Case Information
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
--------------------------------------------------------- X
:
GRACE GRISSOM, :
individually and on behalf of those similarly :
situated , :
: 20-CV-7948 (VSB) Plaintiff, : : OPINION & ORDER
- against - : :
STERLING INFOSYSTEMS, INC., :
:
Defendant. :
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Appearances:
John G. Albanese
Eleanor Michelle Drake
Berger Montague PC
Minneapolis, MN
Counsel for Plaintiff and the Proposed Class
Pamela Q. Devata
John W. Drury
Robert Tadeusz Szyba
Seyfarth Shaw LLP
Chicago, IL and New York, NY
Counsel for Defendant
VERNON S. BRODERICK, United States District Judge:
This class action was filed on September 25, 2020 against Defendant Sterling Infosystems, Inc. (“Defendant” or “Sterling”), a company that creates background check reports. (Doc. 1 ¶ 1–9.) Plaintiff Grace Grissom (“Plaintiff” or “Grissom”) brought this action under the Fair Credit Reporting Act (“FCRA”), 15 U.S.C. § 1681 et seq ., on behalf of individuals allegedly injured because Sterling’s background check returned false information. ( Id .)
Before me is Plaintiff’s motion, on behalf of herself and two putative classes of persons similarly situated, for preliminary approval of the class action settlement reached with Sterling. ( See Doc. 43 (motion for preliminary settlement approval); Doc. 43-1 (the memorandum in support, or “Mem.”)). The motion for preliminary settlement approval is unopposed. Along with the motion, Plaintiff has submitted the proposed settlement agreement, (Doc. 43-3 (the “Agreement”)), a proposed order preliminarily approving the Agreement, (Doc. 43-6), a declaration of Plaintiff’s attorney Michelle Drake, (Doc. 43-2 (“Drake Decl.”)), Drake’s resume, (Doc. 43-5), and the resume of Plaintiff’s law firm (Doc. 43-4). Because I find after a preliminary evaluation that the settlement is fair, reasonable, and the result of good faith negotiation, Plaintiff’s motion is GRANTED.
I. Background [1]
In September 2019, Plaintiff applied to work as a nanny on an online nanny matching service. ( Id . at 2.) As part of that website’s screening process, Plaintiff agreed to undergo a background check conducted by Defendant Sterling. ( Id .) Sterling ran Plaintiff’s Social Security number (“SSN”) through its SSN Trace tool, which searches for, among other things, criminal records. ( Id .) Sterling’s SSN Trace “revealed an ‘alternative name’ of Martell Scott that was associated with Plaintiff.” ( Id .) However, Plaintiff had “no relation to” Martell Scott, and never lived in the location where Scott is alleged to have lived. ( Id . at 3.) Sterling’s SSN Trace also revealed that there were five criminal charges associated with Martell Scott. ( Id .) Sterling’s background report therefore incorrectly flagged Plaintiff as having a criminal background. By the time Plaintiff corrected the background report, the nanny position Plaintiff sought had already been filled. ( Id .)
The proposed Agreement consists of two settlement classes. The “Injunctive Relief Class” is defined as:
All consumers for whom Sterling matched a record included in a consumer report based on a name developed through a SSN trace from September 25, 2018 through June 4, 2021 wherein the consumer’s first name, last name and middle name or middle initial did not exactly match the first name, last name, middle name or middle initial of the record reported.
(Agreement § 1.28.) The parties estimate there are approximately 44,658 members of the Injunctive Relief Class, ( id .), each of whom will release “their ability to bring claims against Defendant as part of a mass or aggregated proceedings” in exchange for Defendants’ agreement to change the way its SSN Trace tool works. (Mem. at 1–2.)
The “Damages Class” is defined as:
All consumers for whom Sterling matched a record included in a consumer report based on a name developed through a SSN Trace from September 25, 2018 through June 4, 2021 wherein the consumer’s first name, last name and middle name or middle initial did not exactly match the first name, last name, middle name or middle initial of the record reported; and where the consumer either made a dispute to Defendant regarding the report and an amended report was issued or where a pre-adverse action notice was sent to the consumer regarding the report.
