Wright v. HireRight LLC

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 Daniel Wright, No. CV-23-00493-PHX-SMM

10 Plaintiff, ORDER

11 v.

12 HireRight LLC,

13 Defendant. 14 15 Before the Court is Defendant’s Motion for Summary Judgment (Docs. 45; 53), and 16 Defendant’s Motion to Exclude Expert Testimony of Douglas A. Hollon. (Docs. 47; 55). 17 For the following reasons, the Court grants in-part and denies in-part Defendant’s Motion 18 for Summary Judgment and denies Defendant’s Motion to Exclude Expert Testimony. 19 I. BACKGROUND 20 Plaintiff, Daniel Wright, brought suit against Defendant, HireRight LLC, alleging 21 violations of the Fair Credit and Reporting Act (“FCRA”), 15 U.S.C. §§ 1681, after 22 Defendant provided an employment background check to Plaintiff’s potential employer, 23 which incorrectly labeled a prior offense as a felony, rather than a misdemeanor. (Doc. 9). 24 Plaintiff has two prior, relevant convictions. In 2013, when Plaintiff was nineteen 25 (19) years-old, he was convicted of a drug-related Arizona felony. (Doc. 46 (Defendant’s 26 Statement of Facts “SOF”) at ¶ 1). Then, in 2015, Plaintiff was convicted of a second 27 Arizona felony, a class six undesignated felony, for facilitation to commit trafficking in 28 stolen property. (Id. at ¶ 2). An undesignated felony provides for an offense to be 1 redesignated as a misdemeanor after the fulfillment of the conditions of probation and 2 discharge by the court. A.R.S. §13-604(c). Accordingly, in 2020, Plaintiff requested a court 3 to reduce his conviction to a misdemeanor—which the court granted. (Id. at ¶ 3). 4 In December 2022 and January 2023, Plaintiff interviewed for a job with 5 CloudKitchens. (Id. at ¶ 6). During this process, Plaintiff disclosed his 2013 conviction, 6 but not his 2015 conviction. (Id. at ¶ 8). By the end of the year, Plaintiff contends he 7 received a verbal job offer, although the record establishes Plaintiff did not receive a formal 8 offer letter. (Doc. 78 (Plaintiff’s Separate Statement of Facts (“SSOF”) at ¶ 49); (SOF at ¶ 9 10). 10 On January 11, 2023, CloudKitchens requested Defendant, a consumer reporting 11 agency, to prepare a background check on Plaintiff. (SOF at ¶ 11). The report created from 12 this background check was completed on January 24, 2023. (Id. at ¶ 11). The report 13 included both the 2013 and the 2015 convictions, and the 2015 conviction was labeled as 14 a “Felony (or equivalent) – Class 6 felony.” (Id. at ¶ 12). Upon being queried, Defendant 15 admits that labelling the 2015 conviction as a felony, rather than a misdemeanor, was a 16 mistake. (Id. at ¶ 27). On the date the report was completed, and transmitted to 17 CloudKitchens, Plaintiff formally disputed the classification with Defendant and 18 Defendant opened a reinvestigation into the matter. (Id. at ¶ 29). 19 Meanwhile, Plaintiff discussed the background check with CloudKitchens. (Id. at ¶ 20 30). On January 23, 2023, Plaintiff sent CloudKitchens court documents that proved his 21 2015 felony had been reduced to a misdemeanor. (Id. at ¶ 32). However, over a video-call 22 on January 27, CloudKitchens informed Plaintiff that they would not hire him. (Id. at ¶ 34). 23 On January 30, upon the completion of its reinvestigation, Defendant sent Plaintiff and 24 CloudKitchens an updated background check, which now had the 2015 conviction labeled 25 as “Misdemeanor (or equivalent) – Classification not recorded.” (Id. at ¶ 35). 26 II. LEGAL STANDARD 27 A party seeking summary judgment “bears the initial responsibility of informing the 28 district court of the basis for its motion [ ] and identifying those portions of [the record] 1 which it believes demonstrate the absence of a genuine issue of material fact.” Celotex 2 Corp. v. Catrett, 477 U.S. 317, 322 (1986). Summary judgment is appropriate if the 3 evidence, viewed in the light most favorable to the nonmoving party, shows “that there is 4 no genuine issue as to any material fact and that the movant is entitled to judgment as a 5 matter of law.” Fed. R. Civ. P. 56(c). Only disputes over facts that might affect the outcome 6 of the suit will preclude the entry of summary judgment, and the disputed evidence must 7 be “such that a reasonable jury could return a verdict for the nonmoving party.” Anderson 8 v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 9 III. ANALYSIS 10 Plaintiff sues under the FCRA. The purpose of the Act is “to require that consumer 11 reporting agencies adopt reasonable procedures for meeting the needs of commerce for 12 consumer credit . . . in a manner which is fair and equitable to the consumer, with regard 13 to confidentiality, accuracy, relevancy, and proper utilization of such information.” 