Why it matters

According to the Sixth Circuit Court of Appeals, the failure to include an applicant’s middle name as part of a background check could be a negligent—but not willful—violation of the Fair Credit Reporting Act (FCRA). David Alan Smith had worked as a delivery driver for ten years when his employer was purchased by another company. The new company did not automatically hire the workers but conditioned their employment on a criminal background check. Smith provided his authorization to LexisNexis Screening Solutions to run a background check and provided his full name and other identifying information to the employer. While a credit check was returned for the proper individual, the report also returned criminal convictions for a David Oscar Smith. The company refused to hire David Alan Smith until the error was corrected and he sued LexisNexis. A jury sided with Smith and awarded him $375,000 in damages. On appeal to the Sixth Circuit, the federal appellate panel acknowledged the case was “a close call” but said a reasonable jury could have found negligence on the part of LexisNexis, upholding the $75,000 compensatory award. Lacking sufficient evidence of willfulness, however, the court threw out the punitive damage award.

Detailed discussion

David Alan Smith worked as a delivery driver for Tasson Distributing. When the company was purchased in 2012, former Tasson employees were instructed to apply for new positions with Great Lakes Wine and Spirits, conditioned upon satisfactory completion of a credit check and a criminal history check. To authorize the checks, Smith provided Great Lakes with his first, middle and last name; Social Security number; driver’s license number; date of birth; sex; street address; and phone number.

Great Lakes contracted with LexisNexis Screening Solutions to complete the checks. To conduct its search, Lexis requested a first name, last name and date of birth for criminal checks. While the Lexis form included fields for middle name and Social Security number, it did not require this information.

A search of criminal records that matched Smith’s first and last name and date of birth returned a conviction for uttering a forged instrument for David Smith born on March 12, 1965. However, the conviction was for David Oscar Smith. Because Lexis did not require a middle name from Great Lakes, it could not exclude the “Oscar” result from its search, and the criminal records did not contain a Social Security number for further verification.

Lexis included the criminal records in the report it provided to Great Lakes and the employer rejected Smith’s application for employment. When Smith received a copy of the report, he contacted Lexis to correct the inaccurate search results. Approximately six weeks later, Lexis removed the disputed criminal history and Great Lakes hired Smith as a delivery driver.

Smith then sued Lexis for violating the FCRA. A jury sided with Smith and awarded him $75,000 in compensatory damages for his weeks of lost wages and emotional distress, plus $300,000 in punitive damages. The trial judge reduced the punitives award and both parties appealed.

Lexis argued that no evidence was presented from which a reasonable jury could conclude that it either negligently or willfully violated the FCRA. The Sixth Circuit Court of Appeals both agreed and disagreed. “Although it is a close call, the evidence in the record was sufficient to support the jury’s finding of negligence,” the three-judge panel wrote.

The defendant argued that it met the statutory requirement to “follow reasonable procedures to assure maximum possible accuracy of the information concerning the individual about whom the report relates,” as it used birthdates and Social Security numbers to confirm the accuracy of its information. In Smith’s case, the birthdate matched and the records did not contain a Social Security number, Lexis said, noting the company has a 0.2 percent dispute rate for its roughly 10 million criminal background reports per year.

However, given that “David Smith” is an exceedingly common first-and-last name combination (with more than 125,000 individuals with the moniker in the United States), the “jury could conclude that a reasonably prudent CRA, when presented with such a common name, would have required additional identifying information—like a middle name—to heighten the accuracy of its reports,” the court said. “The fact that requiring a middle name is an inarguably reasonable procedure (considering Lexis already had a field for middle names on the form that Great Lakes filled out) is what tips the scales against Lexis.”

Additional support for the jury’s determination was found in the fact the credit report listed Smith as “David A. Smith,” providing a cross-reference that Lexis failed to take advantage of, the panel said.

Despite the reasonable conclusion of negligence, “that is a far cry from being willful,” the panel wrote, which entails “an unjustifiably high risk of harm that is either known or so obvious that it should be known.” The jury’s willful finding “fails to acknowledge Lexis’s efforts to combat inaccuracies: requiring an individual’s first name, last name, and birthdate, and also—when provided—using a middle name and Social Security number. These procedures have kept Lexis’s dispute rate at just 0.2 percent, which is remarkably low.”

Smith presented no evidence of similar complaints lodged against Lexis and a single inaccuracy, without more, does not constitute a willful violation of the FCRA, the panel said. “Although this inaccuracy might have resulted from Lexis’s carelessness, it did not result from Lexis’s disregarding a high risk of harm of which it should have known,” the panel concluded. “The district court thus should have granted judgment as a matter of law with respect to the willfulness claim.”

Without a finding of willfulness, the court struck the entire punitives award and affirmed the $75,000 jury award for compensatory damages.

To read the opinion in Smith v. LexisNexis Screening Solutions, click here.