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Kidd v. Thomson Reuters Corp.

United States Court of Appeals, Second Circuit

May 30, 2019

Lindsey A. Kidd, Plaintiff-Appellant,
v.
Thomson Reuters Corporation, Defendant-Appellee.

          Argued: February 4, 2019

          Appeal from the United States District Court for the Southern District of New York. No. 16-1668 - Jesse M. Furman, Judge.

         Appeal from a judgment of the United States District Court for the Southern District of New York following the grant of Defendant- Appellee Thomson Reuters' motion for summary judgment. We hold that the district court was correct in concluding that Thomson Reuters is not a "consumer reporting agency," 15 U.S.C. § 1681a(f), and therefore is not subject to the Federal Consumer Reporting Act. Accordingly, we AFFIRM the district court's judgment.

          James A. Francis, Francis & Mailman, Philadelphia, PA, for Appellant.

          Kevin King (Eric C. Bosset & Neil K. Roman, on the brief), Covington & Burling, Washington, D.C., for Appellee.

          Before: Calabresi, Droney, Circuit Judges, and Underhill, Chief District Judge. [*]

          DRONEY, CIRCUIT JUDGE:

         Plaintiff-Appellant Lindsey A. Kidd was the subject of a background check as part of an employment application process with the state of Georgia Department of Health ("Department"). The background check was performed using Defendant-Appellee Thomson Reuters' subscription-based internet platform, "CLEAR." The CLEAR report obtained by the Department falsely showed that Kidd had been previously convicted of theft. Believing the report to be correct, the Department rejected Kidd's application. Kidd then filed this action in the Southern District of New York, alleging that Thomson Reuters is a "consumer reporting agency" subject to the Fair Credit Reporting Act and that it violated that act by providing the false report. After the conclusion of discovery, the district court (Furman, J.) granted Thomson Reuters' motion for summary judgment, concluding that because Thomson Reuters is not a "consumer reporting agency," it is not subject to the Act. For the reasons that follow, we AFFIRM the district court's judgment in favor of Thomson Reuters.

         I.

         The Fair Credit Reporting Act ("FCRA") regulates, among other things, the circumstances in which a "consumer reporting agency" may furnish "consumer reports" to third parties, and the information contained in those reports. 15 U.S.C. §§ 1681b, 1681c. Typically, consumer reporting agencies sell consumer reports to lenders, credit card companies, insurers, and employers for credit, insurance, and employment decisions. Consumer Financial Protection Bureau, List of Consumer Reporting Companies, 3 (2019), https://www.consumerfinance.gov/consumer-tools/credit- reports-and-scores/consumer-reporting-companies/companies-list/ (last visited Apr. 23, 2019). Examples of government-designated consumer reporting agencies are Equifax, Transunion, and Experian. Id. at 8. If a "consumer reporting agency" fails to comply with the Act, it may be subject to civil liability to consumers, which includes actual and punitive damages. 15 U.S.C. §§ 1681n, 1681o. This appeal turns on whether Thomson Reuters qualifies as a "consumer reporting agency" under the Act.

         A.[1]

         Thomson Reuters operates an online research platform named "Consolidated Lead Evaluation and Reporting," or "CLEAR," that provides its subscribers summary reports of motor vehicle records, court records, aliases, the status of professional licenses, real property transactions, and similar information.[2] CLEAR subscribers are principally government agencies and law enforcement entities, but also include financial institutions, corporate security offices, and insurance claims departments. The platform receives approximately 100, 000 search queries each day and is designed to help combat fraud and assist public agencies in criminal investigations.

         Thomson Reuters prohibits its subscribers from utilizing CLEAR for any purpose covered by the FCRA, such as credit inquiries or background checks related to employment, and has established measures to prevent those uses of its reports. For example, the company markets CLEAR for law enforcement, fraud prevention, or identity verification purposes only. Employees tasked with marketing CLEAR to potential subscribers are trained that CLEAR "may not be promoted or used for FCRA-regulated purposes." App'x at 141.

