In Culberson v. Walt Disney Parks and Resorts, the Culbersons brought a class action lawsuit against Disney under the Fair Credit Reporting Act (“FCRA”).  The suit alleges that Disney violated the FCRA by obtaining a background report without providing a proper disclosure and by taking adverse action without following a proper adverse action process.  Although the Culbersons dealt the first blow to Disney by obtaining class certification, Disney struck back by prevailing at summary judgment.

Specifically, on February 9, the Los Angeles Division of the Superior Court of California granted Disney summary judgment on both of the Culbersons’ claims.  The Court found that Disney did not willfully violate the FCRA, even if the Culbersons might be capable of stating a claim for a technical FCRA violation.

With respect to the adverse action claim, the Court disagreed with the Culbersons’ interpretation of the FCRA.  Under the FCRA, when an employer intends to take adverse action against a job applicant based on a background check, it must follow a pre-adverse action protocol.  This protocol requires an employer, before taking adverse action, to provide the applicant with a copy of the background check and a summary of rights.

The Culbersons asserted that Disney’s coding of an applicant as “no hire” in its hiring system constitutes adverse action.  Because this coding occurs before Disney sends out a copy of the background check and summary of rights, the Culbersons argued that Disney necessarily fails to follow a proper pre-adverse action process.  The Court rejected this approach, instead finding that Disney’s “no hire” coding does not constitute “adverse action” because it is simply an “internal decision.”  An employer is permitted to make an internal decision regarding an applicant without that internal decision constituting adverse action.  As a result, Disney did not violate the FCRA by creating an internal “no hire” coding before sending out pre-adverse action letters.

As to the second claim, the Culbersons argued that Disney’s background check disclosure did not consist “solely of the disclosure” and, therefore, violated the FCRA, because it included extraneous information.  Although the Court declined to address whether the disclosure “technically” complied with the FCRA, it held that the disclosure did not willfully violate the statute.

To find willfulness, a court must conclude that a defendant’s FCRA interpretation was objectively unreasonable.  The Court opined that to show objective unreasonableness, the Culbersons were required to show that Disney was on notice of its FCRA violations.  The Court declined to make such a finding.  According to the Court, although the Culbersons could point to cases casting doubt on disclosure forms like Disney’s, these cases were decided “years after Plaintiffs applied for employment … .”  Because these relatively recent cases could not have put Disney on notice that the disclosure form it used years ago was deficient, the Court found that Disney was entitled to summary judgment on willfulness.

The FCRA poses many traps for unwary employers.  In its common sense approach to willfulness, the Superior Court made clear that an employer does not violate the FCRA by making reasonable efforts to comply with the FCRA, even if they may ultimately fall short.