### In the 

# United States Court of Appeals For the Seventh Circuit

____________________ No s

. 17

- 1310 & 17

- 1649
D ANIEL R IVERA , et al. , Plaintiff s

- Appellees

.

v.
A LLSTATE I NSURANCE C OMPANY , Defendant

- Appellant

.

____________________ Appeal s from the United States District Court for the Northern District of Illinois, Eastern Division

. No. 1 0 C 1733

— William T

. Hart , Judge

.

____________________
A RGUED O CTOBER 25 , 2017

— D ECIDED O CTOBER 31, 2018 A S A MENDE D ON P ETITION FOR R EHEARING J ANUARY 14 , 2019

____________________

Before K ANNE and S YKES , Circuit Judges , and D ARROW , District J udge

. *
S YKES , Circuit Judge

. In 2009 Allstate Insurance Company launched an internal inve stigation i nto suspicious trading on its e quity desk

. The initial inquiry unearthed email evidence suggesting that several portfolio managers might be timing

* Of the Central District of Illinois, sitting by designation.2 Nos. 17

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trades to inflate their bonuses at the expense of their portfolios , which includ ed two pension funds to which Allstate owed fiduciary duties . Allstate retained attorneys from Steptoe & Johnson to investigate further , and they in turn hired an economic consulting firm to calculate potential losses

. Based on the email evidence, t he consulting firm found re ason to believe that timed trading had potentially
cost the port folios $8 million and possibly much more

. Because actu al losses could not be established , t he consultants used an algorithm to estimate a potential adverse impact of $91 million on the pension funds. Everyone understood that this estimate w as wildly unrealistic , but i n an abundance of caution, Allstate poured $91 million into the pension portfolios.
When the investigation wrapped up , Steptoe lawyers delivered oral findings to Allstate

. The company thereafter determined that four portfolio managers

— Daniel Rivera, Stephen Kensinger, Deborah Meacock, and Rebecc a Scheuneman

— had violated the company’s conflict

- of

interest policy by timing trades to improve their bonuses . On December 3, 2009, Alls tate fired them for cause

. On February 25 , 2010, Al lstate filed its annual Form 10

- K for 2009. The report expla in ed that : (1) in 2009 the company had received information about possible timed trading and retained counsel to investigate ; (2) counsel hir ed an economic consult ing firm to estimate the potential impact on the portfolios; and (3) based on this outside investigation, Allstate paid $91 million into the two pension funds to cover the potential adverse impact . That same day Allstate sent a
memo to employees in its I nvestment D epartment describing the information disclosed in the 10

- K

. Neither document mentioned the four fired portfolio managers

.Nos. 17

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Th r e e weeks later the four former employees sued Al lstate in federal court for defamation based on the 10

- K and the internal memo

. The y also alleged that A llstate violated 15 U.S.C. § 1681a(y) (2) , a provision in the Fair Credit Reporting Act (“FCRA or the Act ”) , by fai ling to give them a summary of Steptoe’s findings after they were fired. The defamation claim was the main event in the litigation; the FCRA claim received comparatively little attention. A jury returned a verdict in the plaintiffs’ favor, awarding more than $27 million in compensatory and punitive damages , and statutory damages on the FCRA c laim (there are no actual damages on that claim)

. The district judge tacked on additional punitive damages and attorney’s fees under the FCRA

. Allstate attacks t he defamation award s on multiple grounds and also argues that the FCRA awards must be vacated f or lack of standing under Spokeo, Inc. v. Robbins , 136 S. Ct. 1540 (2016) . We agree that the plaintiffs lack a concrete injury to support Article III standing on the FCRA claim

. S o that claim must be dismissed on jurisdiction al grounds

. And t hat end s our review. B ecause the FCRA claim provided the sole basis for federal jurisdiction

— and thus the only basis for the district court to exercise supplemental jurisdictio n over the state

- law claim under 28 U.S.C. § 1367(a)

— the district court was without power to adjudicate the defamation claim , and it too must be dismissed for lack of jurisdiction . Th e parties did not identify the § 1367(a) jurisdictional problem in the ir initial briefing , but that does not matter; defects in subject

- matter jurisdiction must alway s be addressed

. Accordingly, we vacate the judgment and remand with instructions to dismiss the action in its4 Nos. 17

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entirety for lack of subject

- matter jurisdiction. See F ED

. R. C IV

. P. 12(h)(3). I. Background
Plaintiffs Rivera, Kensinger, Meacock, and Scheunema n

w ere employed as securities analysts in the Equity Division of Allstate’s I nvestment Department

. Rivera was the Division director, and Kensinger, Meacock, and Scheuneman w ere analysts o n the growth team. During their time with the company, the Equity Division managed and invested $10 billion in assets on behalf of various funds, including
two defined

- benefit pension plans

. Because the plaintiffs helped manage two pension portfolios , they occupied positions of trust and owed a duty of loyalt y to plan beneficiaries under the Employee Retirement Income Security Act

