WASHINGTON (Legal Newsline) - A Washington, D.C.-based public interest law firm is asking a federal appeals court to rehear a settlement case, arguing that a deal -- one of two reached over the sale of personal data reports to debt collectors -- is unfair to the class and that class attorneys are seeking enormous fees.

On Friday, the Center for Class Action Fairness, now a subunit of the Competitive Enterprise Institute, asked the U.S. Court of Appeals for the Fourth Circuit to rehear the settlement case against LexisNexis, a company known for providing computer-assisted legal research and business research and risk management services.

The Fourth Circuit initially ruled against CCAF in a Dec. 4 decision.

“The court’s previous ruling created a circuit split concerning injunctive-relief class action settlements, but if the court rehears this case, the Fourth Circuit will have the opportunity to repair the split,” CCAF attorney Adam Schulman said Friday. “In doing so, it would reaffirm that the class action mechanism is supposed to serve class members, not attorneys or defendants.”

He added, “To ensure a proper ruling and a fair settlement, we implore the court to reexamine these issues.”

CCAF argued the settlement was unfair to the class and that class attorneys were seeking 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 that 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 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 ruling earlier this month, 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 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 argues the appellate 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.

CCAF said Friday’s petition for a rehearing was prompted by the court’s failure to follow governing Supreme Court law that recognizes the “inherent potential” for abuses of the class action settlement process.

“We fear this ruling will allow unscrupulous class counsel to settle in ways that benefit themselves, while withholding the remedies that Congress wanted class members to have,” Schulman said.

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

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