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

June 25, 2012


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



In this putative class action, plaintiffs allege that defendant's system for conducting employment-related 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 for those employers.

On March 22, 2012, the Court granted in part and denied in part defendant's first Motion to Dismiss. Thereafter, the Court granted plaintiffs leave to amend their Class Action Complaint ("First Complaint"). Plaintiffs filed an Amended Class Action Complaint ("Amended Complaint") on April 23, 2012, and defendant filed a second Motion to Dismiss under Federal Rules of Civil Procedure 12(b)(6) and 12(f) seeking dismissal of the new counts in the Amended Complaint and asking the Court to strike the class action allegations in Count I of the Amended Complaint. For the reasons stated below, the Court denies defendant's second 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." (Am. Compl. ¶ 11.) 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. (Esteem Member: Service Agreement, Am. Compl. Ex. A.) Members must also give defendant new records of theft incidents involving their own employees and customers. (Am. Compl. ¶ 16.) Members may only submit incident reports in two situations: (1) if the member referred the incident for criminal prosecution, or (2) if the employee admits guilt. (Id. ¶ 17.) 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. ¶ 19.)

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. ¶ 24.) 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. ¶ 41.) If the employee falls below a certain threshold, defendant assigns the employee a "noncompetitive" score. (Id.) Defendant then generates a "report" detailing the match and the adjudication and sends the report to the inquiring member. (Id. ¶ 27.) The admission statement is not provided as part of the report. (Id. ¶ 28.)

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 part of the service provided to members, defendant sends these "pre--adverse action letters" on members' letterhead to employees or potential employees whose information results in a match after it completes the adjudication and sends the report to the member. (Id. ¶¶ 43, 44, 46.) Defendant includes a copy of the report with the pre--adverse action letter, but not a copy of the admission statement. (Id. ¶ 46.) 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." (Pre--Adverse Action Letter, Am. Compl. 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. (Am. Compl. ¶ 44.)

In the Amended Complaint, plaintiffs allege that defendant failed to "follow reasonable procedures to assure maximum possible accuracy" of the files in the Esteem system. (Id. ¶ 136.) Plaintiffs point out that "[d]efendant has few policies and procedures governing employer practices regarding the form, content, and quality of contributed admission statements." (Id. ¶ 137.) Rather, member employers are free to submit admission statements in any form; defendant does not require that there be an "express admission" in the admission statement. (Id. ¶ 139.)

Plaintiffs also allege that defendant does not conduct a "reasonable reinvestigation" of information in an employee's file if the employee contacts defendant to contest the accuracy of that information. (Id. ¶ 153.) Rather, defendant "disregards the gravity of the reinvestigation obligation." (Id.)

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. ¶ 51.) Forman Mills is a subscribing member of Esteem. (Id. ¶ 52.) Forman Mills fired Ms. Goode in October 2008 based upon an accusation that she committed a theft. (Id. ¶ 56.) Forman Mills submitted an incident report to defendant following Ms. Goode's termination. (Id. ¶ 57.) The incident report contained an admission statement that Ms. Goode signed. (Id.) Forman Mills did not inform Ms. Goode that it was submitting the admission statement to defendant. (Id. ¶ 58.)

In May 2009, Ms. Goode applied for a job at a store owned by the Family Dollar Stores chain. (Id. ¶ 60.) Family Dollar Stores decided to hire Ms. Goode, provided that she passed an employment background screening conducted by defendant. (Id. ¶ 61.) 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 letter did not contain a copy of the admission statement. (Id. ¶ 68.) The pre--adverse action letter was on Family Dollar Stores' letterhead, but it was actually sent by defendant pursuant to the Esteem member services agreement between defendant and Family Dollar Stores. (Id. ¶ 65.) The letter advised 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. (Id. ¶ 69, Ex. D.) 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. ¶ 70, 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.) Ms. Goode then sent a second letter requesting copies of "whatever information you are relying on." (Id. ¶ 71, Ex. F.) She did not receive a response from defendant. (Id. ¶ 67.) It was only after the instant action was filed that defendant provided Ms. Goode with a copy of her admission statement relating to the Forman Mills incident. (Id. ¶ 73, Ex. G.)

Family Dollar Stores did not hire Ms. Goode, and she was "denied other job opportunities with any of the hundreds of [member] employers." (Id. ¶ 74.) Ms. Goode alleges that she suffered lost income, "humiliation, anxiety, anguish and other forms of emotional harm and distress over being branded a thief." (Id. ¶ 75.)

C. Facts Pertaining to Plaintiff Victoria Goodman

From June 2005 to the summer of 2006, Ms. Goodman worked as a cashier and stock person at a Dollar General store. (Id. ¶ 76.) In the summer of 2006, her supervisor informed her that Dollar General was investigating her in relation to a theft and that she should go home. (Id. ¶ 78.) Although Ms. Goodman does not recall signing anything during the investigation of the incident, Dollar General submitted to defendant an admission statement with Ms. Goodman's signature. (Id. ¶¶ 78, 80.) Dollar General never informed her of the outcome of its investigation, and Ms. Goodman applied and was approved for unemployment compensation benefits. (Id. ¶¶ 82, 83.)

On October 2, 2006, Ms. Goodman began work as a cashier at a Rite Aid store. (Id. ¶ 85.) In November 2009, she applied for a promotion. (Id. ¶ 86.) After deciding to promote Ms. Goodman, Rite Aid submitted an inquiry to the Esteem system. (Id. ¶ 88.) Defendant verified a match in its system for Ms. Goodman related to the Dollar General incident, and Rite Aid fired her on November 30, 2009. (Id. ¶¶ 89, 90.) On December 2, 2009, defendant sent her a pre-- adverse action letter on Rite Aid's letterhead with the report attached. (Id. ...

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