. See 29 U.S.C. § 1104(a)(1). The y were also bound by Allstate’s code of e thics, which required them to avoid conflicts of interest.
In addition to their salaries , the plaintiffs were eligible to receive bonus compensation under Allstate’s “pay

- for

performance” plan. The plan relied on a formula called the

“ Dietz method ” to estimate portfolio returns and evaluate performance accordingly . The Dietz method assumes that all cash flows in a portfolio occur at the same time of day; high transaction volume makes i t impractical to use actual trade times

. The particular formula in use at Allstate assumed all cash flows occurred at midday. While practical, Allstate’s formula ha d two drawbacks. F irst, it distorted a portfolio’s actual performance, both positive and negative

. Th e midday Dietz method inflate d measured performance for sales on up days and buys on down days ; conversely, it understated measured perfor-Nos. 17

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mance when sales were made on down days and buys on up days. Allstate’s traders referred to t his discrepancy as the “Dietz effect

. ” Second, the formula could be manipulated. Because it assumed that all cash flows occurred midday, portfolio m anagers could wait until the end of day to calculate the Dietz effect before deciding to execute a trade

. T he system consequently rewarded portfolio managers who waited to make trades even if the portfolio suffer ed as a result. Moreover, Allstate’s bonus structure measured performance relative t o a daily benchmark ; it didn’t consider market movement in the preceding days. This feature also pitted the interests of the manager against those of the portfolio. A manager could improve his performance by delay ing a sale over several down days before se lling on a n up day even if the portfolio would have been better off if he sold earlier . In sum , under Allstate’s pay

- for

- performance plan , portfolio managers could boost their bonus pay by tim ing trades

— potentially at the expense of the ir portfolio s

. In mid

- 2009 Allstate received troubling information that its portfolio managers were doing just that . Peter Hecht, a member of Allstate’s Performance Management Group, reported to Chief Compliance Officer Trond Odegaard that members of the Equity Division wer e delaying trades to maximize their bonuses at the expense of their portfolios. Odegaard passed the se concerns along to Chief Investment Officer Judy Greffin, who ordered him to investigate. Odegaard and a team of Allstate employees soon discovered signs of timed trading. The team noted several trading patterns that suggested portfolio managers had delayed trades to take advantage of the Dietz effect. The investiga-6 Nos. 17

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tion also uncovered em ails suggesting that the manager s were aware of the Dietz effect and ac tively considered it when trading. T hough not conclusive, the investigation raised concerns that personnel in the Equity Division had timed trades to increase bonuses at the expen se of their portfolios; as a result, Allstate may have reported inaccurate fi nancial information to the public.
Allstate accordingly retained the law firm Steptoe & Johnson to investigate further. Steptoe attorneys interviewed Rivera and Scheuneman regarding their trading practices and hired NERA Economic Consulting, Inc. , an inde pendent economic consulting firm, to determine if timed trading had harmed the portfolios, especially the pension funds

. Beginning with the trades mentioned in the suspicious emails and eventually r eview ing six years of trading data , NERA preliminarily estimated a potential adverse portfolio impact of $8.2 million.
But NERA had reason to believe that the actual impact may be much higher. Several suspicious emails could not be tied to particular trades, and other evidence suggested that por tfolio managers routinely considered Dietz in the course of trading. Based on Allstate’s records, however, it was not possible to calculate actual losses with any precision. So NERA devised an algorithm that would capture every Dietz

favorable trade from J une 2003 to May 2009 that was executed after a series of days where the Dietz effect would have harmed the trader’s performance

. Based on these parameters , NE RA estimated that over the six years surveyed, the potential adverse impact on the pension plans w as $91 million and t he potential adverse impact on the company ’s other portfolios was $116 million

. It was clear to everyone that these estimates vastly overstated the potential effectNos. 17

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of timed trading . E rring on the side of caution , however, in mid

- December Allstate paid $91 million into the two pension plans to compensate f or any potential loss es

. W hile the investigation was ongoing, Allstate disband ed the Equity Division and outsource d its work to Goldman Sachs

. On October 6, 2009, Greffin met firs t with Rivera and then the rest of the d ivision and explained that e very member, save those who managed convertible portfolios, would be let go effective December 31, 2009

. T he laid

- off employees

w ould , however, receive severance pay

. Later that day Stepto e attorneys conducted off

- site interview s with E quity Division managers concerning Dietz trading.
The outside investigation soon wrapped up , and Steptoe attorneys orally reported the findings to Allstate . Based on the internal and external investigations, Allstate concluded that Rivera, Meacock, Scheuneman, and K ensinger had violated the company’s conflict

- of

- interest policy by timing trades. On December 3, 2009, Brett Winchell , the D irector of H uman R eso urces, informed each of the four analysts that the y were fired for cause effective immediately. Winchell delivered th e bad news by reading from a short script that reminded the four manager s of the investigation in to timed trading, noted that each of them had been interviewed by outside counsel , and explained that they were being fired because they violated Allstate’s conflict

