SCOTT v. RESOLVE PARTNERS LLC (2021)

ORDER

Full House Marketing, Inc. (“Full House”) moves to intervene in this case as a defendant under Fed. R. Civ. P. 24. (Doc. 63.) Defendant Resolve Partners, LLC (“Defendant”) and Plaintiff Derrick Perez Scott (“Plaintiff”) have responded, (Docs. 68, 69), and Full House has replied, (Doc. 70). This matter is now ripe for ruling. This court will grant Full House's motion.

I. FACTUAL AND PROCEDURAL BACKGROUND

Defendant provides employment screening services. (Complaint (“Compl.”) Doc. 1 ¶ 2.) Full House is a temporary staffing company that contracted with Defendant in 2012 to complete employment screening reports and criminal background checks for applicants to Full House's positions. ((Doc. 36-6) at 24-25.)¹

In or around March 2019, Plaintiff applied online for employment as a Leasing Agent with Full House. (Compl. (Doc. 1) ¶ 10.) At the request of Full House, Defendant completed a background report and provided it to Full House. (Id. ¶ 28.) That background report contained information pertaining to Derrick Lee Scott, who was born on the same day as Plaintiff and who, unlike Plaintiff, has a criminal record. (Id. ¶ 30.) On the basis of the incorrect information contained in the report, Plaintiff did not receive that or several other jobs at Full House. (Compl. (Doc. 1) ¶¶ 11, 14, 21, 38.)

Plaintiff filed this action (“Scott I”) on October 18, 2019, alleging that Defendant had violated the federal Fair Credit Reporting Act (“FCRA”) by “falsely portray[ing] [Plaintiff] as a drug dealer, felon, and serial criminal.” (Id. at 1.) The FCRA creates liability for willful violations, for which punitive and actual damages are available, 15 U.S.C. § 1681n, and for liability for negligent violations, for which actual damages are available, 15 U.S.C. § 1681o. Plaintiff's Complaint alleges both willful and negligent violations of the FCRA. (Compl. (Doc. 1) ¶¶ 47-49.)

In its Amended Answer filed September 15, 2020, Defendant admitted that the background check contained criminal charges and convictions pertaining to Derek Lee Scott, rather than Plaintiff, due to a failure to cross-check Plaintiff's middle name with that of Derek Lee Scott. (Doc. 32 ¶ 45.) Defendant admitted that this failure constituted negligent noncompliance with the FCRA but denied willful noncompliance. (Id.)

On September 18, 2020, following the close of discovery, Defendant filed a motion for partial summary judgment, (Doc. 35), arguing that Plaintiff has not met his burden in creating a genuine dispute of material fact that the alleged violations of the FCRA were willful, (Doc. 36 at 16-17). That motion is pending before this court.

On March 25, 2021, Plaintiff filed a class action against Full House on behalf of himself and all similarly situated individuals (“Scott II”), alleging violations of the Fair Credit Reporting Act. (Scott v. Full House Marketing, Inc., No. 1:21CV242 (M.D.N.C. filed March 25, 2021) (Doc. 1) at 1.) Plaintiff's complaint in Scott II alleges that Full House failed to provide proper notice to Plaintiff and putative class members of the information contained in their background reports before taking adverse actions against them. (Id. ¶¶ 41-51.)

On April 16, 2021, Full House filed this motion to intervene. (Doc. 63.) Full House argues that Plaintiff's claims against Full House in Scott II should have been brought in a single lawsuit, as Defendant is a necessary party in both lawsuits. (Mem. of Law in Supp. of Mot. to Intervene (“Full House's Br.” (Doc. 65) at 1.) Full House argues that inconsistent outcomes in the two pending lawsuits may occur if Full House is not permitted to intervene in Scott I. (Id. at 3.)

