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Milbourne v. JRK Residential America LLC

United States District Court, E.D. Virginia, Richmond Division

August 11, 2016

DERRICK A. MILBOURNE, On his own behalf and on Behalf of those similarly Situated, Plaintiff,


          Robert E. Payne Senior United States District Judge.

         This matter is before the Court on the parties' joint oral motion, made at the Final Pretrial Conference, to have the Court decide, as a matter of law, whether defendant JRK Residential America, LLC's ("JRK") violation of 15 U.S.C. § 1681b(b)(2) of the Fair Credit Reporting Act ("FCRA") was "objectively reasonable, " as that concept was defined by the Supreme Court of the United States in Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47 (2007) . For the reasons set forth below, the Court finds that: (1) the "objective reasonableness" analysis set forth in Safeco does not apply because JRK did not adopt or act on an interpretation of the statute at the time that the violation occurred; and (2) assuming that JRK's conduct sufficiently evinces an "interpretation" of the statute (as JRK contends to be the case), that interpretation is not objectively reasonable.


         A. Class Claims

         On October 26, 2015, Plaintiffs Derrick A. Milbourne ("Milbourne") and Samantha Churcher ("Churcher") (collectively, "Plaintiffs") filed a First Amended Complaint ("FAC", ECF No. 147) on behalf of themselves and all others similarly situated, alleging that JRK violated two sections of the FCRA. In Count One, Plaintiffs alleged that JRK took adverse action against potential employees without complying with 15 U.S.C. § 1681b(b)(3)(A), which requires that:

In using a consumer report[1] for employment purposes, before taking any adverse action based in whole or in part on the report, the person intending to take such adverse action shall provide to the consumer to whom the report relates: (i) a copy of the report; and (ii) a description in writing of the rights of the consumer under this subchapter, as presented by the Bureau under Section 1681g(c)(3) of this title.

         Count One is sometimes referred to as "the § 1681b(b)(3) claim."

         In Count Two, Plaintiffs alleged that the disclosure form that JRK provided to all potential employees ("the Standard Disclosure Form") violated 15 U.S.C. § 1681b(b) (2) (A), which provides that:

A person may not procure a consumer report, or cause a consumer report to be procured, for employment purposes with respect to any consumer, unless: (i) a clear and conspicuous disclosure has been made in writing to the consumer at any time before the report is procured or caused to be procured, in a document that consists solely of the disclosure, that a consumer report may be obtained for employment purposes; and (ii) the consumer has authorized in writing (which authorization may be made on the document referred to in clause (i)) the procurement of the report by that person.

         Count Two is sometimes referred to as "the § 1681b(b)(2) claim." Plaintiffs alleged that the violations alleged in Counts One and Two were committed "willfully, " and sought statutory and punitive damages.

         Count Three, filed on behalf of a putative subclass of the class represented in Count Two, alleged that a second disclosure form that JRK provided to some potential employees ("the Standalone Disclosure Form" or "the contingency form") also violated § 1681b(b)(2)(A).


         In November 2010, Milbourne applied for, and conditionally received, a job with JRK pending satisfactory completion of a background check. (FAC ¶¶ 7-9). Before JRK obtained a consumer report on Milbourne, he signed two disclosure forms. Id. at ¶¶ 15-18. The first form, the "Standard Disclosure Form, " provides in pertinent part:

I certify that the information contained herein is true and understand that any falsification will result in the rejection of my application or termination of my employment. I also understand that the requested information is for the sole purpose of conducting a background investigation which may include a check of my identity, work and credit history, driving records, and any criminal history which may be in the files of any state or local criminal agency...
I hereby authorize this company, its corporate affiliates, its employees, its authorized agents, and verify all information contained in this form or in my application and to inquire into any character, general reputation, personal characteristics, and mode of living...I hereby release this company, its corporate affiliates, its employees, its authorized agents and representatives and all others involved in this background investigation from any liability in connection with any information they give or gather and any decisions made concerning my employment based on such information. I understand that any offer of employment I may receive is contingent upon the successful completion of the background investigation. I further understand that I have a right, under Section 606(B) of the Fair Credit Reporting Act, to make a written request to this company within a reasonable period of time for a complete and accurate disclosure of the nature and scope of the investigation requested.

(ECF No. 49-2 at 2) (emphasis added) . Churcher also signed the Standard Disclosure Form when she applied for employment with JRK in September 2013. (FAC ¶¶ 27-31).

         After extensive discovery, it became apparent that Milbourne, along with 558 other class members (not including Churcher), had also signed a second disclosure form before JRK obtained their background checks ("the Standalone Disclosure form"). That form provides:

I understand that my employment with JRK is subject to the successful clearance of my background report to acceptable company standards. The results of my background report will be reviewed and evaluated by JRK and JRK, in its sole discretion, will determine whether it is approved.

(ECF No. 150, Exs. 1-650).

         Milbourne was conditionally hired by JRK, contingent upon the successful clearance of his background check. After receiving Milbourne's consumer report, which contained two felony arrest records, JRK terminated Milbourne's employment. (ECF No. 76-8 ¶¶ 2-3). Milbourne did not receive a copy of his consumer report or a summary of rights under the FCRA before JRK informed him of its decision to terminate his employment. However, Milbourne later received a "Notice of Adverse Action" accompanied by those materials from United States ...

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