- of

- interest policy

. All four asked Winchell for additional explanation ; they later asked the same questions in writing. N o further e xplanation , oral or written, was forthcoming

. Allstate immediately escorted the m o ff the premises and disconnected their phone and em ail service the next day.8 Nos. 17

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On December 16 Steptoe attorneys met with regulators in the Department of Labor ’s Employee Benefits Security Administration to discuss the investigation as it related to the pension funds

. At the Department’s request , Steptoe sent

a follow

- up letter summarizing the allegations of timed trading and the subsequent investigation. The letter

— dated J anuary 29, 2010

— advised the Department that the employees in Allstate’s Equity Division had denied that they improperly delay ed trades but that several emails “could support a contrary conclusion.” The letter further explained that NERA’s algorithm “estima te[d] potential disadvantage to the plans” but that “ there is little question that the algorithm overstate[d] any disadvantages that the plans might have suffered.” Finally, the letter explained that “taking into account returns recalc ulated by NERA,” the estimated “increase i n the aggregate bonuses for the entire group” was “approximately $1.2 million .”
Fast

- forward to October 14, 2010 . On that day Allstate ’s in

- house counsel sent a nother letter to the Labor Department clarif ying that the $1.2 million figure “ roughly approximate[d] the potential increase in bonuses , ... assum[ing] thealgorithm used by NERA ... reflected actual trading activity.” Th is letter emphasized that NERA’s calculations estimated “a possible maximum impact” and explain ed that “[n]oone believed, then or now, that this was an accurate description of the activity on the equity desk, nor that a n y actual impact on the portfolios was anywhere near the result produced by using the NERA algorithm.” Th e October letter

a lso stated that i f the analysis had been limited to the trades mentioned in the suspicious emails, “there would have been

v irtually no effect on bonuses.”Nos. 17

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Returning now to our chronology, o n February 25 , 2010, Allstate filed its annual 10

- K report for 2009 in which it disclos ed the allegations of timed trades and explain ed in general terms the subsequent investigation and the company’s decision to reimburse the two pension plans. As relevant here , t he 10

- K stated : In 2009, we became aware of allegations tha t some employees responsible for trading equity securities in certain portfolios of two [ Allstate Insurance Company] defined benefit pension plans and certain portfolios of [Allstate Insurance Company] and an [Allstate Insurance Company] subsidiary may hav e timedthe execution of certain trades in order to enhance their individual performance under incentive compensation plans, without regard to whether such timing adversely impacted theactual investment performance of the portfolios. We retained outside c ounsel, who in turn engaged an independent economic consultingfirm to conduct a review and assist us in understanding the facts surrounding, and the potential implications of, the alleged timing of these trades for the period from June 2003 to May 2009. T he consulting firm reported that it was unable to determine from our records theprecise amounts by which portfolio performance might have been adversely impacted during that period. Accordingly, the economicconsultant applied economic modeling techniques and assumptions reasonably designed10 Nos. 17

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to estimate the potential adverse impact on thepension plans and the company accounts, taking into account, among other things, the distinctions between the pension plans and the company portfolios.
Based on their work, the economic consultants estimated that the p erformance of the pension plans’ portfolios could have been adversely impacted by approximately $91 million (including interest) and that the performance of the company portfolio s could have been adversely impacted by approximately $116 million (including interest) in the aggregate over the six

- year period under review. We believe that our financial statements and those for the pension plans properly reflected the portfolios ’ actual investment performance r esults during the entire period that was reviewed. In December 2009, b ased on the economic consultant’s modeled estimates, we paid an aggregate of $91 million into the two defined benefit pension plans. These payments had no material impact on our re ported earnings or shareholders’ equity, but reduced our assets, operating cash flows, and unfunded pension liability to the plans.

... At all times during thisperiod, the plans were adequately funded pursuant to applicable regulatory and actuarial requirements. As a result of these additional funds in the plans, our future contributions to the plans, based on actuarial analysis, may be reduced . Using the economic consultant’ s cal-Nos. 17

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culation of the potential adverse impact on the portfolios, we currently estimate that the additional compensation paid to all the employeesworking in the affected group was approximately $1.2 million over the s ix

- year period asa result of these activities. In late 2009, we retained an independent investment firm to conduct portfolio management and trading activity for the specific portfolios impacted by these activities. That same day Greffin sent a memo to al l employees in the Investment Department alert ing them to the information in the 10

- K filing. In full, the Greffin memo states : Allstate released its annual financial report on Form 10

– K today. Within that filing, we disclosed details around allegations r egarding trading practices within our equity portfolios that came to light in the past year. We took thismatter very seriously and launched an investigation as soon as we became aware of the allegations.
Outside counsel was retained to assist us in unders tanding the facts surrounding, and the potential implications of, these activities. Aspart of their analysis, an independent economic consulting firm was retained to estimate the potential adverse impact to the performance of our portfolios. The consultan t determined that the performance on some of our portfolios, as well as our two pension plan portfolios, could have been adversely impacted by the activities.12 Nos. 17