15 14 U.S.C. § 1681(b). Under the FCRA, only negligent or willful violations are actionable; a 15 consumer may recover compensatory damages for negligent violations and statutory and 16 punitive damages for willful violations. See 15 U.S.C. §§ 1681(n), 1681(o). 17 A. Negligent Violation of the FCRA 18 “The FCRA provides for compensation in the form of actual damages and attorneys' 19 fees if a consumer reporting agency negligently fails to comply with any provision of the 20 FCRA.” Guimond v. Trans Union Credit Info. Co., 45 F.3d 1329, 1332 (9th Cir.1995). 21 Plaintiff “has the burden of proving that his damages were caused by the defendant's 22 violations of the FCRA.” Waddell v. Equifax Info. Servs., LLC, No. CV-05-0092-PHX- 23 DGC, 2006 WL 2640557, at *3 (D. Ariz. 2006), (quoting Zala v. Trans Union, No. 99– 24 CV–0399, 2001 WL 210693, at *6 (N.D.Tex. 2001). 25 Plaintiff, contending the Defendant’s misreporting the accuracy of his criminal 26 history, claims economic and emotional damages in this case by advancing two theories as 27 to the causation of these damages. First, Plaintiff indicates that the mere creation of the 28 false report, and Plaintiff’s awareness that it existed, caused him to experience emotional 1 damages. However, Plaintiff cites no cases that the mere sighting of a false report gives 2 rise to actionable damages, nor does the statute suggest as such. Further, the factual record 3 makes clear that it was not the knowledge of the false report that caused Plaintiff despair, 4 but rather the loss of the potential job opportunity. (Doc. 66, Ex. A at 155:1-5) (Q: “[c]an 5 you tell me about what emotional distress you claim occurred because of [the] background 6 check? Plaintiff: Losing that job opportunity brought me back to a really dark place.”). The 7 Court finds that the loss of the potential job opportunity was the direct cause of Plaintiff’s 8 damages. 9 Second, Plaintiff asserts that Defendant’s violation of the FCRA caused Plaintiff to 10 lose the potential job opportunity. Defendant’s position is that Plaintiff’s criminal history, 11 not Defendant’s misreporting of the severity of Plaintiff’s second conviction, is the true 12 cause behind the loss of the potential job opportunity. Defendant asserts that Plaintiff 13 advances no facts to defeat the what the records establishes: CloudKitchens would not have 14 hired Plaintiff, even if the original background report correctly displayed his 2015 15 conviction. 16 CloudKitchens was aware that the misreported felony was a misdemeanor before it 17 made the decision not to hire Plaintiff. (Doc. 53 at 7). (SOF at ¶ 8) (“Q: So you told them 18 on a phone call that it was a misdemeanor?” [Plaintiff]: “Uh-huh”); see also, (Id. at ¶ 33) 19 (Ms. Lynch stating Plaintiff told CloudKitchens his “real” criminal history before it made 20 its decision) (Plaintiff stated he “showed [CloudKitchens] that their information was 21 wrong”). 22 The record clearly establishes that it was immaterial to CloudKitchens whether the 23 2015 offense was considered a felony or a misdemeanor. In his Declaration, Mr. Anthony 24 DiBenedetto, the Associate General Counsel of CloudKitchens, stated “before finalizing 25 the Company’s hiring decision, [Plaintiff] informed [CloudKitchens] that his conviction 26 for ‘Facilitation to Commit Trafficking in Stolen Property, Second Degree’ should be 27 classified as a misdemeanor, rather than a felony . . . [t]hat distinction was immaterial to 28 [CloudKitchens].” (See. Doc. 50, Ex. 4.). 