Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_15-cv-05551/USCOURTS-cand-3_15-cv-05551-3/pdf.json

Nature of Suit Code: 890
Nature of Suit: Other Statutory Actions
Cause of Action: 15:1681 Fair Credit Reporting Act

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United States District Court

Northern District of California

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

HARLEY MILNE,

Plaintiff,

v.

SEARS HOLDINGS CORPORATION,

Defendant.

Case No. 15-cv-05551-JST 

ORDER DENYING DEFENDANT 

SEARS HOLDINGS CORPORATION’S

MOTION TO DISMISS

Re: ECF No. 25

Before the Court is Defendant Sears Holdings Corporation’s Motion to Dismiss the 

Complaint. ECF No. 25. The Court denies the motion.

I. BACKGROUND1

Plaintiff Harley Milne filed a Complaint against Defendants Sears Holding Corporation 

(“Sears”) and HireRight, LLC (“HireRight”), alleging violations of the Fair Credit Reporting Act 

(“FCRA”). ECF No. 1 ¶¶ 68–73. Plaintiff’s claims arise from an employment-related background 

check performed by HireRight on behalf of Sears.

On April 30, 2015, Sears offered Plaintiff full-time employment as Senior Director of 

eCommerce Operations. Id. ¶ 19. The offer was “contingent on [Plaintiff’s] successful 

completion of a background check.” Id. ¶ 20. On or about May 6, 2015, Sears requested that 

HireRight perform a background check on Plaintiff. Id. ¶ 23. HireRight completed the 

background check on May 14, 2015 and set Plaintiff’s “Adjudication Status”2as “Does Not Meet 

Company Standards -- Education Report, Criminal Felony & Misdemeanor” on May 15, 2015. Id.

 

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For the purposes of this order, the Court accepts as true all of the well-pleaded factual allegations 

contained in Plaintiff’s Complaint, ECF No. 1. See Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 

2001).

2 According to the Complaint, “[a]n adjudication status is a determination made by the consumer 

reporting agency of whether the subject of a background report meets the pre-determined 

employment criteria set by the user of the report.” ECF No. 1 ¶ 24.

Case 3:15-cv-05551-JST Document 44 Filed 04/26/16 Page 1 of 8
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¶¶ 23, 25. 

On May 15, 2015, “[b]ased on HireRight’s adjudication, . . . Karen Lee, a Sears employee 

located at corporate headquarters in Illinois, contacted Plaintiff via telephone to tell him that Sears 

was unwilling to honor the job offer it had previously extended [him].” Id. ¶ 26. “During that 

phone call, Plaintiff asked Ms. Lee to identify the exact reason that Sears was withdrawing his job 

offer. In response, Ms. Lee told Plaintiff that she was unable to give Plaintiff more specific 

information and that he should contact HireRight for further information.” Id. ¶ 27. 

Three days later, on May 18, 2015, Sears sent Plaintiff a copy of his background report, 

which Plaintiff alleges incorrectly adjudicated Plaintiff as “Does Not Meet Company Standards—

Education Report, Criminal Felony & Misdemeanor.” Id. ¶¶ 31, 33; ECF No. 1-2 at 7. Plaintiff 

alleges that he does not have a criminal record. ECF No. 1 ¶ 34. Plaintiff further alleges that 

“HireRight reported that it was ‘Unable to Verify’ Plaintiff’s degree from [Almeda] University,” 

despite the fact that HireRight “never actually attempted to verify the degree.” Id. ¶ 35.

Later on May 18, 2015, Plaintiff submitted a dispute to HireRight via HireRight’s online 

dispute form. Id. ¶ 37. On May 19, 2015, Plaintiff submitted to HireRight a copy of his Almeda 

University diploma and “authenticated and notarized documents from the Department of State that 

proved that Plaintiff had received a degree from Almeda University.” Id. ¶ 39; see also ECF No. 

1-3.

On May 27, 2015, Plaintiff received a letter from Sears stating that Sears was “unable to 

offer [him] employment.” ECF No. 1 ¶ 41; ECF No. 1-5 at 1. Sears stated that its “decision was 

based in whole or in part on information contained in a [background] report from HireRight . . . .” 

Id. 

On June 14, 2015, Plaintiff sent a letter to Sears’ Human Resources Department stating 

that he “did not wish to abandon the application process” and had “disputed the report with 

HireRight . . . .” ECF No. 1 ¶ 42; ECF No. 1-6. Plaintiff continued to contact HireRight in an 

attempt to correct the alleged errors in his background report. ECF No. 1 ¶ 43–47. On June 23,

2015, HireRight emailed Plaintiff to explain that “[p]er HireRight’s guidelines we are unable to 

contact unaccredited schools,” such as Almeda University. Id. ¶ 46; see also ECF No. 1-10. 

