Hillson et al v. Kelly Services, Inc.
OPINION AND ORDER Preliminarily Approving Settlement Agreement and Preliminarily Certifying Settlement Class. (Final Approval Hearing set for 8/2/2017 at 10:00 AM before District Judge Laurie J. Michelson). Signed by District Judge Laurie J. Michelson. (KJac)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
STEVEN BOHLER, and
individually and as proposed representatives
of a class,
Case No. 2:15-cv-10803
Honorable Laurie J. Michelson
Magistrate Judge Anthony P. Patti
KELLY SERVICES INC.,
OPINION AND ORDER PRELIMINARILY APPROVING SETTLEMENT
AGREEMENT AND PRELIMINARILY CERTIFYING SETTLEMENT CLASS
Plaintiffs Lasandra Hillson, Steven Bohler, and Ashley Schmidt claim that Defendant
Kelly Services, Inc. violated the Fair Credit Reporting Act. When Plaintiffs applied for jobs
Kelly offered, they received a form disclosing that Kelly might run a background check to assess
their employability. But, say Plaintiffs, this form included additional information that violated
the FCRA’s requirement that the disclosure be in a stand-alone document. Plaintiffs also
maintain that there are about 220,000 individuals who received a virtually identical disclosure
form when they applied for Kelly jobs. Plaintiffs seek to represent this class of individuals.
Following some formal discovery, two mediation sessions (with two retired federal
judges), and additional negotiations, Plaintiffs and Kelly have settled their dispute. As the
parties’ settlement would bind not only them but any of the 220,000 individuals who do not opt
out, the law requires this Court to both certify the proposed class and determine that the
settlement is fair to the class. As a first step, Plaintiffs ask this Court to preliminarily certify the
class for settlement purposes and to preliminarily approve the settlement. (R. 37.) Kelly does not
oppose Plaintiffs’ motion. (See R. 37.) Having studied the briefing and associated law, and
having heard oral argument, the Court preliminarily finds that the parties’ settlement is fair and
preliminarily certifies Plaintiffs’ proposed class.
In 2012 and 2013, Plaintiffs Hillson, Bohler, and Schmidt each applied for a job offered
by Defendant Kelly Services. (R. 2, PID 22–24.) Their application packets included a document
titled “Background Screening Notice, Disclosure, and Authorization.” (R. 2, PID 23.)
As its name suggests, the form included a disclosure and sought the applicant’s
authorization. Regarding the disclosure, the form read in part, “Kelly may request consumer
reports and/or investigative consumer reports (collectively ‘consumer reports’) in connection
with my application for employment or at any time during my employment in accordance with
all applicable laws. These reports may include information bearing on my character, general
reputation, personal characteristics or mode of living.” (R. 2, PID 32.) As for the authorization,
the form stated: “I have read this Background Screening Notice, Disclosure, and Authorization, I
understand it, and I agree to its terms.” (See R. 2, PID 32.)
Although the disclosure and authorization comprised the bulk of the one-page form, the
form included two additional sentences. (See R. 2, PID 32.) One was a waiver: “To the fullest
extent permitted by law, I release Kelly, its employees, agents, successor and assigns, from any
and all claims, actions or liability whatsoever that are in any way related to the procurement of a
consumer report about me, or any subsequent investigation(s) of my background or personal
history.” (R. 2, PID 32.) The other was a disclaimer: “I understand that this Authorization is not
a contract for continued employment and does not alter the at-will nature of my employment or
offered employment.” (Id.)
Hillson, Bohler, and Schmidt claim that the inclusion of the waiver and disclaimer on the
disclosure form violated the following provision of the Fair Credit Reporting Act:
[A] person may not procure a consumer report, or cause a consumer report to be
procured, for employment purposes with respect to any consumer, unless . . . a
clear and conspicuous disclosure has been made in writing to the consumer at any
time before the report is procured or caused to be procured, in a document that
consists solely of the disclosure, that a consumer report may be obtained for
employment purposes . . . .
15 U.S.C. § 1681b(b)(2)(A)(i) (emphasis added). The emphasized language is commonly known
as the “stand-alone disclosure” requirement. It is Plaintiffs’ position that while both the notice
and authorization could be included in the same document, see § 1681b(b)(2)(A)(ii), the standalone disclosure requirement prohibited the inclusion of the waiver and disclaimer. (R. 2, PID
Accordingly, Plaintiffs filed this lawsuit on behalf of themselves and about 220,000
others asserting a claim that Kelly violated § 1681b(b)(2)(A)(i). (See R. 2, PID 23, 28.)
Since that time, the parties have worked toward settlement. And in June 2016, Plaintiffs
filed an unopposed motion for this Court to (1) preliminarily approve the parties’ settlement and
to (2) preliminarily certify their proposed class for settlement purposes. (R. 37.)
Although Plaintiffs’ proposed class and the parties’ settlement agreement will be
discussed in detail below, a brief outline is useful at this point.
Plaintiffs seek to represent a class of about 220,000 individuals who were hired when
Kelly was using a disclosure form that included a waiver and for whom, between July 18, 2012
and January 23, 2014, Kelly obtained a consumer report. (See R. 37, PID 519.) Although the
parties do not propose subclasses, their settlement effectively divides members of this class into
two groups. For approximately 180,000 potential class members, Kelly ran a background check
and assigned the potential member a “favorable” rating. (See R. 37, PID 514.) But for the
remaining 40,000 (or so) potential class members, Kelly assigned a rating other than favorable.
(Id.) The parties’ settlement agreement contemplates awarding these “Adjudicated Ineligible”
class members three times as much as the favorably rated class members. (R. 37, PID 521.)
Under the settlement agreement, Kelly will provide Plaintiffs and the proposed class with
several benefits. The primary one is that Kelly will create a settlement fund of $6,749,000, none
of which will revert to Kelly. (R. 37, PID 520, 522.) Of this fund, it is contemplated that up to
33% (approximately $2,250,000) will go to class counsel for fees. (See R. 37, PID 521.)
Administrative expenses (about $330,000) and incentive awards to Plaintiffs ($2,500 each) will
also be deducted from the fund. (See R. 37, PID 522.)1 After all these deductions, the payout,
assuming all 220,000 potential class members make a claim, will be about $41 for an
Adjudicated Ineligible class member and about $14 for those who received a favorable rating. In
addition, Kelly has agreed to remove the waiver and disclaimer language from its disclosure
forms for a period of five years and to provide, upon request, each class member (and Kelly
temporary employees) a copy of the consumer report that Kelly obtained. (R. 37, PID 520.)
In exchange for these benefits, Kelly will receive a release of claims. In particular, the
parties propose that those class members who do not opt out of the settlement will forever release
any and all claims “arising out of or relating directly or indirectly in any manner whatsoever to
the facts alleged or asserted in the Complaint and Amended Complaint and which relate directly
Although the settlement agreement provides that administration expenses will be about
$293,000, the Court has suggested changes to the content of the notices which will increase
administration expenses by about $38,000. (See R. 49, PID 752.)
or indirectly in any manner whatsoever to Defendant’s procurement of consumer reports,
including but not limited to any and all claims under 15 U.S.C. §§ 1681b(b)(1), 1681b(b)(2) and
1681b(f) of the Fair Credit Reporting Act and any analogous state law claims.” (R. 49, PID 776–
Before addressing whether the settlement is fair and whether the proposed class should be
certified, the Court must decide whether it has subject-matter jurisdiction over the claim
Plaintiffs assert. Following the Supreme Court’s recent decision in Spokeo, Inc. v. Robins, —
U.S. —, 136 S. Ct. 1540, 194 L. Ed. 2d 635 (2016), this is a close question.
