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Bercut v. Michaels Stores Inc.

United States District Court, N.D. California

June 29, 2017

MICHELLE BERCUT, Plaintiff,
v.
MICHAELS STORES INC., Defendant.

          ORDER GRANTING MOTION TO REMAND; DENYING MOTION TO STAY AS MOOT Re: Dkt. Nos. 13, 32, 38, 41

          PHYLLIS J. HAMILTON United States District Judge

         Plaintiff's motion to remand and defendant's motion to stay came on for hearing before this court on June 28, 2017. Plaintiff appeared through her counsel, Mark Greenstone. Defendant appeared through its counsel, Michael Burns and Robert Szyba. Having read the papers filed by the parties and carefully considered their arguments and the relevant legal authority, and good cause appearing, the court hereby GRANTS the motion to remand for the reasons that follow. Given this disposition, the motion to stay the case is DENIED AS MOOT.

         BACKGROUND

         A. Factual Allegations

         This is a putative class action under the Fair Credit Reporting Act (“FCRA”), which was removed, for the second time, from Sonoma County Superior Court on March 31, 2017. Dkt. 1. Plaintiff Michelle Bercut alleges that defendant Michaels Stores, Inc. (“Michaels”) procured consumer reports in conjunction with its employment applications, yet failed to comply with FCRA's disclosure requirements for obtaining such reports. Compl. ¶¶ 2, 62, 71. The basis for removal is both federal question and CAFA jurisdiction. Notice of Removal ¶ 12.

         Specifically, Bercut alleges that in the fall of 2014 she applied to work for Michaels by completing an online application. Compl. ¶ 32. In conjunction with that application, Michaels used a third party to procure consumer and/or investigative reports within the meaning of FCRA, as part of its background check for potential employees. Compl. ¶¶ 2-3, 41-43.

         Procuring such reports is not unlawful, but is subject to particular disclosure requirements under FCRA. Compl. ¶¶ 3, 22-30. One of the concerns that motivated FCRA was that “prospective employers were obtaining and using consumer reports in a manner that violated job applicants' privacy rights.” See Syed v. M-I, LLC, 853 F.3d 492, 496-97 (9th Cir. 2017) (citing S. Rep. No. 104-185 at 35 (1995)). In response, Congress enacted the provision now codified at 15 U.S.C. § 1681b(b)(2)(A), which prohibits the procurement of consumer reports “for employment purposes” unless certain specified procedures are followed. Id.

         Section 1681b(b)(2)(A) requires a “clear and conspicuous” written disclosure before a consumer report is procured for employment purposes, which must be contained “in a document that consists solely of the disclosure.” 15 U.S.C. § 1681b(b)(2)(A)(i). The complaint refers to this provision as FCRA's “stand-alone disclosure” requirement. See Compl. ¶ 24. Plaintiff alleges that under judicial and FTC guidance, the stand-alone disclosure may not be part of the employment application document, and may not include a liability release. Compl. ¶¶ 26-27. FCRA further requires that the consumer authorize the procurement of the consumer report “in writing.” 15 U.S.C. § 1681b(b)(2)(A)(ii).

         Plaintiff alleges that Michaels' online application consisted of a single form, violating FCRA's stand-alone disclosure requirement. Compl. ¶¶ 37-38. The application does include a hyperlink to a purported “disclosure form, ” but plaintiff alleges that this is insufficient because the disclosure was not “clear and conspicuous” and included “extraneous information.” Compl. ¶¶ 38-39. Plaintiff also alleges that the application's electronic signature procedure was not an effective “authorization” under FCRA for the procurement of a consumer report. Compl. ¶ 71.

         Plaintiff seeks to represent a nationwide class of “all employees or prospective employees of [Michaels] who applied for a job by filling out Defendant's online Employment Application, with respect to whom Defendants procured or caused a consumer report to be procured, during the two years prior to the filing of the Complaint in this action through the date of certification.” Compl. ¶ 55.

         Bercut asserts two causes of action under FCRA, one based on defendant's alleged failure to make the required disclosures, and one based on defendant's alleged failure to obtain the required authorization. Plaintiff seeks statutory and punitive damages, as well as attorneys' fees and costs. Compl. ¶¶ 67-69, 73-75.

         B. Procedural History

         The case has an unusual procedural history. The complaint was originally filed on June 8, 2015 in California Superior Court for Sonoma County. Notice of Removal ¶ 1. Michaels first removed the matter to the Northern District of California on June 23, 2015. Id. ¶ 3. Less than three weeks later, the Judicial Panel for Multidistrict Litigation identified the case as a tag-along action. See Bercut v. Michaels Stores, Inc., No. 4:15-cv-02913-HSG, Dkt. 14. On July 14, 2015, the case was transferred to MDL No. 2615, In re Michaels Stores, Inc., FCRA Litigation (the “In re Michaels MDL” or “the MDL”) before the Hon. Kevin McNulty in the District of New Jersey. Notice of Removal ¶ 4.

         The In re Michaels MDL was subsequently stayed pending the Supreme Court's decision in Spokeo v. Robins, 136 S.Ct. 1540 (2016). Notice of Removal ¶ 6. Following the Supreme Court's May 16, 2016 decision in Spokeo, Michaels successfully moved to dismiss plaintiffs' claims based on a lack of Article III ...


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