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“Despite Plaintiff’s dispute, HireRight failed to consider the evidence of Plaintiff’s education 

presented by Plaintiff, instead refusing to contact the educational institution from which Plaintiff 

had received his degree simply because the institution was [allegedly] unaccredited . . . .” Id. ¶ 47.

On December 4, 2015, Plaintiff filed this action, asserting two claims against HireRight3

and a single claim against Sears under the FCRA. Id. ¶¶ 68–73. On February 18, 2016, Sears 

filed a motion to dismiss, ECF No. 25, which motion the Court now considers.

II. JURISDICTION

The Court has jurisdiction pursuant to 28 U.S.C. § 1331.

III. MOTION TO DISMISS

A. Legal Standard

On a motion to dismiss, the court accepts the material facts alleged in the complaint, 

together with all reasonable inferences to be drawn from those facts, as true. Navarro v. Block, 

250 F.3d 729, 732 (9th Cir. 2001). However, “the tenet that a court must accept a complaint’s 

allegations as true is inapplicable to threadbare recitals of a cause of action’s elements, supported 

by mere conclusory statements.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). To be entitled to 

the presumption of truth, a complaint’s allegations “must contain sufficient allegations of 

underlying facts to give fair notice and to enable the opposing party to defend itself effectively.” 

Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011).

To survive a motion to dismiss, a plaintiff must plead “enough facts to state a claim to 

relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). 

Plausibility does not mean probability, but it requires “more than a sheer possibility that a 

defendant has acted unlawfully.” Iqbal, 556 U.S. at 687. “A claim has facial plausibility when the 

plaintiff pleads factual content that allows the court to draw the reasonable inference that the 

defendant is liable for the misconduct alleged.” Id.

 

3 On February 29, 2016, Plaintiff filed a notice of dismissal pursuant to Fed. R. Civ. P. 

41(a)(1)(A)(i) regarding his claims against HireRight. ECF No. 31.

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B. Discussion

i. Failure to Provide Pre-Adverse Action Notice

Plaintiff’s sole claim against Sears alleges that Sears violated the FCRA by “negligently 

and willfully failing to” provide him with pre-adverse action notice as required by 15 U.S.C. 

§ 1681(b)(3). Id. ¶¶ 72–73. Under the FCRA, “in using a consumer report 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 . . . .” 15 U.S.C. § 1681b(b)(3)(A); Moore v. Rite Aid Headquarters Corp., No. 13-cv1515, 2015 WL 3444227, at *4 (E.D. Pa. May 29, 2015) (“Section 1681b(b)(3)(A) thus requires 

an employer to provide job applicants with their background report, summary of rights, and a ‘real 

opportunity’ to contest the contents of the background report before the employer relies on the 

report to take an adverse action against the applicant.”). The FCRA defines an “adverse action” to 

include “a denial of employment or any other decision for employment purposes that adversely 

affects any current or prospective employee.” 15 U.S.C. § 1681a(k)(1)(B)(ii).

Plaintiff alleges that Sears failed to provide him with pre-adverse action notice because 

Sears’ representative, Ms. Lee, told Plaintiff via telephone “that Sears was unwilling to honor 

[Plaintiff’s] job offer” three days before Sears sent Plaintiff a copy of his background report. ECF 

No. 1 ¶ 26 (Plaintiff’s telephone call with Ms. Lee occurred on May 15, 2015); Id. ¶ 31 (HireRight 

did not send Plaintiff a copy of his report until May 18, 2015); see also ECF No. 1-2. Sears argues 

that Ms. Lee’s telephone conversation with Plaintiff did not constitute an adverse action because 

“[t]he only plausible conclusion from the Complaint is that Ms. Lee telephoned Plaintiff to inform 

him that Sears intended to withdraw his conditional offer but that she could not give him any 

further information because the decision was not final and the FCRA process still needed to play 

out.” ECF No. 25 at 8 (emphasis in original). 

