Orpilla v. Schenker, Inc.

Background

Michelle Orpilla filed a putative class action in the Superior Court of California for Santa Clara County against Schenker, Inc. She alleged one claim under Section 1681b(b)(2)(A) of the Fair Credit Reporting Act. According to the complaint, Schenker used credit and background reports in its employment process without providing a clear, standalone disclosure and obtaining proper written authorization. Orpilla alleged that the disclosures included a New York-specific provision and a liability release, along with other extraneous information.

Schenker removed the case to federal court based on the federal question presented by the Fair Credit Reporting Act claim. Orpilla moved to remand the case to state court, arguing that her complaint did not allege an injury in fact sufficient to establish standing under Article III of the Constitution.

Standing and Remand

The court explained that Article III standing requires an injury in fact that is concrete and particularized, traceable to the defendant’s conduct, and likely to be redressed by a favorable decision. The court noted that neither party disputed traceability or redressability, so it focused on whether Orpilla alleged a concrete injury.

The court held that Orpilla alleged only a bare procedural violation of the Fair Credit Reporting Act’s standalone-disclosure requirement. She did not allege that she was confused by the disclosure, discovered the violation only later, would not have signed the authorization if the information had been presented separately, or was unaware that she was authorizing a background check or releasing liability. She also did not allege that Schenker denied her employment based on the report. The court found that the complaint’s reference to an invasion of “privacy and statutory rights” did not adequately describe a concrete and particularized harm.

The court distinguished Ninth Circuit decisions cited by Schenker, including a case involving a liability waiver where the plaintiff alleged confusion and later discovery of the violation. The court stated that the other cited decisions did not address Article III standing in the circumstances presented here. Because Orpilla had not alleged concrete harm, the court concluded that she lacked Article III standing and that the federal court lacked subject-matter jurisdiction.

Other Requests and Disposition

The court rejected Schenker’s argument that Orpilla had used improper or “artful” pleading to avoid federal jurisdiction. The court stated that the complaint clearly arose under federal law and that Orpilla was free to plead truthfully whether she had suffered actual harm. The court also found that jurisdictional discovery was not warranted. It explained that the Fair Credit Reporting Act permits enforcement in either federal or state court and that remand would not deprive Schenker of due process because Schenker could present its defenses, including any state-law standing arguments, in state court.

The court granted Schenker’s request for judicial notice of four public court documents. It did not address Schenker’s arguments about venue because those arguments were irrelevant to the remand motion. Because the court lacked subject-matter jurisdiction, it terminated Schenker’s motion to transfer venue to the United States District Court for the District of Virginia as moot. Judge Beth Labson Freeman granted Orpilla’s motion to remand, ordered the Clerk to return the action to the Superior Court of California for Santa Clara County, and vacated the scheduled hearing.