1 However, Plaintiff asserts the declaration as inadmissible and controverted. (Doc. 2 77 at 4). First, Mr. DiBenedetto’s personal knowledge of the decision to not hire Plaintiff 3 is disputed. See Fed. R. Civ. P. 56(B)(4) (“[a]n affidavit or declaration used to support or 4 oppose a motion must be made on personal knowledge”). Plaintiff points to no evidence 5 on the record that disputes Mr. DiBenedetto’s personal knowledge, rather stating the 6 declaration lacks information to substantiate Mr. DiBenedetto’s knowledge. (Doc. 77 at 5). 7 Personal knowledge can be inferred from the statements themselves. Barthelemy v. 8 Air Lines Pilots Ass’n, 897 F.2d 999, 1018 (9th Cir. 1990). This inference can be based on 9 the declarants’ “positions and the nature of their participation in the matters to which they 10 swore.” Id. Based on his position as Associate General Counsel of CloudKitchens and the 11 lack of any contravening evidence against his personal knowledge, the Court finds that Mr. 12 DiBenedetto’s declaration is based on personal knowledge.1 13 Next, Plaintiff characterizes the declaration as inadmissible hearsay. See Fed. R. 14 Civ. P. 56(B)(2) (prohibiting relying on hearsay in MSJ). However, the declaration is not 15 inadmissible hearsay. Mr. DiBenedetto is not recounting out-of-court statements to prove 16 the truth of the matter asserted; rather, he testifies based on his personal knowledge and his 17 involvement in CloudKitchens’ decision not to hire Plaintiff. Fed. R. Civ. Evid. 801(c). 18 Finally, Plaintiff asserts “Mr. DiBenedetto has avoided or ignored Plaintiff’s notices 19 and subpoena for deposition, depriving Plaintiff of the opportunity to test his statements as 20 a witness and rendering his credibility at issue.” (Doc. 77 at 4). Defendant name Mr. 21 DiBenedetto in its Amended Initial Disclosures. (Doc. 80 at Ex. B). The Declaration was 22 produced in Defendant’s first document production. (Doc. 65 at Ex. C). At that point, two 23 months of discovery remained. (Doc. 28 at 2). The Court does not find any evidence that 24 Mr. DiBenedetto was avoiding a subpoena from Plaintiff.2 As the Court finds that the 25 record shows Plaintiff could have conducted a deposition of Mr. DiBenedetto, it will

26 1 Plaintiff was also under the impression that the legal team was involved in his employment decision. See (SOF Ex. 1 at 86:17–88:7 (“Q: Do you know if they had a legal team that was looped in? A: Yes.”) 27 2 Then, seven (7) days before the end of discovery, Defendant received an email from Plaintiff that Ms. Findsen’s declaration referenced. Defendant’s counsel maintains that it could not accept the subpoena on 28 behalf of Mr. DiBenedetto, as Defendant’s counsel did not represent him. (Doc. 80 at 3). 1 consider the Declaration. Cowboy v. Zinke, No. CV-16-08094-PCT-DGC, 2018 WL 2 619722, at * 3 (D. Ariz. 2018). 3 Considering the record, including Mr. DiBenedetto’s declaration, the Court finds 4 that Plaintiff has failed to show a genuine dispute of material fact. Plaintiff offers no 5 rebuttal evidence to Mr. DiBenedetto’s Declaration, nor his email. The only evidence 6 Plaintiff indicates demonstrates that the faulty background check caused his loss of the 7 potential job opportunity is the testimony of Plaintiff and his girlfriend. However, Plaintiff 8 admits that the two parties could not have “independent knowledge of CloudKitchen[s’] 9 internal hiring processes and parameters.” (Doc. 77 at 9) (Plaintiff goes further to state that 10 “[e]ven if [Defendant’s brief was] an accurate representation of [Ms.] Lynch’s testimony, 11 it would be completely irrelevant. [Ms.] Lynch’s testimony was speculative, not based on 12 personal knowledge.” Id. 13 For a claim under the FCRA asserting negligence, Plaintiff “has the burden of 14 proving that his damages were caused by the defendant's violations of the FCRA.” 15 Waddell, 2006 WL 2640557, at *3. The established record has no genuine dispute of 16 material fact on the issue of causation. The record shows that the incorrect report did not 17 cause Plaintiff’s damages. Therefore, the Motion is granted as to the negligent claims. See 18 Celotex Corp., 477 U.S at 322-23 (holding that where party will have burden of proof on 19 an element essential to its case at trial and does not, after adequate time for discovery, make 20 a showing sufficient to establish the existence of that element, “there can be no genuine 21 issue as to any material fact since a complete failure of proof concerning an essential 22 element of the nonmovant's case necessarily renders all other facts immaterial.”). 