Photo of H. Scott Kelly

Scott specializes in complex litigation and business disputes.

On August 16, seven Democrat senators proposed a bill (S.3351, named the “Medical Debt Relief Act of 2018”) to amend the Fair Credit Reporting Act and Fair Debt Collection Practices Act to cover certain provisions related to the collection of medical-related debt. The proposed act would institute a 180-day waiting period under the FCRA before medical debt could be reported on a person’s credit report. Further, medical debt that has been settled or paid off would be required to be removed from a person’s credit report within 45 days of payment or settlement.

The bill has been referred to the Senate Banking Committee for consideration. The senators introducing the bill were Jeff Merkley (D-Ore.), Richard Blumenthal (D-Conn.), Dianne Feinstein (D-Calif.), Elizabeth Warren (D-Mass.), Dick Durbin (D-Ill.), Bob Menendez (D-N.J.), and Maggie Hassan (D-N.H.).

The bill targeted Section 1692(g) of the FDCPA specifically and would require debt collectors to send a statement to individuals that includes a notification that:

(1) the debt may not be reported to a credit bureau for 180 days from the date in which the statement is sent, and

(2) if the debt is settled or paid by the individual or an insurance agency during the 180-day period, the debt may not be reported to a consumer reporting agency.

Troutman Sanders will continue to monitor these developments and provide any further updates as they are available.

On August 3, the U.S. District Court for the District of Columbia dismissed a putative class action brought under the Fair and Accurate Credit Transactions Act for lack of subject matter jurisdiction and Article III standing, relying on the 2016 U.S. Supreme Court ruling in Spokeo Inc. v. Robins. As is commonplace in FACTA litigation, the class complaint alleged that the defendant had printed the plaintiff’s entire 16-digit credit card number and expiration date on receipts.

U.S. District Judge Colleen Kollar-Kotelly ruled that plaintiff Doris Jeffries lacked standing to bring her FACTA suit since the few facts alleged in her case failed to show she suffered an injury in fact that is fairly traceable to the defendants’ challenged conduct and that could likely be redressed by a favorable judicial decision. The court also rejected Jeffries’ argument that she was at an increased risk of identity theft when the defendants handed her the receipt with her information printed on it.

In relevant part, the court held:

The receipt containing prohibited information allegedly was provided to plaintiff, and she does not allege any further disclosure of that receipt to anyone else. …  Nor does plaintiff cite any history to support any notion that additional inconvenience associated with review and disposal of an infringing receipt rises to the level of a concrete harm.

The case is Jeffries v. Volume Services America, Inc. et al., Civil Action No. 1:17-cv-01788, in the U.S. District Court for the District of Columbia.  A copy of the memorandum opinion and order can be found here.

Troutman Sanders will continue to monitor these developments and provide any further updates as they are available.

On July 17, the Missouri Court of Appeals affirmed a ruling of the Cole County Circuit Court dismissing a putative class action under the Fair Credit Reporting Act against multinational staffing company, Kelly Services, Inc.

A three-judge panel of the Missouri Court of Appeals issued a one-page order and eleven-page memorandum opinion upholding the lower court’s ruling that the plaintiff lacked standing to pursue his claim since he alleged only bare procedural violations without the requisite concrete injury.

The panel held: “Not even the most liberal construction of his pleading would support a construction favorable to finding that Mr. Boergert pleaded a concrete and actual injury. …  Because Mr. Boergert did not plead an invasion of a legally protected interest that is concrete and particularized and actual or imminent, not conjectural or hypothetical, the trial court did not err in dismissing his complaint for lack of standing.”

Plaintiff Cott Boergert claimed Kelly Services violated the FCRA when it fired him from a job placement based on information in his consumer report indicating that he had been on probation in 2009 for commission of a felony. Boergert had previously indicated that he had not been on probation for a felony in the preceding seven years when he filled out the employment application.