Article III of the U.S. Constitution limits the jurisdiction of the federal courts to “cases”
and “controversies.” For there to be a constitutional case or controversy, it must be that the
plaintiff has standing to sue. See Spokeo, 136 S. Ct. at 1547. And for a plaintiff to have standing,
it must be that she suffered an “injury in fact.” Id. That jurisdictional requirement in turn requires
that her injury be “particularized” and—as relevant here—“concrete.” Id.
In Spokeo, the Supreme Court provided guidance on what types of injuries are “concrete”
enough to give rise to an Article III controversy. There, Spokeo, Inc. operated a website that
allowed “users to search for information about other individuals.” Id. at 1546. At some point, a
user ran a search on Thomas Robins and the website returned inaccurate (but arguably positive)
information about Robins. Id. Robins sued, claiming, among other things, that Spokeo violated a
provision of the FCRA that required consumer reporting agencies (like Spokeo) to provide
certain notices to users of its information about the users’ responsibilities under the FCRA. Id. at
1545 (citing 15 U.S.C. § 1681e(d)).
In addressing whether Robins had alleged “concrete” injury, the Supreme Court
explained that a concrete injury need not be tangible. Id. at 1549. It further provided that both the
historic role of the courts and the judgment of Congress play a role in deciding whether
intangible injury is “concrete.” Id. Regarding the former, the Court explained that “it is
instructive to consider whether an alleged intangible harm has a close relationship to a harm that
has traditionally been regarded as providing a basis for a lawsuit in English or American courts.”
Id. And Congress’ judgment is relevant, stated the Court, because “Congress may elevate to the
status of legally cognizable injuries concrete, de facto injuries that were previously inadequate in
law.” Id. (internal quotation marks and alteration omitted). Still, the Court noted, deference to
congressional judgment cannot be complete, for Congress might define a harm that is insufficient
to give rise to an Article III controversy. Id. Thus, in remanding the concrete-injury issue to the
Ninth Circuit, the Supreme Court concluded, “Robins cannot satisfy the demands of Article III
by alleging a bare procedural violation. A violation of one of the FCRA’s procedural
requirements may result in no harm. For example, even if a consumer reporting agency fails to
provide the required notice to a user of the agency’s consumer information, that information
regardless may be entirely accurate.” Id. at 1550.
Given the guidance in Spokeo, the Court is concerned about whether Plaintiffs (and the
class they seek to represent) have suffered a “concrete” injury. (Indeed, this case was at one point
stayed pending the Supreme Court’s decision in Spokeo.) As noted, Plaintiffs here allege that
Kelly violated 15 U.S.C. § 1681b(b)(2)(A) by including both a waiver and disclaimer in a form
that should have only disclosed that Kelly would procure a consumer report for employment
purposes and sought authorization to do so. (R. 1, PID 23, 28.) Plaintiffs’ claim, however, is not
that Kelly’s inclusion of the waiver and disclaimer in the form caused them to not understand the
disclosure. Nor do they claim that, in signing the form, they did not understand that they were
authorizing Kelly to obtain their consumer report. Indeed, in their motion for preliminary
approval, Plaintiffs acknowledge that there is no “indication, or any plausible scenario, in which
members of the Settlement Class suffered actual damages based upon the wording of
Defendant’s forms.” (R. 37, PID 481 (emphasis added).)
So the jurisdictional question before the Court reduces to this: under circumstances where
Plaintiffs were not (by their own admission) actually damaged, is an alleged violation of the
stand-alone disclosure requirement of § 1681b(b)(2)(A) a claim of a “bare procedural violation”
that is not “concrete” enough under Spokeo? Or does it constitute concrete, intangible harm? The
Sixth Circuit has not answered this question and the courts are divided.
In Thomas v. FTS USA, LLC, the court rejected the defendants’ assertion that the
plaintiff’s FCRA claim amounted to a claim of bare procedural injury. See No. 3:13-CV-825,
2016 WL 3653878, at *8–11 (E.D. Va. June 30, 2016). The plaintiff had alleged (among other
things) that the defendants did not comply with both the stand-alone disclosure and the “clear
and conspicuous” requirements of § 1681b(b)(2)(A). Id. at *1. In answering the “concrete” injury
question, the court in Thomas analogized to three cases where the Supreme Court had found that
deprivation of information amounted to a constitutional injury in fact. Id. at *9. In Havens Realty
Corp. v. Coleman, 455 U.S. 363, 373–74 (1982), the Supreme Court found that, despite having
no intent to buy or rent, a “tester” plaintiff had standing to assert a violation of a statute that
made it unlawful “[t]o represent to any person because of race . . . that any dwelling is not
available . . . when such dwelling is in fact so available”; the Court reasoned that the statute
“establishe[d] an enforceable right to truthful information concerning the availability of
housing.” In Public Citizen v. U.S. Dep’t of Justice, 491 U.S. 440, 449 (1989), the Supreme
Court found that an organization had standing to seek information that would have allowed it to
monitor the ABA’s “workings and participate more effectively in the judicial selection process.”
And in Federal Election Comm’n v. Akins, 524 U.S. 11, 21 (1998), the Supreme Court concluded
that a group of voters suffered constitutional “injury in fact” where they were unable to obtain
information about an organization’s contributions and donors that would have helped them
evaluate candidates for public office. “In the wake of Havens, Akins, and Public Citizen,”
reasoned the Thomas court, “it is well-settled that Congress may create a legally cognizable right
to information, the deprivation of which will constitute a concrete injury.” Id. at *9. Returning to
§ 1681b(b)(2)(A), the Thomas court concluded that by requiring the disclosure to be “clear,”
“conspicuous,” and “in a document consisting solely of the disclosure,” Congress had created a
legally cognizable right to information. Thus, the failure to comply with § 1681b(b)(2)(A)—the
failure to provide the disclosure without the encumbrance of any extraneous information—
amounted to concrete, informational injury.
The court in Thomas also found that the alleged violation of § 1681b(b)(2)(A) gave rise
to a second concrete injury. When a disclosure does not comply with that provision of the FCRA,
the Thomas court reasoned, the consumer has not been given the proper disclosure, and so any
authorization based on that disclosure is invalid. See id. at *10. It followed that the defendants’
procurement of a consumer report violated the consumer’s “statutory right of privacy.” Id.
Apparently addressing the historic-role-of-courts consideration identified in Spokeo, the court in
Thomas noted that the “common law ha[d] long recognized a right to personal privacy, and both
the common law and the literal understandings of privacy encompass the individual’s control of
information concerning his or her person.” Id. Accordingly, the court concluded that the
defendants’ violation of § 1681b(b)(2)(A) also amounted to a concrete, invasion-of-privacy
injury. Id. at *11; see also Syed v. M-I, LLC, — F.3d —, No. 114CV00742, 2017 WL 242559
(9th Cir. Jan. 20, 2017) (citing Thomas with approval and finding that § 1681b(b)(2)(A) creates
rights to information and privacy the violation of which gives rise to concrete injury).
Faced with facts similar to those in Thomas, the court in Shoots v. iQor Holdings US Inc.,
reached a different conclusion regarding the concreteness of the plaintiff’s injury. No. 15-CV563, 2016 WL 6090723 (D. Minn. Oct. 18, 2016). Shoots claimed that iQor had violated
§ 1681b(b)(2)(A) by including extraneous information in a disclosure form. Id. at *1. Although
acknowledging the Supreme Court’s decisions in Havens, Akins, and Public Citizen, the court
found unpersuasive Shoots’ claim that he had suffered informational or privacy injury sufficient
for Article III standing. See id. at *6–7 & n.2. Regarding the claimed privacy injury, the court
explained that had Shoots alleged that the extraneous information in the form “confused him in
some way,” or that the background check “had directly harmed” him, “a case could be made that
an invasion of privacy actually occurred.” Id. at *5. But Shoots had not alleged either of those
things. Id. And regarding Shoots’ claim of informational injury, the court ruled, “If Shoots had
contended somehow that iQor’s failure to provide him with a stand-alone disclosure had
amounted to a constructive deprivation of information—such as by impeding his ability to
understand what he was signing, or by hiding important information in a thicket of legalese—this
might well be a different case. But without such allegations, Shoots’s injury—even if styled an
‘informational’ one—is nothing more than technical, and insufficient to meet the requirements
either of [Braitberg v. Charter Commc’ns, Inc., No. 14–1737, 2016 WL 4698283 (8th Cir. Sept.