(Agreement § 1.12.) The parties estimate there are approximately 7,469 members of the Damages Class. ( Id .) Members of the Damages Class will agree to release SSN-Trace-related claims against Defendant in exchange for Defendant depositing $2,500,000 into a common fund, from which payments will be made to members of the Damages Class. (Mem. at 1.) “If the anticipated fees, costs, and service award are approved, Damages Class Members are expected to receive checks for between $175-200 each, with a double payment for those Damages Class Members that either (i) disputed information on their consumer reports and where an amended report was issued; or (ii) submit a claim attesting that they were harmed.” ( Id .)
Plaintiff filed this putative class action on September 25, 2020, alleging that Sterling’s SSN Trace feature was not a “reasonable procedure[] to assure maximum possible accuracy” in background check reports as required by FCRA, 15 U.S.C. § 1681e(b). (Mem. at 1.) The parties engaged in discovery between approximately April 2021 and June 2022, ( see Docs. 22, 33), which involved review of over 7,000 pages of documents and “millions of pieces of information.” (Mem. at 3.) Following discovery, the parties attended a mediation session before Judge Diane Welsh on October 25, 2022. ( Id .) The parties reached an agreement in principle to settle on December 13, 2022, and submitted their proposed agreement for my preliminary approval on February 28, 2023. ( Id . at 3–4.) The instant motion seeks: (1) preliminary approval of the Agreement; (2) certification of the Damages Class and the Injunctive Relief Class for settlement purposes; (3) notice to be distributed to each class; and (4) scheduling of a final approval hearing. (Doc. 43.) The motion is unopposed.
II. Legal Standard
A. Preliminary Settlement Approval
It is within a district court’s discretion to approve proposed class action settlements.
See
Kelen v. World Fin. Network Nat’l Bank
,
Federal Rule of Civil Procedure 23(e) requires judicial approval of any class action
settlement. Review of a proposed settlement generally involves preliminary approval followed
by a fairness hearing.
See Silver v. 31 Great Jones Rest.
, No. 11-cv-7442,
B. Conditional Settlement Class Certification and Appointment of Class Counsel
Conditional settlement class certification and the appointment of class counsel have
several practical purposes “including avoiding the costs of litigating class status while facilitating
a global settlement, ensuring notification of all class members of the terms of the proposed
settlement agreement, and setting the date and time of the final approval hearing.”
Almonte v.
Marina Ice Cream Corp.
, No. 16-cv-00660,
III. Discussion
A. Preliminary Approval of Class Settlement Based on the materials Plaintiff has submitted and for the reasons outlined below, I find that the settlement merits preliminary approval.
1. Adequacy of Representation
“Determination of adequacy typically entails inquiry as to whether: (1) plaintiff’s
interests are antagonistic to the interest of other members of the class and (2) plaintiff’s attorneys
are qualified, experienced and able to conduct the litigation.”
Cordes & Co. Fin. Servs. v. A.G.
Edwards & Sons, Inc.
,
Plaintiff’s interests are not antagonistic to the interest of the other class members. By
virtue of the class definitions, Plaintiff and the unnamed class members alike suffered the same
harms—factually incorrect or misleading SSN Trace results. Plaintiff and the unnamed class
members seek the same relief from these harms, namely monetary damages under FCRA (in the
case of the Damages Class) and changes to Sterling’s allegedly unlawful practices (in the case of
the Injunctive Relief Class). (
See
Mem. at 21;
see also id
. at 17–18.) Thus, Plaintiff’s interests
are aligned with the interests of the unnamed class members’ interests.
Cf. DeMarco v.
Robertson Stephens Inc.
,
Plaintiff’s attorneys have also demonstrated the necessary qualifications and skill in this matter through their prior results and experience—each of Plaintiff’s attorneys have over a decade of class action experience—and through their work on this case, which involved substantial discovery and resulted in a successful mediated settlement. ( See Drake Decl.; Doc. 43-4 (discussing Plaintiff’s firm’s qualifications). Therefore, Rule 23(e)(2)(A)’s adequacy of representation prong weighs in favor of approval.
2. Existence of Arm’s-Length Negotiations The existence of arm’s-length negotiations further counsels in favor of approving the settlement on a preliminary basis. Rule 23(e)(2)(b) requires a court to consider whether a proposed settlement “was negotiated at arm’s length.” Here, Plaintiff’s counsel engaged in at least twelve months of discovery, involving detailed review of thousands of pages of documents and data. Therefore, the parties had a full opportunity to acquaint themselves with the strengths and weaknesses of their respective cases prior to initiating negotiations. After beginning negotiations, the parties engaged a mediator, and subsequently reached a final agreement after at least three months. (Mem. at 11.) Cf. Puddu v. 6D Glob. Techs., Inc. , No. 15-CV-8061, 2021 WL 1910656, at *4 (S.D.N.Y. May 12, 2021) (explaining that there is “a presumption of fairness when a settlement is reached with the assistance of a mediator”). All of this suggests that the Agreement is the result of good faith arm’s-length negotiations.