In the Ninth Circuit, “[i]f there are two alternative explanations, one advanced by 

defendant and the other advanced by plaintiff, both of which are plausible, plaintiff’s complaint 

survives a motion to dismiss under Rule 12(b)(6). Plaintiff’s complaint may be dismissed only 

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when defendant’s plausible alternative explanation is so convincing that plaintiff’s explanation is 

implausible.” Starr, 652 F.3d at 1216 (emphasis in original). Here, the Court concludes that 

Plaintiff plausibly states a claim for relief under the FCRA because Sears’ plausible alternative 

explanation of the facts is not “so convincing that [P]laintiff’s [alternative] explanation is 

implausible.” Id. (emphasis in original).

The Complaint alleges: “Based on HireRight’s adjudication, [on May 15, 2016] [Ms.] Lee, 

a Sears employee located at corporate headquarters, contacted Plaintiff via telephone to tell him 

that Sears was unwilling to honor the job offer it had previously extended [to him]. . . . During that 

phone call, Plaintiff asked Ms. Lee to identify the exact reason that Sears was withdrawing his job 

offer. In response, Ms. Lee told Plaintiff that she was unable to give Plaintiff more specific 

information and that he should contact HireRight for further information.” ECF No. 1 ¶¶ 23, 26, 

27. These allegations plausibly plead that Sears took an adverse action against Plaintiff on May 

15, 2016 by withdrawing his offer of employment. See 15 U.S.C. § 1681a(k)(1)(B)(ii) (defining 

“adverse action” to include “a denial of employment or any other decision for employment 

purposes that adversely affects any current or prospective employee.”). Nothing in the Complaint 

suggests, let alone requires the Court to conclude, that Ms. Lee’s telephone conversation with 

Plaintiff constituted a mere communication of an intent to withdraw the job offer. Accordingly, 

the Court holds that Plaintiff has plausibly stated a claim that Ms. Lee’s telephone call to Plaintiff 

constituted an adverse action prior to Plaintiff’s receiving notice of his background report in 

violation of the FCRA.4

 

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The Court also rejects Sears’ argument that Plaintiff “fails to allege sufficient facts that the 

decision [to withdraw Plaintiff’s job offer] was based in whole or in part on his background 

check,” as is required for a claim under 15 U.S.C. § 1681b(b)(3)(A). ECF No. 25 at 9. The 

Complaint alleges that Ms. Lee called Plaintiff to withdraw his job offer on May 15, 2015, the 

same day that HireRight set Plaintiff’s Adjudication Status as “Does Not Meet Company 

Standards -- Education Report, Criminal Felony & Misdemeanor.” ECF No. 1 ¶¶ 23, 25–26. 

Moreover, the Complaint alleges that Ms. Lee “told Plaintiff that she was unable to give Plaintiff 

more specific information [as to the reasons for withdrawing the job offer] and that he should 

contact HireRight for further information.” Id. ¶ 27. Finally, the letter that Sears sent to Plaintiff 

on May 27, 2015, stated that Sears would be unable to offer Plaintiff employment “based in whole 

or in part on information contained in a report from HireRight.” ECF No. 1 ¶41. Based on these

allegations, the Court concludes that it is reasonable to infer that Sears’ decision to withdraw the 

job offer on May 15, 2015 was based in whole or in part on Plaintiff’s background check.

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ii. Willful and/or negligent conduct

The FCRA imposes civil liability on a defendant who negligently or willfully fails to 

comply with any requirement imposed under the FCRA. Banga v. Experian Info. Sols., Inc., No. 

09-cv-04867-SBA, 2013 WL 5539690, at *6 (N.D. Cal. Sept. 30, 2013) (citing 15 U.S.C. §§ 

1681n, 1681o); see also Smith v. Sears, Roebuck & Co., 276 F. Supp. 2d 603, 609 (S.D. Miss. 

2003) (“[T]he FCRA plainly does not impose any form of strict liability, but rather imposes 

liability only for negligent noncompliance with the Act and allows for enhanced penalties for 

willful violations.”). Sears argues that even assuming “that Plaintiff established a violation of the 

FCRA, Plaintiff still fails to state a claim under the FCRA because he insufficiently alleged willful 

and negligent conduct.” ECF No. 25 at 11.

“To prove a willful violation, a consumer must prove that [the defendant] either knowingly 

or recklessly violated the requirements of the Act.” Banga, 2013 WL 5539690, at *6 (citing 

Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 56–57 (2007)). Here, Plaintiff does not argue that 

Sears “recklessly” violated the FCRA. ECF No. 36 at 15–16. Rather, Plaintiff argues that Sears 

“knowingly” violated the FCRA. Id. 

