United States District Court, D. South Dakota, Western Division
JEFFREY L. VIKEN CHIEF JUDGE
case originated in a job loss. Defendant Wells Fargo Bank,
N.A., fired plaintiff Charles Scott Benson pleading
compliance with federal banking law as the reason. Plaintiff
sued in South Dakota state court, alleging his termination
constituted various state law tort violations. Defendant
removed the case to this court on the basis of federal
question jurisdiction after plaintiff amended his complaint
to allege a violation of the Fair Credit Reporting Act
(“FCRA”). Now pending before the court is
defendant's motion for summary judgment on all counts.
(Docket 47). Defendant also seeks to exclude testimony by
plaintiff's expert Mark Riley. (Docket 45). Plaintiff
vigorously contests these motions. (Dockets 57 & 68). For
the reasons given below, the court concludes plaintiff lacks
standing to pursue his FCRA claim and remands the remaining
state law tort claims to the state court. The court grants
defendant's motion for summary judgment in part and
denies it in part. The court further denies defendant's
motion to exclude Mr. Riley's expert testimony as moot.
following recitation consists of the material facts developed
from the amended complaint (Docket 35), defendant's
answer (Docket 37), defendant's statement of undisputed
material facts (Docket 71), plaintiff's response to those
facts (Docket 55), and other evidence in the record where
indicated. These facts are “viewed in the light most
favorable to the [party] opposing the motion.”
Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,
475 U.S. 574, 587 (1986). The facts material to
defendant's motion for summary judgment are as follows.
Theft conviction and employment
1992, plaintiff was convicted of theft in the fourth degree
in Iowa. (Docket 58 at ¶ 4). This theft conviction
carried a maximum penalty of one year in jail and a $1, 000
fine. Id. at ¶ 5. In 1998, plaintiff was hired
by U.S. Bank as a Personal Bank/Investment Representative.
Id. at ¶ 7. In a deposition, plaintiff
testified he was fired from that job in 2000 “because
of FDIC regulation” and that during his termination,
his manager discussed his failure to disclose his Iowa
conviction. (Docket 52-4 at p. 3).
his termination from U.S. Bank, plaintiff was employed by
three related home mortgage companies under the name Blue
Ribbon. (Docket 60-1 at p. 3). He held between a 33 percent
and 50 percent ownership interest in these companies.
Id. Plaintiff was also involved in other mortgage
companies during that time. Id. at p. 5. In 2006 and
2007, plaintiff and Wells Fargo employees explored the
possibility of plaintiff joining Wells Fargo's Home
Mortgage division. (Dockets 58 at ¶¶ 10, 12 &
52-6). Plaintiff contends he told multiple Wells
Fargo employees about his Iowa theft conviction during this
period. Wells Fargo employees Paul Olsen and Ryan Niesent,
who recruited plaintiff, testified plaintiff told them about
his conviction. (Dockets 60-2 at p. 2. & 60-3 at p. 2).
September 2007, Wells Fargo offered plaintiff a job in its
Home Mortgage Division with an employment offer letter.
(Docket 58 at ¶ 12). The offer letter stated it did not
“constitute a contract of employment” and the
employment would be “on an at-will basis. . . .
contingent upon satisfactory completion of . . . a background
check.” (Docket 52-6 at p. 4). Plaintiff signed and
returned this letter. (Docket 58 at ¶ 15). He also
signed a separate background check authorization.
Id. at ¶ 16. Plaintiff was not fingerprinted
during this background check. Id. at ¶ 17;
Docket 52-4 at p. 8. The background check did not show any
criminal history. (Dockets 58 at ¶ 18 & 52-7).
accepting the job offer, plaintiff completed an electronic
employment application in November 2007. (Dockets 58 at
¶ 19 & Docket 52-8). On that application, plaintiff
clicked the “yes” button to a question stating he
had been involuntarily discharged from a job. (Docket 58 at
¶ 20). In the explanation box, plaintiff wrote he was
“licensed for investments and the background check
turned up a misdemeanor from when I was a teenager. I
didn't disclose it on my initial application for
employment.” Id. Plaintiff also indicated he
had been “convicted of any crime involved dishonest
[sic.] or breach of trust such as theft[.]”
Id. He explained he “was charged with
misdemeanor theft when [he[ was a teenager.”
Background check and termination
2008, Congress enacted the Secure and Fair Enforcement for
Mortgage Licensing Act, commonly known as the “SAFE
Act.” 12 U.S.C. § 5101 et seq. The SAFE Act
requires all “loan originators” to register in a
national directory. Id. at § 5103(a)(1). As a
part of that registration process, loan originators had to
submit information regarding “[c]onvictions of any
criminal offense involving dishonesty.” 12 C.F.R.
