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Keesha Goode and Victoria Goodman, On Behalf of Themselves and Others v. Lexisnexis Risk & Information

March 22, 2012


The opinion of the court was delivered by: DuBOIS, J.



In this putative class action, plaintiffs allege that defendant's system for conducting background checks violates the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. § 1618 et seq. Plaintiffs are employees who were fired by their employers, and potential employees who were denied employment, based on background checks that defendant conducted as a service to those employers.

Defendant LexisNexis Screening Solutions, Inc.,*fn1 ("LexisNexis") filed a Motion to Dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6).*fn2 For the reasons stated below, the Court grants in part and denies in part defendant's Motion to Dismiss.


A. The "Esteem" System

Defendant operates a proprietary system called "Esteem" that "helps organizations identify applicants with [a] history of theft or fraud." (Compl. ¶¶ 14, 15.) Subscribing member employers ("members") pay a fee based on the number of their employees, and in return, defendant performs background checks on current and potential employees. Members must also give defendant new records of theft incidents involving their own employees and customers ("incident reports" or "reports"). (Id. ¶ 20.) Members may only submit incident reports in one of two situations: (1) if the member referred the incident for criminal prosecution, or (2) if the employee admits guilt. (Id. ¶ 21.) If, as is alleged in this case, the employee admits guilt, the member employer includes an "admission statement"-a statement describing the incident and admitting guilt signed by the person who committed the theft-with the report. (Id. ¶ 23.)

When a member requests information about a current or potential employee, defendant searches its system for possible matches between the employee's personal information and a record on file. (Id. ¶ 28.) If a match is found, defendant "verifies" the match by comparing the personal data from the inquiry with the incident data and the admission statement supporting the incident. (Id.) Once a match is verified, defendant classifies the employee in accordance with adjudication scores agreed upon by defendant and the member ("adjudication"). (Id. ¶ 45.) If the employee falls below a certain threshold, defendant assigns the employee a "noncompetitive" score. (Id. ¶ 46.) Defendant then generates a "report" detailing the match and the adjudication and sends the report to the inquiring member. (Id. ¶ 31.) The admission statement is not provided as part of the report. (Id. ¶ 32.)

The FCRA requires, inter alia, that before taking any "adverse action" against an employee, the person taking such action must send the employee a copy of the report and a notice of the consumer's rights under the FCRA. 15 U.S.C. § 1681b(b)(3). As an additional service, defendant sends these "pre--adverse action letters" on members' letterhead to employees or potential employees whose information results in a match. (Id. ¶ 50.) Defendant sends the pre-- adverse action letter to employees or potential employees after it completes the adjudication and sends the report to the member. (Id. ¶ 48.) While the pre--adverse action letter contains a copy of the report, it does not contain a copy of the admission statement. (Id. ¶¶ 50, 51.) The pre--adverse action letter also contains a disclaimer that defendant "did not participate in any employment decision and will be unable to provide any specific reasons as to why [the employer] may choose to take an adverse employment action." (Id. Ex. B.) Several days after it sends the pre--adverse action letter, defendant sends the employee a final "adverse action letter" on the member's letterhead. (Id. ¶ 48.)

B. Facts Pertaining to Plaintiff Keesha Goode

Plaintiff Keesha Goode worked as a customer service representative and cashier in a Forman Mills store from November 2006 to October 2008. (Id. ¶ 53.) Forman Mills is a subscribing member of Esteem. (Id. ¶ 54.) Forman Mills fired Ms. Goode in October 2008 based upon an accusation of theft against her. (Id. ¶¶ 54, 61.) Forman Mills submitted an incident report, including an admission statement, to defendant following Ms. Goode's termination. (Id. ¶¶ 60, 61.)

In May 2009 Ms. Goode applied for a job at a store owned by the Family Dollar Stores chain. (Id. ¶ 57.) Soon after applying, she received a pre--adverse action letter from defendant telling her that it had matched her information to the incident report Forman Mills submitted in October 2008. (Id. Exs. B, C.) The pre--adverse action letter was on Family Dollar Stores' letterhead, but was actually sent by defendant pursuant to the Esteem member services agreement between defendant and Family Dollar Stores. (Id. ¶ 59.) The letter told Ms. Goode to contact defendant LexisNexis if she wished to contest "the accuracy or completeness of any of the information provided by [defendant]." (Id. Ex. B.)