II. STANDARD OF REVIEW

The Federal Rules of Civil Procedure provide two avenues for intervention: intervention as of right pursuant to Fed. R. Civ. P. 24(a)(2), and permissive intervention pursuant to Fed. R. Civ. P. 24(b). If intervention as of right is not warranted, a court may still allow an applicant to intervene permissively. Fed R. Civ. P. 24(a)(2), (b).

Under Fed. R. Civ. P. 24(a), a court must permit anyone to intervene who “claims an interest relating to the property or transaction that is the subject of the action, and is so situated that disposing of the action may as a practical matter impair or impede the movant's ability to protect its interest, unless existing parties adequately represent that interest.” Fed. R. Civ. P. 24(a)(2). Intervention is necessary where, on timely request, a proposed intervenor demonstrates “(1) an interest in the subject matter of the action; (2) that the protection of this interest would be impaired because of the action; and (3) that the applicant's interest is not adequately represented by existing parties to the litigation.” Teague v. Bakker, 931 F.2d 259, 260–61 (4th Cir. 1991). Each of these requirements must be met before intervention is mandatory, and a failure to meet any one of these requirements will preclude intervention as of right. See Virginia v. Westinghouse Elec. Corp., 542 F.2d 214, 216 (4th Cir. 1976). If that happens, then “a court may still allow an applicant to intervene permissively under Rule 24(b) ․” Stuart v. Huff, 706 F.3d 345, 349 (4th Cir. 2013).

Under Fed. R. Civ. P. 24(b), the court may permit anyone who “has a claim or defense that shares with the main action a common question of law or fact” to intervene on timely motion. Fed. R. Civ. P. 24(b)(1)(B). “In exercising its discretion, the court must consider whether the intervention will unduly delay or prejudice the adjudication of the original parties’ rights.” Fed. R. Civ. P. 24(b)(3). Where a movant seeks permissive intervention as a defendant, the movant must therefore satisfy three requirements: (1) the motion is timely; (2) the defenses or counterclaims have a question of law or fact in common with the main action; and (3) intervention will not result in undue delay or prejudice to the existing parties. League of Women Voters of Va. v. Va. State Bd. of Elections, 458 F. Supp. 3d 460, 463-64 (W.D. Va. 2020); Carcaño v. McCrory, 315 F.R.D. 176, 178 (M.D.N.C. 2016).

The Fourth Circuit has held that “liberal intervention is desirable to dispose of as much of a controversy involving as many apparently concerned persons as is compatible with efficiency and due process.” Feller v. Brock, 802 F.2d 722, 729 (4th Cir. 1986) (internal quotation marks omitted). Further, the decision to grant or deny permissive intervention “lies within the sound discretion of the trial court.” Smith v. Pennington, 352 F.3d 884, 892 (4th Cir. 2003) (quoting Hill v. W. Elec. Co., 672 F.2d 381, 386 (4th Cir. 1982)).

III. ANALYSIS

This court finds that Full House meets the standard for permissive intervention.

A. Full House's Motion is Timely

“Rule 24 is silent as to what constitutes a timely application and the question must therefore be answered in each case by the exercise of the sound discretion of the court.” Black v. Cent. Motor Lines, Inc., 500 F.2d 407, 408 (4th Cir. 1974). To determine whether a motion for intervention is timely, courts examine “how far the suit has progressed, the prejudice which delay might cause other parties, and the reason for the tardiness in moving to intervene.” Gould v. Alleco, Inc., 883 F.2d 281, 286 (4th Cir. 1989).

This court finds that Full House's motion is timely. Contrary to Defendant and Plaintiff's arguments that Full House has been in a position to intervene for many months prior to the filing of the instant motion, (Def.’s Br. in Opp'n to Full House's Mot. (“Def.’s Resp.”) (Doc. 68) at 5; Pl.’s Mem. of Law in Opp'n to Full House's Mot. (“Pl.’s Resp.”) (Doc. 69) at 11), this court finds that Full House did not face liability until Plaintiff filed his Complaint in Scott II on March 25, 2021. (Scott v. Full House Marketing, Inc., No. 1:21CV242 (M.D.N.C. filed March 25, 2021) (Doc. 1) at 1.) In the absence of any liability, Full House did not have an interest to protect in Scott I. Thus, Full House did not have a reason to voluntarily subject itself to liability by intervening.