He then filed the class action in Cole County Circuit Court, claiming that Kelly Services violated the FCRA by including more information in its disclosure form than was allowed and by not providing him with either the report or a summary of his rights. Interestingly, the case was removed to federal court but was dismissed in 2016 under the U.S. Supreme Court’s Spokeo v. Robins decision. That federal district court, however, rethought its decision and the case was remanded back to state court.

The panel’s ruling added: “While alleging that Kelly Services knowingly violated the FCRA by using a disclosure form that contained extraneous information – a bare procedural violation – and that he was therefore entitled to statutory damages for these violations, Mr. Boergert did not plead any concrete or actual injury. … Although he testified during a deposition that the form confused him, he did not plead that it did so or that he did not see the disclosure or authorize Kelly Services to obtain a consumer report.”

Troutman Sanders will continue to monitor these developments and provide further updates as they are available.

On July 5, the U.S. District Court for the Northern District of Illinois granted summary judgment in favor of the Federal Trade Commission against Credit Bureau Service, LLC f/k/a/ MyScore LLC (“CBS LLC”) and its owner, Michael Brown, on charges that they deceived consumers with fake rental property ads and deceptive promises of “free” credit reports, and then improperly enrolled consumers in an expensive monthly credit monitoring service. Judgment was entered in the FTC’s favor for $5.2 million.  A copy of the summary judgment order can be found here.

The FTC’s complaint alleged that CBS LLC and Brown posted Craigslist ads for non-existent rental properties, then impersonated property owners and offered property tours if the consumers would agree to obtain credit reports and/or scores from their websites. The complaint also alleged that the defendants claimed they were providing free credit reports and scores when, in actuality, their systems would automatically enroll consumers in $29.94 per month credit monitoring services without consumers’ knowledge.

The summary judgment order found that CBS LLC and Brown violated the FTC Act, the Restore Online Shoppers’ Confidence Act, the Fair Credit Reporting Act, and the Free Annual File Disclosures Rule. It also:

  • Entered a permanent injunction that bans the defendants from selling any credit monitoring service with a negative option feature and from misrepresenting material facts about any product or service;
  • Instructs the defendants how they must monitor their affiliate marketers in the future;
  • Requires the defendants to investigate any complaints about affiliate marketers and end the affiliation if they find practices the order prohibits;
  • Mandates that the defendants make specific disclosures when selling any product or service with a negative option feature and when offering free credit reports; and
  • Bars the defendants from using billing information to obtain payments from consumers without first obtaining their express informed consent.

Troutman Sanders will continue to monitor these developments and provide any further updates as they are available.

On June 11, St. Louis County officials signed an executive order, effective immediately, that would “ban the box” and ensure that St. Louis County will no longer ask job applicants for criminal histories in their initial employment applications.  Other jurisdictions in Missouri with ban-the-box laws include Jackson County, Columbia, and Kansas City.

“A parolee’s failure to find full-time employment becomes, quite frankly, a serious public safety issue for every county resident,” St. Louis County Executive Steve Stenger told the St. Louis Post-Dispatch. “Without a decent job, ex-prisoners are far more likely to struggle with substance abuse. And they are far more likely to engage in criminal activity.”

The executive order provides that “employment decisions will not be based on the criminal history of a job applicant unless demonstrably job-related and consistent with business necessity, or unless state or federal law prohibits hiring an applicant with certain convictions for a particular position.”

Currently, more than 150 cities and counties nationwide as well as 32 states have passed ban-the-box legislation that delays questions about criminal records of job applicants until later in the hiring process. Eleven of those states have required the removal of criminal history questions from job applications for private employers.

Troutman Sanders will continue to monitor related legislative developments concerning employment background screening and employee hiring.

On June 7, the Federal Trade Commission issued a public notice regarding the Economic Growth, Regulatory Relief, and Consumer Protection Act, which goes into effect on September 21, 2018.  The new law mandates that the three major credit reporting agencies set up webpages to allow consumers to request one-year fraud alerts and credit freezes.  The FTC will post links to those webpages on IdentityTheft.gov.

