Lengel v. HomeAdvisor, Inc.
Filing
55
MEMORANDUM AND ORDER. IT IS THEREFORE ORDERED that plaintiffs' unopposed Motion For Preliminary Approval Of Class Action Settlement (Doc. #49) filed November 18, 2015 be and hereby is SUSTAINED in part. IT IS FURTHER ORDERED that pursuant to Fe deral Rule of Civil Procedure 23(c), the Court preliminarily certifies the following settlement class: All applicants for employment with HomeAdvisor about whom HomeAdvisor procured a consumer report for employment purposes at any time from January 1 3, 2013 through June 10, 2015, excluding any individuals who timely file a valid written notice of intent to opt out of the Settlement. IT IS FURTHER ORDERED that the Court appoints Emerald Lengel as class representative for the settlement class. The Court appoints Kai H. Richter of Nichols Kaster, PLLP and Michael F. Brady and Mark Kistler of Brady & Associates as class counsel for the settlement class. IT IS FURTHER ORDERED that on or before February 6, 2017, plaintiffs may file a motion for preliminary approval of a revised settlement and for approval of a revised proposed class notice. Signed by District Judge Kathryn H. Vratil on 1/25/2017. (hl)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
EMERALD LENGEL,
on behalf of herself and all those
similarly situated,
)
)
)
)
Plaintiffs,
)
v.
)
)
)
HOMEADVISOR, INC.,
)
)
Defendant.
)
__________________________________________)
CIVIL ACTION
No. 15-2198-KHV
MEMORANDUM AND ORDER
Emerald Lengel brings this putative class action on behalf of all persons who applied for
employment with defendant HomeAdvisor, Inc., between January 13, 2013 and June 10, 2015.
Plaintiffs claim that HomeAdvisor violated the Fair Credit Reporting Act (“FCRA”), 15 U.S.C.
§ 1681b(b)(2)(A)(i). Specifically, plaintiffs allege that HomeAdvisor failed to provide job
applicants a stand-alone disclosure stating that it would obtain a consumer report (background
check) for employment purposes. Plaintiffs also allege that these violations were willful, and thus
triggered statutory penalties under 15 U.S.C. § 1681n(a)(1)(A).
This matter comes before the Court on plaintiffs’ unopposed Motion For Preliminary
Approval Of Class Action Settlement (Doc. #49) filed November 18, 2015. Plaintiffs seek
(1) preliminary certification of the proposed settlement class, (2) preliminary settlement approval,
(3) appointment of Lengel as representative of the settlement class, (4) appointment of Lengel’s
attorneys as class counsel and (5) approval of the proposed class notice. For reasons set forth below,
the Court sustains plaintiffs’ motion in part.
Factual And Procedural Background
Plaintiffs allege the following facts:
On November 25, 2013, Lengel submitted a job application to HomeAdvisor.1 The five-page
application contained two disclosures which plaintiffs allege violated the FCRA. The first three
pages of the application seek “basic information” such as name, address, position applied for,
education, prior work history, references and prior convictions. Doc. #1-2. The fourth page
includes a section labeled “Acknowledgment and Signature” which states that the applicant has no
agreement with a prior employer which would restrict or impair employment with HomeAdvisor;
that the employment relationship with HomeAdvisor would be as an at-will employee; that the
applicant understood that policy statements or handbooks or other materials did not constitute a
guarantee of employment; that HomeAdvisor had the right to modify, amend or terminate its
policies, practices, programs and benefit plans; and that the applicant understood that HomeAdvisor
would rely upon the accuracy and completeness of the applicant ’s statements. Finally, the
acknowledgment section states as follows:
I authorize investigation of all statements contained in this application and permit
HomeAdvisor to obtain any transcripts, records or documents pertaining to my
background and business experience. I also agree to release HomeAdvisor from any
liability arising therefrom and understand that any misstatements, omissions or false
statements made by me may be cause for dismissal.
Doc. #1-2 ¶ 18. Lengel signed and dated the fourth page.2
1
HomeAdvisor hired Lengel on the day that she completed the job application,
contingent on a satisfactory background check. On December 2, 2013, Lengel began working for
HomeAdvisor.
2
In ruling on HomeAdvisor’s motion to dismiss, the Court noted that first four pages
of the exhibit have a bold line border. The fifth page does not, suggesting that it is a different
(continued...)
