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Syed v. M-I LLC

United States District Court, E.D. California

August 28, 2014

SARMAD SYED, an individual, on behalf of himself and all others similarly situated, Plaintiffs,
v.
M-I LLC, a Delaware Limited Liablity Company; PRECHECK, INC., a Texas Corporation; and DOES 1-10, Defendants.

MEMORANDUM AND ORDER RE: MOTION TO DISMISS

WILLIAM B. SHUBB, District Judge.

Plaintiff Sarmad Syed brought this putative class action against defendants M-I, LLC ("M-I") and PreCheck, Inc. ("PreCheck"), in which he alleges that defendants failed to comply with state and federal credit reporting laws while conducting pre-employment background checks. Defendants now move to dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted.

I. Factual and Procedural History

Plaintiff applied for a job with M-I on July 20, 2011. (Compl. ¶ 17 (Docket No. 1).) During the application process, plaintiff filled out and signed a one-page form entitled "Pre-Employment Disclosure and Release." (Id. ¶ 18.) That form, which PreCheck allegedly prepared and provided to M-I, included the following language:

I understand that the information obtained will be used as one basis for employment or denial of employment. I hereby discharge, release, and indemnify prospective employer, PreCheck, Inc., their agents, servants, and employees, and all parties that rely on this release and/or the information obtained with this release from any and all liability and claims arising by reason of the use of this release and dissemination of information that is false and untrue if obtained by a third party without verification.
It is expressly understood that the information obtained through the use of this release will not be verified by PreCheck, Inc.

(Id.)

At some point "within the last two years, " plaintiff allegedly obtained and reviewed his personnel file. (Id. ¶ 26, 43.) Upon doing so, he discovered that defendants had procured a consumer credit report about him. (Id.) Plaintiff alleges that defendants procured this report unlawfully because the disclosure appeared in a form that did not consist "solely of the disclosure, " as required by state and federal law. (Id. ¶¶ 15, 39.)

Plaintiff filed this putative class action on May 19, 2014, and asserts that defendants' failure to provide disclosures on a separate form violates both the Fair Credit Reporting Act ("FCRA"), 15 U.S.C. §§ 1681 et seq., and the California Investigative Consumer Reporting Agencies Act ("ICRAA"), Cal. Civ. Code §§ 1786 et seq. Defendants now move to dismiss plaintiff's Complaint pursuant to Rule 12(b)(6) for failure to state a claim upon which relief can be granted. (Docket Nos. 10, 14.)

II. Discussion

On a motion to dismiss under Rule 12(b)(6), the court must accept the allegations in the complaint as true and draw all reasonable inferences in favor of the plaintiff. Scheuer v. Rhodes , 416 U.S. 232, 236 (1974), overruled on other grounds by Davis v. Scherer , 468 U.S. 183 (1984); Cruz v. Beto , 405 U.S. 319, 322 (1972). To survive a motion to dismiss, a plaintiff must plead "only enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570 (2007). This "plausibility standard, " however, "asks for more than a sheer possibility that a defendant has acted unlawfully, " and where a complaint pleads facts that are "merely consistent with a defendant's liability, " it "stops short of the line between possibility and plausibility." Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009) (quoting Twombly , 550 U.S. at 557).

A. Fair Credit Reporting Act

The elements of an FCRA claim depend on the relief that a plaintiff seeks. When a plaintiff only seeks actual damages sustained as a result of an FCRA violation, he need only allege that the defendant was negligent. 15 U.S.C. § 1681o(a). But when a plaintiff seeks statutory and/or punitive damages, he must allege that the defendant "willfully fail[ed] to comply" with the FCRA. Id . § 1681n(a). Because plaintiff seeks only statutory and punitive damages under § 1681n(a), (see Compl. ¶ 24), he must allege that defendants' violation of the FCRA was willful in order to state a claim for relief.

In Safeco Insurance Company of America v. Burr, the Supreme Court held that the FCRA's use of the term "willful" requires a plaintiff to show that the defendant's conduct was intentional or reckless. 551 U.S. 47, 57 (2007). Recklessness, in turn, consists of "action entailing an unjustifiably high risk of harm that is either known or so obvious that it should be known." Id. at 68 (citation and internal quotation marks omitted). In other words, "a company subject to FCRA does not act in reckless disregard of it unless the action is not only a violation under a reasonable reading of the statute's terms, but shows that the company ran a risk of violating the law substantially greater than the risk associated with a reading that was merely careless." Id. at 69. Applying this standard, the Court held that a defendant's violation of the FCRA is ...


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