Rattler v. MH Sub I, LLC ( 2020 )

1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 KIM RATTLER, Case No. 20-cv-02444-EMC 8 Plaintiff, ORDER DENYING DEFENDANTS’ 9 v. MOTION TO STRIKE OR DISMISS CLASS ALLEGATIONS 10 MH SUB I, LLC, et al., Docket No. 7 11 Defendants. 12 13 14 I. INTRODUCTION 15 Kim Rattler (“Plaintiff” or “Ms. Rattler”) has filed a putative class action against MH Sub 16 I, LLC1 and Demandforce, Inc. (collectively “Defendants”), alleging violations of the Fair Credit 17 Reporting Act (“FCRA”), 15 U.S.C. § 1681 et seq. In particular, she alleges that Defendants 18 provide FCRA disclosure notices that are not “clear and conspicuous,” as required by law. 19 Defendants have filed a motion to dismiss or strike a portion of Plaintiff’s class allegations based 20 on FCRA’s statute of limitations. 21 II. BACKGROUND 22 A. Factual Background 23 Plaintiff alleges as follows. Plaintiff was an employee of “Defendant” in the state of 24 California. See Complaint ¶ 6, 21, Docket No. 1. Although Plaintiff does not specify which 25 Defendant was her employer, Defendants’ motion states that “Plaintiff applied for a Customer 26 Services Manager position with Demandforce on November 12, 2018, and, as part of 27 1 Demandforce’s application process, authorized Demandforce to run a pre-employment 2 background check as part of the hiring process.” See Docket No. 7 (“Mot.”) at 3. Plaintiff alleges 3 that Defendants “routinely acquire consumer reports to conduct background checks on Plaintiff 4 and other prospective, current and former employees and use information from consumer reports 5 in connection with their hiring process without providing proper disclosures and obtaining proper 6 authorization in compliance with the law.” Complaint ¶ 2. 7 More specifically, Plaintiff alleges that when she applied for employment, she was 8 provided with “a disclosure and authorization form” permitting Defendants to conduct a 9 background check. Id. ¶ 21. However, “[t]he disclosures provided by Defendants contained 10 extraneous and superfluous language that does not consist solely of the disclosure as required by 11 the FCRA and/or is not clear and conspicuous.” Id. ¶ 22. In particular, Plaintiff alleges that the 12 disclosure contained several sections not relevant to the rights of California applicants (of which 13 Plaintiff was one); it included sections entitled “State of Washington applicants and employees 14 only,” “Massachusetts and New Jersey applicants, employees, and residents only,” and “New 15 York applicants, employees, and residents only.” Id. ¶ 23. Plaintiff contends that because these 16 sections “have no bearing on the rights of California applicants,” the inclusion of such information 17 makes the disclosures unclear and therefore noncompliant with FCRA. Id. Plaintiff further 18 contends that the disclosure is not “clear and conspicuous” because “(1) the disclosure is not in all 19 capital letters; (2) the disclosure is not in boldface to set off the required disclosure; (3) the 20 disclosure includes multi-state information that is not a permissible element in an FCRA 21 disclosure and reduces clarity as to what rights each applicant or employee possesses; and, (4) the 22 disclosure provisions are set out in a dense, small font that reduces clarity.” Id. ¶ 24. 23 Plaintiff alleges that Defendants’ conduct is willful. Id. ¶ 35.2 In support of that 24 allegation, Plaintiff contends that (1) “Defendants are large entities with access to legal advice,” 25 and (2) they “required a purported authorization to perform credit and background checks in the 26 process of employing the class members,” which suggest “awareness of and willful failure to 27 1 follow the governing laws concerning such authorizations.” Id. 2 B. Fair Credit Reporting Act 3 The section of the Fair Credit Reporting Act pursuant to which Plaintiff brings this lawsuit 4 reads as follows: 5 Except as provided in subparagraph (B) [pertaining to consumer who apply for employment “by mail, telephone, computer, or other 6 similar means”], a person may not procure a consumer report, or cause a consumer report to be procured, for employment purposes 7 with respect to any consumer, unless-- 8 (i) a clear and conspicuous disclosure has been made in writing to the consumer at any time before the report is 9 procured or caused to be procured, in a document that consists solely of the disclosure, that a consumer report 10 may be obtained for employment purposes; and 11 (ii) the consumer has authorized in writing (which authorization may be made on the document referred to 12 in clause (i)) the procurement of the report by that person. 