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Tuesday, June 16, 2009

New case involving an investigative consumer report for employment purposes

The United States District Court for the District of Connecticut released an interesting new opinion on May 28, 2009. The case is Deborah Adams v. National Engineering Service Corporation and involves claims arising from a background check that contained errors and cost the plaintiff a new job.

Basically (and I do mean basically) what happened is that National Engineering Service Corporation ("NESC") was contracted by a potential employer of Adams to run a background check on Adams. NESC got a company called "Verifications" (who was also a defendant in the lawsuit) to run the background check. Verifications prepared the investigative consumer report which contained errors, namely several convictions that showed up under someone with the same name and date of birth as the plaintiff but was not the plaintiff. Verifications was provided the report by yet another company that was not a defendant but probably should have been. Due to the erroneous criminal record, Adams was not hired.

NESC first claimed that it was not subject to the FCRA because it claimed it was not a consumer reporting agency since it didn't prepare the report since Verifications did. The Court found that NESC is a consumer reporting agency because it "evaluated" the consumer report when its employee commented in an e-mail to the employer that the background check was "not good at all."

The Court then found that the Plaintiff presented sufficient evidence for her 15 U.S.C. 1681e(b) claim to survive. 1681e(b) requires consumer reporting agencies must follow reasonable procedures to assure maximum possible accuracy of the credit reports they create. Most courts (like this one) have held that whether reasonable procedures were used is almost always a question for the jury and thus not appropriate for summary judgment where there is evidence of an error on the credit report. In Adams, the defendants did not contest that the background check contained errors, so the Court found that the plaintiff's 1681e(b) claims survived.

The only claims of the plaintiff that were dismissed were some state law claims, primarily because the court found no evidence of malice on the part of the defendants (just evidence of stupidity, apparently). Since 15 U.S.C. 1681h(e) provides CRAs with qualified immunity from state law claims unless there is malice, the Court dimissed the state law claims for defamation and negligence. It dismissed the other state law claims on other grounds.

The only beef I have with the Court's ruling is that it did not consider all of 1681h(e). 15 U.S.C. 1681h(e) grants qualified immunity for certain state law claims if there is no malice but only for certain disclosures of consumer reports, i.e. disclosures made pursuant to 1681g, 1681h or 1681m. Disclosures pursuant to these sections only go to the consumer himself. Thus, disclosures made to third parties (i.e. Adams' potential employer) do not get the benefit of qualified immunity. In defense of the Court in this case, there are many other Courts that have also missed this point.

Overall, though, a great and informative decision.

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