Cross v. Corporate Security Solutions, Inc.

Background

Joseph Cross alleged that Corporate Security Solutions, Inc., now known as Security Check Me, LLC, provided an inaccurate background check to the elementary school where he sought to volunteer. The school required a background check for volunteer applications, and the defendant provided one on February 26, 2024.

According to Cross’s complaint, the report inaccurately stated that he faced pending felony charges in Minnesota, even though he had been acquitted in July 2022. The school denied his volunteer application. Cross alleged that the same inaccurate information appeared in background checks obtained after he reapplied, and that the school rejected those applications as well.

Cross asserted a claim under the Fair Credit Reporting Act (FCRA), alleging that the defendant failed to use reasonable procedures to ensure the report’s maximum possible accuracy. He also asserted Minnesota-law claims for defamation and negligence and sought damages, including punitive damages under Minnesota law.

Motion to Dismiss

The defendant moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which tests whether a complaint states a legally sufficient claim. It argued that the background check was not a “consumer report” under the FCRA because Cross applied for a volunteer position rather than employment. It alternatively argued that the FCRA preempted the state-law claims. The defendant also challenged Cross’s request for punitive damages under Minnesota law.

FCRA Claim

The court explained that a consumer report must contain information communicated by a consumer reporting agency, concern specified factors such as character or personal characteristics, and be used, expected to be used, or collected for one of the purposes listed in the FCRA. The court referred to this last requirement as the “purpose clause.”

The court agreed that the report was not ultimately used to determine eligibility for employment because Cross sought a volunteer position. But it held that the purpose clause can be satisfied when the reporting agency collected the information for an enumerated purpose or expected it to be used for such a purpose. Cross alleged that the defendant sold background checks to employers and regularly assembled information for employment-related reports.

Accepting those allegations as true at the motion-to-dismiss stage, the court found that Cross plausibly alleged that the defendant collected or expected the information to be used for employment purposes. The court therefore denied the defendant’s motion to dismiss the FCRA claim. The court noted that the defendant could renew its argument at the summary-judgment stage, when the court could examine the defendant’s purpose and knowledge in collecting the information.

State-Law Claims and Punitive Damages

The FCRA provision discussed by the court generally bars state-law defamation and negligence claims concerning information reported by a consumer reporting agency unless the consumer alleges that the information was furnished with malice or a willful intent to injure.

Cross did not allege malice or a willful intent to injure. He also conceded during oral argument that the state-law claims could not proceed if the FCRA claim proceeded. The court therefore granted the motion to dismiss Cross’s defamation and negligence claims as preempted by the FCRA.

Because no state-law claims remained, the court also granted the motion to dismiss Cross’s request for punitive damages under Minnesota law. The court’s order specified that the defamation claim, negligence claim, and state-law punitive-damages request were each dismissed without prejudice.

Disposition

The motion to dismiss was granted in part and denied in part. It was denied as to Cross’s FCRA claim and granted as to his defamation and negligence claims and his state-law punitive-damages request. The latter three claims or requests were dismissed without prejudice.