Plaintiff specifically alleges that Sears “was aware of the requirements of [the FCRA]” and 

had “previously certified to HireRight that it would comply with [the FCRA].” ECF No. 1 ¶¶ 64–

65. Plaintiff further alleges that “Sears and its subsidiaries have also been sued previously for 

violations of the FCRA related to their use of consumer reports for employment purposes.” Id. ¶ 

66. On a motion to dismiss under Rule 12(b)(6), “assertions that a defendant was aware of the 

FCRA, but failed to comply with its requirements, are sufficient to support an allegation of 

willfulness and to avoid dismissal.” Singleton v. Domino’s Pizza, LLC, No. 11-cv-1823, 2012 

WL 245965, at *4 (D. Md. Jan. 25, 2012); see also Hawkins v. S2Verify LLC, No. 15-cv-03502-

WHA, 2016 WL 107197, at *3 (N.D. Cal. Jan. 11, 2016) (finding willfulness sufficiently pleaded 

with respect to an FCRA claim where plaintiff alleged defendant “was well aware that it was 

subject to the mandates and requirements of the FCRA and knew or should have known about its 

legal obligations under the FCRA”). Accordingly, the Court concludes that Plaintiff adequately 

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alleges that Sears willfully violated the FCRA under 15 U.S.C. § 1681n.

5

Plaintiff also plausibly states a claim that Sears negligently violated the FCRA. Under 15 

U.S.C. § 1681o, “[a]ny person who is negligent in failing to comply with any requirement 

imposed under [the FCRA] is liable to that consumer in an amount equal to the sum of . . . (1) any 

actual damages sustained by the consumer as a result of the failure; and (2) . . . the costs of the 

action together with reasonable attorney’s fees . . . .” Sears argues that “Plaintiff’s negligence

theory fails because he does not plead actual damages plausibly resulting from Sears’ alleged noncompliance.” ECF No. 25 at 18. 

The Court disagrees. Plaintiff alleges that, as a result of Sears’ violation of the FCRA (1)

he “was unemployed for six months despite his best efforts to find employment”; (2) he suffered 

emotional and financial distress; and (3) he “continues to suffer damages as his new employment 

does not provide a compensation and benefits package on par with what he would have received

from Sears.” ECF No. 1 ¶¶ 53–56. These injuries plausibly resulted from Sears’ alleged violation 

of the FCRA because had Sears given Plaintiff his background report prior to taking adverse 

action against Plaintiff, it is certainly plausible that he would have been able to correct the alleged 

mistakes in that report or otherwise explain to Sears any deficiencies in the report. Plaintiff need 

not prove at this stage that he suffered actual injury. Rather, Plaintiff need only plausibly allege 

that he suffered actual injury as a result of Sears’ violation of the FCRA.

The Court concludes that Plaintiff plausibly alleges that he suffered actual damages as 

 

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Sears argues that “it was neither objectively unreasonable nor involving an unjustifiably high 

risk of violating the FCRA for Sears to interpret the statute as permitting the formation of an intent 

to withdraw an offer and communicate that intent before mailing the pre-adverse action notice.” 

ECF no. 25 at 12. This argument is at best premature, because a factfinder has not yet determined 

whether Ms. Lee’s telephone call with Plaintiff constituted an “intent to withdraw an offer,” as 

Sears claims, or a withdrawal of an offer, as Plaintiff alleges. If the latter, Sears does not argue 

that it would be reasonable to interpret the FCRA to allow for the withdrawal of an offer of 

employment based on a background report prior to notice of the background report. Ultimately, 

the Court cannot decide this issue at the pleading stage because “[t]he reasonableness of the 

procedures and whether [a defendant] followed them will be jury questions in the overwhelming 

majority of cases.” Hawkins, 2016 WL 107197, at *3 (quoting Guimond v. Trans Union Credit 

Info. Co., 45 F.3d 1329, 1333 (9th Cir. 1995)).

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result of Sears’ alleged failure to comply with the FCRA. As a result, Plaintiff has sufficiently 

pleaded that Sears’ failure to comply with the FCRA was negligent.

CONCLUSION

Plaintiff has plausibly alleged that Sears violated the FCRA by failing to provide Plaintiff 

with pre-adverse action notice of his background report. Further, Plaintiff has plausibly alleged 

that Sears’ violation of the FCRA was willful and/or negligent. Accordingly, the Court denies 

Sears’ Motion to Dismiss Plaintiff’s Complaint.

IT IS SO ORDERED.

Dated: April 26, 2016

______________________________________

JON S. TIGAR

United States District Judge

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