2
The fifth page is the “Background Check Authorization: Applicant Information Release
Form,” which states as follows:
I hereby authorize HomeAdvisor and/or [its] authorized agents to gather information
regarding the following: All records including criminal, credit, driving, drug, and/or
education; written or verbal from previous employers; and any other pertinent
information relating to the function of my job.
I understand that all inquiries on this form are used for identification purposes only
in order to conduct a background check, and are asked for legitimate
nondiscriminatory reasons. Responses to sex, age and race inquir[i]es are voluntary,
and choosing not to respond will not preclude hire. I hereby release HomeAdvisor
and any of its authorized agents from liability, and understand there is no invasion
of privacy. I understand that submission of false information on this or any
employment forms m[a]y result in nonselection or termination if hired. The
following is my complete legal name, and all information is true and correct to the
best of my knowledge. This information is used for verification purposes ONLY:
Doc. #1-2. Below these paragraphs are blank fields for the applicant’s name, the position applied
for, race, sex and current and previous address. This information duplicates some of the information
on the first three pages. The fifth page also contains a signature line.
On January 13, 2015, Lengel filed this lawsuit alleging that the HomeAdvisor application
violated the FCRA requirement that an employer disclose a request to procure a consumer report
in a document that consists solely of the disclosure.
On February 24, 2015, HomeAdvisor filed a motion to dismiss the complaint for failure to
state a claim, arguing that the background check disclosure complied with the FCRA and that Lengel
did not adequately allege a willful violation of the FCRA. See Doc. #12. The Court overruled the
motion to dismiss, finding that Lengel alleged a plausible claim under the FCRA. See Memorandum
2
(...continued)
document than the first four pages.
3
And Order (Doc. #20.
The parties have engaged in extensive discovery. On September 16, 2015, the parties
participated in a full-day mediation with Honorable Wayne Anderson, Retired, of JAMS. See
Richter Decl. ¶ 9. On September 23, 2015, the parties reached an agreement in principle and over
the next few weeks they executed a Settlement Agreement. See Settlement Agreement And Release
(Doc. #53-1) filed November 18, 2015.
The Settlement Agreement contemplates a nationwide settlement class defined as follows:
All applicants for employment with HomeAdvisor about whom HomeAdvisor
procured a consumer report for employment purposes at any time from January 13,
2013 through June 10, 2015, excluding any individuals who timely file a valid
written notice of intent to opt out of the Settlement.
Id. at ¶ 25.3 The settlement class includes approximately 1,650 persons. Garcia-Lewis Decl. ¶ 4.
Under the settlement agreement, HomeAdvisor will establish a $190,000 settlement fund to
compensate settlement class members and pay any amounts which the Court approves for attorneys’
fees, expenses and a class representative service award. Doc. #53-1 at ¶ 29. The settlement
agreement provides that in addition to the $190,000 fund, HomeAdvisor will pay all administrative
costs of settlement, including the cost of disseminating notice and distributing settlement payments.
Id. at ¶ 36.
The settlement agreement does not require class members to fill out a claim form to receive
compensation. Rather, if the Court approves the settlement, HomeAdvisor will automatically send
checks to settlement class members by first-class mail. Id. at ¶ 31. HomeAdvisor will use the
address which it has on file for each class member, updated for former employees by
3
The class period ends June 10, 2015 because HomeAdvisor changed its background
check disclosure after that date. See Garcia-Lewis Decl. ¶ 3.
4
cross-referencing the National Change of Address Database. Id.4
In exchange for this monetary payment, class members will release all claims “arising out
of or relating to the facts alleged in the complaint including but not limited to any and all claims
under the FCRA, including specifically 15 U.S.C. § 1681b(b)(2)(A), and any parallel or similar state
or common-law claims.” Id. at ¶ 38.5
HomeAdvisor will send notice of the settlement by first-class mail. Id. at ¶ 39. Class
members will have 60 days from the mailing date to object or opt out of the settlement. Id. at ¶ 13.
HomeAdvisor will re-send any class notice that is returned to the settlement administrator with a
forwarding address. Id. at ¶ 40. If no forwarding address is provided, HomeAdvisor will make
reasonable efforts to obtain a valid address by calling the last known phone number, emailing the
last known email address and searching online for an address. Id.
