April 10, 2015

Three class-action suits accusing crafts retailer Michaels Stores of failing to properly disclose to job applicants its use of their credit reports in employment decisions have been consolidated in federal court in Newark.

The Judicial Panel on Multidistrict Litigation ordered April 2 that cases from the U.S. District Courts for the Northern District of Texas and the Western District of Missouri be transferred to New Jersey, where U.S. District Judge Kevin McNulty of the District of New Jersey has been hearing another such case. Michaels, headquartered in Irving, Texas, preferred the Texas venue but the panel picked New Jersey after noting that the defendant has a nationwide presence and that the case before McNulty was filed before the others.

The suits claim that Michaels violates a requirement of the Fair Credit Reporting Act that requires employers intending to procure job applicants’ credit reports to make “clear and conspicuous” disclosure of the practice in a stand-alone document that “consists solely of the disclosure.” Michaels’ online job application fails to comply because the disclosure is embedded in one long, continuous Web page, according to the suits.

On the Michaels job application, a disclosure about the credit report being obtained for employment purposes appears on the same page with “numerous other pieces of extraneous information,” including several multiparagraph notices relating to various state laws, the suits allege. Many of the extraneous pieces of information surrounding the credit reporting notice on the Michaels job application “are the subject of longstanding [Federal Trade Commission] and judicial guidance indicating that their presence alone is sufficient to render an otherwise compliant disclosure noncompliant,” according to the complaint in the New Jersey case, Graham v. Michaels Stores.

Michaels’ application includes a purported liability waiver, which is “a particularly well-established violation of the Fair Credit Reporting Act,” according to the complaint in Graham. Michaels violated the act even after the vendor that conducts its background reports, General Information Services of Chapin, South Carolina, repeatedly advised its clients that the background check disclosure must be in a stand-alone document, and Michaels certified to GIS that it would comply, the Graham complaint alleges.

The suits seek statutory damages of up to $1,000 per class member, plus punitive damages and legal fees.

In Graham and in Castro v. Michaels Stores, the case originating in Texas, the defendant has offered to settle the case with each named plaintiff for $12,000, plus attorney fees, according to court documents. Christina Graham, the New Jersey plaintiff, rejected the $12,000 offer but Michele Castro, the original Texas plaintiff, accepted the deal and was replaced with another plaintiff, Janice Bercut.

Michaels has maintained in court papers that the plaintiffs’ claims are moot under the Offer of Judgment Rule because the settlement offers fully satisfy plaintiffs’ claims. The company also filed motions to dismiss in Graham and Castro and has claimed that its online job application did comply with the FCRA. 

The complaints failed to disclose that Michaels’ website “included a clear and conspicuous hyperlink labeled ‘click here for a printable copy of the disclosure form and Fair Credit Reporting Act.’ The hyperlink is conspicuous and easily seen, as it is set apart from the paragraphs preceding it, the text is underlined, appears in blue instead of black like the other text near it,” the defendant’s brief states.

Michaels has also argued in the filings that it did not commit a willful violation of the FCRA and the plaintiffs and class are therefore not entitled to statutory damages or attorney fees. The company also claimed in its motion to dismiss the New Jersey case that the plaintiff waived her right to sue because the online application form required her to click a box stating “I agree” and listing terms of use of the website. The terms of use state, in part, that Michaels and the designer of the site may not be held liable to users of the site.

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