable reading of the complaint. See Twombly, 127 S. Ct. at 1969. A claim for relief having been stated, a plaintiff “receives the benefit of imagination so long as the hypotheses are consistent with the complaint.” Twombly, 127 S. Ct. at 1969 (quoting Sanjuan v. American Bd. of Psychiatry and Neurology, Inc., 40 F.3d 247, 251 (7th Cir. 1994)). Although Plaintiff expects to prove all of his/her allegations, in considering a Rule 12(b)(6) motion, the court does “not inquire whether the plaintiff[ ] will ultimately prevail, only whether [she is] entitled to offer evidence to support” her claim. Watson v. Abington Twp., 478 F.3d 144, 150 (3d Cir. 2007); see Rocks v. City of Philadelphia, 868 F.2d 644, 645 (3d Cir. 1989).
III. ARGUMENT
Defendant unlawfully disclosed an obsolete record of an arrest allegedly concerning Plaintiff in the report it made to SEPTA on March 30, 2007, by stating that “[t]his applicant has an arrest/incident on his/her criminal history that is NOT a conviction, and is over 7 years old,” without any basis in believing that the job at issue was for an annual salary of $75,000 or more. Even if the above-quoted language is not a “record[] of arrest” it is certainly an “adverse item of information” under the FCRA. In either instance, Defendant violates the FCRA at subsection 1681c(a). Defendant’s Motion simply does not satisfy the stringent requirements of Fed. R. Civ. P. 12(b)(6). It must therefore be denied.
A. Defendant Disclosed An Obsolete Record Of An Arrest On Plaintiff’s Report That It Sold To SEPTA, In Violation of FCRA Subsection 1681c(a)(2)
Defendant argues that “it did not disclose arrest records of the plaintiff under 1681(c)(a)(2).” (Def. Mem. at 5). Defendant repeats several times that it never “produced” arrest records, but rather made a “salary related inquiry” when it sold SEPTA a report that stated that “[t]his applicant has an arrest/incident on his/her criminal history that is NOT a conviction, and is over 7 years old . . . .” (Def. Mem. at 4, 8, 9). This argument fails at several levels.
First, the plain text of the FCRA is clear: “no consumer reporting agency may make any consumer report containing any of the following information . . . . records of arrest that from the date of entry, antedate the report by more than seven years.” 15 U.S.C. § 1681c(a)(2). There is no dispute here that Defendant is a consumer reporting agency and that it made a consumer report concerning Plaintiff, which it sold to SEPTA on March 30, 2007. Nor is there any dispute that the language that “[t]his applicant has an arrest/incident on his/her criminal history that is NOT a conviction, and is over 7 years old” relates to an arrest that antedates the report by more than seven years. Defendant’s only argument under subsection 1681c(a)(2) appears to be that the above-quoted language at issue is not the “production” of any “records of arrest.” (Def. Mem. at 4, 8, 9).
The FCRA does not define “records of arrest.” Nothing in the text of the statute, however, even suggests that a “complete” or “detailed” record of arrest is required before a violation of subsection 1681c(a)(2) can be established. Under the plain text of the statute, a simple statement or reference that the applicant has an arrest will do.
Nor does the statute impose any obligation concerning a “production” of an arrest record, as Defendant suggests. Further, the statute has no exception of “salary related inquiries.” Rather the statute very broadly prohibits CRAs from making “any” consumer report of any “records” (in the plural) of an arrest. 15 U.S.C. § 1681c(a)(2). If Congress sought to cover only a singular type of arrest record or only certain specific references to arrest records, it could have so stated.
Where, as here, the plain text of the statute is clear, the trial court need not go any further in its inquiry. See Valansi v. Ashcroft, 278 F.3d 203, 209 (3d Cir. 2002); Marshak v. Treadwell, 240 F.3d 184, 192 (3d Cir. 2001); Steele v. Blackman, 236 F.3d 130, 133 (3d Cir. 2001). (“Where the language of the statute is clear the text of the statute is the end of the matter.”). In the case at bar, and contrary to Defendant’s argument, it is clear that the facts pled in Plaintiff’s Complaint identify the unlawful reporting of a “record[ ]of arrest,” and thus set forth a cognizable claim under FCRA subsection 1681c(a)(2).