8, 2016)] or Spokeo.” Id. at *8.
For several reasons, the Court declines to fully weigh in on this split in authority. First,
the “concrete” injury question has not been presented to this Court in an adversarial setting. To
be sure, the Court has a duty to police its own subject-matter jurisdiction. But that task is made
difficult where, at oral argument, both Plaintiffs and Kelly urged the court to follow Thomas.
Second, the Court believes it can answer the concrete-injury question based on the unique facts
of this case. Here, in addition to disclosing that Kelly would procure a consumer report to assess
employability, the disclosure form included a waiver that read, “To the fullest extent permitted
by law, I release Kelly, its employees, agents, successor and assigns, from any and all claims,
actions or liability whatsoever that are in any way related to the procurement of a consumer
report about me, or any subsequent investigation(s) of my background or personal history.” (R.
2, PID 32.) Thus, in signing the disclosure form, a job applicant could have thought she was
merely agreeing not to sue Kelly if it ran a background check (the waiver)—not that she was
granting Kelly permission to run a background check (the disclosure). Or perhaps the consumer
could have thought the reverse. As this is not implausible, there is a risk of harm alleged in this
case. And in Spokeo, the Court provided that “the risk of real harm” could satisfy the
requirement of concreteness. 136 S. Ct. at 1549. Thus, given the manner in which this issue has
been presented, the Court finds that Plaintiffs have suffered a “concrete” injury sufficient for this
litigation to present an Article III case or controversy.2
Jurisdiction having been established, the Court turns to the terms of the parties’
settlement agreement and whether, on preliminary review, they are fair and reasonable.
“[B]y way of background, class-action settlements affect not only the interests of the
parties and counsel who negotiate them, but also the interests of unnamed class members who by
definition are not present during the negotiations.” Shane Grp., Inc. v. Blue Cross Blue Shield of
The Court does not hold that any violation of the stand-alone disclosure requirement, no
matter how minimal, would give rise to concrete injury for purposes of Article III.
Michigan, 825 F.3d 299, 309 (6th Cir. 2016). As such, “there is always the danger that the
parties and counsel will bargain away the interests of unnamed class members in order to
maximize their own.” Id. While this is “not an indictment of any parties or counsel in particular;
it is merely a recognition of the adverse incentives at work in class-action settlements.” Id. Thus,
it is this Court’s responsibility to “carefully scrutinize whether the named plaintiffs and counsel
have met their fiduciary obligations to the class, and whether the settlement itself is ‘fair,
reasonable, and adequate.’” Id. (quoting Fed. R. Civ. P. 23(e)(2)).
At the preliminary approval stage, the Court does not finally decide whether the
settlement is fair and reasonable. See In re Inter-Op Hip Prosthesis Liab. Litig., 204 F.R.D. 330,
337 (N.D. Ohio 2001) (explaining that preliminary approval “is only the first step in an extensive
and searching judicial process, which may or may not result in final approval of a settlement”).
The question now before the Court is simply whether the settlement is fair enough that it is
worthwhile to expend the effort and costs associated with sending potential class members notice
and processing opt-outs and objections. See Newberg on Class Actions § 13:10 (5th ed.).
The fairness of a class-action settlement can be assessed by separately examining
procedural and substantive aspects of the agreement. The Court starts with procedural fairness.
“The primary procedural factor courts consider in determining whether to preliminarily
approve a proposed [class-action] settlement is whether the agreement arose out of arms-length,
noncollusive negotiations. . . . Where the proposed settlement was preceded by a lengthy period
of adversarial litigation involving substantial discovery, a court is likely to conclude that
settlement negotiations occurred at arms-length.” Newberg on Class Actions § 13:14 (5th ed.).
The procedural history of this case reflects arms-length, noncollusive negotiations. First,
the parties engaged in both informal and formal written discovery. (R. 37, PID 508.) This
indicates that they attempted to understand the evidentiary support for their own and the
opposition’s legal positions. Second, the parties engaged in two mediation sessions. The first was
before Retired United States District Judge Layne Phillips in February 2015, the second before
Retired United States District Judge Wayne Anderson in January 2016. (R. 37, PID 507–08.) In
both mediations, the parties submitted mediation briefs. The mediations and associated briefing
indicate that the parties have a deep understanding of the strength and weakness of their cases,
and the use of neutral, experienced mediators is an indication that the parties’ agreement is
noncollusive. In re Penthouse Exec. Club Comp. Litig., No. 10 CIV. 1145 KMW, 2013 WL
1828598, at *2 (S.D.N.Y. Apr. 30, 2013) (“The assistance of two experienced mediators . . .
reinforces that the Settlement Agreement is non-collusive. A settlement like this one, reached
with the help of third-party neutrals enjoys a presumption that the settlement achieved meets the
requirements of due process.” (internal quotation marks omitted)). Further, both the named
plaintiffs’ incentive fees and attorneys’ fees were negotiated after the amount of the settlement
fund was negotiated. This suggests that fees and incentive awards were not the primary reason
for settlement. True, depositions were not taken in this case nor was there any dispositive motion
practice. Even so, on balance, the Court preliminarily finds that settlement was reached in a
procedurally fair manner.
“The starting place for understanding the substantive requirements for preliminary
approval is in reviewing the substantive requirements for final approval.” Newberg on Class
Actions § 13:15 (5th ed.). The Sixth Circuit has identified the following non-exhaustive list of
factors for courts to consider in deciding whether to finally approve a class-action settlement:
“(1) the risk of fraud or collusion; (2) the complexity, expense and likely duration of the
litigation; (3) the amount of discovery engaged in by the parties; (4) the likelihood of success on
the merits; (5) the opinions of class counsel and class representatives; (6) the reaction of absent
class members; and (7) the public interest.” Vassalle v. Midland Funding LLC, 708 F.3d 747,
754 (6th Cir. 2013) (internal quotation marks omitted).
In addition, in assessing the substantive fairness of the agreement, courts have asked
whether (8) the attorneys’ fees are reasonable, (9) the named representatives received
preferential treatment, (10) the notice plan is sufficient, (11) the claims procedure is onerous,
(12) the allocation of the fund is fair, and (13) the class members’ release of claims is overly
broad. See Newberg on Class Actions § 13:15 (5th ed.).
The Court beings with whether the amount of recovery a class member will receive under
the settlement is fair when compared to the likely amount of recovery at trial. See Shane Grp.,
Inc. v. Blue Cross Blue Shield of Michigan, 825 F.3d 299, 309 (6th Cir. 2016) (“[T]he district
court must specifically examine what the unnamed class members would give up in the proposed
settlement, and then explain why—given their likelihood of success on the merits—the tradeoff
embodied in the settlement is fair to unnamed members of the class.”). A logical way to make
this assessment is to compare the settlement recovery against the expected value of proceeding to
trial: “if the class had a 10% chance of securing a $100,000,000 jury verdict, a $10,000,000
settlement would seem reasonable.” Newberg on Class Actions § 13:49 (5th ed.). Thus, the
analysis can be broken down into four steps: (1) determining the amount of recovery under the
settlement, (2) determining the amount of recovery assuming success at trial, (3) determining the
likelihood of succeeding at trial, and (4) comparing the recovery under the settlement with the
recovery a class member will receive at trial discounted by the possibility that the class members
will not prevail at trial.
