As we discussed in a previous post, a class action lawsuit (Sweet, et al. v. LinkedIn) was filed last year against LinkedIn in California based on allegations that the reference reports LinkedIn generates for premium subscribers, including many employers, violate the Fair Credit Reporting Act (“FCRA”). Ruling on LinkedIn’s motion to dismiss, Northern District Magistrate Judge Paul Grewal concluded that, based on the plaintiffs’ complaint allegations, the reference reports did not violate the FCRA.

Magistrate Judge Grewal’s ruling was based on his conclusion that LinkedIn’s “Reference Searches” do not fall within the FCRA’s definition of a consumer report for four reasons:

1. The information contained in the employment histories of the consumers who are subjects of the Reference Searches comes solely from LinkedIn’s transactions or experiences with these same consumers. The FCRA, however, specifically excludes from its consumer report definition any “report containing information solely as to transactions or experiences between the consumer and the person making the report.”

2. The plaintiffs’ allegations did not raise a plausible inference that LinkedIn acts as a consumer reporting agency when it publishes consumers’ employment histories in Reference Searches. The FCRA expressly provides that “[a]n entity does not become a [consumer reporting agency] solely because it conveys, with the consumer’s consent, information about the consumer to a third party in order to provide a specific product or service that the consumer has requested.” The Magistrate Judge agreed with LinkedIn that the facts alleged in the plaintiffs’ complaint supported the inference that LinkedIn gathers the information about the employment histories of the subjects of the Reference Searches not to make consumer reports but to “carry out consumers’ information-sharing objections.”

3. The plaintiffs’ allegations were insufficient to state a claim that the list of names and other information about the references included in the Reference Search bore on the “character, general reputation, mode of living” and other relevant characteristics of the consumers who were the subjects of these searches.

4. The plaintiffs did not state a claim that the Reference Search results were used or intended to be used as a factor in determining whether the subjects of the searches were eligible for employment. The FCRA, on the other hand, requires that communication must be “used or expected to be used or collected in whole or in part for the purpose of serving as a factor in establishing the consumer’s eligibility for . . . employment purposes . . . .” in order to be a consumer report.

This decision provides some needed clarity both to LinkedIn and employers who use LinkedIn’s Reference Search function. However, Magistrate Judge Grewal granted LinkedIn’s dismissal motion with leave to amend; thus, giving the plaintiffs an opportunity to amend their complaint allegations. In addition, the plaintiffs could appeal the decision to the District Court. We will continue to keep you updated on any material developments in this case.