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A lawsuit is a formal legal action in which one party asks a court to resolve a dispute by requiring another party to pay damages, perform a specific act, or stop certain conduct. It is generally a civil process—meaning it involves private parties rather than criminal prosecution—and is used to obtain remedies such as monetary compensation, injunctions, or declaratory judgments.

A lawsuit begins when a plaintiff files a complaint alleging harm caused by a defendant, who must then respond. The court manages the case through stages such as pleadings, discovery, motions, settlement negotiations, and ultimately, trial.

Uber settles class-action for $28.5 million for misleading claims about drivers’ background checks

On February 12, 2016, Uber agreed to settle a consolidated class-action filed in the U.S. District Court for the Northern District of California (Philliben v. Uber Technologies, Inc. and Mena v. Uber Technologies, Inc.) by paying $28.5 million to approximately 25 million riders and promising to avoid using certain language in safety-related advertising, as well as the term “safe ride fee.”

In their complaint filed in 2014, the plaintiffs alleged that Uber’s claim of conducting “industry-leading background checks” for which they paid a “safe ride fee” of $1 to $2 on top of each fare, was false and misleading. According to the complaint, Uber does not and has never had an “industry-leading background check process.” To the contrary, the complaint stated that background screening by Uber does not involve fingerprint identification and, therefore, cannot ensure that the information obtained from a background check actually pertains to the driver that submitted the information. By contrast, most taxi regulators in United States require drivers to undergo criminal background screening, using fingerprint identification, and typically employing a technology called “Live Scan.”  Going forward, Uber said it will rename the “safe ride fee” as a “booking fee” which will be used to cover safety and additional future operational costs.

If the judge approves the settlement, members of the class who rode in an Uber vehicle in the United States between January 1, 2013 and January 31, 2016 will be eligible to receive a portion of the settlement.  If that pot is divided evenly among Uber’s 25 million passengers, after attorneys’ fees, each will get around $1.

Read the consolidated class-action complaint here.

February 23rd, 2016|Categories: Compliance Corner for Employment Decisions|Tags: , , |

Class action charges LinkedIn with violations of FCRA

According to a new putative class action filed in California federal court, social networking site LinkedIn runs afoul of the Fair Credit Reporting Act (FCRA).

The plaintiffs claim that LinkedIn’s reference search functionality allows prospective employers, among others, to obtain reports on job applicants with profiles on the site. LinkedIn’s dissemination of “Reference Reports” – that are created based on a user’s profile and connections to form a list of former supervisors and co-workers as possible references – are available for users who pay a monthly or annual subscription fee.

“LinkedIn has created a marketplace in consumer employment information, where it sells employment information, that may or may not be accurate, and that is has obtained in part from unwitting members, and without complying with the FCRA,” according to the complaint, which noted the site has more than 300 million members and one million jobs listed.

The Reference Reports bring LinkedIn within the purview of the FCRA, and yet the company fails to comply with a host of statutory requirements, according to the complaint.

Specifically, the complaint alleges that the site violates Section 1581(b) by furnishing consumer reports for employment purposes without obtaining the certifications required by the statute or a summary of the consumer’s rights and also does not maintain any of the procedures required by Section 1681e(a) to limit the furnishing of consumer reports to the limited purposes of the statute. In addition, Section 1681e(b) mandates that all consumer reporting agencies follow reasonable procedures to assure the maximum possible accuracy of consumer report information, Section 1681e(d) requires that a user notice be provided to individuals when a report is provided about them, and Section 1681b states that reports can only be provided after an inquiry to ensure the report is used for a “permissible purpose.” None of these statutory requirements were met by LinkedIn, the suit alleges.

“[A]ny potential employer can anonymously dig into the employment history of any LinkedIn member, and make hiring and firing decisions based upon the information they gather, without the knowledge of the member, and without any safeguards in place as to the accuracy of the information that the potential employer has obtained,” Sweet and the other plaintiffs claim. “Such secrecy in dealing in consumer information directly contradicts the express purposes of the FCRA.”

The main plaintiff alleges that she located a job opening on the site and submitted her resume through LinkedIn. She received a notification from the site that the general manager of the employer had viewed her profile and she was offered the job after an interview. The general manager declined the plaintiff’s offer to provide a list of references but later called back to rescind the offer, telling her that he had checked some of her references and changed his mind.

The plaintiffs seek to certify a nationwide class of LinkedIn users who had a Reference Report run on them as well as a subclass of users who applied for employment via the site and had a Report generated by a potential employer. As for remedies, the putative class requests actual, statutory, and punitive damages, as well as attorney’s fees and costs.

To read the complaint in Sweet v. LinkedIn Corporation, click here.

