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Gambles v. Sterling Infosystems, Inc.

United States District Court, S.D. New York

February 13, 2017

RALPH GAMBLES, individually and as a representative of the classes, Plaintiff,

          OPINION & ORDER


         Plaintiff Ralph Gambles brings this putative class action under the Fair Credit Reporting Act, 15 U.S.C. § 1681, etseq. ("FCRA"). He claims that defendant Sterling Infosystems, Inc. ("Sterling") violated his privacy rights under FCRA when, for use by a prospective employer to whom Gambles had applied for a job as a mortgage banker, it generated a background report containing false, misleading, and outdated information about the addresses at which Gambles had lived. Gambles claims that the report violated FCRA in that it (1) contained information about addresses where he had not lived in more seven years; (2) incorrectly, inconsistently, or duplicatively reported the dates that Gambles had lived at various addresses; and (3) used false and derogatory terms to describe certain addresses. Gambles claims these statements depicted him as itinerant, unstable, and unattractive. He brings claims under the FCRA for (1) reporting outdated adverse information in violation of 15 U.S.C. § 1681c(a), (2) duplicative reporting, and (3) reporting of inaccurate information, the latter two in violation of 15 U.S.C. § 1681e(b), which requires a consumer reporting agency to use reasonable procedures to assure the maximum possible accuracy of consumer reports. He seeks statutory and punitive damages as well as attorneys' fees.

         Sterling now moves to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1). It argues that the facts alleged in the Second Amended Complaint (“SAC”) do not make out a concrete and particularized injury-in-fact sufficient to give Gambles standing to sue under Article III of the Constitution. Sterling principally argues that even if its Report about Gambles violated the FCRA, there was no injury to Gambles, because the SAC does not allege that Gambles's prospective employer relied on these challenged aspects of the Report when it declined to offer him a job, or that the report otherwise harmed his job prospects.

         For the following reasons, the Court denies Sterling's motion to dismiss.

         I. Background[1]

         The claims in the SAC arise from Sterling's having created a background report about Gambles and furnished it to Gambles's potential employer. Gambles alleges that the report contained outdated, duplicative, misleading, and adverse information about him.

         A. Gambles's Factual Allegations About Sterling's Report

         The Court focuses here on the allegations relevant to whether Gambles suffered a legally cognizable injury. On Sterling's motion to dismiss, the Court treats these allegations as true.

         In January 2014, Gambles applied to work as a mortgage banker, a position which paid an annual salary of less than $75, 000. SAC ¶ 22.

         On or about January 29, 2014, Sterling furnished the Report to Gambles's prospective employer. Id. ¶ 23. The Report was created and furnished to the employer solely in connection with Gambles's job application. It did not arise from any investigation of suspected misconduct on Gambles's part, whether in employment or elsewhere. Id. ¶ 24.

         The Report purports to set out addresses where Gambles had lived, each accompanied by a “first seen” and “last seen” date. Id. ¶¶ 25-27. The Report contains 53 total address entries for Gambles but only 19 unique addresses. Id. ¶ 29. For various addresses, the duplicative entries contain overlapping and contradictory “first seen” and “last seen” dates. Id. ¶¶ 27-29. The first “first seen” date in the Report is June 2000; the last “last seen” date is December 2013. Id. ¶ 30.

         As to eight addresses, the notation “HIGH RISK INDICATOR” appears alongside the address, which is then followed by a short description of the address. Id. ¶¶ 31-32. The descriptions are, variously, “nursing and personal care facility, ” “rooming or boarding house, ” and “hotel or motel.” Id.; Report at 3-6. Three of these eight notations relate to addresses as to which Gambles's reported dates of residence predate the report by more than seven years. SAC ¶ 33.

         The SAC claims that the Report's account of Gambles's addresses, in various respects, is inaccurate. See Id. ¶ 36. The inaccuracies include addresses at which Gambles, in fact, never resided; incorrect dates for when Gambles lived at various addresses; and notations alongside addresses labeled as “HIGH RISK INDICATOR” addresses that incorrectly describe these variously as a “hotel or motel, ” a “rooming or boarding house, ” or a “nursing and personal care facility, ” when in fact those addresses were simply residential apartments. Id.