Some time thereafter, Ms. Goode sent defendant a letter requesting her entire "file" and disputing the alleged theft from Forman Mills.*fn4 (Id. ¶ 64.) Defendant responded with a letter dated August 6, 2009, stating that defendant had reinvestigated the incident and that "the original information provided on the background report was reported accurately." (Id. ¶ 65, Ex. E.) Attached to the letter was a copy of the same report that defendant had supplied to Ms. Goode in the pre--adverse action letter. (Id. ¶ 65.). Ms. Goode then sent a second letter requesting copies of "whatever information you are relying on." (Id. ¶ 66, Ex. F.) She did not receive a response from defendant. (Id. ¶ 67.) Nothing in the Complaint suggests that Family Dollar Stores knew that Ms. Goode contested the accuracy of the report or that she received any communication directly from Family Dollar Stores after her interview.

C. Facts Pertaining to Plaintiff Victoria Goodman

From June 2005 to June 2006 Ms. Goodman worked as a cashier and stock person at a Dollar General store. (Id. ¶ 69.) In June 2006, her supervisor informed her that Dollar General was investigating her in relation to a theft and that she should go home. (Id. ¶ 70.) Dollar General asked Ms. Goodman to sign an admission statement, which she did. (See Def.'s Mem. Law Ex. 2.) Dollar General never informed her of the outcome of its investigation, and Ms. Goodman applied and was approved for unemployment compensation benefits.*fn5 (Compl. ¶¶ 73, 75.)

On October 2, 2006, Ms. Goodman began work as a cashier at a Rite Aid store. (Id. ¶ 75.) In November 2009, she applied for a promotion. (Id. ¶ 76.) In response to Ms. Goodman's application, Rite Aid submitted an inquiry to the Esteem system. (Id. ¶ 78.) Rite Aid fired her on November 30, 2009. (Id. ¶ 79.) On December 2, 2009, defendant sent her a pre--adverse action letter on Rite Aid's letterhead with the report attached. (Id. Exs. G, H.) Defendant sent Ms. Goodman a final adverse action letter on Rite Aid's letterhead on December 7, 2009. (Id. Ex. I.)

Ms. Goodman wrote to defendant during December 2009 disputing the report. (Id. ¶ 91.) Defendant responded on December 22, 2009, stating that it had "completed [its] reinvestigation of the disputed information and . . . verified that the original information provided on the background report was reported accurately." (Id. ¶ 92.) Ms. Goodman contacted Community Legal Services, which sent defendant a request for Ms. Goodman's admission statement. (Id. Ex. L.) Defendant did not respond. (Id. ¶ 93.) Ms. Goodman later filed a union grievance and was reinstated as a cashier at Rite Aid. (Id. ¶ 94.)

Defendant attached Ms. Goodman's admission statement to its motion to dismiss. (Def.'s Mem. Law Ex. 2.) The admission statement appears to contain two different sets of handwriting. (Id.) The first describes the alleged incident. (Id.) The second states, "I really thought I bought the fan," and denies that she intended to steal it. (Id.) The Complaint does not state whether Rite Aid ever saw the admission statement or knew that Ms. Goodman had disputed the accuracy of the report.


To survive a motion to dismiss under Rule 12(b)(6), a civil plaintiff must allege facts that "'raise a right to relief above the speculative level.'" Victaulic Co. v. Tieman, 499 F.3d 227, 234 (3d Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). A complaint must contain "sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 1949 (2009) (quoting Twombly, 550 U.S. at 570). To satisfy the plausibility standard, a plaintiff's allegations must show that defendant's liability is more than "a sheer possibility." Id. "Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of entitlement to relief.'" Id. (quoting Twombly, 550 U.S. at 557).

In Twombly, the Supreme Court used a "two-pronged approach," which it later formalized in Iqbal. Iqbal, 129 S. Ct. at 1950; Fowler v. UPMC Shadyside, 578 F.3d 203, 210-- 11 (3d Cir. 2009). Under this approach, a district court first identifies those factual allegations that constitute nothing more than "legal conclusions" or "naked assertions." Twombly, 550 U.S. at 555, 557. Such allegations are "not entitled to the assumption of truth" and must be disregarded. Iqbal, 129 S. Ct. at 1950. The court then assess "the 'nub' of the ...

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