13 14 15 U.S.C. § 1681b(b)(2)(A). 15 C. Procedural Background 16 On March 9, 2020, Ms. Rattler filed this putative class action against Defendants in 17 California Superior Court in the County of Alameda. See Notice of Removal, Docket No. 1. The 18 Complaint defines the class as 19 All of Defendants’ current, former and prospective applicants for employment in the United States who applied for a job with 20 Defendants at any time during the period for whom a background check was performed beginning five years prior to the filing of this 21 action and ending on the date that final judgment is entered in this action. 22 23 Complaint ¶ 13(a) (emphasis added). On April 9, 2020, Defendants removed the case to federal 24 court. See Notice of Removal. On April 16, 2020, Defendants filed this Motion to Dismiss or 25 Strike Certain Class Allegations. See Docket No. 7. It is the only motion currently pending 26 before the Court. 27 1 III. DISCUSSION 2 A. Legal Standard 3 Under Rule 12(f), “[a] court may strike from a pleading an insufficient defense or any 4 redundant, immaterial, impertinent, or scandalous matter.” Fed. R. Civ. P. 12(f). “The function of 5 a 12(f) motion to strike is to avoid the expenditure of time and money that must arise from 6 litigating spurious issues by dispensing with those issues prior to trial.” Whittlestone, Inc. v. 7 Handi–Craft Co., 618 F.3d 970, 973 (9th Cir. 2010). Motions to strike are generally disfavored. 8 See Barnes v. AT & T Pension Ben. Plan–Nonbargained Program, 718 F.Supp.2d 1167, 1170 9 (N.D. Cal. 2010); see also Platte Anchor Bolt, Inc. v. IHI, Inc., 352 F.Supp.2d 1048, 1057 (N.D. 10 Cal. 2004) (stating that, “[i]f there is any doubt whether the portion to be stricken might bear on an 11 issue in the litigation, the court should deny the motion”). 12 “Courts disfavor motions to strike class allegations because issues related to class 13 allegations are generally more appropriately resolved on a motion for class certification.” Moser 14 v. Health Ins. Innovations, Inc., No. 3:17-CV-1127-WQH-KSC, 2018 WL 325112, at *11 (S.D. 15 Cal. Jan. 5, 2018) (citing Lyons v. Coxcom, Inc., 718 F. Supp. 2d 1232, 1235–36 (S.D. Cal. 2009); 16 Thorpe v. Abbott Labs., Inc., 534 F. Supp. 2d 1120, 1125 (N.D. Cal. 2008)). 17 B. Analysis 18 As noted above, Plaintiff has proposed a putative class which includes those “who applied 19 for a job with Defendants . . . beginning five years prior to the filing of this action and ending on 20 the date that final judgment is entered in this action.” Complaint ¶ 13(a). However, the FCRA 21 statute of limitations is “the earlier of -- (1) 2 years after the date of discovery by the plaintiff of 22 the violation that is the basis for such liability; or (2) 5 years after the date on which the violation 23 that is the basis for such liability occurs.” 15 U.S.C. § 1681p. Courts have construed the “date of 24 discovery” to include the date of constructive discovery. See, e.g., Grigoryan v. Experian Info. 25 Sols., Inc., 84 F. Supp. 3d 1044, 1057 (C.D. Cal. 2014) (citing Merck & Co., Inc. v. Reynolds, 559 26 U.S. 633, 653 (2010)). Thus, Defendants seek to strike “plaintiff’s class allegations that 27 incorporate claims arising more than two years prior to the filing of the Complaint.” Mot. at 1. 