3. Adequacy of Relief
In assessing the adequacy of a settlement under Rule 23(e)(2)(C)(i), “courts may need to
forecast the likely range of possible classwide recoveries and the likelihood of success in
obtaining such results.”
In re Payment Card
,
The parties expect each member of the Damages Class to receive a payment of approximately $175 to $200. (Mem. at 12.) This estimate is in line with FCRA’s per-violation statutory damages range of $100 to $1,000. 15 U.S.C. § 1681n. Plaintiff has also submitted various other court approved FCRA settlements with recoveries in this range. [4]
The Injunctive Relief Class likewise will receive meaningful relief preventing
Defendant’s SSN Trace from misattributing criminal records in a similar manner as alleged.
(Mem. at 13–14.) This relief is especially significant given that FCRA “does not provide for
injunctive relief to consumers.”
Owoyemi v. Credit Corp Sols. Inc.
,
The risks of further litigation reinforce why the relief Plaintiff obtained on behalf of the
class is adequate. These risks include that “FCRA does not provide for strict liability for a
[consumer reporting agency] that reports inaccurate information,”
Wenning v. On-Site Manager,
Inc.
, No. 14-CV-9693,
Under Rule 23(e)(2)(c)(ii), a court must evaluate the “effectiveness of any proposed
method of distributing relief to the class, including the method of processing class-member
claims.” Fed. R. Civ. P. 23(e)(2)(c)(ii). “A claims processing method should deter or defeat
unjustified claims, but the court should be alert to whether the claims process is unduly
demanding.”
Lea v. Tal Educ. Grp.
, No. 18-cv-5480,
The distribution plan here has been formulated by experienced counsel. The Agreement indicates that once the claims administrator notifies each member of the Damages Class by electronic and postal mail, each member will automatically receive a payment, and “those who disputed and had an amended report issued or who attest to further harm will receive a double payment.” (Mem. at 16; Agreement § 8.) I find there is little risk that this process will be unduly demanding or unable to filter out unjustified claims. Therefore, I conclude that this plan is fair, reasonable, and adequate.
In assessing the adequacy of the relief, Rule 23 also requires the court to examine the
proposed attorneys’ fees. Fed. R. Civ. P. 23(e)(2)(c)(iii). Here, Plaintiff anticipates filing an
application for a fee award of an amount of “not to exceed” one-third of the fund set aside for the
Damages Class plus reasonable out-of-pocket costs. (Mem. at 16.) This approach is consistent
with what other courts in this District have approved.
See, e.g.
,
Suarez v. Rosa Mexicano Brands
Inc.
, No. 16-CV-5464,
Plaintiff also contemplates filing a request “for up to” $500,000 as attorneys’ fees for the
Injunctive Relief Class. (Mem. at 17.) This is also consistent with the case law.
See McDaniel
v. Cnty. of Schenectady
,
Finally, a court must consider “any agreement required to be identified under Rule 23(e)(3),” which includes “any agreement made in connection with the proposal.” Fed. R. Civ. P. 23(e)(2)–(3). There are no such agreements here, (Mem. at 9 n.1), so this consideration does not weigh against preliminary approval.
4. Equitable Treatment of Class Members
Rule 23(e)(2)(D) requires the Court to consider whether “the proposal treats class
members equitably relative to each other.” The Agreement provides that each Damages Class
member will receive either a single payment of approximately $175 to $200, or a double
payment if a class member attests to further harm. (Mem. at 12, 17–18.) Pro rata distribution is
sufficient evidence of equitable treatment.
See In re Payment Card,
As part of this factor, I must also consider the incentive payments proposed in the
Agreement. “Rule 23(e)(2)(D) does not forbid incentive awards.”
Moses
,
5. Remaining
Grinnell
Factors
The
Grinnell
factors not expressly assessed under Rule 23(e)(2)(C)(i) include “[] the
reaction of the class to the settlement; [] the stage of the proceedings and the amount of
discovery completed; . . . [] the ability of the defendants to withstand a greater judgment; [] the
range of reasonableness of the settlement fund in light of the best possible recovery; and [] the
range of reasonableness of the settlement fund to a possible recovery in light of all the attendant
risks of litigation.”