Case law also supports Plaintiff’s position that the FCRA prohibits any reference to criminal arrests or convictions which predate a consumer’s report by more than seven years. See Porter v. Talbot Perkins Children’s Services, 355 F.Supp. 174, 177 (S.D.N.Y. 1973) (noting Federal Trade Commission’s view that a report that refers to an arrest constitutes a consumer report which bears on the personal characteristics of a consumer). See also 17 A.L.R. Fed. 675, Construction and Application of Fair Credit Reporting Act, § 8, citing Anonymous v. Dun & Bradstreet, Inc., 40 Law Week 2162 (NY Sup. Ct. 1971) (held that FCRA prohibits reference to criminal arrests or convictions which predate the credit report by more than seven years).
Further, the Federal Trade Commission has opined in its Official Staff Commentary that a CRA, such as Defendant, cannot suggest even the existence of obsolete information:
A consumer reporting agency may not furnish a consumer report indicating the existence of obsolete adverse information, even if no specific item is reported. For example, a consumer reporting agency may not communicate the existence of a debt older than seven years by reporting that a credit grantor cannot locate a debtor whose debt was charged off ten years ago.
FTC Official Staff Commentary § 605 item 6.
Similarly, in In re Equifax, Inc., an FTC administrative law judge found that a credit reporting agency violated the FCRA by inserting phrases in its reports such as, “[i]n compliance with the Fair Credit Reporting Act, no additional information can be reported from this former employer concerning employment experience prior to seven years ago.” 96 F.T.C. 854 (1977) (initial opinion), aff’d, 96 F.T.C. 1045 (1980) (final opinion), rev’d in part on other grounds, 678 F.2d 1047 (11th Cir. 1982). “The quoted phrase was inserted into consumer reports only when Equifax believed it had adverse obsolete information. It was enough that use of that phrase indicated the presence of adverse information, even if users of the consumer report might not actually interpret the stock sentence as suggesting the presence of adverse information.” National Consumer Law Center, Fair Credit Reporting (6th ed. 2006), § 5.2.2.3.
The legislative intent of the FCRA also favors Plaintiff’s position. The FCRA was intended to protect privacy and to assure accuracy in credit reporting. 15 U.S.C. § 1681(a). It is to be liberally construed in favor of consumers, not credit reporting agencies. See Philbin v. Trans Union and Equifax Corp., 101 F. 3d 957, 962 (3d. Cir. 1996); Guimond v. Trans Union Credit Info. Co., 45 F.3d 1329 (9th Cir. 1995). The restrictive reading of the FCRA that Defendant may wish to have would allow CRAs to place references to obsolete arrest records on credit reports so long as they are not accompanied by the “production” of a “complete” arrest record. That would simply defeat the point of having a clean slate after seven years. For once any information about an arrest is revealed, the damage is done. The reporting of an arrest need not be chapter and verse, but only a simple reference that the applicant was arrested.
As a practical matter, this last point is exactly the one that Defendant misses. When it tells employers and prospective employers that “[t]his applicant has an arrest/incident on his/her criminal history . . . ” and that they may request more information if the job has a salary of $75,000 or more, Defendant is not simply making a “salary related inquiry.” It is reporting to the employer or prospective employer that the applicant, in fact, has an old arrest record. As will be discussed below, a “salary related inquiry” can be made in other ways, without letting the horse out of the barn.
In sum, the FCRA at subsection 1681c(a)(2) prohibits exactly the conduct in which Defendant engages, as set forth in Plaintiff’s Complaint. Thus Defendant’s Rule 12(b)(6) motion to dismiss must fail.
B. Defendant Disclosed Obsolete Adverse Information On Plaintiff’s Report That It Sold To SEPTA, In Violation of FCRA Subsection 1681c(a)(5)
Defendant also argues that Plaintiff’s Complaint should be dismissed because when it told SEPTA on the March 30, 2007 report that “this applicant has an arrest/incident on his/her criminal history . . . ” it was not conveying any “adverse item of information.” (Def. Mem. at 4-5). This argument is both circular and otherwise flawed.
In his Complaint, Plaintiff pleads in the alternative that if the language “this applicant has an arrest/incident on his/her criminal history . . . ” is not a “record[] of arrest,” it must be an unlawful reporting of an obsolete “adverse item of information,” in violation of the catch-all obsolescence provision set forth at FCRA subsection 1681c(a)(5). Defendant argues in its Motion that the above-quoted language “did not disclose arrest records of the plaintiff under 1681(c)(a)(2).” (Def. Mem. at 5). Defendant, however, would also have this Court find that the offending language cannot be “adverse” information under the catch-all obsolescence provision because “[i]nasmuch as the statute expressly covers, inter alia, arrest records, there is no reason whatsoever for this or any other Court to address whether or not arrest records constitute ‘other adverse information’ under the statute.” (Def. Mem. at 4-5).