         Thomson Reuters also screens potential subscribers before granting them access to CLEAR. They are required to indicate how they intend to use the platform on an "Account Validation and Credentialing" form, which Thomson Reuters employees then review to confirm that the use of CLEAR is not for an FCRA purpose. If an employee suspects an applicant intends to use the platform for an improper purpose, the applicant will be flagged for review by a "Credentialing Committee" that may reject the applicant or require the applicant to affirm she will not improperly use CLEAR. Once approved, the customer enters into a contract with Thomson Reuters in which she specifically represents that she will not use CLEAR for a purpose covered by the FCRA. Thomson Reuters "offers complimentary training to new CLEAR subscribers" to ensure compliance. App'x at 145. Every two years, Thomson Reuters requires subscribers to reaffirm their commitment to using CLEAR for a non- FCRA purpose, and before a subscriber may enter an individual search request, she must verify that her search is for an approved purpose.

         Thomson Reuters also investigates reports of CLEAR misuse through its in-house compliance office. If the office determines misuse has occurred it will "remind[] the subscriber that FCRA use of CLEAR is prohibited and require[] the subscriber to provide a written 'attestation' of its authorized uses of CLEAR and its intent to enforce the subscriber's contractual obligation not to use CLEAR for any FCRA purpose." App'x at 146. It is undisputed that reports of misuse are rare. Of the 144 million CLEAR searches conducted between 2012 and 2016, only 46 were alleged to be for an FCRA purpose.[3] Thomson Reuters determined that 12 of the 46 reports did not involve misuse, required the users responsible for 24 of the searches to reaffirm their promise to perform non-FCRA searches, and terminated the accounts of the subscribers responsible for the remaining 10 improper searches.

         B.

         This case involves one of those 46 reports of misuse. In November 2014, Plaintiff-Appellant Lindsey Kidd was the leading candidate for a position as an "Immunization Program Consultant" with the Georgia Department of Public Health, a CLEAR subscriber. The Department received Kidd's authorization to obtain a background check during the application process. Using the CLEAR platform, the Department discovered that Kidd had a prior state conviction for theft. Although the Department regarded Kidd as the "top candidate" for the position, the report led the Department not to hire her. But Kidd had not been convicted of theft; the CLEAR report contained false information. Kidd was not able to correct the mistake in the report in time to obtain the position.

         Kidd subsequently filed a putative class action complaint in the Southern District of New York against Thomson Reuters in March 2016, alleging that operating the CLEAR platform renders Thomson Reuters a "consumer reporting agency" under the FCRA and that the company violated several provisions of the Act in providing false information to the Georgia agency.

         After the conclusion of discovery, the district court granted summary judgment in favor of Thomson Reuters. Starting with the text of the FCRA, the district court determined that an entity is a "consumer reporting agency" under the Act if it "regularly assembles consumer information with a particular purpose or subjective intention-namely, of providing it to third parties for use (actual or expected) in connection with an FCRA-regulated end, such as employment eligibility." Kidd v. Thomson Reuters Corp., 299 F.Supp.3d 400, 404 (S.D.N.Y. 2017). "That is because," the court explained, "an entity qualifies as a [consumer reporting agency] only if it 'regularly' assembles information on consumers 'for the purpose of furnishing consumer reports to third parties,' and 'purpose' means '[t]he reason for which something is done or created or for which something exists' or to '[h]ave as one's intention or objective.'" Id. (quoting Purpose, Oxford English Online Dictionary, https://en.oxforddictionaries.com/definition/purpose).

         Applying that definition to Thomson Reuters, the district court determined that the company does not qualify as a "consumer reporting agency" because Thomson Reuters did not intend to furnish "consumer reports" through the CLEAR platform. The court explained that Thomson Reuters took "affirmative steps . . . at every stage of the customer acquisition, application, contracting, and support processes to ensure that subscribers are not using CLEAR for FCRA-regulated purposes," thereby establishing that it did not intend to ...


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