Michaels escaped a potential class action alleging Fair Credit Reporting Act (“FCRA”) violations late last month when a federal judge found the United States Supreme Court’s recent decision in Spokeo, Inc. v. Robbins, 136 S. Ct. 1540 (2016) foreclosed the plaintiffs’ claim for a bare statutory violation not resulting in concrete damages. The recent ruling in In re: Michaels Stores, Inc., Fair Credit Reporting Act (FCRA) Litigation confirms the significance of the Spokeo decision and also provides FCRA defendants with additional ammunition to use in fighting statutory violation claims where damages are lacking.

The Michaels suit was based upon the consolidation of three proposed class actions alleging the store failed to clearly and conspicuously announce its intent to obtain background checks in a separate document containing only that disclosure, which was in violation of the FCRA. Instead of providing a standalone document, Michaels did disclose that it would be obtaining such checks as part of its online employment application. The complaints in the class pointed to 15 U.S.C. § 1681b(b)(2)(A), which directs that an employer may not procure a consumer report for employment purposes without providing a “clear and conspicuous disclosure…in a document that consists solely of the disclosure….”

The Michaels court, however, did not find this to be enough. The court termed this a violation of “the purely formal requirements of FCRA” and observed that the plaintiffs “do not actually allege any harm aside from the statutory violation itself.” Accordingly, that was insufficient for an injury-in-fact to satisfy the Article III standing requirement and the court said it was compelled to “join the ranks of the courts that have so held.”

Plaintiffs also tried to avoid a standing-based dismissal by asserting that the FCRA violations resulted in two types of concrete harm, “informational injury” and invasion of privacy. The court rejected both of these attempts. First, the court found there was no informational injury because Plaintiffs were not deprived of any information Michaels was required to disclose; rather, the information was provided, just in a means other than that described in the statute. Such a deviation from a statutorily specified form of information that did not result in failure to disclose the information, though, did not constitute a concrete harm.

Second, the Plaintiffs did not suffer an invasion of privacy, as the incorrect format of the disclosure did not mean that any background check the retailer procured would be unauthorized. Where no disclosure is provided and thus a background check is obtained without consent, an invasion of privacy could occur, however, because Michaels provided the necessary disclosure – albeit in a different format than that specified in the FCRA – the background checks it obtained were authorized by the applicants. Plaintiffs conceded receiving a disclosure, and in the absence of allegations that, for example, they did not know what they were authorizing, the formatting issue was “precisely the type of ‘bare procedural violation’ that is insufficient to confer standing,” said the court. As the court pointed out, “Plaintiffs’ position amounts to a contention that a violation of a standalone requirement automatically implies” any obtained report is unauthorized. But such an argument would elevate every technical statutory violation to the level of a “major substantive harm,” a “leap too far [that] is directly contradicted by Spokeo,” the court reasoned.

The Michaels decision from the District of New Jersey is just one more ruling that helps define the concrete harm requirement and one upon which defendants may find useful to rely in future dismissal bids, particularly in the context of the FCRA – the statute which actually triggered the seminal Spokeo ruling. Indeed, the standing analysis for FCRA claims is unique to the statute. Additionally, some courts have also found that the Spokeo standing requirements are not a stumbling block. For example, in Syed v. M-I, LLC, (9th Cir. Jan. 20, 2017), the U.S. Court of Appeals for the Ninth Circuit ruled that the plaintiff had alleged more than a bare procedural violation in a suit based on the inclusion of a liability waiver in a background check disclosure, which the FCRA directs is to be in a stand-alone document free of any other information.