The rapid rise of artificial intelligence (“AI”) has seen many positive results for retailers and other industries, including improved efficiencies, reduced costs, fraud detection, and improved inventorying, among others. AI, however, has also created problems for those who utilize it irresponsibly. In the legal profession, we have seen story after story of lawyers citing cases that do not exist, resulting in substantial sanctions and other disciplinary measures, including loss of license. Another area that may be problematic is the use of AI in employment decisions.
In January 2026, Kistler et al. v. Eightfold AI Inc. was filed as a class action in Contra Costa County Superior Court in California before it was removed to the United States District Court in the Northern District of California. The plaintiffs allege a violation of the Fair Credit Reporting Act (FCRA) on the theory that the mass collection of applicant data and the scoring of candidates from sources outside of an application creates a consumer report. If, in fact, the information gathered and scored does create a consumer report, then the FCRA has disclosure, authorization, and an opportunity to dispute requirements that Eightfold did not adhere to.
The FCRA angle is definitely a fascinating theory and, to my knowledge, an issue of first impression. The case remains pending in the District Court, with Eightfold’s motion to dismiss scheduled to be heard in the coming weeks. Suffice it to say, the result of this case has the potential to have an industry-wide impact on companies that use AI recruiting and those who develop and market the product. Should the plaintiff prevail, it is not just Eightfold that can be subject to financial penalties. Retailers and others who use the service could also face lawsuits depending on how they utilized the information.
Many AI legal issues will emerge over the next decade or more. I will keep an eye on this case in the coming weeks and will report back. As a practical first step to protecting yourself, consider adopting an AI governance policy for your business. I will go into more detail in a future article on this topic, but the suggestion seems appropriate here given the Eightfold case. Plus, a sound written policy is never a bad idea.