The proposed notice of settlement includes, among other things: (1) a summary of the
lawsuit; (2) the definition of the settlement class; (3) a description of the material terms of the
settlement; (4) a disclosure of the release of claims; (5) an explanation of settlement class members’
opt-out rights, the date by which class members must opt out and information regarding how to opt
out; (6) instructions how to object to the settlement and the due date for objections; (7) the date, time
4
If the U.S. Postal Service returns any settlement payment with a forwarding address
before the check expires, HomeAdvisor will promptly re-mail the check to the forwarding address.
Settlement Agreement, Doc. #53-1 at ¶ 31. If the settlement payment is returned without a
forwarding address, HomeAdvisor will make reasonable efforts to obtain a current address for the
pertinent settlement class member by calling the last known phone number, emailing the last known
email address, and, if necessary, searching online for an address. Id.
5
This release will apply to HomeAdvisor and its affiliates, parent companies,
subsidiaries, predecessors, successors, corporate family members, officers, directors, partners,
employees, attorneys, agents, shareholders, representatives, trustees, principals, and assigns.
Doc. #53-1 at ¶ 24.
5
and location of the final approval hearing; (8) how to obtain further information regarding the
settlement; (9) contact information for class counsel; and (10) information regarding the amount that
class counsel may seek in attorneys’ fees ($63,333) plus expenses, as well as the proposed class
representative service award (up to $1,000). Proposed Notice Of Settlement (Doc. # 53-2) filed
November 18, 2015.
Analysis
Plaintiffs seek (1) preliminary certification of the proposed settlement class, (2) preliminary
settlement approval, (3) appointment of Lengel as representative of the settlement class,
(4) appointment of Lengel’s attorneys as class counsel and (5) approval of the proposed class notice.
HomeAdvisor does not oppose the motion.
I.
Preliminary Settlement Class Certification
A.
Class Certification Standards
The class action is an exception to the usual rule that litigation is only conducted by and on
behalf of individual named parties. Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541, 2550 (2011).
Whether to certify a class is left to the broad discretion of the trial court. See Shook v. El Paso Cty.,
386 F.3d 963, 967 (10th Cir. 2004). The Court must conduct a rigorous analysis to determine
whether the parties seeking certification have shown that the putative class satisfies the prerequisites
of Rule 23. Dukes, 131 S. Ct. at 2551. While Rule 23 does not give the Court license to conduct
free-ranging merits inquiries at the certification stage, the Court may consider the merits of a suit
“to the extent – but only to the extent – that they are relevant to determining whether the Rule 23
prerequisites are satisfied.” Amgen v. Conn. Ret. Plans & Trust Funds, 133 S. Ct. 1184, 1194-95
(2013).
6
As the party seeking class certification, plaintiffs have the burden to prove that the
requirements of Rule 23 are met. D. Kan. Rule 23.1(d); Shook, 386 F.3d at 968; see Dukes, 133
S. Ct. at 2553 (citing Gen. Tel. Co. v. Falcon, 457 U.S. 147, 159 (1982)). Under a strict burden of
proof, plaintiffs must affirmatively demonstrate that the requirements of Rule 23 are clearly
satisfied. Dukes, 131 S. Ct. at 2551; Trevizo v. Adams, 455 F.3d 1155, 1162 (10th Cir. 2006).
Plaintiffs must first satisfy the prerequisites of Rule 23(a), that is, they must demonstrate that (1) the
class is so numerous that joinder of all members is impracticable, (2) questions of law or fact are
common to the class, (3) the claims of the representative parties are typical of the claims of the class
and (4) the representative parties will fairly and adequately protect the interests of the class.
Fed. R. Civ. R. 23(a). After meeting these requirements, plaintiffs must demonstrate that the
proposed class action fits within one of the categories described in Rule 23(b), Fed. R. Civ. P.
Plaintiffs seek to proceed under Rule 23(b)(3), which requires that “questions of law or fact
common to class members predominate over any questions affecting only individual members and
that a class action is superior to other available methods for fairly and efficiently adjudicating the
controversy.” Fed. R. Civ. P. 23(b)(3). In determining predominance and superiority under
Rule 23(b)(3), the Court considers the following factors:
(A)
(B)
(C)
(D)
the class members’ interests in individually controlling the prosecution or
defense of separate actions;
the extent and nature of any litigation concerning the controversy already
begun by or against class members;
the desirability or undesirability of concentrating the litigation of claims in
the particular forum; and
the likely difficulties in managing the action.
