Last week, the Sixth Circuit partially reversed a defense
judgment in a Fair Credit Reporting Act case where the consumer reporting
agency mistakenly mis-identified the plaintiff as having a criminal fraud record
when it should have realized based on his credit check that he did not. Smith v.
LexisNexis Screening Solutions, Inc., No. 15-2329 (6th Cir.
Sept 13, 2016). The plaintiff lost six
weeks of wages while straightening out the mistake. A jury awarded him $75,000 in compensatory
damages and $300,000 in punitive damages. The Court found that while there may
have been negligence, the defendant’s actions were not sufficiently willful to
support punitive damages. While this is
not an employee-employer case, employers and employees should both be
interested in how the FCRA works in this case.
According to the Court's opinion, the plaintiff has a common name, David Alan Smith. A company bought his employer and required
all of the employees to re-apply for jobs with the new company. The plaintiff was offered a lower paying job
than his former position, subject to passing a background check. He authorized the release of his full name,
social security number, birth date, address, phone number, driver’s license
number and sex, but the employer did not provide his middle name or initial. The credit check came back clean under David
A. Smith, but a criminal conviction for
David O. Smith came up under his first and last name and birthdate. No one apparently noticed the discrepancy. The plaintiff’s employment application was
then revoked on December 12 and he was directed to address any correction issue
to the defendant company, which corrected its mistake and notified the employer
and him on January 11. The defendant showed that it runs over 10 million checks
each year and 98.8% of them are never disputed. The plaintiff was then rehired on January 29. Needless to say, he had a joyless holiday
that year and had become very depressed.
He ultimately sued the consumer reporting agency.
The jury found that the defendant’s failure to require the
plaintiff’s middle initial when running the check and failing to notice the discrepancy
between its own criminal and credit checks could be negligent and willful violations
of the Act. The court also found
sufficient evidence of economic and emotional harm. The jury initially returned punitive damages
of $300,000, but the trial court reduced those to $150,000.
The Sixth Circuit agreed that there was sufficient evidence
of negligence in this case. The Fair
Credit Reporting Act at “15 U.S.C. § 1681e(b) mandates that CRAs “follow
reasonable procedures to assure maximum possible accuracy of the information
concerning the individual about whom the report relates.” In this case, the evidence showed that David
Smith is an extremely common name, with over 125,000 such individuals living in
the U.S. alone. A prudent agency when
confronted with an extremely common name should have required a middle name to
improve the accuracy of its results.
Indeed, the defendant had a field to insert a middle name, but did not
make it mandatory.
There was also some evidence of negligence from the fact
that the Equifax credit report identified David A. Smith and the criminal record
referred to David Oscar Smith.
A failure to cross-reference such information, standing
alone, might not have any bearing on whether a CRA’s actions were reasonable. . . . In this case, however, the fact that
Lexis possessed a report with Smith’s middle initial serves as additional
evidence supporting the jury’s finding as to negligence.
Although the defendant may have been negligent, it does not
follow that it was also willful. “In
order to willfully violate the FCRA, a CRA’s action must entail “an
unjustifiably high risk of harm that is either known or so obvious that it
should be known.” The defendant
obviously had taken steps (such as requiring birth dates, social security
numbers, etc.) to ensure a high degree
of accuracy and could point to the fact that less than 1% of its checks were
ever disputed. “Furthermore, a single inaccuracy, without more, does not
constitute a willful violation of the FCRA. . . . Although this inaccuracy
might have resulted from Lexis’s carelessness, it did not result from Lexis’s
disregarding a high risk of harm of which it should have known.” Accordingly, the Court ruled that punitive
damages were inappropriate.
The Court affirmed the compensatory damages award of $75,000
from the defendant’s negligent error: “This situation, and particularly the
financial hardships involved in it, is one with which reasonable jurors could
identify and infer that a reasonable person in the same situation would suffer
emotional distress.” It rejected the
defendant’s efforts to limit the amount of the judgment based on the short time
(i.e., six weeks) that the plaintiff was unemployed or the four weeks that it
took the defendant to correct the mistake.
NOTICE: This summary is designed merely to inform and
alert you of recent legal developments. It does not constitute legal advice and
does not apply to any particular situation because different facts could lead
to different results. Information here can be changed or amended without
notice. Readers should not act upon this information without legal advice. If
you have any questions about anything you have read, you should consult with or
retain an employment attorney.