Starting with step one, as noted, if the parties’ settlement is approved, and every class
member makes a claim, Adjudicated Ineligible class members will receive about $41, while
those who received a favorable rating will receive about $14 (the average over all class members
is about $19). Although Plaintiffs have cited significantly higher recoveries under the settlement
based on a more likely 15% claim rate, the $41 and $14 figures allow for the proper comparison:
if this case was tried, and Plaintiffs prevailed, every class member would recover without having
to file a claim.
Proceeding to step two, the amount of recovery at trial assuming success, Plaintiffs in this
case (quite reasonably) seek statutory as opposed to actual damages. Under the FCRA, a
consumer may recover statutory damages of “not less than $100 and not more than $1,000,”
punitive damages, costs, and attorneys’ fees—if he is able to show that the defendant’s violation
of the FCRA was willful. See 15 U.S.C. § 1681n. Thus, if Plaintiffs were to show at trial that
Kelly willfully violated the FCRA, each potential class member would be entitled to something
in the range of $100 to $1,000.
A review of Plaintiffs’ claim indicates that, assuming success, the award at trial would be
around $100. While the inclusion of the waiver and disclaimer might have been inconsistent with
the language of the stand-alone disclosure requirement, it was arguably consistent with the
purpose of that provision. See Letter from Cynthia Lamb, Investigator, Div. of Credit Practices,
Fed. Trade Comm’n, to Richard Steer, Jones Hirsch Connors & Bull, P.C. (Oct. 21, 1997), 1997
WL 33791227 (F.T.C.), 1 (“The reason for specifying a stand-alone disclosure was so that
consumers will not be distracted by additional information at the time the disclosure is given.”).
As for the possibility that applicants did not understand the waiver (because it was included on
the disclosure form), there is no indication that Kelly has ever attempted to enforce that waiver.
(R. 37, PID 481 n.3.) As such, the violation of the FCRA asserted in this case is only technical in
nature, and so the Court would expect class members to receive around $100—or less—should
they prevail at trial. See Singleton v. Domino’s Pizza, LLC, 976 F. Supp. 2d 665, 680 (D. Md.
2013) (“[T]his case involves allegations of technical FCRA violations, which creates the risk that
even if a jury awarded the minimum requisite statutory damages, i.e., $100 to each of the
individual class members, the court may find remitter/reduction appropriate.”); Klingensmith v.
Max & Erma’s Restaurants, Inc., No. CIV.A. 07-0318, 2007 WL 3118505, at *5 (W.D. Pa. Oct.
23, 2007) (asserting, where claim was that display of credit card expiration dates on receipts
violated the FCRA, “that were a jury to award even the minimum requisite statutory damages for
Defendant’s technical violations, i.e., $100 to each of the 225,000 individual class members,”
that remittitur or reduction “might well” be appropriate).
This last step of the analysis assumed success at trial, but a preliminary review of the
merits reveals that this is not a certainty. As noted, to recover statutory damages, Plaintiffs would
have to show that Kelly willfully violated the FCRA. A plaintiff demonstrates a willful violation
of FCRA by showing that the defendant knowingly violated the Act, or, less onerously, that the
defendant recklessly disregarded the Act’s requirements. See Safeco Ins. Co. of Am. v. Burr, 551
U.S. 47, 56–58 (2007). But a defendant’s action is not in reckless disregard of the FCRA unless
the action “shows that the company ran a risk of violating the law substantially greater than the
risk associated with a reading [of the FCRA] that was merely careless.” Id. at 50.
Here, there is good reason to think Plaintiffs might not be able to show that Kelly, by
including the waiver and disclaimer on its disclosure forms, knew it was violating the standalone disclosure provision or that it took a risk “substantially greater” than that associated with a
careless reading of that provision. It appears that Kelly used disclosure forms that contained a
waiver or disclaimer only between December 1, 2011 and January 23, 2014. (See R. 6, PID 557.)
The time period is important because, while many courts have since found that the inclusion of a
waiver in a disclosure runs afoul of the stand-alone disclosure requirement (see R. 42, PID 656
n.1), prior to January 2014, only two district courts had made findings to that effect, see Reardon
v. ClosetMaid Corp., No. 2:08-CV-01730, 2013 WL 6231606, at *8–9 (W.D. Pa. Dec. 2, 2013);
Singleton v. Domino’s Pizza, LLC, No. CIV.A. DKC 11-1823, 2012 WL 245965, at *9 (D. Md.
Jan. 25, 2012). This could be read as indicating that Kelly’s inclusion of a wavier on the
disclosure form did not violate the stand-alone disclosure requirement. See Smith v. Waverly
Partners, LLC, No. 3:10-CV-00028-RLV, 2012 WL 3645324, at *5–6 (W.D.N.C. Aug. 23,
2012); Burghy v. Dayton Racquet Club, Inc., 695 F. Supp. 2d 689, 699 (S.D. Ohio 2010). Indeed,
one court has cited these four cases as indicating a split in authority regarding the propriety of
including waivers in disclosure forms. See Syed v. M-I LLC, No. CIV. 1:14-742 WBS, 2014 WL
4344746, at *3 (E.D. Cal. Aug. 28, 2014). As Plaintiffs acknowledge in their motion for
preliminary approval, given the state of the case law during the period that Kelly used disclosure
forms that allegedly violated § 1681b(b)(2)(A)(i), it appears that, if this case were to proceed to
trial, Plaintiffs would have some difficulty convincing this Court or a jury that Kelly knowingly
violated that provision or that its conduct reflected substantially more than a careless reading of
Now the last step: comparison. As explained, if Plaintiffs prevailed at trial, each class
member would receive around $100, while under the settlement, each class member is only
guaranteed to receive, on average, $19. But, as also noted, Plaintiffs’ likelihood of success at trial
is not 100%. And once the $100 award is discounted by the likelihood of success at trial (which
is conceivably in the ballpark of 19%), the amount of recovery under the settlement appears
reasonable. And the amount seems even more reasonable in light of the non-monetary benefits
class members will receive under the settlement.
Accordingly, the Court preliminarily finds that the amount of recovery under the
settlement is fair relative to the likely amount of recovery should Plaintiffs proceed to trial.
The Court also considers what the potential class members will give up to obtain that
recovery. Thus, in assessing the fairness of the settlement, it is also necessary to evaluate the
scope of Kelly’s release.
As it originally appeared in the parties’ settlement agreement, class members agreed to
release Kelly from any and all claims “arising out of or relating directly or indirectly in any
manner whatsoever to the facts alleged or which could have been alleged or asserted in the
Complaint and Amended Complaint, including but not limited to any and all claims under 15
U.S.C. §§ 1681b(b)(1), 1681b(b)(2) and 1681b(f) of the Fair Credit Reporting Act and any
analogous state law claims.” (R. 37, PID 531.)
The Court thought that this release was overbroad. A “fact alleged” in the amended
complaint was that Plaintiffs applied for a position offered by Kelly. A claim relating “indirectly
in any manner whatsoever” to this fact could be, for example, a claim of discrimination in hiring.
As this was plainly not what this suit was about, the Court expressed to the parties its concern
over the breadth of the release.
The parties have stipulated to a narrower release. Class members who do not opt out now
will release Kelly from any and all claims “arising out of or relating directly or indirectly in any
manner whatsoever to the facts alleged or asserted in the Complaint and Amended Complaint
and which relate directly or indirectly in any manner whatsoever to Defendant’s procurement of
consumer reports, including but not limited to any and all claims under 15 U.S.C.
§§ 1681b(b)(1), 1681b(b)(2) and 1681b(f) of the Fair Credit Reporting Act and any analogous
state law claims.” (R. 49, PID 776–77 (emphasis added).) The parties further agree, “This release
is . . . not intended to be construed as a general release of all employment related claims.” (R. 49,
Given the revised language, the Court finds that the scope of release does not disfavor
preliminary approval of the settlement. It now represents a more typical release that is tied more
directly to the claim at issue—Kelly’s procurement of consumer reports in a manner that violates
the FCRA. Under the standard that now governs preliminary approval, the release does not
require further revision.