         The SAC alleges that Sterling knew its customers would rely on the address information in the reports for employment purposes and intended that its customers do so. The SAC alleges, in fact, that Sterling's customers certified that they were using the addresses in the reports for employment purposes. Id. ¶ 69.

         The SAC alleges that Sterling failed to use reasonable procedures in creating the Report. Sterling generates background reports by using algorithms that collect information from various electronic databases. Id. ¶¶ 46-47. The SAC alleges that, given Sterling's ability to generate these reports, it could have created an algorithm that would exclude addresses at which he lived more than seven years ago, id. ¶¶ 46-51, or resolve duplicative, incoherent, or overlapping “first seen” and “last seen” dates, id. ¶¶ 56-60, 65. The SAC further alleges that Sterling did not manually review background reports before issuing them. Id. ¶¶ 52, 65. The SAC acknowledges that the Report includes a disclaimer that the information in it, “for legal and practical reasons, ” should be used only to verify information provided by the job application of the Report's subject, and “should not be used alone or in conjunction with any other information to make an employment decision.” Id. ¶ 67; Report at 7.

         The SAC alleges that the Report's errors harmed Gambles by making him less appealing to prospective employers, casting him as itinerant and unstable, and that it infringed his privacy interests. Id. ¶¶ 37-41. The Report, the SAC alleges, also caused Gambles emotional harm. Id. ¶ 43. The SAC further alleges that, because Sterling is a large employment screening company, there is a risk that it will report information in the Report to another potential employer. Id. ¶ 42. The SAC does not, however, allege that the employer to whom the Report was furnished based its decision not to hire Gambles on its account of his address history.

         The SAC brings three FCRA claims, each on behalf of a putative class defined by the type of information that Sterling allegedly improperly disseminated in its reports. The first, on behalf of a “Outdated Adverse Information Class, ” brings a claim under 15 U.S.C. § 1681c(a) on behalf of persons whose background report contained addresses for time periods that predated the report by more than seven years, one of which has a “high risk indicator.” The second, on behalf of a “Duplicative Information Class, ” brings a claim under 15 U.S.C. § 1681e(b) on behalf of persons whose background report contained multiple references to the same address. The third, on behalf of a “Inaccurate Address Information Sub-Class, ” brings a claim under 15 U.S.C. § 1681e(b) on behalf of persons in the Duplicative Information Class as to whom there are inconsistent “first seen” and “last seen” dates for a particular address. See Id. ¶ 78.

         B. Procedural History

         On December 14, 2015, Gambles filed a Complaint. Dkt. 1. On March 28, 2016, Sterling filed a motion to dismiss. Dkt. 21. On April 8, 2016, Gambles filed a First Amended Complaint (“FAC”). Dkt. 28. On April 15, 2016, the Court stayed proceedings pending the decision in Spokeo v. Robins, 136 S.Ct. 1540 (2016), Dkt. 34, which was decided on May 16, 2016. On May 31, 2016, Sterling moved to dismiss the FAC. Dkt. 39. On June 22, 2016, Gambles filed the SAC, Dkt. 47, having been granted leave to do so on June 20, 2016, Dkt. 44. On July 25, 2016, Sterling filed the instant motion to dismiss, Dkt. 51, and included a memorandum of law in support, Dkt. 52 (“Sterling Mem.”). On August 8, 2016, Gambles filed an opposition to Sterling's motion. Dkt. 53 (“Gambles Opp.”). On August 15, 2016, Sterling filed a reply in support of its motion. Dkt. 56 (“Sterling Rep.”).

         On September 15, 2016, the Court held argument on Sterling's motion to dismiss, and commissioned supplemental briefing. See Dkt. 62 (“Tr.”). On September 29, 2016, Gambles and Sterling filed supplemental briefs, Dkts. 60, 61 (“Sterling Supp.”), respectively. During the briefing process, the parties have filed letters drawing the Court's attention to supplemental case authority. See Dkts. 55, 59, 68-71.

         II. Discussion

         Sterling moves to dismiss for lack of subject matter jurisdiction under Federal Rule of Civil Procedure 12(b)(1), arguing that Gambles does not have standing to bring his lawsuit ...

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