Standing to Sue Not Guaranteed by Federal Law in California

Standing to Sue Not Guaranteed by Federal Law in California

Because a job applicant didn’t allege any concrete injury in connection with a claimed informational injury under the federal Fair Credit Reporting Act (FCRA) from an employer's allegedly inadequate disclosure in obtaining his authorization to get a consumer report, the applicant lacked standing to pursue claims in California courts.

The Court of Appeals also held that alleging a concrete injury was necessary because standing under California law required not only real party in interest status under California Code of Civil Procedure (CCP) § 367, but also a beneficial interest, which was a generally applicable requirement. And the FCRA's damages provision in 15 U.S.C. § 1681n(a)(1)(A) did not confer public interest standing within the meaning of case law under Code Civ. Proc., § 526a.

Background

The plaintiff appealed from a dismissal entered in favor of Circle K Stores and against the plaintiff after the trial court sustained Circle K's demurrer to the plaintiff's class action complaint without leave to amend.

The complaint alleged that Circle K violated the FCRA by failing to provide him with proper disclosures when it sought and received his authorization to obtain his consumer report in connection with his employment application, and by actually obtaining the report in reliance on that authorization.

On appeal, the plaintiff argued no injury is required to pursue his causes of action under the FCRA. In the alternative, he argued he’d been injured as a result of Circle K's alleged FCRA violations.

Circle K operates gas stations and convenience stores in California. The plaintiff was employed by Circle K at a location for about a month. To gain employment with Circle K, he was required to complete a consent form purporting to authorize the store “to obtain a consumer report verifying [the plaintiff's] background and experience.” The plaintiff alleged the form violated the FCRA’s “standalone’ disclosure requirement” and the Act’s “clear and conspicuous disclosure’ requirement.”

The General Differences Between Requirements for Standing in Federal and California Courts

Judge Mark W. Snauffer of the California Court of Appeals wrote that for purposes of federal court jurisdiction, case law has established that the minimum standing requirement has three elements. The plaintiff must have (1) suffered an injury in fact (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.

Judge Snauffer explained that in assessing standing, California courts aren’t bound by the “case or controversy” requirement of Article III of the U.S. Constitution. Instead, they’re guided by “prudential’ considerations.” The purpose of a standing requirement is to ensure that the courts decide only actual controversies between parties with a sufficient interest in the subject matter of the dispute. As such, California decisions generally require a plaintiff to have a personal interest in the litigation's outcome.

Standing in California - Code of Civil Procedure Section 367

CCP 367 provides, “[e]very action must be prosecuted in the name of the real party in interest, except as otherwise provided by statute.” Generally speaking, a party lacks standing to assert a claim that belongs to another person. Thus, California courts have repeatedly said “[a] real party in interest ordinarily is defined as the person possessing the right sued upon by reason of the substantive law.”

Section 367 relates to standing in that it largely prohibits persons from pursuing claims they themselves don’t own. But the Legislature has the power to grant such persons a right to sue for the benefit of others, i.e., to make him a real party in interest. In such a case, it might be said that it has granted him standing.

Section 367 merely requires, in most instances, that the person who brings the claim in a California court must be the person who actually owns the claim. Notably, federal courts have the same requirement. Federal Rule of Civil Procedure Rule 17 provides: “An action must be prosecuted in the name of the real party in interest.” However, just as this requirement is not the only requirement for standing under article III of the federal Constitution, this requirement isn’t the only requirement for standing in California.

The Beneficial Interest Requirement

The requirement that a party be “beneficially interested” in an action to have standing has been acknowledged in a number of decisions, Judge Snauffer explained. Although there are exceptions, the Court of Appeals concluded, as a general matter, to have standing to pursue a claim for damages in the courts of California, a plaintiff must be beneficially interested in the claims he’s pursuing. Further, the Court held that the FCRA doesn’t eliminate the requirement that the plaintiff be beneficially interested (suffer an injury in fact) to have standing and that the FCRA doesn’t confer public interest standing on the plaintiff.

Here, Judge Snauffer found that this isn’t a situation where the statute at issue confers public interest standing upon the plaintiff. The FCRA expressly confers authority upon federal and state agencies and officials—not private litigants—to vindicate the public's interest in ensuring compliance with the FCRA. Thus, there’s no basis upon which to conclude the FCRA was intended to confer public interest standing upon a private litigant.

As a result, the plaintiff didn’t have standing under the public interest doctrine to pursue his claims in California's courts. To have standing to pursue his claims, the plaintiff must allege a concrete injury.

The Plaintiff Hasn’t Suffered a Sufficient Injury for Standing to Sue

The plaintiff also contended that his interests in privacy and access to information were violated and the violations are sufficient to confer in him standing to bring suit. He further claimed the trial court was required, but failed, to determine whether he had interests protected by the FCRA and whether those interests were violated. The plaintiff stated he “was not presented with all the required information in a clear manner to enable him to understand his rights and give informed consent for Circle K to procure his consumer report.” He argued that the release of liability caused injury to his “privacy interests because it prevents him from holding a third-party vendor accountable” for furnishing such information.

Circle K countered by contending the plaintiff suffered no “injury to his privacy rights because he testified that: (1) he was willing to submit to a background check; (2) he knew by checking a box on Circle K's employment application he was informing Circle K that he was ok with it procuring his background check; and (3) he would have signed any indisputably compliant FCRA form consenting to his background check.”

To assess a plaintiff's standing to pursue claims in California courts, one must consider whether the plaintiff suffered an injury—i.e. an “invasion of [his or her] legally protected interests” and whether it is “sufficient to afford them an interest in pursuing their action vigorously.” The latter consideration is met where the injury is “[a] concrete and particularized, and (b) actual or imminent, not conjectural or hypothetical.”

The judge noted that here the plaintiff didn’t allege he didn’t get a copy of the consumer report that Circle K obtained. He didn’t allege the consumer report obtained by Circle K contains any defamatory content or other per se injurious content. Further, he didn’t allege the report contained false or inaccurate information. Likewise, there were no allegations of any exposure to a material risk of future harm, imminent or substantial. Thus, there was no injury to the plaintiff's protected interest in ensuring fair and accurate credit (or background) reporting. As to the release of liability contained in Circle K's consent form, there were no allegations to suggest that any harm resulted from the release. The plaintiff admitted he was hired by Circle K, and didn’t allege any adverse employment decision based upon information contained in the report. He didn’t allege any facts or cite any law upon which to conclude that he had any viable cause of action against the company or companies performing his background check that he relinquished by signing the release.

Thus, the Court of Appeals concluded the plaintiff didn’t alleged a concrete or particularized injury to his privacy interests sufficient to afford him an interest in pursuing his claims vigorously. The judgment of dismissal in the case was affirmed. Limo n v. Circle K Stores Inc., California Court of Appeal, 5th Appellate District (10/25/22).

Bottom Line

A plaintiff must suffer a concrete or particularized injury to have standing to sue under the FCRA in California courts. Here, the plaintiff failed to adequately allege a sufficient injury to confer standing upon him to sue Circle K.