The law requires any credit freeze to be free of charge – nationwide.  Currently, some credit freezes may involve fees under state law.  The new law also allows consumers to freeze a child’s credit file until the child is 16 years of age.

Further, consumers will be allowed to request one-year fraud alerts, which are currently set at 90 days. An initial fraud alert will still be free, and identity theft victims can still get an extended fraud alert for seven years. For military servicemembers, the new law provides more.  Within a year, credit reporting agencies must offer free electronic credit monitoring to all active duty military.

Troutman Sanders will continue to monitor these developments and provide any further updates as they are available.

 

On May 21, the U.S. Supreme Court, in a 5-4 decision penned by Justice Neil Gorsuch, held that employers can include a clause in their employment contracts that requires employees to arbitrate their disputes individually and to waive the right to resolve those disputes through class actions and other joint proceedings. The Court ruled such requirements are enforceable under the Federal Arbitration Act (“FAA”).

The decision is a major victory for employers, as arbitration can be a tool to funnel employee disputes into out-of-court resolution and away from class actions. The ruling, moreover, takes its place in a lengthy and growing list of rulings by the Supreme Court enforcing arbitration agreements and the pro-arbitration policies of the FAA over the resistance of some lower federal courts and state courts.

The court addressed three cases in this decision:

  • A class action from the Fifth Circuit against Murphy Oil USA Inc. under the Fair Labor Standards Act (“FLSA”);
  • A wage and hour class from the Seventh Circuit against Epic Systems, a healthcare software company, alleging that it violated the FLSA; and
  • A class action from the Ninth Circuit claiming Ernst & Young violated the FLSA and California labor laws by misclassifying employees to deny them overtime wages.

According to the majority decision, the FAA mandates enforcing the terms of an agreement to arbitrate, given that the FAA was enacted “in response to a perception that courts were unduly hostile to arbitration.” The FAA thus instructed courts to “respect and enforce the parties’ chosen arbitration procedures” – such as the agreement to “use individualized rather than class or collective action procedures.”

The appellee-employees argued that the National Labor Relations Act (“NLRA”), passed in 1935, rendered class action and other joint-proceeding waivers unenforceable in arbitration agreements because the NLRA gives workers the right to organize “and engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection.” The Supreme Court rejected that position, stating, “The NLRA secures to employees rights to organize unions and bargain collectively, but it says nothing about how judges and arbitrators must try legal disputes that leave the workplace and enter the courtroom or arbitral forum.”

“The policy may be debatable but the law is clear: Congress has instructed that arbitration agreements like those before us must be enforced as written,” wrote Justice Gorsuch.

Further, the majority refused to defer to the conclusion of the National Labor Relations Board (“NLRB”) that the NLRA trumps the FAA. The Court found such Chevron deference was inappropriate since the NLRB was interpreting the NLRA “in a way that limits the work of” the FAA. The majority also declined to defer to the NLRB’s prior conclusion that the NLRA trumps the FAA.

Justice Ruth Bader Ginsburg penned a strongly-worded dissent, deeming the majority’s decision an attack on “statutes designed to advance the well-being of vulnerable workers.”

Going Forward

The Epic Systems decision is good news for employers nationwide as it enhances their ability to limit exposure to employee claims in class arbitration, class actions, and other joint proceedings.

Moving forward, we see several potential developments:

  1. Undoubtedly, more employers will include class and joint-proceeding waivers in their arbitration agreements, and will make those agreements mandatory for new hires. This will become the norm for employers.
  2. Defenders of the decision point to an overall reduction in costs for all parties, as arbitration of individual disputes may allow for more efficient and quicker resolution of claims.
  3. Democrats in Congress likely will push to pass legislation to reduce the overall impact on employees from the Epic Systems decision. The passage of any such legislation, however, will be difficult in the Republican-controlled Congress.
  4. The logical underpinnings and reasoning in the Epic Systems decision have ramifications beyond the employment context. Pro-employee advocates have long argued that employment law or the relationship between employer and employee somehow justified different treatment than other contractual relationships meaning that the FAA did not apply or these special circumstances trumped the FAA. Likewise, in the consumer context, many pro-consumer advocates have raised a host of similar arguments that the relationship between consumer and businesses (such as credit card companies, auto finance entities, and debt collectors) provides justification for courts to disregard plainly worded arbitration provisions embedded in applicable contracts under supposed public policy rationales. Epic Systems reiterates the Supreme Court’s view that the FAA will govern the interpretation of arbitration provisions, including in the class action context, by reviewing the plain language used by the parties and will reject arguments that amount to a rewriting or failure to enforce the clear language in arbitration provisions.