Fed. R. Civ. P. 23(b)(3)(A)-(D). In deciding whether to certify a settlement class, the Court need
not inquire whether the case, if tried, would present difficult management problems under
7
Rule 23(b)(3)(D). See Amchem Prods. v. Windsor, 521 U.S. 591, 620 (1997). All of the other
requirements apply, however, and demand heightened attention in the settlement context. Id. Such
attention is vital because in the settlement context, the Court generally lacks an opportunity to adjust
the class as it becomes informed by the proceedings as they unfold. See id.
B.
Rule 23(a) Requirements
As noted, plaintiffs seek conditional certification of the following settlement class:
All applicants for employment with HomeAdvisor about whom HomeAdvisor
procured a consumer report for employment purposes at any time from January 13,
2013 through June 10, 2015, excluding any individuals who timely file a valid
written notice of intent to opt out of the Settlement.
Settlement Agreement And Release (Doc. #53-1) filed November 18, 2015, at ¶25. HomeAdvisor’s
records indicate that the settlement class includes approximately 1,650 individuals.
1.
Numerosity
Rule 23(a)(1) requires plaintiffs to show that “the class is so numerous that joinder
of all members is impracticable.” Fed. R. Civ. P. 23(a)(1); see Trevizo, 455 F.3d at 1162 (plaintiffs
must produce evidence to meet numerosity requirement). As noted, plaintiffs represent that the
settlement class includes 1,650 members. Although there is no strict numerical test, the “per se
numerosity threshold seems to exist somewhere south of 150 proposed class members.” Anderson
Living Tr. v. WPX Energy Prod., LLC, 306 F.R.D. 312, 379, 436 (D.N.M. 2014) (citing Mullen v.
Treasure Chest Casino, LCC, 186 F.3d 620, 624 (5th Cir. 1999) (class of 100 to 150 members within
range that generally satisfies numerosity requirement)). The Court finds that plaintiffs satisfy the
numerosity requirement.
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2.
Commonality
Rule 23(a)(2) requires plaintiffs to show that “questions of law or fact are common
to the class.” Fed. R. Civ. P. 23(a)(2). Merely raising common questions, however, does not
automatically satisfy the commonality requirement. See Dukes, 131 S. Ct. at 2551. Plaintiffs must
demonstrate that they have suffered the same injury, and their claims must rely on a common
contention that is capable of classwide resolution. Id. A question is “common” if its truth or falsity
will resolve an issue that is central to the validity of every claim in one stroke. Id. To satisfy
Rule 23(a)(2), a single common question will do. Id. The commonality requirement of Rule 23(a)
is satisfied “when the legal question linking the class members is substantially related to the
resolution of the litigation.” DeBoer v. Mellon Mortg. Co., 64 F.3d 1171, 1174 (8th Cir. 1995)).
Here, common questions are clear. Plaintiffs allege numerous common issues of law and
fact, including (1) whether HomeAdvisor’s background check disclosure was part of the
employment application or a “stand-alone” document; (2) whether HomeAdvisor’s background
check disclosure violated the FCRA because it contained extraneous information and if so,
(3) whether HomeAdvisor “willfully” violated the FCRA. Every member of the settlement class
received the same background check disclosure. A class action will therefore generate common
answers to questions that are central to every claim.
3.
Typicality And Adequacy Of Representation
The typicality and adequacy of representation requirements of Rule 23(a) tend to
merge, “although the latter requirement also raises concerns about the competency of class counsel
and conflicts of interest.” Dukes, 131 S.Ct. at 2551 n.5 (citing Falcon, 457 U.S. at 157-58).
Rule 23(a)(3) requires plaintiffs to show that “the claims of the representative parties are typical of
9
the claims of the class.” Fed. R. Civ. P. 23(a)(3). This element requires that a representative
plaintiff possess the same interests and suffer the same injuries as the proposed class members.
Falcon, 457 U.S. at 156. The claims of the representative plaintiff need not be identical, however,
to those of the other class members. DG ex rel. Stricklin v. Devaughn, 594 F.3d 1188, 1198 (10th
Cir. 2010). As long as the claims of named plaintiff and class members are based on the same legal
or remedial theory, differing fact situations of the class members do not defeat typicality. Id.
