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Benson v. Wells Fargo Bank, N.A.

United States District Court, D. South Dakota, Western Division

March 25, 2019

WELLS FARGO BANK, N.A., Defendant.




         This 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.


         I. Facts

         The 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.

         A. Theft conviction and employment

         In July 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).

         After 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).[1] 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).

         In 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.[2] The background check did not show any criminal history. (Dockets 58 at ¶ 18 & 52-7).

         After 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.” Id.

         B. Background check and termination

         In 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.

         As a 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).[3] 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 & 52-12).

         First 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 the termination.

         In June 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).

         C. Procedural history

         On 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). Defendant 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 ΒΆ 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 ...

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