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As a result, Allstate made a contribution to the pension plans during the 4th quarter which is di sclosed in the 10

– K.
We believe that our financial statementsand those of the pension plans properly reflected the portfolios ’ actual investment performance and the pension plans were adequately funded during this entire period. This matter did not affect the plans ’ ability tocontinue to provide benefits to plan participants. Situations like this can be unsettling andcan reflect poorly on our organization. However, I believe organizations are also defined by how they respond to events like this. We were transparent in reporting this matter to the U.S. Department of Labor and the S.E.C., and disclosed it t o our in vestors. We’ re taking stepsto improve our governance, compliance practices and training. We remain committed to the highest levels of ethics and integrity in the stewardship of Allstate’ s assets.
Three weeks later the four fired portfolio manager s sued Allstate and Greffin in federal court for defamation based on the 10

- K and Greffin’s internal memo . The y a lso asserted a claim against Allstate for violation of § 1681a(y)(2) of the FCRA and a claim against Greffin for tortious interference with prospective economic advantage. The district judge dism issed the tortious

- interference claim , and t he plaintiffs then am e nded their complaint to a dd an age

- discriminationNos. 17

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claim against Allstate. They later dismissed the discrimination claim a s well as the defamation claim against Greffin.

L engthy discovery ensued and in due course Allstate moved for summary judgment. Judge Feinerman ruled that the statements in the 10

- K and the Greffin memo were not defamat ory per se

. Rivera v. Allstate Ins. Co. , 140 F. Supp. 3d 722, 729

– 30 (N.D. Ill. 2015). B ut he permitt ed the case to go forward on a theory of defamation per quod and on the FCRA claim

. Id. at 730

– 37.
As nar rowed, the case proceeded to a jury trial with Judge Hart presiding

. The jury found for the plaintiffs across the board and awarded more than $27 million in compensatory and punitive d amages, broken down roughly as follows:
Rivera : $7.1 million (defamation compensatory damages ) $4 million ( defamation p unitive damages ) $1,000 (FCRA statutory damages) Kensinger : $2.9 million (defamation compensatory damages ) $2 million (defamation punitive damages ) $1,000 (FCRA statutory damages)
Meacock : $3.6 million (defamation compensatory damages ) $3 million (defamation punitive damages ) $1,000 (FCRA statutory damages)14 Nos. 17

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Scheuneman : $3

. 4 million (defamation compensatory damages ) $1 million (defamation punitive damages ) $1,000 (FCRA statutory damages)
Allstate move d for judgment as a ma tter of law , or alternatively, for a new trial . T he plaintiffs separately asked the judge for an award of punitive damages and attorney’s fees under the FCRA

. 15 U.S.C. § 1681n(a)(2) , (3) (authorizing “such amount of punitive damages as the court may allow” and attorney’s fees for willful violations of the FCRA). Judge Hart denied Allstate’ s motion and granted the plaintiffs’ requests, a warding each plaintiff an additional $3,000 in pu niti ve damages under the FCRA and approving their request for $357,716.25 in attorney’s fees associated with the statutory claim.
II. Discussion
Allstate attacks th is large judgment on many grounds. In brief, the company argues that the defamation award s must be set aside because : (1) the statements in the 10

- K and the Greffin memo were substantially true; (2) neither the 10

- K

nor the Greffin memo identif ied t he plaintiffs , and no evidence supports a finding that the se documents could be reasonably understood to refer to them; (3) the statements in the 10

- K and the Greffin memo were privileged; and (4) the plaintiffs failed to prove special damages as required for recovery for defamation per quod. Regarding the FCRA awards , Allstate argue s that the plaintiffs lack standing under Spokeo , and secondarily, that the record does not support the jury’s finding of a willful violat ion of the statute as required for statutory and punitive damages

. (There areNos. 17

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no actual damages.) Finally, Allstate at tacks the award of FCRA attorney’s fees as excessive and disproportionate considering the relative insignificance of the statutory claim to this litigation.

T he state

- law defamation claim predominated over the federal claim in this long

- running litigation

— both in the district court and here. The FCRA claim occupied very little of the parties’ appellate briefing and received only modest attention below

. O ur initial opinion vacated the defamation awards based on the plaintiffs’ failure to prove special damage s

. We also vacated the FCRA awards for lack of standing under Spokeo and remanded with instructions to dismiss the federal claim for lack of jurisdiction

. The plaintiffs petitioned for rehearing, raising for the first time a probable jurisdictional defect under § 1367 if we found

— as we did

— that they failed to establish an injury in fact sufficient to support Article III standing to litigate the FCRA claim

. T he petition noted that th e FCRA claim provided the only jurisdictional basis for litigating this entire dispute in federal court . The district court’s jurisdiction rested solely on federal

- question jurisdiction, see 28 U.S.C. § 1331; the parties are not divers e, so 28 U.S.C. § 1332 does not apply. And the court’s supplemental jurisdiction under § 1367 (a) to adjudicate the state