23 B. Defendant’s Motion to Exclude Expert Testimony of Douglas A. Hollon 24 Defendant moves for this Court to Exclude the Expert Testimony of Douglas A. 25 Hollon. Defendant’s motion is governed by Rule 702 of the Federal Rules of Evidence: A witness who is qualified as an expert by knowledge, skill, experience, training, or 26 education may testify in the form of an opinion or otherwise if: 27 (a) the expert's scientific, technical, or other specialized knowledge will help the trier of fact to understand the evidence or to determine a fact in issue; 28 (b) the testimony is based on sufficient facts or data; 1 (c) the testimony is the product of reliable principles and methods; and (d) the expert has reliably applied the principles and methods to the facts of the case. 2 Fed. R. Evid. 702. The Court finds Mr. Hollon’s expert testimony to be admissible. First, 3 Mr. Hollon’s specialized knowledge will help the trier of fact to understand the evidence. 4 Id. While Defendant concedes that Mr. Hollon may have credit expertise, it disputes that 5 Mr. Hollon has any employment-related consumer report expertise or knowledge regarding 6 the reporting of criminal records. (Doc. 55 at 6). Plaintiff asserts that Defendant is a 7 consumer reporting expert, which includes both credit related matters and employment- 8 related matters. (Doc. 56 at 9). 9 Mr. Hollon is undoubtedly an expert in the “consumer reporting” field. Mr. Hollon 10 has over 18 years of experience in the credit reporting industry, 14 years of which were 11 with Experian, one the major consumer reporting agencies and has testified in 13 FCRA 12 cases an expert. (Expert Disclosure at 31-34). He is recognized as a consumer report expert 13 by the Consumer Data Industry Association, which “is the voice of the consumer reporting 14 industry, representing consumer reporting agencies including the nationwide credit 15 bureaus, regional and specialized credit bureaus, background check companies.” (Id. at 33- 16 34; 3 fn. 1). 17 This narrowing of Defendant’s expertise is inappropriate in this case, as the FCRA 18 requires the use of reasonable procedures in procuring and using a “consumer report” 19 which encompasses both credit reports and criminal background reports. U.S.C. § 20 1681a(d); see also, Syed v. M-I, Ltd. Liab. Co., 853 F.3d 492, 496 (9th Cir. 2017). Mr. 21 Hollon’s opinions will be helpful to the fact finder in determining whether reasonable 22 procedures were followed by Defendant based on the facts of the case. 23 Further, the Court finds that Mr. Hollon based his opinion on sufficient facts. Fed. 24 R. Evid. 702. Mr. Hollon reviewed Defendant’s Answer, Defendant’s Answers to Requests 25 for Production of Documents, Defendant’s Answers to Interrogatories, Defendant’s 26 Responses to Requests for Admission, Deposition of Defendant, plus Exhibits, dated 27 December 7, 2023. (Expert Disclosure at 3). Defendant asserts that Mr. Hollon has not 28 1 reviewed enough facts, as he testified that he only reviewed Defendant’s policies and 2 procedures that were exhibits to HireRight’s 30(b)(6) deposition transcript. (Doc. 55, Ex. 3 B at 61:4–62:25). However, there is no requirement that an expert review all potentially 4 relevant material so long as his opinions are based on sufficient facts. 5 Reviewing Mr. Hollon’s statements, the Court finds that his testimony is the product 6 of reliable principles and methods, that he has reliably applied to the facts of the case. Fed. 7 R. Evid. 702. The Court finds Mr. Hollon’s expert testimony to be admissible under the 8 Federal Rules of Evidence and denies Defendant’s Motion to Exclude his testimony. 9 C. Willful Violation of the FCRA 10 Under the FCRA, a Plaintiff can recover statutory and punitive damages if a willful 11 violation of the Act’s requirements is shown. 