Rule 23(a)(4) requires plaintiffs to show that “the representative part[y] will fairly and
adequately protect the interests of the class.” Fed. R. Civ. P. 23(a)(4). To meet this requirement,
the representative plaintiff must show that (1) her interests do not conflict with the interests of other
class members and (2) she will prosecute the action vigorously through qualified counsel. See
E. Tex. Motor Freight Sys., Inc. v. Rodriguez, 431 U.S. 395, 403 (1977); Rutter & Wilbanks Corp.
v. Shell Oil Co., 314 F.3d 1180, 1187-88 (10th Cir. 2002); Harlow v. Sprint Nextel Corp., 254
F.R.D. 418, 425 (D. Kan. 2008). To defeat class certification a conflict must be “fundamental” and
speak to specific issues in controversy. Minor conflicts are not enough. Eatinger v. BP Am. Prod.
Co., No. 07-1266-EMF, 2010 WL 3023957, at *4 (D. Kan. Aug. 2, 2010).
Lengel asserts that plaintiffs satisfy the typicality requirement because her claims and the
claims of other class members arise out of the same alleged course of conduct, are based on the
same legal theories and require the same evidence to prove. Lengel contends that she will
adequately represent absent class members because she has no interests which are antagonistic to
the class and has demonstrated her allegiance to this litigation through her participation in the
settlement process on behalf of all putative class members. See Amchem, 521 U.S. at 625; Carpe
v. Aquila, Inc., 224 F.R.D. 454, 458 (W.D. Mo. 2004)). Based on these representations, the Court
10
finds that Lengel is an adequate representative of the settlement class. Moreover, Lengel’s counsel,
Kai H. Richter of Nichols Kaster, LLP and Michael F. Brady and Mark Kistler of Brady &
Associates have extensive experience litigating class action cases, including disclosure cases under
the FCRA, and are clearly adequate to represent the settlement class in this case. See Richter Decl.
¶¶ 16-20; see Rutter, 314 F.3d at 1187-88.
C.
Rule 23(b) Requirements
In addition to satisfying Rule 23(a), parties seeking class certification must meet the
requirements of Rule 23(b)(1), (2), or (3). Amchem 521 U.S. at 623. Plaintiffs ask the Court to
certify a settlement class under Rule 23(b)(3). Under that provision, plaintiffs must show that
“questions of law or fact common to members of the class predominate over any questions affecting
individual members” and that a class action “is superior to other available methods for fairly and
efficiently adjudicating the controversy.” Fed. R. Civ. P. 23(b)(3). The predominance requirement
tests whether the proposed class is sufficiently cohesive to warrant adjudication by representation.
Amchem, 521 U.S. at 623. The superiority requirement insures that no other available method of
handling the claims has greater practical advantages. See In re Universal Serv. Fund Tele. Billing
Practices Litig., 219 F.R.D. 661, 679 (D. Kan. 2004). In determining predominance and superiority
under Rule 23(b)(3), the Court considers the following factors:
(A)
(B)
(C)
(D)
the class members’ interests in individually controlling the prosecution or
defense of separate actions;
the extent and nature of any litigation concerning the controversy already
begun by or against class members;
the desirability or undesirability of concentrating the litigation of claims in
the particular forum; and
the likely difficulties in managing the action.
Fed. R. Civ. P. 23(b)(3)(A)-(D).
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1.
Predominance
The predominance prong “asks whether the common, aggregation-enabling, issues in the
case are more prevalent or important than the noncommon, aggregation-defeating, individual
issues.” CGC Holding Co., LLC v. Broad & Cassel, 773 F.3d 1076, 1087 (10th Cir. 2014). Here,
the predominant issue is whether HomeAdvisor’s background check disclosure form complied with
the FCRA. Because every settlement class member received the same disclosure form, this issue
is susceptible to class-wide resolution. Further, the question whether HomeAdvisor willfully
violated the FCRA is the same for each settlement class member. Finally, as to damages, there are
no individualized issues because the statutory damages available to each settlement class member
are the same. The Court finds that common questions predominate over individual questions.
2.
Superiority
Plaintiffs state that a class action is superior to other available methods because class
members would have little incentive to proceed with individual cases, each of which concerns a
relatively small amount of money compared to costs and uncertainty of litigation. The Court agrees
that a class action would be superior to individual actions.
Accordingly, the Court will
conditionally certify the proposed settlement class subject to plaintiffs demonstrating at the final
approval hearing – “under a strict burden of proof”—that the requirements of Rule 23(a) and (b)(3)
are clearly satisfied.