Turning to Plaintiffs’ anticipated attorneys’ fee request of 33% of the settlement fund, or
approximately $2.25 million, the Court finds that this request is in the ballpark of a reasonable
award. See Gooch v. Life Inv’rs Ins. Co. of Am., 672 F.3d 402, 426 (6th Cir. 2012) (“The
‘majority of common fund fee awards fall between 20% and 30% of the fund.’”); Brian T.
Fitzpatrick, An Empirical Study of Class Action Settlements and Their Fee Awards, 7 J.
Empirical Legal Studies 811, 839 (2010) (providing that for settlements in the range of $4.45 to
$7 million, the average attorneys’ fees award over all class-action settlements in 2006 and 2007
For two reasons, the prior paragraph was purposely conclusory. First, the settlement
agreement is not contingent upon an award of attorneys’ fees: “Should the Court decline to
approve any requested [attorneys’ fees and costs] payment, or reduce such payment, the
Settlement shall still be effective.” (R. 37, PID 521–22.) Second, Plaintiffs’ attorneys’ fee
request is not briefed. Under the proposed agreement, Plaintiffs will brief their request 14 days
prior to the opt-out deadline. (R. 37, PID 534.) At that point, the Court will be in a better position
to evaluate the reasonableness of the fee request.
True, one fact counsels toward a more complete analysis at this stage of the litigation: the
notices sent to class members will include an estimate of their recovery (a $90 estimate appears
on the notices sent to the favorable group, a $270 one on those sent to the Adjudicated Ineligible
group based on the more realistic claim rate). That estimated recovery is affected by the fee
award because attorneys’ fees are drawn from the settlement fund. And the estimated recovery is,
of course, a factor in a class member’s decision to opt-out, object, or make a claim.
Even so, the Court maintains that a full attorneys’ fees analysis is not necessary at this
time. This is because even if the Court were to award counsel something less than the requested
33% of the fund, the Court’s reduction in fees is unlikely to be so significant that each individual
class member would be entitled to significantly more. Indeed, the amount a class member
ultimately recovers likely depends more on how many others make claims.
All of that said, the Court’s research has identified several fee-related issues that
Plaintiffs should address in their fee motion.
One. Under the proposed settlement, the amount of attorneys’ fees is based on a
percentage of the settlement fund. But some courts have held that where, as here, a statute
awards fees to the prevailing party, the amount of fees should be determined based on the
loadstar method. See Yeagley v. Wells Fargo & Co., 365 F. App’x 886, 887 (9th Cir. 2010)
(“Under a fee-shifting statute such as the FCRA, see 15 U.S.C. § 1681n(a)(3), the lodestar
method is generally the correct method for calculating attorneys’ fees.”); Reibstein v. Rite Aid
Corp., 761 F. Supp. 2d 241, 259–60 (E.D. Pa. 2011) (“[B]ecause the damages provision of the
FCRA includes such a mechanism for attorneys fees, courts evaluating attorneys’ fees following
settlements of FCRA actions have often employed the lodestar method.”). Plaintiffs should
address this case law in their motion for fees.
Two. Even if a percentage-of-the-fund award is proper, courts are encouraged to crosscheck that amount with the loadstar in determining reasonableness. See Goldberger v. Integrated
Res., Inc., 209 F.3d 43, 50 (2d Cir. 2000) (“[T]he lodestar remains useful as a baseline even if
the percentage method is eventually chosen. Indeed, we encourage the practice of requiring
documentation of hours as a ‘cross check’ on the reasonableness of the requested percentage.”);
Bowling v. Pfizer, Inc., 102 F.3d 777, 779–81 (6th Cir. 1996) (affirming the district court’s fee
award where “district court based its fee award on a percentage of the common fund and then
cross-checked the fee against class counsel’s lodestar”); cf. Gascho v. Glob. Fitness Holdings,
LLC, 822 F.3d 269, 281 (6th Cir. 2016) (performing cross-check of loadstar with percentage-offund analysis). Thus, Plaintiffs should, in all events, provide a loadstar analysis in their motion
Three. Under the proposed settlement, the amount of attorneys’ fees is 33% of the total
settlement fund. This percentage may be slightly high. See Gooch, 672 F.3d at 426; In re
Bluetooth Headset Prod. Liab. Litig., 654 F.3d 935, 942 (9th Cir. 2011) (“[C]ourts typically
calculate 25% of the fund as the ‘benchmark’ for a reasonable fee award, providing adequate
explanation in the record of any ‘special circumstances’ justifying a departure.”); Singleton v.
Domino’s Pizza, LLC, 976 F. Supp. 2d 665, 688 (D. Md. 2013) (setting forth detailed attorneys’
fees analysis in FCRA case involving a stand-alone disclosure claim and awarding 25% of fund
instead of requested 30%); Manual Complex Lit. § 14.121 (4th ed.) (“Attorney fees awarded
under the percentage method are often between 25% and 30% of the fund.”); Fitzpatrick, supra,
at 839. Plaintiffs should address the case law suggesting that 33% of the settlement fund may be
In assessing whether a class-action settlement is substantively fair, courts “also look to
whether the settlement gives preferential treatment to the named plaintiffs while only perfunctory
relief to unnamed class members.” Vassalle v. Midland Funding LLC, 708 F.3d 747, 755 (6th
Cir. 2013) (internal quotation marks omitted).
Here, the named Plaintiffs will receive the same guaranteed damage payout as the other
class members. They differ, however, in the settlement’s award of an additional $2500 incentive
fee to the named Plaintiffs. Thus, Plaintiffs will receive on the order of 100 times more than what
their fellow class members are guaranteed to recover. Cf. Vassalle, 708 F.3d at 756 (“The $17.38
payment [to class members] can only be described as de minimis, especially in comparison to the
now-forgiven debt of $4,516.57 owed by [one of the named plaintiffs].”). And even accepting
Plaintiffs’ estimated 15% claim rate, $2,500 is over 25 times more than the $90 other class
members will receive. Moreover, although Plaintiffs’ counsel avers that Plaintiffs “have been
consistently engaged in this case” (R. 37, PID 508), the Court notes that there have been limited
in-court proceedings, no depositions, and, presumably, most if not all of the work of the
mediation and settlement was done by Plaintiffs’ counsel as opposed to Plaintiffs.
Thus, while the $2,500 incentive award to each Plaintiff does not on its face indicate that
Plaintiffs failed to settle in the best interests of the entire class, the Court directs the parties to
either reconsider this award or further justify it when they seek final approval. See Shane Grp.,
825 F.3d at 311.
The Court next examines whether the proposed notice of the settlement and notice of
class certification is adequate. This has two aspects: the manner in which the parties intend to
notify potential class members and what the parties will tell the potential members in the notices.
Regarding the manner of notice, Plaintiffs must comply with two sets of requirements.
Because they seek to certify a Rule 23(b)(3)-type class, Rule 23(c)(2)(B) applies: “the court
must direct to class members the best notice that is practicable under the circumstances,
including individual notice to all members who can be identified through reasonable effort.” In
addition, because the parties seek to settle this litigation, the manner in which they provide notice
must further comply with Rule 23(e)(1): “[t]he court must direct notice in a reasonable manner to
all class members who would be bound by the proposal.” See In re Prudential Ins. Co. of
America Sales Practices Litigation, 962 F. Supp. 450, 526 (D.N.J. 1997) (“The combined Class
Notice must meet the requirements of both Rule 23(c)(2) and Rule 23(e).”).