15 USC §1681n(a)(1)(A). To show that a 12 violation was willful, a plaintiff must show that the defendant either knowingly violated 13 the Act or recklessly disregarded the Act's requirements. Marino v. Ocwen Loan Servicing 14 LLC, (9th Cir. 2020), (citing Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 69 (2007). 15 Willfulness under the FCRA is generally a question of fact. See Guimond, 45 F.3d 16 at 1333 (“The reasonableness of the procedures and whether the [ ] agency followed them 17 will be jury questions in the overwhelming majority of cases,”); Cairns v. GMAC Mortgage 18 Corp., No. CV 04–01840 PHX(SMM), 2007 WL 735564, *8 (D.Ariz. 2007) (“in this case, 19 like in the overwhelming number of cases in which state of mind is dispositive, the issue 20 of punitive damages is best left for the trier of fact to determine”). 21 Looking at the evidence in a light most favorable to the Plaintiff, the Court finds 22 that the record is filled with genuine disputes over material facts regarding Defendant’s 23 culpability. Defendant asserts they have multi-layered procedures set up to ensure the 24 information it reported was complete and up to date. (Doc. 53 at 12). The procedures 25 include training researchers how to read and report criminal records, including records 26 from Arizona and training on reporting crime severities. (SOF at ¶ 15). Additionally, 27 Defendant continuously monitors both researchers and third-party public vendor 28 performance and accuracy rates, requiring its researchers to maintain a minimum accuracy 1 rate of 99.95%. (Id. at ¶ 16; 20-22). 2 Conversely, Plaintiff points the case history of the 2015 conviction, which contained 3 an entry stating “NOTE: TO DESIGNATE CLASS 6 UNDESIGNATED FELONY AS A 4 MISDEMEANOR.” (RSOF at ¶ 12). Plaintiff alleges that this would communicate to a 5 reasonable reader that the conviction was redesignated to a misdemeanor. (Doc. 77 at 14). 6 Additionally, Plaintiff points to his expert witness whose report stated, “that Defendant’s 7 procedures were not consistent with industry standards[,] and . . . that had [it] maintained 8 adequate policies and procedures, [it] would [not have misreported Plaintiff’s offense].” 9 (RSOF at ¶ 26.) Defendant disputes the reliability of Mr. Hollon’s report. 10 Further, the parties dispute over what conclusions a fact finder should draw from 11 the December email reminding Defendant’s employees how to correctly report Arizona 12 ‘class six undesignated felonies.’ (Doc. 53 at 12); (RSOF at ¶ 15). While Defendant 13 portrays the email as an example of procedures to ensure accuracy, Plaintiff characterizes 14 the emails as a response to a “pervasive” problem. Further, while Plaintiff and Defendant 15 agree that the guidelines in the email were not followed in the case of Plaintiff’s 16 background report, they disagree as to whether this shows a reckless violation of the FCRA. 17 /// 18 /// 19 /// 20 /// 21 /// 22 /// 23 /// 24 /// 25 /// 26 /// 27 /// 28 /// 1 Looking at the evidence in a light most favorable to the Plaintiff and considering 2|| the precedent to treat the culpability of an actor under the FCRA as a question of fact for 3 || the jury, it would be improper to grant Summary Judgment. There is a genuine dispute over 4|| Defendant’s procedures, policies, and actions in this case. Therefore, the Motion for 5 || Summary Judgment as to the willful violation of the FCRA is denied. 6 IT IS ORDERED granting in-part and denying in-part the Motion for Summary Judgment. (Doc. 45) 8 IT IS FURTHER ORDERED denying the Motion to Exclude the Testimony of Douglas A. Hollon. (Doc. 47). 10 IT IS FURTHER ORDERED dismissing Plaintiffs claims asserting damages 11 || under 15 U.S.C. § 1681(0), for a negligent violation of the FCRA. 12 IT IS FURTHER ORDERED that Plaintiffs claims asserting damages under 15 U.S.C § 1681(n), for a willful violation of the FCRA, are not dismissed. 14 Dated this 27th day of March, 2025. 15 16 dais.) wt 17 Stephen M. McNamee 18 Senior United States District Judge 19 20 21 22 23 24 25 26 27 28

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