II.
Preliminary Approval Of Proposed Settlement
Under Rule 23(e), Fed. R. Civ. P., once a class is certified, the action may not be settled,
dismissed or compromised without Court approval. Preliminary approval of a proposed settlement
is the first of two steps required before a class action may be settled. In re Motor Fuel Temp. Sales
12
Practices Litig., 258 F.R.D. 671, 675 (D. Kan. 2009). If the Court grants preliminary approval, it
directs notice to class members and sets a hearing to determine the fairness of the class settlement.
Id.
At the preliminary approval stage, the Court makes a preliminary evaluation of the fairness
of the proposed settlement and determines whether the proposed settlement is within the range of
possible approval, i.e. whether there is any reason not to notify class members of the proposed
settlement and proceed with a fairness hearing. See Gautreaux v. Pierce, 690 F.2d 616, 621 n.3
(7th Cir. 1982); Freebird, Inc. v. Merit Energy Co., No. 10-1154-KHV, 2012 WL 6085135 (D. Kan.
Dec. 6, 2012); In re Motor Fuel Temp. Sales Practices Litig., 258 F.R.D. at 675-76. The Court will
ordinarily grant preliminary approval where the proposed settlement appears to be the product of
serious, informed, non-collusive negotiations; has no obvious deficiencies; does not improperly
grant preferential treatment to class representatives or segments of the class; and falls within the
range of possible approval. The standards for preliminary approval of a class settlement are not as
stringent as the requirements for final approval. Freebird, 2012 WL 6085135, at *5. The Court is
mindful, however, that a higher degree of scrutiny applies when determining the fairness of a
settlement negotiated before class certification. In re Motor Fuel Temp. Sales Practices Litig., 258
F.R.D. at 676.
In deciding whether to approve a proposed settlement, the Court assesses the reasonableness
of the compromise, taking into account the context in which the parties reached the settlement. See
id. (citing Nat’l Treasury Emp. Union v. United States, 54 Fed. Cl. 791, 797 (2002)). Although the
Court must assess the strength of plaintiffs’ claims, it should “not decide the merits of the case or
resolve unsettled legal questions.” Id. (citing Carson v. Am. Brands, Inc., 450 U.S. 79, 88 n.14
13
(1981)).
Plaintiffs ask the Court to preliminarily approve the proposed settlement. In determining
whether a proposed settlement is fair, reasonable and adequate, the Court considers the following
factors:
(1)
(2)
(3)
(4)
whether the proposed settlement was fairly and honestly negotiated;
whether serious questions of law and fact exist, placing the ultimate outcome
of the litigation in doubt;
whether the value of an immediate recovery outweighs the mere possibility
of future relief after protracted and expensive litigation; and
the judgment of the parties that the settlement is fair and reasonable.
Rutter & Wilbanks Corp. v. Shell Oil Co., 314 F.3d 1180, 1188 (10th Cir. 2002). While the Court
will consider these factors in greater depth at the final approval hearing, they are a useful guide at
the preliminary approval stage as well. See In re Motor Fuel Temp. Sales Practices Litig., 258
F.R.D. at 675; Lucas v. Kmart Corp., 234 F.R.D. 688, 693 (D. Colo. 2006); Am. Med. Ass’n v.
United Healthcare Corp., No. 00-2800(LMM), 2009 WL 1437819, at *3 (S.D.N.Y. May 19, 2009).
Here, the first, second and fourth factors weigh in favor of preliminary approval. As to the
first factor, it appears the parties negotiated the settlement fairly and honestly. The parties are
represented by counsel with experience in class action litigation. They engaged in extensive armslength negotiations which produced this proposed settlement.
As to the second factor, questions of law and fact remain. Specifically, although plaintiffs
successfully defeated a motion to dismiss the lawsuit, HomeAdvisor has asserted several defenses
to liability. For example, because the FCRA is not a strict liability statute, plaintiffs can recover
statutory damages of $100 to $1000 only where defendant has acted willfully. See 15 U.S.C. §
1681n(a)(1). In denying HomeAdvisor’s motion to dismiss, the Court did not decide the issue of
willfulness. Instead, the Court stated that it was “plausible” that plaintiffs could prove that the
14
violations were willful. Memorandum And Order (Doc. #20) at 16. Thus, the Court left open the
possibility that at summary judgment or at trial, HomeAdvisor could establish that any FCRA
violations were merely negligent and not willful – in which case plaintiffs would recover nothing.