Plaintiffs propose notifying class members of this potential class action and the
settlement by mailing postcards to the putative class members. In particular, the settlement
administrator will use the address information that Kelly has on file for the putative class
members and then, prior to mailing, update those addresses based on the U.S. Postal Office’s
National Change of Address System. (R. 37, PID 515, 524.) In addition, if postcards are returned
as undeliverable, the settlement administrator will re-mail the postcard to the forwarding address
provided or, if no forwarding address is provided, the administrator will use “any other legally
available database for the purpose of finding new addresses and remailing.” (R. 37, PID 523.)
The foregoing efforts appear to satisfy Rule 23(c)(2)(B). See In re Nissan Motor Corp.
Antitrust Litig., 552 F.2d 1088, 1098 (5th Cir. 1977) (“[Rule 23](c)(2)’s reasonable effort
standard requires that, once a 23(b)(3) action has been certified, the name and last known address
of each class member known to the parties or capable of being identified from business or public
records available to them must be produced.”).
As for the contents of a class notice, Plaintiffs must again comply with two sets of
requirements. Rule 23(c)(2)(B) requires that the notice “clearly and concisely state in plain,
easily understood language” the following: “the nature of the action,” “the definition of the class
certified,” “the class claims, issues, or defenses,” “that a class member may enter an appearance
through an attorney if the member so desires,” “that the court will exclude from the class any
member who requests exclusion,” “the time and manner for requesting exclusion,” and “the
binding effect of a class judgment on members under Rule 23(c)(3).” Fed. R. Civ. P. 23(c)(2)(B).
In addition, because the parties wish to settle this class action, to comply with Rule
23(e)(1), the notice should also include “the essential terms of the proposed settlement,” “any
special benefits provided to the class representatives,” “information regarding attorney’s fees,”
“the time and place of the hearing to consider approval of the settlement,” “the method for
objecting to (or, if permitted, for opting out of) the settlement,” “the procedures for allocating
and distributing settlement funds, and, if the settlement provides different kinds of relief for
different categories of class members, clearly set forth those variations,” “the basis for valuation
of nonmonetary benefits”; should “provide information that will enable class members to
calculate or at least estimate their individual recoveries, including estimates of the size of the
class and any subclasses”; and should “prominently display the address and phone number of
class counsel and how to make inquiries.” Manual for Complex Litigation § 21.312 (4th ed.).
The Court carefully reviewed the two postcard notices originally proposed by the parties
(one for the Adjudicated Ineligible members, the other to the favorably rated). (See R. 37, PID
545–46, 551–52.) The postcards provided a summary of the settlement and set forth most of the
information that Rule 23(c)(2)(B) and Rule 23(e) require. But there were two significant
omissions: (1) a description of the release of claims and (2) a description of how the class is
divided into two groups. As for the former, it is presumably important to a potential class
member to know what he gives up if he makes a claim. As to the latter, it may be significant to a
potential class member’s decision to object that another class member is receiving up to three
Both before and after the preliminary approval hearing, the Court met with counsel and
discussed these omissions. Counsel has submitted (twice) revised postcards that include this
information. (See R. 53, PID 813, 815, 820.)
It is true that some of the other information about the settlement that should be provided
to class members under Rule 23(e)(1) is not included on the revised postcards. This is to be
expected given the limited space available on the postcard. And the information omitted—the
full class definition, benefits provided to the class representatives, the procedures for distributing
settlement funds, the valuation of nonmonetary benefits, and the size of the class—is not
essential for a class member to have a good sense of whether to make a claim, object, or opt-out.
As a class member, the primary assessment is this: “is the amount I will receive (along with the
right to obtain my consumer report) a fair trade for giving up my right to sue Kelly for claims
relating to a disclosure document that also included a liability waiver”? Now that a description of
the release has been added, the information necessary to answer that question is on the postcards.
Moreover, any other relevant information omitted from the postcard is included on the long-form
notice. And the postcard makes plain that the long-form notice is available by either visiting the
settlement website or by calling the settlement administrator.
In all, the Court finds that the content of the revised postcards that will be mailed to class
members, especially when supplemented by the long-form notice explicitly referenced in the
postcards, meets the requirements of Rule 23(c)(2)(B) and Rule 23(e)(1). See In re Ins.
Brokerage Antitrust Litig., 297 F.R.D. 136, 151–52 (D.N.J. 2013) (finding notice complied with
Rules 23(c)(2)(B) and 23(e)(1) where postcard included the essential information about the
settlement and class and postcard was supplemented by a detailed notice that was mailed to those
who requested it and published on the settlement website).
The Court next examines whether the proposed processes for making claims under,
objecting to, or opting-out of the settlement agreement are fair and reasonable.
Regarding the claims process, one inconsistency initially gave the Court pause. Under the
settlement, class members that fail to take action are included in the settlement and thus grant
Kelly a release of claims. Yet, the settlement requires a class member to take action to receive a
benefit. In other words, Kelly receives its benefit of the bargain when a class member does
nothing, but the class member does not.
Even considering that potential facial inequity, the Court preliminarily finds that the
claims process is reasonable. The alleged wrong in this case occurred in the range of two to four
years ago and so a claims requirement, as opposed to sending checks to all that do not opt-out,
helps reduce the chance of funds being erroneously sent to people who are not members of the
class. As the Sixth Circuit recently explained:
The objectors assert that a check simply should have been mailed to the address
listed for each class plaintiff because common sense dictates that direct payment
would have resulted in a payout greater than 8% of the claims made. This ignores
the inadequate member data, the number of the checks that would not have
reached the class members and the administrative costs of managing that
Gascho v. Glob. Fitness Holdings, LLC, 822 F.3d 269, 290 (6th Cir. 2016). Moreover, it appears
that a claims process is common in class-action settlements. See id. Finally, the proposed claims
process is far from onerous. The claim form is included with the postcard notice and can simply
be signed and dated (with a phone number and email) and dropped back in the mail—the postage
is paid. (See R. 53, PID 813, 818.) And, as the Court has requested, the parties have made more
explicit on the postcard that a claim may also be submitted online. In all then, the Court
preliminarily finds that the claims process is fair.
The opt-out procedure also appears fair. Although the postcards do not include an opt-out
form, they clearly inform class members that they must submit a written notice to opt out and
they direct class members to the settlement website for further instructions. (R. 53, PID 815,
820.) This seems reasonable. See Krzesniak v. Cendant Corp., No. C 05-05156 MEJ, 2007 WL
4468678, at *3 (N.D. Cal. Dec. 17, 2007) (explaining that the Federal Judicial Center’s example
notice forms “do not appear to contemplate the inclusion” of an opt-out form). Further, the Court
proposed an amendment to the long-form notice, which counsel has included, to provide an
example of an acceptable written opt-out. (R. 49, PID 761.) If those who wish to be excluded
follow the example, they need only provide a signed statement that they wish to opt-out along
with their address. (See id.) This seems reasonable. See Wright v. Nationstar Mortage LLC, No.
14 C 10457, 2016 WL 4505169, at *13 (N.D. Ill. Aug. 29, 2016) (overruling objectors claim that
opt-out process was burdensome; explaining that “the opt-out requirements were minimal: the
request had to be signed, and include the individual’s name, address, telephone number, case
caption, and a statement that the individual is a class member who wishes to opt-out”).
As for the objection procedure, it too appears fair. The postcards clearly inform potential
class members that, to object, they must submit a written notice. The cards also inform the
potential class members that they may appear in court at the final approval hearing. The
postcards further direct those who wish to object to the settlement website, which includes the
long-form notice. The long-form notice in turn describes the objection process and sets out the
required content of a proper objection. The information that an objector must provide is not
onerous, consisting primarily of the objector’s contact information, the basis for the objection,
and a statement as to whether the objector plans to appear at the final approval hearing. (R. 49,
Accordingly, the Court preliminarily finds that the proposed claims, opt-out, and
objection procedures are fair and reasonable.
Remaining among the most significant substantive fairness factors at issue is the
allocation of the settlement fund.
