Jessica Karmasek May 24, 2016, 1:54pm


WASHINGTON (Legal Newsline) - A Washington, D.C.-based public interest law firm filed a petition with the U.S. Supreme Court last week, urging the court to review a class action settlement that it argues is unfair to class members.

On Thursday, the Competitive Enterprise Institute’s Center for Class Action Fairness, or CCAF, filed its petition for writ of certiorari with the nation’s highest court.

CCAF’s petition was filed after a federal appeals court refused to review the deal -- one of two reached over the sale of personal data reports to debt collectors -- for a second time.

The U.S. Court of Appeals for the Fourth Circuit initially ruled against CCAF in a Dec. 4, 2015 decision.

Two weeks later, the center asked the Fourth Circuit to rehear the case against LexisNexis, a company known for providing computer-assisted legal research and business research and risk management services.

The appeals court denied CCAF’s petition for rehearing and rehearing en banc Jan. 4.

CCAF argues the Fourth Circuit failed to follow governing Supreme Court law that recognizes the “inherent potential for abuses” of the class action settlement process.

“The Supreme Court has an opportunity to bring clarity for thousands of class members who want to opt out of class actions,” said Adam Schulman, a CEI attorney.

If the Supreme Court agrees to hear the case, it could resolve splits in circuit court decisions over whether the law provides damages claimants the right to opt out of class actions and, if not, whether the Due Process Clause guarantees that right.

The sole statute at issue in the litigation, the Fair Credit Reporting Act, does not permit private parties to seek injunctive relief.

“Review by this Court is needed to resolve such conflicts and to protect the due process rights of literally hundreds of millions of absent class members in this and other cases,” CCAF’s 29-page petition states.

The center argues the settlement was unfair to the class and that class attorneys sought excessive fees -- more than $5 million, on top of their fees from a related settlement.

The class action centered around LexisNexis Risk and Information Analytics Group’s sale of personal data reports to debt collectors -- in particular, its Accurint reports.

The reports are used to locate people and assets, authenticate identities and verify credentials. The Accurint database contains information on more than 200 million people, and millions of such reports are sold each year.

The action claims the defendants -- including LexisNexis Risk & Information Analytics Group Inc., now LexisNexis Risk Solutions FL Inc.; Seisint Inc., now LexisNexis Risk Data Management Inc.; and Reed Elsevier Inc. -- prepared and sold Accurint searches and reports, that these reports were “consumer reports” under the Fair Credit Reporting Act, and that the defendants failed to follow certain FCRA requirements that apply to consumer reports, including handling disputes about the reports’ contents and providing consumers with full copies of reports about them.

A federal district court did not decide whether the reports were consumer reports, or that either side was right or wrong. Instead, both sides agreed to settle, thus resolving the case and providing benefits to consumers.

Two settlements were proposed -- by the same group of lawyers.

Class counsel included Leonard Bennett of Consumer Litigation Associates PC in Newport News, Va.; Dale Pittman of the Law Office of Dale W. Pittman PC in Petersburg, Va.; Michael Caddell and Cynthia Chapman of Caddell & Chapman in Houston, Texas; and James Francis of Francis & Mailman PC in Philadelphia.

One deal, on behalf of 31,000 people, established a $13.5 million settlement fund covering payments to class members, $3.375 million in attorneys’ fees and expenses, and incentive awards totaling $30,000 to the class representatives.

CCAF did not object to that settlement, but to another deal, on behalf of 200 million people.

The second settlement established no fund, rather it put in place a new regime for the next several years with regards to Lexis’ reports and paid the attorneys $5.5 million -- on top of their fees from the other settlement -- and did not allow class members to opt out.

Judge James R. Spencer of the U.S. District Court for the Eastern District of Virginia ruled on Sept. 5, 2014 that both proposed settlements were a “fair, reasonable and adequate bargain” between the defendants and the plaintiffs.

However, some class members objected to the settlements, and filed a notice of appeal with the Fourth Circuit.

The objectors argued that Lexis violated the FCRA “willfully,” making statutory damages of $100 and $1,000 available to all of the class members.

The Fourth Circuit, in its Dec. 4, 2015 ruling, found no error in the district court’s release of the statutory damages claims as part of the settlement, and affirmed.

“Willfulness is a high standard, requiring knowing or reckless disregard of the FCRA’s requirements,” the appeals court wrote.

The objectors also took issue with certification of the settlement class under Rule 23(b)(2), on the grounds that the monetary relief sought was not incidental to injunctive or declaratory relief.

The Fourth Circuit disagreed, finding that the terms of the deal made opt-out rights unnecessary.

CCAF has argued the appeals court’s decision sets an “unfortunate precedent” for future class action cases.

“The Fifth, Seventh, Eleventh circuits and even the Supreme Court have all found differently -- injunctive relief is only appropriate where class members’ claims allow for injunctive relief,” Schulman said following the Fourth Circuit’s ruling last year.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

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Organizations in this Story

Competitive Enterprise Institute's Center for Class Action Fairness
1899 L St NW, 12th Floor, Washington, DC 20036
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U.S. Supreme Court
1 First St NE
Washington, DC 20543

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