Moreover, although plaintiffs believe that HomeAdvisor’s interpretation of the FCRA is objectively
unreasonable, some courts have read the statute to allow inclusion of extraneous information in
addition to the authorization and disclosure. See Schoebel v. Am. Integrity Ins. Co. of Fla., No.
8:15-cv-380-T-24 AEP, 2015 WL 3407895 (M.D. Fla. May 27, 2015) (finding technical violation
of FCRA but dismissing claims for willful violation because release language consistent with spirit
of FCRA and not objectively unreasonable). Further, in denying HomeAdvisor’s motion to dismiss,
the Court expressed doubt whether the background check authorization was part of the employment
application or its own separate disclosure. See Doc. #20 at 16.
As to the fourth factor, Lengel and her counsel have signed the settlement agreement,
indicating that they think the agreement is fair and reasonable. Lengel and her counsel have
submitted declarations in support of the proposed settlement. See Richter Decl.; Lengel Decl. The
Court should “hesitate to substitute its own judgment for that of counsel.” Ingram v. The Coca-Cola
Co., 200 F.R.D. 685, 691 (N.D. Ga. 2001) (quoting Warren v. City of Tampa, 693 F. Supp. 1051,
1060 (M.D. Fla. 1988)); see also In re BankAm. Corp. Secs. Litig., 210 F.R.D. 694, 702 (E.D. Mo.
2002).
Regarding the third factor, the Court weighs the value of immediate recovery under the
settlement against the possibility of future recovery after further proceedings and a trial. Plaintiffs
assert that the settlement provides class members with substantial monetary benefits. See Vigil v.
Finesod, 779 F. Supp. 522, 526 (D.N.M. 1990) (if proposed settlement not approved, result will be
15
“a much more complicated and expensive course of litigation and there is no assurance that the final
result will in any way be superior”). Specifically, the settlement agreement provides that
HomeAdvisor will establish a $190,000 settlement fund to compensate class members and to pay
any amounts which the Court approves for attorneys’ fees, expenses and a class representative
service award.
Settlement Agreement (Doc. #53-1) at ¶ 29.
HomeAdvisor will pay all
administrative costs of settlement, including the cost of notice and distributing settlement payments.
Id. ¶ 36.6
Plaintiffs point out that on a gross basis, the settlement amount represents a recovery of over
$100 per class member ($190,000 / 1,650 = $115.15), which exceeds the minimum statutory penalty
for willful violations under 15 U.S.C. § 1681n(a)(1)(A). On a net basis, each settlement class
member will receive at least $50, see Settlement, Doc. #53-1, ¶ 30.7 A $100 gross recovery and net
recovery of at least $50 per class member is notably higher than other FCRA disclosure settlements
that courts have approved. See, e,g., Memorandum Of Points And Authorities In Support Of Final
Approval Of Class Action Settlement (Doc. #60) at 1, filed September 9, 2015 in Kirchner v.
Shred-It USA Inc., No. 2:14-cv-01437 (E.D. Cal.) (seeking final approval where class would receive
$44 gross recovery per class member) and Final Order And Judgment (Doc. #63) filed October 22,
2015 in Kirchner, No. 2:14-cv-01437 (E.D. Cal.) (approving settlement); Memorandum Of Law
In Support Of Joint Motion For Final Approval Of Class Action Settlement (Doc. #58-1) at 6, filed
6
Because HomeAdvisor has agreed to pay these expenses, they will not be deducted
from the payments provided to class members under the settlement.
7
The actual amount is likely to be greater because plaintiffs’ counsel do not intend to
seek more than one-third of the settlement fund in fees. Richter Decl.,¶ 6.5.
16
June 22, 2105 in Rawlings v. The Scotts Co., No. 3:14-cv-319 (W.D. Mo) (seeking final approval
where class members would receive approximately $40 before deductions for fees and costs) and
Final Approval Order, Doc. #61 (W.D. Mo. July 2, 2015) (approving settlement); Plaintiff’s
Memorandum In Support Of Joint Motion For Preliminary Approval Of Class Action Settlement
(Doc. #24) filed August 11, 2014 in Simons v. Aegis Commnc’s Grp., LLC, No. 2:14-cv-4012
(W.D. Mo.) (seeking approval for settlement where class members would receive $33 before
deductions) and Final Order And Judgment (Doc. #32) filed January 15, 2015 in Simons, No.