- law defamation claim evaporates if th e claim on which federal jurisdiction rests is dismissed on jurisdictional grounds. We accordingly withdraw our original opinion and in its place substitute this amended opinion. A lthough the parties spent most of their energy on the merits of the defamation claim, our analysis begins and ends with the jurisdictional basis for the FCRA claim.16 Nos. 17

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Relying on Spokeo , Allstate maintains that the FCRA award s must be tossed out for lack of standing. A bit of statutory backgrou nd is required to understand t he FCRA claim in this case. We note for starters that the case represent s an odd application of the Act. The FCRA regulates the activities of consumer reporting agencies and the permissible uses of c onsumer reports by third parties . Among many other regula tory requirements , the Act imposes certain procedures for the use of consumer r eports for employment purposes. For example , the Act prohibits an employer from p rocuring a consumer report about an emp loyee or job applicant without first giving th at person a stand

- alone written notice that “clear[ly] and conspicuous[ly]” discloses the employer’s request for permission to access the report and t h e person signs a written consent to release the report to t he employer

. See 15 U.S.C. § 1681 b (b) (2)(A) (establishing the disclosure and consent requirements); see id. § 1681a (d)(1) (defining “consumer report” to include reports about a consumer’s creditworthiness and personal background compiled by a “consumer reporting agency” and “used or expected to be used ... for the purpose of serving as a factor in establishing the consumer’s eligibility for” credit , insurance, or “employment purposes” ). The Act further requires that before taking any adverse

ac tion against an employee or job applicant “based in whole or in part” on such a report, the employer must give the employee or applicant a copy of the report and a written description of the person’s rights under t he Act

. Id. § 1681b(b)(3)(A).Nos. 17

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The FCRA pro vision at issue here appears in § 1681a, which contains the Act’s definition s and rules of construction

. ( The statutory scheme is reticulated and complex , so bear with us. ) S ubs ection (d)(2)(D) of § 1681a excludes from the definition of “ consumer report ” a ny “communication descr ibed in subsection (o) or (x).” The reference to “ s ubsection (x)” is a n error ; it should read “ subsection (y). ” The

error was introduced in the Dodd

– Frank Act of 2010, 1 which redesignated the former subsection (x) as subsection (y) but neglected to update the c ross

- reference in § 1681a(d)(2)(D)

. See Pub. L. No. 111

- 203, § 1988(a)(1)(A), 124 Stat. 1376, 2086.
Subsection (y), the cross

- referenced provision, was enacted as part of the Fair and Accurate Credit Transactions Act of 2003 , P ub. L. No. 108

- 159, § 611, 117 Stat. 1952, 2010 . It reads in pertinent part :(1) Communications described in this subsection
A communication is described in this subsection if

– ( A ) but for subsection (d )(2)(D), the co mm unication would be a consumer report; ( B ) the communication is made to an employer in connection with an investigation of

— ( i ) suspected misconduct relating to employment; or

1 Technically, the Dodd

– Frank Wall Street Reform and Consumer Protection Act of 201 0.18 Nos. 17

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( ii ) compliance with Federal, State, or local laws and regulations, the rules of a self

- regulatory organization , or any preexisting written policies of the employer; ( C ) the communication is not made for the purpose of investigating a consumer’s credit worthiness, credit standing, or credit capacity; and ( D ) the communication is not provided to any person except

– ( i ) to the employer or an agent of the employer; ( ii ) to any Federal or State officer, agency, or department, or any officer, agency, ordepartment of a unit of general local government; ( iii ) to any self

- regulatory organization with regulatory authority o ver the activities of the employer or employee; ( iv ) as otherwise required by law; or ( v ) pursuant to section 1681f of this title. (2) Subsequent disclosure After taking any adverse action based in whole or in part on a communication described in paragraph (1), the employer shall disclose to the consumer a summary containing the nature and substance of the communication upon which the adverse action is based , except that the sources of information acquired solely for use in prepar-Nos. 17

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ing what would be but for subsection (d)(2)(D) an investigative consumer report need not be disclosed. 15 U.S.C. § 1681a(y) (emphasis added). So in sum, and t o radically simplif y: By o peration of the

cross

- reference in subsection (d)(2)(D) of § 1681a ( and a djusting for the Dodd

– Frank mistake ) , the effect of subsection (y) is to exclude from the definition of “ consumer report ”

— and thus from the myriad regulatory requirements applicable t o consumer reports

— a ny communication that : (1) otherwise qualifies as a consumer report ( but for subsection (d)(2)(D) ) ;(2) was made to an employer in connection with an investigation of employee misconduct ; (3) was not made to the employer for purposes of investigating a n employee’s credit worthiness ; and (4) is not disclosed to anyone other than the employer, a regulatory agency or authority, or as otherwise required by law.
And a lthough § 1681a simply defines statutory terms and rules of construction, s ubsection (y) goes on to say that

“ [ a ] fter taking any adverse action based in whole or in part on” a co mmunication of this type, the employer “ shall disclose to the consumer a summary containing the nature and s ubstance” of the communication