Moreover, the court finds that the sequence of events leading up to and surrounding the filing of Plaintiff's action against Full House indicates that Full House acted in a timely manner. In particular, the court finds the “Rule 408 letter” that Plaintiff sent to Full House on February 5, 2020, significant. (Doc. 65-2.) In the letter, Plaintiff called for a response from Full House prior to March 5, 2020, indicating that he would otherwise proceed with legal action against Full House. (Id. at 2.) Full House apparently responded to the letter in some fashion because, on April 27, 2020, Full House sent a letter denying any wrongdoing or liability, referencing the prior email communication between Plaintiff and Full House. (Doc. 69-2 at 1.)

The parties offer no further evidence of any pre-filing discussions or communications regarding the filing of a complaint by Plaintiff as to Full House. Instead, Defendant issued a subpoena to Full House on June 19, 2020, and deposed Full House's owner on August 12, 2020. (Pl.’s Resp. (Doc. 69) at 5-6; Def.’s Resp. (Doc. 68) at 5-6.) On September 18, 2020, after the close of discovery in the instant matter, Defendant filed a motion for summary judgment, which remains pending. (Doc. 35.) It was not until March 25, 2021, nearly six months later, that Plaintiff filed a complaint against Full House. (Scott v. Full House Marketing, Inc., No. 1:21CV242 (M.D.N.C. filed March 25, 2021) (Doc. 1) at 1.)

On balance, even though neither party contends the claims against Full House are compulsory in the Scott I action, this court finds Full House's motion to intervene timely. Plaintiff's failure to file an action against Full House during discovery and trial preparations in Scott I would have reasonably suggested to Full House that it did not face legal liability. Plaintiff's failure to further threaten or file a lawsuit for over a year after the exchange over the Rule 408 letter, especially considering the unique circumstances of COVID-19, suggests that the motion is timely. Moreover, when Plaintiff did file an action against Full House in Scott II, Full House acted in a timely manner by filing the instant motion to intervene in Scott I only three weeks later.

Although this court recognizes, as Plaintiff and Defendant argue, (Pl.’s Resp. (Doc. 69) at 10-11; Def.’s Resp. (Doc. 68) at 3-5), that litigation in this matter is at an advanced stage, this court finds that Full House has provided an adequate justification for not moving to intervene until April 2021.

B. The Defenses or Counterclaims Have a Question of Law or Fact in Common with the Main Action

This court further finds that Full House's proposed defenses or counterclaims in Scott II share a question of law or fact with the main action between Plaintiff and Defendant.

Although brought in separate actions, the claims alleged in Scott I and Scott II arise out of the same factual scenario – the background report and Full House's decisions not to offer Plaintiff a job on the basis of that report. (Compare Compl. (Doc. 1) ¶¶ 10-40, with Doc. 65-1 ¶¶ 23-31.) Defendant concedes that “common issues of fact do exist between the two actions,” particularly “the fact that Plaintiff seeks to recover twice for the same damages (lost wages, emotional distress, etc.).” (Def.’s Resp. (Doc. 68) at 10.) To the extent that Plaintiff argues in response to Full House's motion that “[t]he two lawsuits involve separate entities who have separate obligations under the FCRA, separate violations of the FCRA, separate questions of law and fact, and individualized damages issues,” (Pl.’s Resp. (Doc. 69) at 5), Plaintiff concedes that “Full House was the only entity that took adverse action against Plaintiff as a direct result of [Defendant's] grossly ² inaccurate report ․” (Id. at 1.) Plaintiff's concession is a recognition that the same underlying incidents gave rise to Plaintiff's individual claims in both actions.