Given the nature of Plaintiffs’ claims, the Court initially had reservations about some
class members receiving three times more than others. As discussed, Plaintiffs have not claimed
adverse effects from Kelly’s alleged violation of the stand-alone disclosure requirement.
Moreover, the FCRA includes a separate provision that required Kelly to provide a copy of the
consumer report to applicants prior to taking adverse action based on the report. See 15 U.S.C
§ 1681b(b)(3)(A). Plaintiffs have not alleged a violation of this provision.
But at the preliminary approval hearing, Plaintiffs’ counsel explained the reason for one
group of class members receiving more than the other. Counsel argued that while all class
members suffered an invasion of privacy (because the disclosure was improper and so any
authorization based on the disclosure was invalid), those for whom Kelly did not assign a
favorable rating presumptively had a greater invasion of privacy. The Court finds this
explanation for the disparate recovery acceptable. It is plausible that those with something
unfavorable on their report, say, a conviction, would feel that their privacy was violated in a
manner greater than those with nothing unfavorable on their report.
Accordingly, the Court preliminarily finds the allocation of the settlement fund to be fair.
* * *
In sum, the Court preliminarily finds that the settlement agreement was reached in a
procedurally fair manner. And upon careful review of the agreement, the proposed notices, and
the claim, opt-out, and objection procedures, the Court preliminarily finds that the settlement is
Remaining is to decide whether Plaintiffs’ proposed class should be preliminarily
Before turning to the Rule 23 requirements for class certification, the Court pauses to
briefly address the class definition. See Powers v. Hamilton Cnty. Pub. Def. Comm’n, 501 F.3d
592, 619 (6th Cir. 2007) (“[D]istrict courts have broad discretion to modify class definitions, so
the district court’s multiple amendments merely showed that the court took seriously its
obligation to make appropriate adjustments to the class definition as the litigation progressed”);
In re Pressure Sensitive Labelstock Antitrust Litig., 69 Fed. R. Serv. 3d 791 (M.D. Pa. 2007)
(“[T]he Court notes it is not bound by Plaintiffs’ proposed class definition and has broad
discretion to redefine the class, whether upon motion or sua sponte.”).
Plaintiffs ask the Court to preliminarily certify the following class for purposes of
All persons on whom Defendant procured a consumer report pursuant to the Fair
Credit Reporting Act during the period from July 18, 2012 through January 23,
2014, and whose initial hire date at Kelly was during the period of time when
Defendant was providing new Kelly applicants with a disclosure form that
contained a liability release.
(R. 37, PID 519.)
Prior to the preliminary-approval hearing, the Court questioned two aspects of this class
definition. Based on an affidavit submitted by a Kelly representative, Kelly used disclosure
forms that included waivers prior to July 2012. (See R. 37, PID 556.) So the class definition
appeared under-inclusive. In addition, the Court believed that the second limitation on the scope
of the class—those “whose initial hire date at Kelly was during the period of time when
Defendant was providing new Kelly applicants with a disclosure form that contained a liability
release”—might be more sharply defined using start and end dates.
At the hearing, counsel adequately addressed these questions. Regarding the first, counsel
informed the Court that the July 18, 2012 date was selected based on the statute of limitations
governing Plaintiffs’ claim. (This suit was filed on July 18, 2014. (See R. 1, PID 9.)) And
counsel explained that while dates certain might be used, the language “during the period of time
when Defendant was providing new Kelly applicants with a disclosure form that contained a
liability release” would not present a who-is-in-who-is-out issue as Kelly had reliably identified
all such individuals.
Given counsel’s representations, the Court preliminary finds that the class definition is
Having determined that the class definition is sound, the Court proceeds to Rule 23’s
certification requirements. Plaintiffs have the burden of showing that class certification is proper.
Wal-Mart Stores, Inc. v. Dukes, — U.S. —, 131 S. Ct. 2541, 2551, 180 L. Ed. 2d 374 (2011). To
do so, they must convince the Court that their proposed class meets each of the requirements of
Federal Rule of Civil Procedure 23(a) and fits one of the types set out in Rule 23(b).
Rule 23(a) requires Plaintiffs’ to satisfy four requirements: numerosity, commonality,
typicality, and adequacy. The Court discusses each in turn.
Plaintiffs’ proposed class includes over 220,000 individuals located across the country.
Accordingly, “joinder of all members is impracticable” and the numerosity requirement is
readily satisfied. See Fed. R. Civ. P. 23(a)(1).
Rule 23(a)(2) requires that there be “questions of law or fact common to the class.” This
requirement is not satisfied by the mere showing that there is some question that pertains to all
class members; after all, “any competently crafted class complaint literally raises common
questions.” Wal-Mart, 564 U.S. at 349. Thus, Rule 23(a)(2) requires that the determination of a
common contention’s “truth or falsity will resolve an issue that is central to the validity of each
one of the [class members’] claims in one stroke.” Id. at 350; see also Sprague v. Gen. Motors
Corp., 133 F.3d 388, 397 (6th Cir. 1998) (“What we are looking for is a common issue the
resolution of which will advance the litigation.”).
Here, there are at least two common contentions that, if resolved, would apply to every
class members’ claim and substantially advance the litigation: (1) whether Kelly’s inclusion of
the waiver and disclaimer language on its disclosure forms violated the stand-alone disclosure
requirement and, if so, (2) whether the violation was willful. As the answers to these questions
would likely be dispositive of every class members’ claim based on § 1681b(b)(2)(A)(i), the
Court preliminarily finds the commonality requirement satisfied.
Rule 23(a)(3) requires that “the claims or defenses of the representative parties [be]
typical of the claims or defenses of the class.” A representative’s claims are “typical” within the
meaning of Rule 23(a)(3) if the defendant’s conduct that gave rise to the representative’s claims
also gave rise to the class members’ claims, and if the representative and class members seek to
establish the defendant’s liability “based on the same legal theory.” Romberio v. Unumprovident
Corp., 385 F. App’x 423, 438 (6th Cir. 2009). Thus, “[a] necessary consequence of the typicality
requirement is that the representative’s interests will be aligned with those of the represented
group, and in pursuing his own claims, the named plaintiff will also advance the interests of the
class members.” Young v. Nationwide Mut. Ins. Co., 693 F.3d 532, 542 (6th Cir. 2012).
In this case, the reasons that the commonality requirement is satisfied also show that the
typicality requirement is satisfied. See Young, 693 F.3d at 542 (noting that “[c]ommonality and
typicality ‘tend to merge’”). Factually, Plaintiffs say that when they applied for a job Kelly
offered, they received a disclosure form. Their legal claim is that this form violated
§ 1681b(b)(2)(A)(i) because it included a waiver and disclaimer. The class members that
Plaintiffs seek to represent also purportedly applied for a job with Kelly and received a
materially identical form. Thus, it appears that any class member could be substituted for one of
the named plaintiffs and there would be no material shift in the claims of this case.
That said, there is one issue that requires additional exploration. As noted, about 40,000
of the 220,000 potential class members had a consumer report that Kelly did not identify as
favorable. And it could be inferred that the parties view these potential class members differently
than those in the favorable group, as their settlement grants them three times the recovery.
Notably, named Plaintiffs Hillson, Bohler, and Schmidt are not part of this not-favorable group.