. Id. § 1681a(y )(2). Needless to say, t his is an odd place to find a regulatory mandate on employer investigations into workplace misconduct

. Indeed, the provision is so obscure that in its 15

- year existence, subsection (y)(2) of § 1681a appears in no20 Nos. 17

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published opinion save the district court’s decision in this

case

. Still, taking § 1681a(y) (2) at face value, we understand it to mean that when an employer procures what would otherwise qualify as a consumer r eport in connection with a n investigation into employee misconduct , th e report is not considered a consumer report under the Act and thus is not subject to either § 1681b(b)(2) (A) (requiring the employer to give a stand

- alone written notice and obtain written consent before p rocuring the report ) or § 1681b(b) (3 ) (A) (requiring the employer to give the employee or job applicant a copy of the report and a description of his FCRA rights before taking an adverse action based on it )

. Instead, the employer need only provide a summary

— an oral summary apparently suffices ( subsection (y) (2) does not require a nything in writing )

— and then only after taking an adverse action based in whole or in part on the report

. The FCRA claim in this case rest s on the premise that Allstate was required under subsection (y) (2) to provide a summary of Steptoe’s invest igation after firing the plaintiffs but failed to do so

. I t’s not at all clear , though , that the Steptoe investigation would otherwise qualify as a “ consumer report ” but for the subsection (d)(2)(D) exclusion

. And if the Steptoe investigation i sn’t a “consumer report” in the first place, then subsection (y) (2) does not come into play and the FCRA simply does not apply.
Here is the Act’s full definition of the term “consumer report ” : The term “ c onsumer report” means any written, oral, or other communication of any information by a consumer reporting agency bear-Nos. 17

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ing on a consumer’s credit worthiness, credit standing, credit capacity, character, general reputation, personal characteristics, or mode of living which is used or expect ed to be used or collected in whole or in part for the purpose of serving as a factor i n establishing the consumer’s eligibility for

— ( A ) credit or insurance to be used primarily for personal, family, or household purposes; ( B ) employment purposes; or ( C ) an y other purpose authorized under section 1681b of this title. § 1681a(d)(1) (emphasis added).

T he Steptoe investigation thus cannot be a “ consumer report ” unless Steptoe qualifies under the Act as a “ consumer reporting agency

. ” Here, in turn, is how the Ac t defin es a

“ consumer reporting agency ” : The term “c onsumer reporting agency” means any person which, for monetary fees,dues, or on a cooperative nonprofit basis, regularly engages in whole or in part in the practice of assembling or evaluating consumer credit information or other information on consumers for the purpose of furnishing consumer reports to third parties, and which uses any means or facility of interstate commerce for the purpose of preparing or furnishing consumer reports.
15 U.S.C. § 1681a (f).22 Nos. 17

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Steptoe & Johnson is a law firm . Nothing in the record suggests that it “regularly engages” in “ assembling or evaluating consume r credit information ” or “furnishing consumer reports to third parties.” The parties have not explain ed how Steptoe qualifies as a consumer reporting agency or how its investigation into timed trading at Allstate qualifies as a consumer report. That’s probably because Allstate never disputed these points , choosing in stead to contest the FCRA claim on other grounds

. As w e explain in a moment , the plaintiffs’ FCRA awards must be vacated on jurisdictional grounds based on the lack of a n y concrete injury to support Article III standing to sue. T his opinion should not be construed as endorsing the position t hat a law

- firm investigation of this type qualifies as a consumer report within the meaning of the Act or that subsection (y)(2) applies in a like situation

. With that reservation out of the way , we move to the question of the plaintiffs’ standing. In Spokeo the Sup reme Court re inforced the principle that the “injury in fact” element of Article III standing requires an injury that is both

“ concrete and particularized , ” and that to be “ concrete , ” t he injury must be “ real ” and “not abstract”

— “that is, it must actually exist. ” 136 S. Ct. at 1548. The injury need not be tangible; Congress may identify intangible harms and authorize litigants to seek their redress in court. Id

. at 1549. But a plaintiff does not “ automatically satisf [y] the injury

- in

- fact requirement whenever a statute grants a person a statutory right and purports to authorize that person to sue to vindicate that right.” Id

. I n Spokeo the plaintiff filed a proposed class action alleging violation s of the FCRA

— specifica lly, several provisionsNos. 17

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imposing procedural requirements on consumer reporting agencies

. Id

. at 1545

– 46. The Court explained that a plaintiff

“ cannot satisfy the demands of Article III by alleging a bare procedural violation” of the Act because “[a] violat ion of one of the FCRA’s procedural requirements may result in no harm.” Id

. at 1550. The Court said that “ a bare procedural violation [of the Act] , divorced from any concrete harm,” is not a n injury in fact sufficient to confer standing to sue

. Id

. at 1549. On the other hand , the Court observed that some statutory violations present a risk of real harm to a litigant and that “a plaintiff in such a case need not allege any additional harm beyond the one Congress has identified.” Id. So standing ques tion s in cases of this type sometimes require us to identify the particular interest Congress sought to protect and to determine if the plaintiff has suffered a concrete injury to that interest