§ 208.103(d)(1)(iii). Loan originators also had to
provide their fingerprints and any other information
necessary for the Federal Bureau of Investigation
(“FBI”) to complete a background check.
Id. at § 208.103(d)(1)(ix). The parties agree
plaintiff was a loan originator governed by the SAFE Act.
(Docket 58 at ¶ 23). The parties also agree the SAFE Act
required defendant to register loan originators between
January and July of 2011. Id. at ¶ 24.
part of the SAFE Act registration process, in January 2011
plaintiff authorized defendant to procure “an
investigative consumer report, ” including a criminal
background check. Id. at ¶ 29; Docket 52-9.
First Advantage Enterprise Screening Corporation
(“First Advantage”), a separate company,
investigated plaintiff and compiled the report. (Dockets 58
at ¶ 34, 13, & 74 at ¶¶ 5-6). As a part of
this process, First Advantage sent plaintiff's
fingerprints to the FBI. (Docket 74 at ¶ 6). The FBI
sends its background check report directly to Wells Fargo,
which then immediately forwards it to First Advantage.
Id.; Docket 71 at ¶ 33). Wells Fargo does
not outsource any employment eligibility decisions to First
Advantage. (Docket 74 at ¶ 5). Wells Fargo employees
instead review the information provided by First Advantage to
determine employment eligibility. Id. at ¶ 7.
The First Advantage report did not show plaintiff's
conviction. (Dockets 58 at ¶ 35 & 13). However, the
FBI report showed the conviction. (Dockets 58 at ¶ 32
Advantage sent a package to plaintiff containing its report,
the FBI report, a letter from Wells Fargo stating his
continued employment “may be based, in whole or in
part, on” the provided materials, a summary of
plaintiff's FCRA rights, and a copy of the regulation
allowing the subject of an FBI record to challenge the
record's contents. (Dockets 58 at ¶ 38 & 52-14).
Defendant received these materials before February 15, 2011.
Id. at ¶ 39. On that date, plaintiff's
supervisor Richard Brown terminated him. (Docket 77 at ¶
44). The reason for the termination is somewhat disputed.
During his deposition, plaintiff testified Wells Fargo fired
him “as a result of the background check[.]”
(Docket 52-4 at p. 9). In its response to defendant's
statement of undisputed facts, plaintiff contends he was
fired because he did not pass the background check and
because he was not “bondable” or could not get a
“MLSR number.” (Docket 58 at ¶ 44). In
support of his argument, plaintiff cites to a portion of a
deposition that is not in the record. Id. However,
the parties agree the 2011 background check played a part in
2011, defendant offered to rehire plaintiff on the same terms
as his prior employment. Id. at ¶ 48; Docket
52-19 at p. 10. In his deposition, plaintiff's supervisor
testified the offer was contingent upon plaintiff dismissing
his state court lawsuit. (Docket 60-22 at p. 2). Defendant
suggests the reason for its renewed job offer was that
plaintiff's theft conviction fell within a newly
promulgated regulatory exception for certain de minimis
convictions. (Docket 58 at ¶ 48). Plaintiff rejected the
job offer. Id. at ¶ 49. In an interrogatory
prepared for this litigation, plaintiff stated he rejected
the offer because he “no longer trusted Wells Fargo as
an employer.” (Docket 52-19 at p. 10).
March 18, 2011, plaintiff filed suit against defendant in
South Dakota state court. (Docket 14-3). In his initial
complaint, plaintiff alleged defendant's conduct with
regard to his employment and termination constituted breach
of contract, promissory estoppel, fraud (including fraudulent
inducement and concealment), negligent misrepresentation, as
well as intentional and negligent infliction of emotional
distress. Id. In two 2014 orders, the state court
granted defendant summary judgment on plaintiff's
intentional infliction of emotional distress and breach of
contract claims. (Dockets 52-21 & 52-22). The state court
did not give any reasoning for its decision in the written
orders. Id. In June 2016, the state court permitted
plaintiff to amend his complaint. (Docket 14-1). Plaintiff
promptly did so, alleging defendant violated the FCRA and the
Racketeer Influenced and Corrupt Organizations Act
(“RICO Act”). (Docket 14-4).
timely removed the amended complaint to this court. (Docket
1). It asserted federal question jurisdiction existed because
of plaintiff's FCRA and RICO claims. Id. at
¶ 7. Defendant then moved to dismiss plaintiff's
FCRA and RICO claims. (Docket 5). The court ordered the
parties to brief the question of standing. (Docket 27).
Following that briefing, the court granted defendant's
motion to dismiss plaintiff's RICO claim and allowed
plaintiff to proceed with the FCRA claim. (Docket 33). The
court concluded plaintiff had standing to litigate his FCRA
claim. Id. at pp. 5-18. The court also permitted
plaintiff to amend his complaint. Id. at pp. 38-43.
The second amended complaint alleges ...