Grinnell
,
All five of these factors favor preliminary approval. First, the named Plaintiff favors the
Agreement, and her approval is probative of the class reactions at this time since notice has not
yet been issued.
See, e.g.
,
Sonterra Cap. Master Fund, Ltd. v. Barclays Bank PLC
, No. 15-cv-
3538 (VSB),
B. Conditional Class Certification
The classes meet the requirements for a class set out by Rule 23(a)(1)–(4). The classes
are sufficiently numerous because, according to the parties’ estimate, each consists of thousands
of members. (Mem. at 19.) Common issues predominate across the class because their harms
stem from Sterling’s treatment of class members. Named plaintiff’s claims are typical of the
class because her claims, like all class members, arise out of the same factual and legal
circumstances—Sterling’s SSN Trace and its alleged deficiencies. The adequacy requirements
are met both because the named plaintiff’s interests are not antagonistic to those of the class and
because, as discussed above, her attorneys have sufficient skill and experience to competently
represent the class and have achieved a sound result. Because the class certification request is
made in the context of settlement only, I need not address the issue of manageability.
See Soler
v. Fresh Direct, LLC
, No. 20-cv-3431,
Furthermore, the predominance and superiority requirements of Rule 23(b)(3) are satisfied because the common legal and factual issues already discussed “predominate over any questions affecting only individual members” and a class action is a superior method of resolving these issues. Fed. R. Civ. P. 23(b)(3).
IV. Conclusion
For the foregoing reasons, Plaintiff’s unopposed motion for preliminary approval of the settlement is GRANTED on the terms set out in the Order Preliminarily Approving Class Action Settlement, Certifying Conditional Settlement Classes, Appointing Class Counsel, Approving and Directing Notice Plan, Appointing Settlement Administrator, and Setting Fairness Hearing (“Preliminary Approval Order”). The Court will hold a hearing on May 7, 2025 at Thurgood Marshall U.S. Courthouse, 40 Foley Square, New York, NY, at 2:00pm in Courtroom 518.
Accordingly, it is hereby:
ORDERED that, pending the Final Approval Hearing, all deadlines in this action save those set out in this Opinion & Order and the Preliminary Approval Order for the purpose of executing the Agreement are stayed.
IT IS FURTHER ORDERED that I shall retain jurisdiction over this action to consider all further matters arising out of or connected with the Agreement.
The Clerk of Court is respectfully directed to terminate the pending motion at Doc. 43.
SO ORDERED.
Dated: October 30, 2024
New York, New York
______________________ Vernon S. Broderick United States District Judge
Notes
[1] The factual and procedural background in this section of the Opinion & Order were taken from the “Background” section of the memorandum of law in support of the motion for preliminary settlement approval. (Mem. at 2–4.)
[2] The
Grinnell
factors are: (1) the complexity, expense and likely duration of the litigation; (2) the reaction of the
class to the settlement; (3) the stage of the proceedings and the amount of discovery completed; (4) the risks of
establishing liability; (5) the risks of establishing damages; (6) the risks of maintaining the class action through the
trial; (7) the ability of the defendants to withstand a greater judgment; (8) the range of reasonableness of the
settlement fund in light of the best possible recovery; and (9) the range of reasonableness of the settlement fund to a
possible recovery in light of all the attendant risks of litigation.
See Grinnell
,
[3] The Advisory Committee Notes to the 2018 amendments indicate that the four new Rule 23 factors were intended to supplement rather than displace the Grinnell factors. See Fed. R. Civ. P. 23 advisory committee’s note to 2018 amendment, subdiv. (e)(2)).
[4]
See Ryals v. HireRight Solutions, Inc.
, No. 09-cv-625 (E.D. Va. Dec. 22, 2011), ECF No. 127 (providing between
$15 and $200 per class member);
Dougherty v. QuickSIUS, LLC
, No. 15-cv-06432 (E.D. Pa. May 31, 2018), ECF
No. 66 ($104 to $419 per class member);
Patel v. Trans Union, LLC
, No. 14-cv-00522,
[5] Courts in this District have regularly approved service awards for individual representative plaintiffs ranging from
$1,000 to $10,000.
See, e.g.
,
Johnson v. Body & Pole, Inc.
, No. 22-cv-00857,
