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KARRAKER v. RENT-A-CENTER

January 8, 2003

STEVEN L. KARRAKER, MICHAEL A. KARRAKER, AND CHRISTOPHER M. KARRAKER, PLAINTIFFS,
v.
RENT-A-CENTER, INC., J. ERNEST TALLEY,[FN1] AND ASSOCIATED PERSONNEL TECHNICIANS, DEFENDANTS.



The opinion of the court was delivered by: Michael P. McCUSKEY, United States District Judge

This court has reviewed the Magistrate Judge's reasoning and the objections of the parties. After a thorough and careful de novo review, this court will allow the filing of the Second Amended Complaint, dismiss the FCRA claim, limit the invasion of privacy claim to public disclosure of private facts, and dismiss one defendant for want of personal jurisdiction.

BACKGROUND

Plaintiffs' Amended Complaint (#4) sought to initiate a class action lawsuit against Rent-A-Center, Inc. (RAC); J. Ernest Talley, RAC's Chairman of the Board and Chief Executive Officer; and Associated Personnel Technicians (APT). Plaintiffs, current and former employees of RAC, alleged that RAC required all employees or outside applicants seeking management positions to take a battery of written tests, collectively referred to as the Management Test. Several tests included in the Management Test were personality inventories that inquired about personal information including sexual preferences and orientation, religious beliefs and practices, and medical conditions.

APT scored and interpreted the Management Test for RAC, creating a two-page psychological profile about the individuals. RAC distributed this report to the employees' immediate supervisor and placed a copy of it in the employees' personnel file. RAC used the test results in deciding which employees to promote and what additional training to require. Plaintiffs assert that RAC formulated no policy or procedure for keeping the test results confidential.

Plaintiffs' Amended Complaint sought relief based on four legal theories: a violation of the Fair Credit Reporting Act (FCRA); a violation of the Illinois Mental Health and Developmental Disabilities Confidentiality Act; engaging in the practice of psychology without a license and committing malpractice; and invasion of privacy. RAC filed a Motion to Dismiss Amended Complaint (#6), along with a Memorandum of Law in Support (#7). Plaintiffs responded to the Motion to Dismiss (#22), and also filed a Motion to Allow Filing Second Amended Complaint (#23), which includes an additional count based on a violation of the Americans With Disabilities Act, 42 U.S.C. § 12101, et seq. (ADA). RAC filed a Memorandum in Opposition to Plaintiffs' Motion to Allow Filing of Second Amended Complaint (#26), arguing that Plaintiffs' proposed ADA claim is meritless. Defendant APT adopted this argument (#30).

Plaintiffs tendered a Reply (#46), further explaining and justifying their ADA claim. By letter dated July 1, 2002, RAC notified this court that it wished to continue its Motion to Dismiss in spite of Plaintiffs' request to file a second amended complaint.

Defendant Talley filed a Motion to Dismiss Amended Complaint (#24), and a Memorandum of Law in Support (#25). Plaintiffs filed a Response to Defendant Talley's Motion to Dismiss (#45).

Not wanting to be left out (or "in" the lawsuit, as the case may be), APT filed a Motion to Dismiss Amended Complaint (#32), and a Memorandum in Support (#33). Additionally, APT adopted (#31-32) the arguments set forth in Talley's motion to dismiss and memorandum in support and the arguments RAC raised in its motion to dismiss and accompanying memorandum. Plaintiffs' submitted a Response to APT's Motion to Dismiss (#44).

After thoughtful analysis, the Magistrate Judge's Report and Recommendation (R&R) (#60) recommends first denying Plaintiffs' motion to file a Second Amended Complaint because Plaintiffs could not state a claim under the ADA. The R&R also recommends dismissing the FCRA claim as to APT because the employee profiles it generated from the individual responses to the Management Test do not fall under the purview of the FCRA and because APT was not acting as a third-party consumer reporting agency. The R&R also concludes that Plaintiffs cannot state a claim against RAC under the FCRA because RAC was also not acting as a consumer reporting agency. After disposing of the ADA claim and the FCRA claim, the Magistrate Judge recommends that this court decline to exercise supplemental jurisdiction over the state law claims in Plaintiffs' Amended Complaint.

Plaintiffs filed objections to the R&R (#68), disputing the Magistrate Judge's conclusion about their ADA claim, but not challenging the FCRA analysis. On that same day, RAC filed an Objection to Recommendation to Decline Jurisdiction Over Plaintiffs' State Law Claims (#67), arguing that this court has federal diversity jurisdiction over the state law claims and so should rule on the merits of RAC's motion to dismiss those claims, even if the court elects to dismiss the federal claims. This court ordered Plaintiffs to respond, and they did so (#69), agreeing that diversity jurisdiction exists and tendering a Third Amended Complaint that explicitly pleads diversity should this court find no viable federal claim.

ANALYSIS

After receiving an objection from either party concerning the Magistrate Judge's R&R, this court must conduct a de novo review to those portions of the R&R in dispute. Fed.R.Civ.P. 72(b); Kruger v. Apfel, 214 F.3d 784, 787 (7th Cir. 2000).

1. ADA Claim*fn2

The Magistrate Judge recommended denying Plaintiffs' request for leave to file an amended complaint because he determined the proposed ADA claim to be without merit. Specifically, he concluded that Plaintiffs must be qualified individuals with disabilities in order to assert a prayer for relief under the ADA.

Plaintiffs are not claiming that they are disabled under the statute, but they disagree that the particular provision at issue requires them to be.

