FCRA Claim – $54 Million Class Action Settlement for Alleged Violations May Be Sued in State Court


After reaching a settlement, a background check provider and consumer class asked a Missouri district court to dismiss an insurer’s federal lawsuit in favor of state litigation. The settlement related to alleged violations of the Fair Credit Reporting Act (FCRA). The insurer they want to terminate accuses both parties of violating insurance policy guidelines and failing to inform or cooperate with the insurer throughout the process.

This case dates back to 2018, when the named plaintiff applied for a position with a North Carolina-based manufacturer of building materials. The applicant received a conditional job offer subject to a background check. Apparently, the manufacturer withdrew the proposal based on the consumer’s report without providing him with a copy of the information. If true, it would violate the FCRA.

The named plaintiff filed a class action against the manufacturer, which settled in 2019 for $2 million. In 2020, the named plaintiff again filed a class action lawsuit against the consumer reporting agency (BOW) who provided the background check. In April of this year, the two sides agreed to a $54 million settlement.

Subsequently, however, the CRA insurer requested a declaratory judgment to indemnify themselves to cover the settlement. Additionally, the insurer argued that the CRA failed to cooperate in the settlement, thereby violating the insurance policy. If he had had these possibilities, the insurer maintains that he would have been able to considerably mitigate the damage.

Additionally, the insurer noted that it was only made aware of 3,501 background checks performed for the manufacturer after 2018; of these, only 336 reviews resulted in a refusal of employment. However, the arbitrator had found more than 27,000 FCRA violations. Finally, the insurer argues that these FCRA-related claims were unrelated to CRA commercial general liability coverage because of the exclusions for recording and distribution of material, acts related to employment and punitive damages.

In arguing against allowing the case to be argued in federal court, the parties to the lawsuit say the case involves only issues of Missouri insurance law. Therefore, in the interest of judicial efficiency, they argue that the court should dismiss or stay the motion for declaratory relief and remove the case from federal court.

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