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Sept. 14 — A worker whose hiring was delayed because his prospective employer mistakenly believed he had a criminal record may recover damages against LexisNexis Screening Solutions Inc. for providing the erroneous background report, the U.S. Court of Appeals for the Sixth Circuit ruled ( Smith v. LexisNexis Screening Sols., Inc. , 2016 BL 298048, 6th Cir., No. 15-2329, 9/13/16 ).
David Alan Smith is entitled to $75,000 in compensatory damages against the LexisNexis division under the Fair Credit Reporting Act for its negligence in performing the background screen and inaccurately reporting Smith had a fraud conviction, the court said Sept. 13.
A different person, David Oscar Smith, was the criminal defendant and LexisNexis should have discovered its mistake before contacting Great Lakes Wine and Spirits, the prospective employer, the Sixth Circuit said.
But an additional award of $150,000 in punitive damages must be reversed, the appeals court said.
The court’s “core decision” that the LexisNexis division violated the FCRA is a “great outcome” for workers who are increasingly subject to background checks that determine if they can get or keep a job, said Alan Jay Butler, senior counsel with the Electronic Privacy Information Center in Washington.
LexisNexis argued its failure to include middle names in its searches couldn’t be negligent because it was the “industry standard,” but the court rightly rejected that contention, Butler told Bloomberg BNA Sept. 14.
Given the frequency of inaccurate information contained in background reports used for employment purposes, courts should be “skeptical” of reporting companies’ claims that even if a particular report is false, the process they used should be upheld, Butler said.
The Electronic Privacy Information Center submitted an amicus brief supporting Smith in the Sixth Circuit.
The appeals court should have affirmed punitive damages because the trial evidence showed the LexisNexis division acted recklessly, said lawyer James Francis, who represented Smith.
The jury heard at least four different ways in which the LexisNexis division conducted a flawed search, Francis told Bloomberg BNA Sept. 14.
A simple check of the public records would have shown it was a different David Smith who had the criminal conviction, said Francis, a partner with Francis & Mailman in Philadelphia.
“It’s a common problem” that consumer reporting agencies mix up the public records of people with the same name, he said.
Reporting agencies should be compelled to use “enhanced” procedures when performing checks on individuals with frequently used names, Francis said.
Smith’s lawyers are considering all of his options to revive the punitive damages award, including a petition for rehearing by the full Sixth Circuit, Francis said.
Attorneys representing LexisNexis Screening Solutions weren’t immediately available for comment Sept. 14.
The case arose in 2012 when Tasson Distributing, Smith’s former employer, was bought by Great Lakes Wine and Spirits, the appeals court said.
Rather than automatically hire the former Tasson employees, Great Lakes required an application process that included the criminal background checks.
Smith, a delivery driver for Tasson, subsequently was informed that Great Lakes wouldn’t hire him because of the criminal conviction shown in the report it received from LexisNexis Screening Solutions.
A federal district court correctly upheld a jury’s verdict that the LexisNexis division was negligent in preparing and issuing the false report, Judge John M. Rogers wrote for the Sixth Circuit.
Smith is entitled to recover damages under the Fair Credit Reporting Act for the six-week delay in his hiring by Great Lakes that was caused by the false report, the court said.
But the punitive damages award can’t be sustained because the jury lacked sufficient evidence to find the reporting agency was reckless, the Sixth Circuit said.
The FCRA requires evidence of a “willful violation” of the law to award punitive damages, the court said. That evidence is lacking in this case, it ruled.
Judges Eugene E. Siler Jr. and Jeffrey S. Sutton joined in the decision.
John Soumilas of Francis & Mailman and Ian B. Lyngklip in Southfield, Mich., also represented Smith. Kara L. Goodwin and Thomas J. Piskorski of Seyfarth Shaw in Chicago and Frederick T. Smith of the firm’s Atlanta office represented LexisNexis Screening Solutions.
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