Employers who do not have an arbitration program, or a program that has not been recently refreshed, might now consider adding or updating arbitration clauses to their agreements. Indeed, consumer-facing companies of all types can take additional comfort in the efficacy of arbitration agreements in designing and implementing arbitration programs for consumer claims.

Troutman Sanders advises clients in developing and administering consumer arbitration agreements, and has a nationwide defense practice representing employers in many types of class actions and individual claims. We will continue to monitor these developments.

On May 2, Kansas Governor Jeff Colyer signed a “ban the box” order applicable to state government positions but not private businesses or state contractors.  Kansas agencies will no longer ask job applicants whether they have a criminal record during the initial application process. The state legislators argued that asking about criminal records on applications unfairly stigmatized individuals with records years – even decades – after their convictions and made it more difficult for individuals released from prison to be employed.

Applicants may still be asked about criminal history later in the hiring process, and applications for jobs where individuals with felonies are specifically prohibited from working will also continue inquiring about the applicant’s criminal history.

“It provides applicants with the opportunity to explain their unique facts and circumstances and what has happened to them and how their lives have changed,” Colyer said.  Colyer indicated that he was in favor of expanding the “ban the box” law to private businesses, but enactment would be up to the Kansas legislature.

Currently, Kansas has no “ban the box” law, unlike thirty-one other states.  Eleven of those states have required the removal of criminal history questions from job applications for private employers, and more than 150 cities and counties in the United States have a “ban the box” ordinance.

Troutman Sanders will continue to monitor related legislative developments concerning employment background screening and employee hiring.

On May 1, the city council of Wilmington, North Carolina unanimously approved a new “ban the box” ordinance for city employees.  The ordinance mandates that candidates for employment will not be asked about their criminal history nor have a criminal background check conducted until a decision has been made to offer the candidate employment. According to Wilmington officials, the new ordinance will ensure people with criminal arrest or conviction records will not be unduly denied employment or discouraged from being employed by the city.

The ordinance also enacted seven-year lookback periods on misdemeanor assault, all sexual offenses, homicide, and financial crimes as automatic disqualifiers.  It also added language allowing applicants to provide evidence of mitigation of any misdemeanor or felony (other than sexual) that has been fully disposed of for more than seven years to proceed in the application process.

Wilmington is now one of more than 150 cities and counties in the United States to enact a “ban the box” ordinance.

Troutman Sanders will continue to monitor related legislative developments concerning employment background screening and employee hiring.

According to a recent report from WebRecon, filings of Fair Credit Reporting Act cases have continued to increase in 2018.  FCRA claims led consumer litigation filings in February, while Fair Debt Collection Practices Act (“FDCPA”) and Telephone Consumer Protection Act (“TCPA”) cases declined during the same month.  The overall statistics for consumer litigation in February 2018 were as follows:

  • 2,458 complaints filed with the Better Business Bureau
  • 4,439 complaints filed with the Consumer Financial Protection Bureau
  • 788 FDCPA cases filed, of which 181 were class actions (23.0%)
  • 296 TCPA cases filed, of which 66 were class actions (22.3%)
  • 422 FCRA cases filed, of which 153 were class actions (36.3%)

Notably, the 422 FCRA filings in February 2018 far outnumbered the 265 filings from the same month last year.

Troutman Sanders will continue to monitor industry trends and will provide updates as they are available.