In the context of employment, the ADA prohibits discrimination against "a qualified individual with a disability . . . in regard to job application procedures, the hiring, advancement, or discharge of employees, employee compensation, job training, and other terms, conditions, and privileges of employment." 42 U.S.C. § 12112(a). Concerning medical examinations and inquiries, the statute sets forth the general statement that "[t]he prohibition against discrimination as referred to in subsection (a) of this section shall include medical examinations and inquiries." § 12112(d)(1). The ADA then outlines separate rules governing examinations and inquiries for job applicants who have not received an offer of employment (§ 12112(d)(2)), applicants who have received an offer of employment but have not yet commenced working for the entity (§ 12112(d)(3)), and current employees (§ 12112(d)(4)). For job applicants who have not received an offer of employment, an employer may only ask about the applicant's ability to perform job-related functions, § 12112(d)(2)(B), but may not inquire whether the applicant has a disability, § 12112(d)(2)(A). 29 C.F.R. § 1630.14(a). After extending an offer of employment to an applicant, an employer may condition that offer on the results of a medical examination provided that all entering employees are subject to the examination and that the results are maintained as confidential medical records. § 12112(d)(3); 29 C.F.R. § 1630.14(b). Once the period of employment has commenced, the employer may not inquire whether an employee has a disability unless the examination or inquiry is "job-related and consistent with business necessity." § 12112(d)(4)(A); 29 C.F.R. § 1630.14(c).

The crucial issue before this court is whether an individual must be a "qualified individual with a disability" in order to bring a claim that an employer required improper or unauthorized medical inquiries. Turning first to case law from the Courts of Appeals for guidance, it appears that the Seventh Circuit has not squarely addressed the issue. In Murdock v. Washington, 193 F.3d 510 (7th Cir. 1999), the court made a passing reference to § 12112(d), and in dicta noted that the statute "does not require that an individual be disabled to state a claim." Id. at 512. Three years later, however, when faced with the question more directly, the court asserted that it had not yet decided the issue, and it declined to do so then. O'Neal v. City of New Albany, 293 F.3d 998, 1007 (7th Cir. 2002).

Second, the courts found this interpretation of the statute to be superior because it is consistent with the policy behind the medical examination and inquiries provisions. "[P]rotecting only qualified individuals," the Fredenburg court reasoned, "would defeat much of the usefulness of those sections." Fredenburg, 172 F.3d at 1182. Relying on legislative history, the Griffin court recognized that Congress intended to curtail all questioning that would identify persons with disabilities. Griffin, 160 F.3d at 594. And all three circuits agreed that "[i]t makes little sense to require an employee to demonstrate that he has a disability to prevent his employer from inquiring as to whether or not he has a disability." Roe, 124 F.3d at 1229 (internal quotation marks and citation omitted).

In addition to the appellate courts, two district courts in circuits that have not addressed this issue have also held that a nondisabled plaintiff may state a cause of action under § 12112(d)(2)-(4). Pollard v. City of Northwood, 161 F. Supp.2d 782 (N.D.Ohio. 2001); Mack v. Johnstown Am. Corp., 1999 WL 304276 (W.D.Pa. 1999). These decisions relied on the circuit court opinions discussed above and supported their holdings with very similar reasoning.

One district court opinion, Varnagis v. City of Chicago, 1997 WL 361150 (N.D.Ill. 1997), which both RAC and the Magistrate Judge cited, has answered this question differently. Varnagis interprets the plain language of the statute to require plaintiffs bringing claims under § 12112(d) to be qualified individuals with disabilities. The district judge in Varnagis specifically relied on the reference in § 12112(d)(1) to subsection (a) which prohibits discrimination against "a qualified individual with a disability." And although §§ 12112(d)(2)-(4) use the terms "job applicants" and "employees," the district judge determined that the statute does not specifically define those terms, and a logical reading of the statute incorporates the general rule set forth in (d)(1) and therefore the narrower definition of who is protected by the statute. Varnagis, 1997 WL 361150, at *6-7. Moreover, the court reasoned that the ADA was designed to protect individuals with disabilities, whether real or perceived, and Congress gave no suggestion that it intended the provisions of the ADA to apply to persons without disabilities. Id. at *7.

The Varnagis opinion, along with RAC and the Magistrate Judge, cites to Armstrong v. Turner Indus., Ltd., 950 F. Supp. 162 (M.D.La. 1996), as further support of its conclusion. Although Armstrong held that the plaintiff must be a qualified individual with a disability, id. at 167, on appeal the Fifth Circuit affirmed the district court, but on a different basis, declining to address the issue of whether a disability is required under § 12112(d). Armstrong v. Turner Indus., Inc., 141 F.3d 554, 558 (5th Cir. 1998).

Although the reasoning of the Magistrate Judge is not inherently flawed or entirely unsupported, it appears that the great weight of case law supports the opposite conclusion. On de novo review, this court is forced to conclude that, for the reasons articulated by the Eighth, Ninth, and Tenth Circuits, the better interpretation of § 12112(d) does not require that Plaintiffs be qualified individuals with disabilities in order to state a claim. Accordingly, Plaintiffs' addition of an ADA claim to their complaint would not be futile.

RAC also argues that Plaintiffs' ADA claim would be untimely. In response, however, Plaintiffs identified at least one challenged act that occurred within the 300-day period as they calculate it. At this stage in the proceedings, therefore, this court cannot conclude that Plaintiffs' ADA claim is barred by the statute of limitations. Their motion to amend their complaint is granted ...


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