Defendant simply cannot have it both ways. If the language at issue is an arrest record under the FCRA, then Plaintiff has set forth a proper cause of action under the specific “records of arrest” provision discussed in the previous section of this brief — FCRA subsection 1681c(a)(2). If, on the other hand, the offending language is not an arrest record, then it is necessarily some “other” item of information. If it is something “other,” the offending language cannot be excluded from coverage because “the statute expressly covers, inter alia, arrest records” (i.e., because the offending language really is an arrest record). To the contrary, if the offending language is not an arrest record, it would fall under the catch-all obsolescence provision set forth at FCRA subsection 1681c(a)(5), concerning any “other adverse item of information.”
There is simply no valid reason (and Defendant offers none) as to why the catch-all obsolescence provision set forth at FCRA subsection 1681c(a)(5) would not apply to this case if the offending language is not an arrest record. See In re Miller, 335 B.R. 335 (Bankr. E.D. Pa. 2005) (generally discussing application of FCRA subsection 1681c(a)(5) catch-all obsolescence provision). The language “this applicant has an arrest/incident on his/her criminal history . . . ” is certainly information and it is certainly adverse.
The phrase “adverse information” under the FCRA has been construed as information which may have, or may reasonably be expected to have, an unfavorable bearing on a consumer’s eligibility or qualifications for credit, insurance, employment, or other benefit, including information which may result, or which may be reasonably expected to result, in a denial of or increased costs for such benefits. Equifax, Inc. v. Federal Trade Commission, 678 F.2d 1047, 1050 (11th Cir. 1982) (citing FTC’s Final Order to Cease and Desist issued December 15, 1980).
The meaning of “adverse information” is so broad that it encompasses information that does not even have to refer to or reflect on the credit-standing, character or morals of an applicant or that would ordinarily be regarded as adverse. For example, even a dangerous hobby such as parachuting or the weight of a health insurance applicant can constitute adverse information for purposes of the FCRA. Id. at 1050. Therefore, disclosing that an individual has an arrest history that is more than seven years old certainly falls within the ambit of prohibited adverse information contemplated by the FCRA.
Defendant’s circular argument that its disclosure does not constitute an “arrest record” under subsection 1681c(a)(2), yet cannot be an “item of adverse information” under subsection 1681c(a)(5), allegedly because arrest records are specifically addressed in the former provision, clearly must fail. So must any other suggestion that a reference to an arrest record on a credit report is not “adverse.” Accordingly, Defendant’s motion to dismiss should be denied.
C. Defendant May Easily Meet Both Its Duties Under The FCRA And Its Obligations To Its Customers.________________________________ _
Finally, Defendant argues that its practices are a proper balance between its obligations to its customers and its duties under the FCRA. This argument is hollow.
Defendant may very easily and inexpensively correct its method of disclosing information to its customers in a manner that complies with the FCRA. For example, Defendant could simply notify its employer-customers that when an applicant is applying for a job with a salary at or exceeding $75,000, they may be entitled to certain information about the applicant that is more than seven years old. Alternatively, Defendant could provide a simple form to employers seeking to order credit reports, containing two check boxes — one to be checked if the applicant will make less than $75,000 annually and the other to be checked if the applicant will make $75,000 or more annually. The form could have a notation that if the applicant’s annual salary would be $75,000 or more, the employer would be entitled to receive additional information about the applicant that is more than seven years old, without any actual reference to that information or an advance notice that such information, in fact, exits. With either of the above options, it is up to the employer to determine whether it wants to advise Defendant of the salary of the job and thus receive additional older information.
Many other simple solutions are also available to Defendant so that it may provide its customers with accurate and complete information regarding job applicants, while at the same time protecting the privacy and rights of individuals as mandated by the FCRA. Fashioning such solutions, however, is neither a burden that the FCRA places on consumer-plaintiffs, nor a relevant inquiry in deciding the pending Motion. Accordingly, Defendant’s business obligations argument regarding its unlawful practices must fail.
IV. CONCLUSION
For all of the reasons discussed above, Plaintiff respectfully requests that this Court deny
Defendant’s motion to dismiss (Docket No. 8).
Respectfully submitted,
Dated: February 28, 2008 /s/ JAMES A. FRANCIS
FRANCIS & MAILMAN, P.C.
JAMES A. FRANCIS, ESQUIRE
JOANNE Y. PARK, ESQUIRE
Land Title Building, 19th Floor
100 South Broad Street
Philadelphia, PA 19110
DONOVAN SEARLES, LLC
DAVID A. SEARLES, ESQUIRE
1845 Walnut Street, Suite 1100
Philadelphia, PA 19103
(215) 732-6067
Attorneys for Plaintiff