1 about whether and when each putative class member discovered the alleged violation” of FCRA. 2 Id. 3 It is true, as Defendants point out, that courts have dismissed class allegations where 4 Plaintiffs have identified FCRA classes with exclaims extending beyond the shorter, two-year 5 statute of limitations. See, e.g., Holman v. Experian Info. Sols., Inc., No. C 11-0180 CW, 2012 6 WL 1496203, at *15 (N.D. Cal. Apr. 27, 2012) (Wilken, J.) (“Experian is correct that, to assess its 7 liability to those more than 4,000 putative class members whose credit reports were disclosed 8 more than two years before January 12, 2011, would require a determination of whether the class 9 member had accessed their credit report or otherwise learned of Experian’s disclosure. For that 10 time period, the Court finds that individual issues will predominate over the common issues.”); 11 Molina v. Roskam Baking Co., No. 1:09-CV-475, 2011 WL 5979087, at *5 (W.D. Mich. Nov. 29, 12 2011) (“Defendant properly points out that if Plaintiff’s proposed classes are certified, there would 13 need to be an individualized determination for each class member of when the violation that gave 14 rise to his or her claim was discovered. Plaintiff’s assertion that the proposed class members have 15 not yet discovered the facts supporting the violations does not ameliorate this task.”). 16 However, in both Holman and Molina, the court declined to certify the earlier FCRA 17 claims at the class certification stage. See also Bebault v. DMG Mori USA, Inc., No. 18-CV- 18 02373-JD, 2020 WL 2065646, at *3 (N.D. Cal. Apr. 29, 2020) (modifying a FCRA class to 19 comply with the two-year statute of limitations at the class certification stage). Furthermore, in 20 Holman, the Court also noted that it was possible that a “substantial portion” of the class was on 21 notice because “federal law permits everyone free, annual access to their own Experian credit 22 report,” and the report would have revealed the FCRA violation. Holman, 2012 WL 1496203, at 23 *15. Accordingly, these cases provide only indirect support for Defendants’ contention that it 24 would be proper to strike Plaintiff’s class claims at this time and instead appear to support the idea 25 that this issue is better resolved at the class certification stage, once discovery has been completed. 26 Importantly, this Court has previously approved a FCRA class settlement that reflected 27 reduced recovery for those who might fall outside the two-year statute of limitations. See 1 Cal. Feb. 27, 2019). In addition, “the Ninth Circuit has repeatedly held that ‘[t]he existence of a 2 statute of limitations issue does not compel a finding that individual issues predominate over 3 common ones.’” Nitsch v. Dreamworks Animation SKG Inc., 315 F.R.D. 270, 308 (N.D. Cal. 4 2016) (quoting Williams v. Sinclair, 529 F.2d 1383, 1388 (9th Cir. 1975); and then citing 5 Cameron v. E.M. Adams & Co., 547 F.2d 473, 478 (9th Cir. 1976) (“We hold that the presence of 6 individual issues of compliance with the statute of limitations here does not defeat the 7 predominance of the common questions.”)). 8 Accordingly, the Court DENIES Defendants’ motion to strike portions of Plaintiff’s class 9 allegations pursuant to Rule 12(f). The denial is without prejudice to opposing class certification 10 or seeking to limit the scope thereof at the appropriate juncture. 11 Defendants also ask the Court to consider striking the class allegations pursuant to Rule 12 12(b)(6) and Rule 23(d)(1)(D). But this, too, is disfavored. See, e.g., In re Wal-Mart Stores, Inc. 13 Wage & Hour Litig., 505 F. Supp. 2d 609, 615 (N.D. Cal. 2007) (“[T]he granting of motions to 14 dismiss class allegations before discovery has commenced is rare.”); Cholakyan v. Mercedes-Benz 15 USA, LLC, 796 F. Supp. 2d 1220, 1246 (C.D. Cal. 2011) (citing Brothers v. Portage Nat’l Bank, 16 No. Civ. A 306–94, 2007 WL 965835, *7 (W.D. Pa. Mar. 29, 2007) for the proposition that “a 17 Rule 12(b)(6) motion must not be used ‘as a vehicle for preempting a certification motion’”); 18 Reniger v. Hyundai Motor Am., 122 F. Supp. 3d 888, 908 (N.D. Cal. 2015) (“[T]he Court is not 19 inclined to grant motions to strike under Fed. R. Civ. P. 12(f) or 23(d)(1)(D).”). Accordingly, 20 Defendants’ request to strike the class allegations pursuant to one of these alternative approaches 21 is also DENIED. 22 /// 23 /// 24 /// 25 /// 26 /// 27 /// 1 IV. CONCLUSION 2 For the foregoing reasons, the Court DENIES Defendants’ motion. 3 This order disposes of Docket No. 7. 4 5 IT IS SO ORDERED. 6 7 Dated: June 12, 2020 8 LL 9 □ ir ED M. CHEN 10 United States District Judge 11 12 13 15 16 17 Z 18 19 20 21 22 23 24 25 26 27 28