## Facts

- Abel Obabueki applied for employment with International Business Machines Corp. (IBM) and received a conditional offer subject to a criminal background check.
- In 1995, Obabueki pleaded nolo contendere to a California misdemeanor, served a sentence, and completed probation.
- In 1997, a California court vacated and dismissed the conviction under a statutory dismissal procedure that set aside the plea and dismissed the accusatory instrument, with specified exceptions.
- IBM required a Security Data Sheet asking whether, within seven years, the applicant had pleaded guilty/no contest to, or been convicted of, a crime, and instructed: “Do not include convictions that have been expunged.”
- Believing the California dismissal effectively expunged the matter, Obabueki answered “no.”
- IBM retained ChoicePoint, Inc., a consumer reporting agency, to prepare a criminal background report.
- ChoicePoint reported the 1995 conviction but did not include the subsequent 1997 dismissal; its verification steps for found records were limited.
- On October 13, 1999, IBM sent Obabueki a letter enclosing the report and stating it intended to withdraw the offer based on the report.
- Obabueki responded promptly, provided the dismissal order, and disputed the report’s completeness.
- IBM concluded the 1995 disposition still had to be disclosed and treated the omission as dishonesty; IBM rescinded the offer on October 18, 1999.
- Obabueki sued IBM under the New York State Human Rights Law (NYSHRL) and the Fair Credit Reporting Act (FCRA), and sued ChoicePoint under the FCRA and N.Y. General Business Law § 349; the parties cross-moved for summary judgment.

## Issues

1. Whether IBM’s rescission violated NYSHRL § 296(15) by denying employment “by reason of” a criminal conviction.
2. Whether IBM’s consideration of the dismissed California matter violated NYSHRL § 296(16) concerning arrests or accusations not then pending or favorably terminated/sealed matters.
3. Whether IBM satisfied the FCRA’s pre-adverse-action requirements by providing the report (and required disclosures) and a meaningful opportunity to respond before final rescission.
4. Whether ChoicePoint violated the FCRA by failing to use reasonable procedures to assure maximum possible accuracy, including by reporting a conviction without noting the later vacatur/dismissal.
5. Whether ChoicePoint’s conduct supported a claim under N.Y. General Business Law § 349 for deceptive practices.

## Decision

- IBM’s motion for summary judgment was granted on the NYSHRL § 296(15) claim because IBM acted based on perceived dishonesty in the application process rather than “by reason of” the conviction itself.
- IBM’s motion for summary judgment was granted on the NYSHRL § 296(16) claim because the California disposition, as presented, did not fit the category of protected nonpending arrests/accusations or sealed/favorably terminated matters in a manner making IBM’s action unlawful.
- IBM’s motion for summary judgment was granted on the FCRA pre-adverse-action claim because IBM substantially complied by sending an “intent to withdraw” letter with the report, considering Obabueki’s response, and rescinding only after that interval.
- ChoicePoint’s motion for summary judgment was denied in part on FCRA accuracy/procedures theories because a jury could find the omission of the dismissal and limited verification rendered the report materially incomplete or misleading.
- ChoicePoint’s motion for summary judgment was granted on the N.Y. General Business Law § 349 claim because the dispute involved a private employment background check rather than consumer-oriented conduct directed at the public.

## Legal Principles

- NYSHRL § 296(15) prohibits adverse employment action “by reason of” a criminal conviction, but does not bar an employer from acting on a nonprohibited, nondiscriminatory rationale such as perceived dishonesty in the application process, even if the conviction is part of the factual context.
- NYSHRL § 296(16) limits adverse action based on certain arrests or accusations not then pending and certain sealed/favorably terminated matters; a prior disposition may fall outside the statute’s protected categories depending on its legal character and how it is treated by the employer.
- Under FCRA § 1681b(b)(3), before adverse action based in whole or in part on a consumer report, an employer must provide the consumer with the report and required rights information and allow a reasonable chance to dispute inaccuracies before the action becomes final.
- A consumer reporting agency must follow reasonable procedures to assure maximum possible accuracy; a report may be actionable if it is materially incomplete or misleading, including where it omits subsequent vacatur/dismissal information that bears on the practical meaning of a conviction record.
- N.Y. General Business Law § 349 generally requires consumer-oriented conduct affecting the public at large; a private dispute over an employment background check typically does not satisfy that element.

## Conclusion

The court awarded summary judgment to IBM on NYSHRL and FCRA theories, holding that IBM’s decision was grounded in perceived application dishonesty and that IBM substantially complied with FCRA pre-adverse-action procedures, while allowing limited FCRA accuracy/procedures claims against ChoicePoint to proceed and dismissing the § 349 claim for lack of consumer-oriented conduct.


Obabueki v. Int'l Bus. Machs. Corp., 145 F. Supp. 2d 371 (S.D.N.Y. 2001)