December 3rd, 2014|Categories: Compliance Corner for Employment Decisions|Tags: , , , |

Class-action against U.S. Census Bureau alleges race-bias in using criminal background checks

On July 1, 2014, a magistrate judge in the U.S. District Court for the Southern District of New York certified as a class-action an unprecedented lawsuit brought under Title VII of the Civil Rights Act of 1964, that alleges the U.S. Census Bureau’s process of using criminal background checks when selecting temporary workers for the 2010 census unlawfully screened out approximately 250,000 African-Americans. Filed in April 2010, the complaint charges that in hiring nearly a million temporary workers, most of whom went door-to-door seeking information from residents, the Bureau erected unreasonable and largely insurmountable hurdles for applicants with arrest records, regardless of whether the arrests were decades old, were for minor charges, or led to criminal convictions.

July 9th, 2014|Categories: Compliance Corner for Employment Decisions|Tags: , , |

Class actions against employers for violations of the FCRA are increasing

An auto parts company (CA USDC Case No. 2:14-cv-3470) and a hotel chain (CA USDC Case No. 3:14-cv-01089) are just the latest employers that have been slapped with class action lawsuits for alleged violations of the Fair Credit Reporting Act (the “FCRA”) charging willful non-compliance with the FCRA’s disclosure, authorization, and/or notice requirements. And the payouts in such lawsuits can be in the millions. Within the past three years, a national trucking company reached a settlement for $4.6 million, a national retail chain for $3 million and a national pizza maker for $2.5 million.

The FCRA allows an applicant or employee to bring a private right of action against an employer who negligently or willfully fails to comply with any of the FCRA’s requirements. Under the statute of limitations, an action must be brought by the earlier of (1) two years after the date of violation discovery by the plaintiff, or (2) five years after the date on which the violation occurred. The employer’s liability for negligent non-compliance is actual damages sustained by the applicant/employee, and reasonable attorneys’ fees and costs. A willful violation carries actual or statutory damages ranging between $100 and $1,000, punitive damages, and attorneys’ fees and costs.

Below are general FCRA compliance reminders to employers when procuring and using background check reports prepared by a consumer reporting agency (“CRA”):

  • Provide disclosure to the applicant/employee in a standalone document that a consumer report may be obtained and used for employment purposes (language must be clear, with no superfluous information or liability waiver, and separate from the employment application);
  • Provide to the applicant/employee a summary of rights under the FCRA and applicable state notices;
  • Obtain the applicant/employee’s authorization for the consumer report;
  • Before taking adverse action based on the report (1) provide a pre-adverse action notice to the applicant/employee along with a copy of the report, and notices of rights, if not given previously, (2) wait a reasonable period of time (at least 5 days) before taking the adverse action, and (3) after deciding to take the adverse action, provide a notice that contains the FCRA required information, such as the name, address, and telephone number of the CRA that provided the report.
May 14th, 2014|Categories: Compliance Corner for Employment Decisions|Tags: , , |

New Texas law limits negligent hiring and negligent supervision suits against employers

Rather than denying employers access to potentially consequential information about a candidate’s criminal past, a new Texas law is striving to curb lawsuits against employers. Signed into law on June 14, 2013 and effective September 1, 2013, HB 1188 amends the Texas Civil Practice and Remedies Code to prohibit most causes of action “against an employer, general contractor, premises owner, or other third-party solely for negligently hiring or failing to adequately supervise an employee, based on evidence that the employee has been convicted of an offense.”

Notably, the statute provides exceptions that allow claims if the employer knew or should have known its employee was convicted of: (1) an offense “that was committed while performing duties substantially similar to those reasonably expected to be performed in the employment, or under conditions substantially similar to those reasonably expected to be encountered in the employment;” (2) a sexually violent offense; or (3) certain offenses specified in the Texas Code of Criminal Procedure, Article 42.12- Section 3g including but not limited to murder, indecency with a child, aggravated kidnapping, aggravated sexual assault, and aggravated robbery.

The protections under this statute do not apply in actions “concerning the misuse of funds or property of a person other than the employer, general contractor, premises owner, or third party by an employee if, on the date the employee was hired, the employee had been convicted of a crime that includes fraud or the misuse of funds or property as an element of the offense, and it was foreseeable that the position for which the employee was hired would involve discharging a fiduciary responsibility in the management of funds or property.”

June 21st, 2013|Categories: Compliance Corner for Employment Decisions|Tags: , , , |

Diploma mill ordered to pay $22.7 million to 30,000 scam victims

On August 31, 2012, Belford High School, Belford University and several of their co-conspirators were ordered to pay $22.7 million to a class of more than 30,000 U.S. residents who were duped into purchasing fake high school diplomas from Belford. The defendants were also ordered to forfeit the websites used to perpetrate the scam, including www.belfordhighscool.com, www.belfordhighschool.org, www.belforduniversity.org, and www.belforduniversity.com.

