Arnold v. DMG MORI USA, Inc.

Background

Named plaintiffs Brandon Bebault and Steven Arnold sued DMG MORI USA, Inc. under the Fair Credit Reporting Act (FCRA). They alleged that DMG used disclosure and authorization forms that did not comply with the law when obtaining consumer reports for employment purposes. The court had certified a class consisting of people residing in the United States for whom DMG obtained, or caused to be obtained, a consumer report for employment purposes on or after April 19, 2016, with Arnold as the class representative.

The plaintiffs moved for summary judgment on liability. DMG opposed that motion and filed its own cross-motion, arguing mainly that the plaintiffs lacked a sufficiently concrete injury to establish standing under Article III of the Constitution.

FCRA requirements and standing

The FCRA requires an employer to provide a clear and conspicuous disclosure that it may obtain a consumer report, in a document consisting solely of that disclosure. The applicant must authorize the report in writing. The plaintiffs sought statutory damages, which required them to show that DMG’s violations were willful.

The court rejected DMG’s renewed standing argument. It relied on Ninth Circuit decisions holding that an improper disclosure under the FCRA can cause a concrete injury by interfering with an applicant’s informational and privacy rights, including the ability to meaningfully authorize a credit check. The court also concluded that DMG’s reliance on an unpublished decision was an improper attempt to seek reconsideration without following the applicable requirements. The court noted that the decision did not account for other Ninth Circuit authority holding that a disclosure containing extra state-law information fails the FCRA’s standalone-document requirement.

The court also observed that both named plaintiffs had submitted declarations stating that they were confused about what they were signing and might not have signed had they understood the forms. The court said this was the type of evidence DMG claimed was required.

Liability

The court held that DMG’s standardized forms violated the FCRA. The original form combined the federal disclosure with statements about the laws of California, Maine, Minnesota, New York, Oklahoma, Oregon, and Washington. Under Ninth Circuit precedent, the required disclosure must contain nothing more than the disclosure itself; adding state-law disclosures is extraneous information that violates the standalone-document requirement.

DMG argued that liability should be limited to the original form because it later used a revised form that removed the state-law references. The court found that the revised form still violated the FCRA. Although the court did not find one challenged sentence in the revised form defective, it concluded that the form improperly included information about the signatory’s rights to request information about whether a report had been obtained and to request a copy of the report. Similar additional language had been held inconsistent with the standalone-document requirement.

Willfulness

The court held that DMG’s violations were willful. Under the FCRA, a violation is willful when the company knows its conduct violates the statute or recklessly disregards the statute’s requirements. The court concluded that violating the unambiguous standalone-disclosure requirement by adding terms beyond the required disclosure is reckless as a matter of law.

The court rejected DMG’s argument that there was insufficient legal guidance before a 2019 Ninth Circuit decision. It found that a 2017 Ninth Circuit decision had already rejected a substantially similar argument and that DMG had the benefit of that decision when it issued the revised form in 2019.

Disposition

The court granted the plaintiffs’ motion for summary judgment on liability and willfulness. It denied DMG’s cross-motion for summary judgment. The amount of damages remained unresolved; the opinion stated that statutory damages could range from $100 to $1,000 per plaintiff. The court stayed the case and referred it to Magistrate Judge Hixson for a settlement conference, vacated the remaining pretrial and trial dates, and administratively closed the case pending further order.

The court denied the plaintiffs’ request for sanctions under 28 U.S.C. § 1927, finding that although DMG’s reliance on the standing argument was misplaced, it was not so frivolous or unreasonable as to warrant sanctions.