2:14-cv-4012 (W.D. Mo.) (approving settlement). Plaintiffs also point out that in contrast to many
other class settlements, HomeAdvisor will pay class members without requiring a claim form.
Moreover, the settlement will save time and costs and avoid the risks associated with further
litigation.
Although most of the other terms of the settlement appear fair and reasonable, the settlement
is unclear on one point regarding the scope of the release and on two points related to payment to
class members.
The settlement provides that in exchange for a monetary payment, class members will
release all claims “arising out of or relating to the facts alleged in the complaint including but not
limited to any and all claims under the FCRA, including specifically 15 U.S.C. § 1681b(b)(2)(A),
and any parallel or similar state or common-law claims.” Id. at ¶ 38. The broad release of claims
relating to the facts alleged in the complaint and not limited to claims under the FCRA potentially
covers a range of employment claims far broader than the FCRA claims in the complaint. See In re
Adelphia Commcn’s Corp. Sec. & Derivative Litig., 272 Fed.Appx. 9, 13 (2d Cir. 2008) (although
broad class action settlements common, released claims must be limited to claims arising out of
17
factual predicate of lawsuit). Here, the settlement amount appears reasonable only if plaintiffs
release any FCRA claims but not all employment-related claims. See In re Literary Works in Elec.
Databases Copyright Litig., 654 F.3d 242, 247-48 (2d Cir. 2011) (citing TBK Partners, Ltd. v. W.
Union Corp., 675 F.2d 456, 460 (2d Cir. 1982)).
The Court also notes two issues in regard to provisions for payments to class members.
First, the agreement provides that HomeAdvisor will mail each settlement class member a check
for the pro-rata share of the net settlement fund. Presumably defendant will not mail checks to
settlement class members for whom it has no good address, but the settlement agreement does not
spell out what happens to those class members’ share of the net settlement fund.8 Second, the
settlement agreement does not contain a provision for re-distributing to class members the funds
from checks which are not cashed within 60 days. As this Court has noted,
where settlement involves individual distributions to class members and funds
remain after distributions because some class members could not be reached, the
settlement should presumptively provide for further distributions to participating
class members unless the amounts involved are too small to make individual
distributions economically viable or other specific reasons exist that would make
such further distributions impossible or unfair.
Better v. YRC Worldwide, Inc., 2013 WL 6060952, at *6 (D. Kan. Nov. 18, 2013) (quoting Am.
Law Inst., Principles of the Law of Aggregate Litigation § 3.07 (2010)).
On this record, the third factor, i.e. whether the value of an immediate recovery outweighs
the mere possibility of future relief after protracted and expensive litigation, does not favor
preliminary approval of the settlement. Accordingly, the Court cannot preliminarily approve the
8
As a practical matter, defendant will not know the number of settlement class
members for whom it has correct addresses until the notice procedure is complete. The parties have
not provided information about how many class members are likely to be unreachable based on age,
the passage of time, etc.
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settlement agreement as fair, reasonable and adequate.
III.
Notice
Because the Court has not approved the settlement agreement, it does not address plaintiffs’
proposed class notice.
IT IS THEREFORE ORDERED that plaintiffs’ unopposed Motion For Preliminary
Approval Of Class Action Settlement (Doc. #49) filed November 18, 2015 be and hereby is
SUSTAINED in part.
IT IS FURTHER ORDERED that pursuant to Federal Rule of Civil Procedure 23(c), the
Court preliminarily certifies the following settlement class:
All applicants for employment with HomeAdvisor about whom HomeAdvisor
procured a consumer report for employment purposes at any time from January 13,
2013 through June 10, 2015, excluding any individuals who timely file a valid
written notice of intent to opt out of the Settlement.
IT IS FURTHER ORDERED that the Court appoints Emerald Lengel as class
representative for the settlement class. The Court appoints Kai H. Richter of Nichols Kaster, PLLP
and Michael F. Brady and Mark Kistler of Brady & Associates as class counsel for the settlement
class.
IT IS FURTHER ORDERED that on or before February 6, 2017, plaintiffs may file a
motion for preliminary approval of a revised settlement and for approval of a revised proposed class
notice.
Dated this 25th day of January, 2017 at Kansas City, Kansas.
s/ Kathryn H. Vratil
Kathryn H. Vratil
United States District Judge
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