The lawsuit, filed on November 5, 2009, charged that Belford High School is an Internet scam that defrauded students of their money by offering them a supposedly “valid” and “accredited” high school diploma. As affirmed by the judgment, the school is a fake and the diplomas are not valid. The lawsuit also alleged that the two accrediting agencies by which Belford claimed to be accredited – International Accreditation Agency for Online Universities and the Universal Council for Online Education Accreditation – are not legitimate accrediting agencies.

Notably, we came across Belford University in 2010 when a bachelor’s degree from the “school” was listed on an employment application by a candidate for a professional level position with one of our clients. Click here to read the 2010 blog.

 

December 18th, 2012|Categories: Compliance Corner for Employment Decisions|Tags: , , , , |

Decisions in two cases to set precedence for auditors’ fraud liability

 

It all started in 1905 with the lawsuit Smith v. London Assurance Corporation whereby an auditor was held liable for failing to audit its client’s branch office and detecting embezzlement.

Now more than 100 years later, the legal liability of auditors in detecting corporate fraud  will be decided in two cases that were heard on Tuesday, September 14, 2010, in the New York Court of Appeals, potentially increasing the Big Four accountants’ exposure to multibillion-dollar shareholder lawsuits for malpractice. In both cases, the court will rule whether auditors can rely on the legal doctrine of in pari delicto (“in equal fault”) to reject claims for fraud allegedly committed by company insiders. The doctrine prevents someone from recovering damages from a defendant if that someone is also at fault. The argument is whether the shareholders, as owners of the company, can be held at fault for frauds committed within the company and barred from suing its auditors for not discovering the wrongdoing.

The first lawsuit facing scrutiny was filed by the shareholders of AIG against PricewaterhouseCoopers (PwC), the insurer’s auditor. The shareholders claim that PwC failed in its job as auditors in the early 2000s, when various AIG officers and directors, including ex-CEO Maurice Greenberg, allegedly engaged in fraudulent transactions to pad AIG’s bottom line. Authorities subsequently caught the fraud, and AIG had to restate years of financial statements that “eventually reduced stockholder equity by $3.5 billion.” AIG ended up paying more than $1.5 billion in fines, and the shareholders say that since PwC missed the fraud, they should be allowed to sue PwC for malpractice. The Chancery Court in Delaware dismissed their request to sue PwC, and the case was appealed in Delaware’s Supreme Court. That court asked the New York’s Court of Appeals to decide whether the shareholders have a claim under New York law.

The second case relates to protracted litigation by the bankruptcy trustee of Refco Inc., the failed futures broker, seeking damages from a number of the firm’s professional advisers, and auditors including Grant Thornton, KPMG LLP, Ernst & Young LLP, PricewaterhouseCoopers LLP, Mayer Brown, LLP, et al. The trustee alleges that Refco’s outside counsel Mayer Brown, and several other insiders are liable for defrauding Refco’s creditors by helping the defunct company conceal hundreds of millions of dollars in uncollectible debt. The U.S. Court of Appeals for the Second Circuit found that the trustee’s argument to revive claims against the corporate insiders raised unresolved questions concerning his standing under New York law to sue third-parties for Refco’s fraud.

September 17th, 2010|Categories: Commercial Transactions Due Diligence|Tags: , |

Background investigation reveals untruth in advertising

 

SI was engaged to investigate a national company along with two of its principals as part of our client’s risk management program. The company’s ads have appeared almost daily in major newspapers and on the Internet, and the merits of its consumer services (for confidentiality, we can’t say what they are) have been touted in the professionally scripted testimonials of “real” customers. But SI’s investigation found media reports and court documents showing that the claims were not so credible. There is a pending federal class-action lawsuit against the company and its principals alleging several fraudulent business practices, including the misleading advertising of a service guarantee that “is riddled with restrictions, waivers and limitations” and service enrollments without authorization. Six additional lawsuits for similar causes of action are pending in various county-level courts.

Further, SI’s investigation uncovered the checkered backgrounds of the two principals behind the company. Searches of bankruptcy records revealed that both subjects had filed for protection from creditors – and in the co-founder’s case, had filed multiple times. Also missing from the company’s pitch was that the co-founder’s previous career in a similar business culminated in a federal judge’s order barring him from “promoting, offering for sale, performing or distributing any product or service related to [consumer] services.”  Had our client’s decision-makers relied on the company’s presentation of itself and its principals, they would not have been able to realistically assess the risk of engaging in business with the subjects. While a search of media stories might reveal complaints against a potential client, it’s a full in-depth investigation that brings all the pieces together.

September 8th, 2009|Categories: Commercial Transactions Due Diligence|Tags: , , , |
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