Because these actions arise out of the same underlying events, this court finds that there is significant risk for prejudice to Full House if Full House is not permitted to intervene. Plaintiff intends to call Full House's owner, Rebecca Rosario, to testify at trial in order to question her about the hiring process at Full House, the contract between Full House and Defendant, and Plaintiff's application to work at Full House. (See Doc. 51 at 6-14.) It is likely that, during her testimony, facts that either Plaintiff or Defendant may present as true are issues that Full House would challenge in Scott II. More importantly, neither Plaintiff nor Defendant has any incentive to rehabilitate Rosario's testimony should she offer testimony that helps the parties, but harms Full House.

For example, Full House “adamantly denies” that Plaintiff did not receive a pre-adverse action letter regarding his background check. (Doc. 70 at 4-5.) Full House anticipates raising an affirmative defense in Scott II that Plaintiff did not mitigate his damages by being reasonably diligent upon receiving the pre-adverse action letter. (Id. at 4.) As Full House recognizes, however, “Resolve does not assert that defense in its Amended Answer to Scott 1,” even though Full House believes “that would be a key defense at trial for Full House in Scott 2.” (Id.)

Although Rosario would be permitted to have counsel from Full House present during her testimony, if Full House is not a party to the litigation between Plaintiff and Defendant in Scott I, Full House would not have standing to object to any questions. On any topic in Scott I that might be contested at trial in Scott II, such as whether Plaintiff received a pre-adverse action notice, Plaintiff would be deprived of an opportunity to protect its interests. Full House could move at trial in Scott II to exclude any prejudicial testimony, but Rosario's testimony could still be used as a vehicle for discovery, see Fed. R. Civ. P. 26, or for impeachment purposes as a prior inconsistent statement of a witness, Fed. R. Evid. 613, both of which would be adverse to Full House's interests.

Moreover, having two trials involving the same operative facts and underlying events creates a risk of inconsistent verdicts and judicial inefficiency. For example, Full House's conduct will play a significant role at trial in Scott I to establish the damages Defendant owes to Plaintiff,³ and as well as in Scott II to establish the damages Full House would owe to Plaintiff. (See Def.’s Resp. (Doc. 68) at 10; Pl.’s Resp. (Doc. 69) at 1.) Any concerns about res judicata notwithstanding,⁴ this court finds that it would be improper to permit Plaintiff two attempts to prove the same set of operative facts in two actions that should have been brought together in the first instance. “[D]istrict courts have the inherent authority to manage their dockets and courtrooms with a view toward the efficient and expedient resolution of cases,” Dietz v. Bouldin, 579 U.S. 40, 47, 136 S. Ct. 1885, 1892, 195 L.Ed.2d 161 (2016), and the decision to permit permissive intervention is committed to the sound discretion of the trial court, see Smith, 352 F.3d at 892. Because these actions arise out of the same factual scenario, in the interest of judicial economy, this court finds that Full House should be permitted to intervene in this action.

C. Intervention Will Not Result in Undue Delay or Prejudice

This court further finds that intervention will not result in undue delay or prejudice to the existing parties, as Plaintiff, not Full House, has created the circumstances that necessitate Full House's intervention just as Plaintiff and Defendant prepare to go to trial.

Full House argues that Plaintiff has brought his individual claims as a class action against Full House in Scott II, since he missed the May 1, 2020 deadline in Scott I to amend the pleadings or join additional parties. (Full House's Br. (Doc. 65) at 8.) Full House has presented evidence that, on February 5, 2020, counsel for Plaintiff sent a demand letter to Full House indicating Plaintiff believed Full House had not sent a pre-adverse action letter to Plaintiff prior to denying his employment, in violation of the FCRA. (Doc. 65-2 at 1.) Plaintiff's letter to Full House suggests that Plaintiff was aware, prior to the May 1, 2020 deadline, of possible claims against Full House. Yet, Plaintiff did not add Full House as a defendant, amend his pleadings to state a claim against Full House, or bring a class action against Plaintiff in a separate action at that time. Plaintiff did not file the action in Scott II until nearly one year later, on March 25, 2021. (Scott v. Full House Marketing, Inc., No. 1:21CV242 (M.D.N.C. filed March 25, 2021) (Doc. 1) at 1.) Plaintiff does not persuasively rebut Full House's allegations as to why Plaintiff delayed filing the action. (See Pl.’s Resp. (Doc. 69) at 17-19.)