Nonetheless, the Court finds that Plaintiffs’ claim is typical of that of the Adjudicated
Ineligible group. At the preliminary approval hearing, counsel explained that the claim of class
members for whom Kelly assigned a favorable rating and the claim of class members that Kelly
adjudicated ineligible are identical: they both received and signed a disclosure that allegedly
does not comply with the FCRA’s stand-alone disclosure provision. The difference between the
groups, counsel argued, was the extent of the privacy breach: those in the Adjudicated Ineligible
group had potentially embarrassing information revealed without valid authorization. On
preliminary review, this explanation is adequate. Although those in the Adjudicated Ineligible
group may have been exposed to a risk of greater harm, the type of harm (breach of privacy), the
type of wrong (violation of § 1681b(b)(2)(A)(i)), and the facts giving rise to the wrong (a
disclosure form with a waiver) are the same for Hillson, Bohler, and Schmidt and all other class
members. Thus, by pursuing their claim, Plaintiffs are also pursuing the claim of those in the
Adjudicated Ineligible group—even if those class members were exposed to a risk of greater
Rule 23(a)(4) requires that “the representative parties will fairly and adequately protect
the interests of the class.” “The adequacy inquiry under Rule 23(a)(4) serves to uncover conflicts
of interest between named parties and the class they seek to represent. A class representative
must be part of the class and possess the same interest and suffer the same injury as the class
members.” Amchem Prod., Inc. v. Windsor, 521 U.S. 591, 625–26 (1997) (citations and internal
quotation marks omitted).
For reasons set forth above regarding commonality and typicality, the Court preliminarily
finds that Hillson, Bohler, and Schmidt will adequately represent the class. Although there is a
possible conflict of interest among Plaintiffs, all of whom received a “favorable” rating, and
those in the Adjudicated Ineligible group, counsel satisfied the Court at the preliminary approval
hearing that the possibility was nothing more than just that. In particular, Hillson, Bohler, and
Schmidt have sought three times the award for those Adjudicated Ineligible, quelling any
concerns over self-interest.
Rule 23(a)(4) also demands that “the representatives will vigorously prosecute the
interests of the class through qualified counsel.” Young, 693 F.3d at 543 (internal quotation
The Court preliminarily finds proposed class counsel is qualified to represent the class.
Plaintiffs propose that the class be represented by counsel from three firms: Nichols Kaster,
PLLP; Berger & Montague, P.C.; and Lyngklip & Associates Consumer Law Center PLC. (See
R. 37, PID 515.) According to Plaintiffs’ motion, the Berger firm is well versed in class-action
litigation and lead counsel from Berger, E. Michelle Drake, is “currently serving as lead counsel
in over 30 active FCRA class action cases nationwide.” (R. 37, PID 497–98.) The Court has no
reason to question these assertions and finds them consistent with the documentation attached to
Drake’s declaration, including the positive comments by other federal district judges. (R. 37, PID
595–99.) Proposed lead counsel from Nichols Kaster, Anna P. Prakash, avers that Nichols Kaster
“has been lead or co-counsel on hundreds of class and collective actions” and that she “has
worked almost exclusively on class and collective actions under various consumer-protection
and employment laws” over the past several years. (R. 37, PID 603–04.) The Court not only has
no reason to question these assertions, Prakash’s well prepared and well delivered arguments
during the preliminary approval hearing supports them. Finally, the Court’s experience with and
review of a declaration submitted by Ian B. Lyngklip indicates that he is experienced in both
consumer and class-action litigation. (See R. 37, PID 637–46.) Again, nothing before the Court is
to the contrary. As such, the Court preliminarily approves proposed class counsel to represent the
In addition to satisfying the Rule 23(a) requirements, Plaintiffs must show that their
proposed class is one of the varieties listed in Rule 23(b). Plaintiffs claim their class is of the
Rule 23(b)(3) type.
To certify a Rule 23(b)(3) class, it must be the case “that the 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). “[T]he predominance inquiry tests
whether proposed classes are sufficiently cohesive to warrant adjudication by representation.”
Amchem, 521 U.S. at 623. Although predominance overlaps with commonality, “the
predominance criterion is far more demanding” than its Rule 23(a) counterpart. Id. at 624.
Factors that bear on the predominance and superiority inquiries in the settlement context include
the class members’ interest in maintaining a separate action, other currently-pending litigation
concerning the controversy, and the desirability of concentrating the litigation in a particular
forum. See Fed. R. Civ. P. 23(b)(3)(A)–(C); see also Amchem, 521 U.S. at 620 (providing that
for settlement-only class certification, a court need not concern itself with Rule 23(b)(3)(D)’s
Plaintiffs have made a preliminary showing that the predominance requirement of Rule
23(b)(3) is met. As explained, the primary two issues to be litigated in this case—whether Kelly
violated the stand-alone disclosure provision of the FCRA and whether Kelly did so willfully—
are issues common to every class member’s claim. It is true that the issue of damages might vary
from class member to class member. But the Court does not think this likely given that, even
with the waiver and disclaimer included on the form, most applicants would likely have
understood that Kelly was seeking the applicant’s authorization to obtain a consumer report for
employment purposes. As such, the Court preliminary finds that Plaintiffs have satisfied the
predominance requirement. See Amchem, 521 U.S. at 625 (noting that the “[p]redominance is a
test readily met in certain cases” involving consumer laws).
The Court also finds that Plaintiffs have made a preliminary showing that the superiority
requirement is met. The available damages for Kelly’s violation of the stand-alone-disclosure
requirement is not large. Amchem, 521 U.S. at 617 (“The policy at the very core of the class
action mechanism is to overcome the problem that small recoveries do not provide the incentive
for any individual to bring a solo action prosecuting his or her rights.”). As such, it is unlikely
that the claim asserted in this suit would be brought individually. Moreover, even if class
members were motivated to bring their claims individually, a class action avoids hundreds of
thousands of suits across the country against Kelly for the same conduct based on the same legal
theory. Accordingly, the Court preliminarily finds the superiority requirement satisfied.
For the foregoing reasons, the Court preliminarily approves the parties’ settlement and
preliminarily certifies Plaintiffs’ proposed class for settlement purposes as follows:
Preliminary Approval Of Proposed Settlement. The Settlement Agreement (R.
37, PID 511–43; see also R. 49, PID 776–78 (Stipulation and Revised Release)), including both
the exhibits thereto (R. 37, PID 548–49 (Ex. B), 554–59 (Ex. D)) and exhibits thereto as revised
(R. 49, PID 756–64 (Revised Long-Form Notice); R. 53, PID 813–21 (2d Revised Postcard
Notices)), is preliminarily approved as fair and reasonable.
Class Certification For Settlement Purposes Only. Pursuant to Federal Rule of
Civil Procedure 23(c), the Court preliminarily certifies, for settlement purposes only, the
following Settlement Class:
All persons on whom Defendant procured a consumer report pursuant to the Fair
Credit Reporting Act during the period from July 18, 2012 through January 23,
2014, and whose initial hire date with Defendant was during the period of time
when Defendant was providing new applicants with a disclosure form that
contained a liability release.
Class Counsel. Nichols Kaster, PLLP; Berger & Montague, P.C.; and Lyngklip &
Associates Consumer Law Center PLC are hereby APPOINTED as Class Counsel.
Class Representatives. Plaintiffs LaSandra Hillson, Steven Bohler, and Ashley
Schmidt are hereby APPOINTED Class Representatives.
Class Notice. The Parties’ Second Revised Postcard Notice and Claim Form (R.
53, PID 813–16) and Second Revised Adjudicated Ineligible Postcard Notice and Claim Form
(R. 53, PID 818–21) are APPROVED for distribution in accordance with the schedule included
in the Settlement Agreement;
Opt-Outs and Objections. Settlement Class Members shall have the right to either
opt out or object to this Settlement pursuant to the procedures and schedule included in the
Final Approval Hearing. A Final Approval Hearing is set for August 2, 2017 at
10:00 a.m. in Courtroom 242.
s/Laurie J. Michelson
LAURIE J. MICHELSON
U.S. DISTRICT JUDGE
Dated: January 23, 2017
CERTIFICATE OF SERVICE
The undersigned certifies that the foregoing document was served upon counsel of record
and any unrepresented parties via the Court=s ECF System to their respective email or First Class
U.S. mail addresses disclosed on the Notice of Electronic Filing on January 23, 2017.
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