. Our recent decision s in Groshek v. Time Warner Cable, Inc. , 8 65 F.3d 884 (7th Cir. 2017), and Robertson v. Allied Solutions, LLC, 902 F.3d 690 (7th Cir. 2018) , are illustrative

. The plaintiff in Groshek signed a form authorizing a prospective employer to obtain a consumer report about him in connection with his job application; he alleged that the disclosure form was not a stand

- alone document as required by § 1681b(b)(2)(A). 865 F.3d at 885

– 86. Applying Spokeo , weheld that this claim rested on “a statutory violation completely removed from any concrete harm or appreciable risk of harm.” Id

. at 887. We explained that the requirement of a stand

- alone disclosure “does not seek to protect [the plaintiff] from the ki nd of harm he claims he has suffered, i.e. , receipt of a non

- compliant disclosure.” Id

. at 888. That is, “Congress did not enact § 1681b(b)(2)(A)(i) to protect job applicants from disclosures that do not satisfy the require-24 Nos. 17

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ments of that section; it did so to decrease the risk that a jobapplicant would unknowingly consent to allowing a prospective employer to procure a consumer report.” Id

. Because the plaintiff acknowledged that he read and signed the employer’s disclosure form, he had not suffered an inju ry to any interest protected by the Act. Id

. at 888

– 89.
In Robertson the plaintiff applied for a job with the defendant , and the defendant procured a background check in the process of considering her application. The background check qualified as a consum er report under the FCRA, and the employer asked the plaintiff to sign a consent form giving it permission to obtain the report. S he did so. The employer initially offered her a job but then rescinded the offer when the background check turned up negative information. 902 F.3d at 693

– 94. She sued for two FCRA violations: (1) the employer violated § 1681b(b)(2)(A) because the consent form was not a stand

- alone document and did not contain “clear and conspicuous” disclosure s , and (2) the employer violated § 1 681b (b) (3)(A) by failing to give her a copy of the report before rescinding the job offer

. Id

. at 693. We referred to the first claim as a “notice claim” and the second as an “adverse

- action claim.” Id

. The district court dismissed the entire case for lack of standing, and we affirmed in part and reversed in part. The first claim , we said, was squarely controlled by our decision in Groshek , which he ld that “an injury functionally indistinguishable from the one underpinning [the plaintiff’s] notice claim was not concrete and did not confer standing.” Robertson , 902 F.3d at 694. Our conclusion in Groshek applied with equal force in Robertson , so we affirmed the dismissal of the plaintiff’s notice claim. Id.Nos. 17

- 1310 & 17

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The adverse

- action claim , however, was a different m atter. Recall that § 1681b(b)(3)(A) states that when an employerprocures a consumer report about an employee or job applicant, the employer must disclose a copy of the report to the employee or applicant before taking any adverse action against him based on it either in whole or in part

. I n Robertson we held that this disclosure obligation protects the employee’s (or applicant’s) interest in the information needed to correct mis takes and respond to the employer’s potential concerns before the adverse action occurs , perhaps averting it altogether

. Id. at 6 9 6

– 97. Testing the plaintiff’s claim against that interest, we held that she suffered a concrete injury because she “was denied information that could have helped her craft a response to [the defendant ’s] concerns” about the content of her consumer report before the defendant rescinded the job offer. Id

. at 697. The question we confront here is whether subsection (y) (2) is sufficiently similar to § 1681b(b)(3)(A) to require the same outcome

. T he answer is no. Subsection (y) (2) requires only that the employer disclose a “summary ” of

“ the nature and substance ” of a “communication” (i.e., a consumer report) obtained from a third party in connection with an investigation into employee misconduct. The summary need n o t be in writing, and specificity is not required

. Finally, the summary is required only after the employer tak es an adverse action, not before

. A postdecision, summary

- only disc losure obligation like this one is a far cry from § 1681b(b)(3)(A), which (to repeat) requires the employer to give an employee or job applicant a complete copy of the consumer report and a written explanation of his FCRA rights before taking any adverse action against the employee or job applicant

. That robust disclosure26 Nos. 17

- 1310 & 17

- 1649

requirement , we held in R obert son , provides substantive protection : it gives the employee or applicant important information at a time and in a form that allow s him to correct errors and address the employer ’s concerns before

an y adverse action is taken. And that, we said, brought the case within the line of Supreme Court precedent s dealing with informational injuries. 902 F.3d at 694 (citing Fed. Election Comm’n v. Akins , 524 U.S. 11 (1998); Pub. Citizen v. U.S. Dep’t of Justice , 491 U.S. 440 (1989)).
Subsection (y) (2) , in contrast, performs a mere post hoc notice function ; it does little more . In that sense this case is closer to Groshek than to Robertson. I ndeed, the disclosur e requirement at i ssue in Groshek applie s before the employer may access an employee’s or job applicant’s consumer report and thus provides the entire basis for the statutory informed