Regardless of Plaintiff's reason, this court finds that it was Plaintiff who chose to delay bringing the action in Scott II. In light of the circumstances justifying intervention and Plaintiff's role in creating those circumstances, this court finds that any delay to trial in Scott I is not undue, as it is not “[e]xcessive or unwarranted.” Undue, Black's Law Dictionary (11th ed. 2019). Instead, intervention is warranted to protect Full House's interests and promote judicial economy.⁵

IV. CONCLUSION

For the reasons set forth above, this court finds that Full House's motion to intervene, (Doc. 63), should be granted.

IT IS THEREFORE ORDERED that Full House's Motion for to Intervene, (Doc. 63), is GRANTED.

FOOTNOTES

1.   All citations in this Order to documents filed with the court refer to the page numbers located at the bottom right-hand corner of the documents as they appear on CM/ECF.

2.   Plaintiff often uses adjectives or adverbs in a distracting manner. To refer to the report as “grossly inaccurate” is distracting and arguably inflammatory. No one suggests the report is inaccurate as to Derrick Lee Scott. The issue is whether the report is accurate as to Plaintiff. All parties concede it is not. The question of the nature of the conduct – whether negligent or willful – is the issue under the FCRA. This court finds that kind of inflammatory rhetoric unhelpful as part of the legal analysis by a party.

3.   Even if this court grants Defendant's motion for partial summary judgment and dismisses Plaintiff's claim for a willful violation of the FCRA, (Doc. 35), because Defendant has admitted negligent noncompliance with 15 U.S.C. § 1681e(b) in Scott I, (Doc. 32 ¶ 45), there will still be a dispute for trial regarding the damages owed to Plaintiff due to Defendant's negligence.

4.   This court recognizes that Full House's arguments regarding inconsistent verdicts are premised on the idea that Defendant is a necessary party in both Scott I and Scott II, (Full House's Br. (Doc. 65) at 4-7), and that the notice claim Plaintiff has pleaded against Full House in Scott II should have been raised in Scott I, (id. at 7-8). This would result in “improper claim splitting,” preventing Full House from defending itself in Scott II due to res judicata. (Id. at 9.) Plaintiff does not present a persuasive position to the contrary. (See Pl.’s Resp. (Doc. 69) at 14-16.)As is apparent from this court's analysis, however, this court finds only that Full House may permissively intervene pursuant to Fed. R. Civ. P. 24(b), and declines to consider whether intervention as of right is necessary pursuant to Rule 24(a). Issues of res judicata are typically only a consideration in a motion for intervention as of right. See, e.g., Spring Constr. Co. v. Harris, 614 F.2d 374, 377 (4th Cir. 1980) (holding that, under Rule 24(a), “a party need not prove that he would be bound in a res judicata sense by any judgment in the case,” but rather that intervention is required where “disposition of a case would, as a practical matter, impair the applicant's ability to protect his interest in the transaction”).

5.   This court recognizes that the party arguably most burdened by Full House's intervention at this point in the proceedings is Defendant. Nevertheless, because the facts of Defendant's actions are inextricably intertwined with those of Plaintiff and Full House, Defendant would likely have continuing involvement in Scott II, even if intervention were denied. Under these circumstances, this court finds any prejudice created by the delay is outweighed by judicial economy and the value of resolving all claims arising out of common questions of fact.

William L. Osteen, Jr., United States District Judge