The Fair Credit Reporting Act (“FCRA”) bars consumer reporting agencies from reporting civil suits, civil judgments, records of arrest, and other “adverse items” more than seven years after they occur. In a recent decision in Moran v. The Screening Pros, the Ninth Circuit held that the later dismissal of criminal indictments or charges was not a new adverse event and did not restart the seven-year clock for reporting. Judge Kleinfeld, dissenting, argued that dismissals often are evidence of an “adverse event,” such as a guilty plea followed by deferred sentencing, and should be considered a separate event that restarts the clock. Because Moran opens the door to additional lawsuits based on the reporting of dismissals, other circuits are likely to consider the same question. Judge Kleinfeld’s dissent is a potential roadmap for both defendant consumer reporting agencies litigating in other jurisdictions and other courts considering the issue anew.
The Ninth Circuit majority made a two-step analysis. First, it considered whether the starting date of the seven year period, as to an indictment or other filing of charges, should begin at the “date of entry” of the charge or the “date of disposition.” (Because convictions are always reportable, “disposition” here will generally mean dismissal by the court.) The district court had determined that the starting date was the date of disposition, but the panel majority reversed. While noting that the statute was “silent” on this question as to “other adverse items,” including indictments, the court noted that “[a] charge is an adverse event upon entry so it follows that the date of entry begins the reporting window.”
The majority then tackled the question of whether the dismissal of a charge itself constituted an adverse event, so that it would have its own seven-year reporting window separate from the window that begins to run when the charge is entered. The majority concluded that it did not, reasoning that a dismissal could not be adverse because it “indicates that the consumer no longer faces an indictment, an overall positive—but at least neutral—development.”
This was confirmed, in the majority’s view, by the fact that Congress had amended the FCRA in 1998 to remove the section pertaining to arrests, indictments, and convictions, lumping arrests in with civil suits and civil judgments (whose clock starts running at “date of entry”), and leaving just the “other adverse item” section to cover indictments. Congress did not change the wording of the “other adverse item” section, which refers to neither the date of entry nor the date of disposition, but simply refers to items that “antedate the report by more than seven years.” The majority conceded that ordinarily where a term is included in one section of a statute but not another, “it is generally presumed that Congress acts intentionally.” Thus, one might think that if “date of entry” is used as to suits, judgments, and arrests, but not as to “other adverse items,” that difference must be significant. Nonetheless, the majority here found that maxim “inappropriate,” because the thrust of the amendment was to limit reportable events, which suggested that the “other adverse item” section, like the suits, judgments, and arrests section, should be read as incorporating a date-of-entry rule.
Judge Kleinfeld dissented from these holdings and, in doing so, charted a course for defendants in other circuits to try to obtain a different result. The dissent argued that the statute must be read in light of how the criminal justice system actually works. While the majority saw a dismissal as a positive or neutral event that should not be reported because it might unfairly and untimely bring to light an adverse indictment, Judge Kleinfeld argued that a dismissal itself frequently indicates an outcome that at least does not rule out guilt and in many cases involves an actual admission of guilt.
For example, charges are commonly dismissed after a period of deferred sentencing: the defendant often pleads guilty and serves a certain term of probation or jail time. While the defendant actually receives some punishment (or at least monitoring), the actual sentence is “suspended,” and, if the defendant does not breach the terms of sentencing, he may withdraw the guilty plea and have the charge dismissed. “Such a dismissal,” the dissent argued, “means that the defendant behaved himself after sentencing, and not that he was found innocent or ‘cleared.’”
In other cases, a prosecutor may obtain a guilty plea for some charges in exchange for dropping other related charges. “The prosecutor dismisses the lesser charges because they would likely lead to in-custody time concurrent with and less than the prison time already assured. Far from ‘clearing’ the defendant, the dismissal means that the defendant pleaded guilty to other crimes generating an adequate sentence.”
The dissent also noted that dismissals can occur for other reasons that, while they do not involve an admission of guilt, also do not per se exonerate the defendant—for example, when a police officer or other key witness fails to appear for trial.
For all these reasons, the dissent reasoned, Congress allowed landlords, employers, and other users of background checks to consider dismissals as “adverse events” that signal, or at least flag the potential for, possible criminal behavior on the part of the consumer. The dissent found this conclusion bolstered by the fact while Congress’s 1998 amendments increased restrictions on the reporting of civil lawsuits/judgments (and arrests that never led to charges), it lifted the seven year limitation on reporting criminal convictions. In other words, while Congress tightened the requirements as to events that do not tend to confirm the possibility of criminal behavior, it allowed more reporting of events that do tend to confirm such behavior.
(Moreover, while the dissent only sidles up to this point, it should be noted that Congress saw fit to move arrests to the civil group while relegating indictments (by implication) to the “other adverse items” section. If Congress had wanted to impose the “date of entry” standard on indictments, it would presumably have placed indictments in the section applying that standard, as Congress did with arrests. The actual structure of the amended statute, on the other hand, seems to imply the opposite—that Congress was intentionally omitting indictments from the “date of entry” standard that Congress now saw fit to apply to arrests.)
Finally, although the Consumer Financial Protection Bureau and the Federal Trade Commission had submitted amicus briefing urging the majority’s position, Judge Kleinfeld noted that such briefing was not entitled to Chevron deference, especially when the agencies’ position contradicted prior agency practice and commentary that businesses had long depended on in shaping their policies.
In short, the dissent lays out a map of compelling, arguable ideas that undermine the majority’s simple position that a dismissal of an indictment is not a new adverse event. While the ship has sailed on these arguments in the Ninth Circuit, it seems likely that litigants will be navigating these issues in other circuits. Thus, consumer reporting agencies may want to carefully study these ideas and marshal the dissent’s more complex and nuanced view of the criminal justice system and the function of a dismissal.