907 F.3d 1031
7th Cir.2018Background
- Allstate investigated suspected "Dietz"-timed trading on its equity desk (traders could boost bonuses by delaying trades), retained Steptoe & Johnson and NERA; NERA estimated a potential $91M adverse impact on two pension plans via an algorithm that likely overstated losses; Allstate contributed $91M to the plans as a precaution.
- Based on the investigation, Allstate fired four portfolio managers (Rivera, Kensinger, Meacock, Scheuneman) for cause in December 2009; Allstate disclosed the investigation and the $91M contribution in its 2009 Form 10-K and circulated an internal memo summarizing the 10-K, but did not name the four employees.
- The four former employees sued Allstate for defamation (per quod) based on the 10-K and internal memo and alleged a violation of 15 U.S.C. § 1681a(y)(2) of the FCRA for failure to give them a summary of the outside investigation.
- A jury awarded the plaintiffs >$27M (compensatory and punitive) and statutory damages/fees under the FCRA; district court denied JMOL.
- Seventh Circuit vacated: (1) defamation awards because plaintiffs failed to prove special damages (no evidence any prospective employer refused to hire them due to the statements); (2) FCRA awards for lack of Article III standing under Spokeo because §1681a(y)(2)’s post‑hoc summary requirement is a bare procedural violation unaccompanied by concrete harm.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether statements in 10-K and internal memo supported defamation per quod (special damages required) | Plaintiffs: publications stigmatized them and caused loss of comparable employment / earnings | Allstate: plaintiffs produced no direct evidence any prospective employer refused to hire them because of the publications; only circumstantial evidence | Held: Plaintiffs failed to prove special damages (no third‑party testimony); defamation awards vacated and judgment for Allstate entered |
| Whether Allstate violated FCRA §1681a(y)(2) by not providing a summary of the outside investigative communication after adverse action | Plaintiffs: Steptoe’s investigation qualified under §1681a(y) and Allstate didn’t provide required summary, harming plaintiffs’ ability to defend/career prospects | Allstate: §1681a(y)(2) may not even apply; in any event plaintiffs lack standing under Spokeo because failure was a bare procedural violation without concrete injury | Held: Plaintiffs lacked Article III standing under Spokeo—§1681a(y)(2) violation was a post‑hoc, summary‑only procedural rule unaccompanied by concrete harm; FCRA awards vacated and claims dismissed |
| Whether the Steptoe investigation qualified as a “consumer report” / Steptoe as a consumer reporting agency for FCRA purposes | Plaintiffs: investigation functionally operated like a consumer report in employment‑related investigation | Allstate: Steptoe is a law firm, not a consumer reporting agency; record lacks proof that the investigation is a consumer report | Held: Court expressed skepticism that §1681a(y) even applies here but did not decide; treated standing as dispositive and did not endorse treating law‑firm probe as a consumer report |
| Whether punitive damages and attorney’s fees under FCRA were supported | Plaintiffs: willful violation justified statutory/punitive damages and fees | Allstate: no willfulness proven; statutory claims were minor compared to overall litigation so fees excessive | Held: Court did not reach merits after finding lack of standing; vacated the awards and remanded with instructions to dismiss FCRA claims |
Key Cases Cited
- Spokeo, Inc. v. Robins, 136 S. Ct. 1540 (Sup. Ct. 2016) (Article III requires a concrete, particularized injury; bare procedural violations may not confer standing)
- Continental Nut Co. v. Robert L. Berner Co., 393 F.2d 283 (7th Cir. 1968) (defamation per quod requires proof of special damages via direct third‑party testimony)
- Groshek v. Time Warner Cable, Inc., 865 F.3d 884 (7th Cir. 2017) (procedural notice requirement that does not protect a concrete interest may not confer standing)
- Robertson v. Allied Solutions, LLC, 902 F.3d 690 (7th Cir. 2018) (contrast: pre‑adverse‑action disclosure of consumer report can cause concrete informational injury and support standing)
- Maag v. Ill. Coalition for Jobs, Growth & Prosperity, 858 N.E.2d 967 (Ill. App. Ct. 2006) (Illinois law: defamation per quod requires pleading and proving special damages)
- Imperial Apparel, Ltd. v. Cosmo's Designer Direct, Inc., 853 N.E.2d 770 (Ill. App. Ct. 2006) (wide dissemination cases may permit circumstantial proof of special damages where identifying specific deterred customers is unreasonable)