- consent procedure . If anything, the disclosure requirement in Groshek serves a far stronger notice purpose than does subsection (y) (2) , which operates entirely after the fact

. And the post hoc summary required by subsection (y)(2) may be quite generalized. It d oes not provide information at a time or in a form that allow s the employee to meaningfully respond and possibly avert an adverse employ ment action

. If the empl oyer’s failure to provide a compliant disclosure i n Groshek was a bare procedural violation in sufficient to confer standing, then the plaintiffs here have likewise suffered a

mere procedural violation unaccompanied by any concrete injury

. The plaintiffs in sist that Allstate’s failure to comply with subsection (y)(2) left them “hampered in defending themselves before Allstate or potential employers.” But subsec-Nos. 17

- 1310 & 17

- 1649 27

tion (y) (2) doesn’t protect a substantive “defense” interest

. A t most it serves a minimal notice function. And t he plaintiffs have not explained how the modest , post hoc summary required by subsection (y)

— again, a brief oral summary suffices

— could possibly have informed a “defense ” against Allstate after the fact

. W e note , moreover, that they f ailed to identify any prospective employer that refused to hire them based on the 10

- K or the Greffin memo , s o they have not established that they suffered a concrete informational injury. Nor have they identified any other tangible or intangible harm aris ing from Allstate’s failure to comply. In short, the FCRA claim rest s on a bare procedural violation of subsection (y) (2) unaccompanied by a ny concrete and particularized harm or risk of harm to an int erest protected by the statute. T he FCRA awards must be vacated and the claim dismiss ed for lack of standing. Our ruling on the plaintiffs’ standing to sue under the FCRA has implications for the defamation awards. As we’ve explained, the FCRA claim was the sole basis for federal jurisdiction. The district c ourt adjudicated the defamation claim under the supplemental jurisdiction provision, which provides: [I]n any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other clai ms that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversyunder Article III of the United States Constitution. 28 U.S.C. § 1367(a).28 Nos. 17

- 1310 & 17

- 1649

By its plain terms, § 1367(a) “makes clear that s upplemental jurisdiction may only be invoked when the district court has a hook of original jurisdiction on which to hang it.” Herman Family Revocable Tr

. v. Teddy Bear , 254 F.3d 802, 805 (9th Cir. 2001). Because the plaintiffs lack Article III standing
to bring the FCRA claim, there is no original jurisdictional “hook” to support an assertion of § 1367(a) supplemental jurisdiction over the defamation claim , and the district cou r t was without power to hear it. [I]f the federal claim [ is ] dismissed for lack of subject matter jurisdiction, a district court has no discretion to retain the supplemental claims for adjudication. The dismissal means that there never was a valid claim within the court’s original jurisdiction to which the state cl aims may be supplemental. Therefore, the district court has no discretion to exceed the scope of its Article III power and must dismiss the state law claims without prejudice.

16 J AMES W M

. M OORE , M OORE ’ S F EDERAL P RACTICE § 106.66[1] ( Daniel R. Coquillette et al. eds., 3d ed. 2018)

. In notable contrast, when the court dismisses t he federal claim on the merits , it has the discretion under § 1367(c) (3) to decline to hear related state

- law claims or to retain them , though there is a general presumption that the court will relinquish supplemental jurisdiction and dismiss the state

law claim s without prejudice. RWJ Mgm t

. Co. v. BP Prod s

. N

. Am

. , Inc. , 672 F.3d 476, 479

– 80 (7th Cir. 2012). But that’s not this case. Here the plaintiffs failed to establish Article II I standing to bring the federal claim that supported the exercise of § 1367(a) jurisdiction . “[W]here there is no underlyingNos. 17

- 1310 & 17

- 1649 29

original federal subject matter jurisdiction, the court has no authority to adjudicate supplemental claims under § 1367.” Herman Fa mily Revocable Tr. , 254 F.3d at 805; see also Textile Prods., Inc. v. Mead Corp. , 134 F.3d 1481, 1485

– 86 (Fed. Cir. 1998); Saksenasingh v. Sec’y of Educ. , 126 F.3d 347, 351 (D.C. Cir. 1997); Musson Theatrical, Inc. v. Fed. Express Corp. , 89 F.3d 1244, 1255 (6th Cir. 1996); Nowak v. Ironworkers Local 6 Pension Fund , 81 F.3d 1182, 1187 (2d Cir. 1996).We are not unmindful of the costs of a jurisdictional dismissal at this late stage, after a full trial on the merits and an appeal. Regrettably, the federal cou rts have sunk considerable resources into resolving the parties’ dispute when the case belonged in state court. But the jurisdictional defect leaves us with no choice. Accordingly, the judgment is vacated and the case is remanded with instructions to dismiss the entire action for lack of subject

- matter jurisdiction. See F ED

. R. C IV

. P. 12(h)(3) ( “ If the court determines at any time that it lacks subject

- matter jurisdiction, the court must dismiss the action.”).

V ACATED AND R EMANDED WITH I NSTRUCTIONS

.