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Lagos v. Leland Stanford Junior University

United States District Court, N.D. California

March 24, 2017

THOMAS LAGOS, Plaintiff,
v.
THE LELAND STANFORD JUNIOR UNIVERSITY, Defendant.

          ORDER DENYING MOTION FOR PRELIMINARY APPROVAL RE: DKT. NO. 62

          KANDIS A. WESTMORE UNITED STATES MAGISTRATE JUDGE

         Plaintiff Thomas Lagos filed the instant putative class action against Defendant The Leland Stanford Junior University, alleging that Defendant violated the Fair Credit Reporting Act ("FCRA"). (First Amended Compl., FAC, Dkt. No. 30.) The parties entered into a settlement, and on January 12, 2017, Plaintiff filed a motion for preliminary approval of the class action settlement. (Plf.'s Mot., Dkt. No. 63.) On February 17, 2017, the Court issued an order requiring that the parties file a joint supplemental brief addressing certain issues, including "whether the settlement falls within the range of possible approval or within the range of reasonableness." (Ord. at 1 (internal quotation omitted), Dkt. No. 66.) On March 2, 2017, the parties submitted the requested briefing. (Joint Supp. Briefing, Dkt. No. 68.) Upon consideration of the moving papers and supplemental brief, as well as the arguments presented at the March 16, 2017 motion hearing, and for the reasons set forth below, Plaintiff's motion is DENIED.

         I. BACKGROUND

         A. Litigation History

         The FCRA generally prohibits an employer from procuring or causing to be procured a consumer report for employment purposes, unless:

(i) 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; and
(ii) the consumer has authorized in writing (which authorization may be made on the document referred to in clause (i)) the procurement of the report by that person.

15 U.S.C. § 1681b(b)(2)(A). When a violation is "willful, " the FCRA provides for statutory damages "of not less than $100 and not more than $1, 000." 15 U.S.C. § 1681n(1)(A). The purpose of the disclosure and authorization provision was to address Congress's "concern[] that prospective employers were obtaining and using consumer reports in a manner that violated job applicants' privacy rights." Syed v. M-I, LLC, 846 F.3d 1034, 1038 (9th Cir. 2017.) Further, the disclosure and authorization provision "promotes error correction by providing applicants with an opportunity to warn a prospective employer of errors in the report before the employer decides against hiring the applicant on the basis of information contained in the report." Id.

         In January 2015, Plaintiff applied for a job with Defendant. (FAC ¶ 14.) "As part of the application process, [Defendant] procured or caused to be procured a consumer report regarding Plaintiff from HireRight." (Id.) Plaintiff alleges that Defendant "willfully" violated the FCRA when it procured or caused to be procured a consumer report without making the required disclosure "'in a document that consists solely of the disclosure.'" (FAC ¶¶ 15-16 (quoting 15 U.S.C. § 1681b(b)(2)(i)).) Specifically, Plaintiff signed a four-page disclosure and authorization form; the form's first page states that Defendant may request a consumer report assembled by HireRight or another consumer reporting agency, and explains the type of information that may be contained in the background report. (See Dkt. No. 7-1, Exh. A at 1.) The form's second and third pages are entitled "Additional State Law Notices, " and contain notices relating to consumer reports for applicants, employees, or contractors in California, Maine, Massachusetts, Minnesota, New Jersey, New York and Washington state. (Id. at 2-3.) The last page is entitled "Authorization of Background Investigation, " which includes a consent to the preparation of a background check. (Id. at 4.) The second paragraph contains the disclaimer: "I also understand that nothing herein shall be construed as an offer of employment or contract for services." (Id.)

         On October 6, 2015, Defendant moved to dismiss Plaintiff's claim, on the grounds that: (1) Defendant's disclosure complied with FCRA requirements, and (2) challenging Plaintiffs ability to show that Defendant "willfully" violated the FCRA. (Dkt. No. 7 at 2.) On December 4, 2015, Judge Grewal denied Defendant's motion to dismiss, finding that Plaintiff had adequately alleged a willful violation. (Dkt. No. 24 at 1, 4-5.)

         On December 28, 2015, Defendant moved to stay the case pending the Supreme Court's decision in Spokeo, Inc. v. Robins. (Dkt. No. 27.) The parties then stipulated to stay the case. (Dkt. No. 28.) After the Supreme Court issued its decision in Spokeo, Judge Grewal lifted the stay on May 20, 2016. (Dkt. No. 34.) The case was then reassigned to the undersigned. (Dkt. No. 36.)

         On November 22, 2016, the parties informed the Court that the case had settled. (Dkt. No. 53 at 1.) Plaintiff then filed the instant motion for preliminary approval of the class action settlement on January 12, 2017.

         B. Settlement Agreement

         Under the terms of the settlement agreement, Defendant agrees to pay a Gross Settlement Fund of $400, 000, in addition to one-half of the administration costs. (Dion-Kindem Decl., Exh. 1 at 7, "Settlement Agreement, " Dkt. No. 62-1.) Of the $400, 000 Gross Settlement Fund, Plaintiffs counsel intends to seek an award of one-third (33 ⅓%), or $133, 333.33, as well as costs not to exceed $12, 000. (Id. at 4.) The $400, 000 Gross Settlement Fund also includes a $7, 500 incentive payment to Plaintiff for his service as the named class representative, and up to $35, 000 in class administration costs. (Id. at 5, 7.) This leaves a Net Settlement Fund of $212, 166.67 for distribution to an estimated class of 15, 347 members. (Plf's Mot. at 5.) Based on the Net Settlement Fund of $212, 166.67, each class member will receive an estimated $13.82.[1]

         Once the Court grants preliminary approval, the Settlement Administrator is responsible for e-mailing notice of the settlement to the class, using the class member's last known e-mail address.[2] (Settlement Agreement at 11.) If the e-mail is undelivered, the Settlement Administrator will mail a Post Card Notice that summarizes the settlement and directs class members to the Settlement Website for class members to get additional information. (Id.) If the Post Card Notice is returned to the Settlement Administrator without a forwarding address, the Settlement Administrator is responsible for using publicly available databases to find an updated address and re-mail the notice. (Id. at 12.) There is no claims process; distribution of the settlement fund is automatic.

         Upon receiving notice, class members will have approximately 45 days from the e-mail or mailing date to opt-out of the settlement. (Id.) An opt-out form will be provided to the class members. (See Joint Supp. Briefing, Exh. 2.) Class members who do not opt out may also object to the settlement. (Settlement Agreement at 13.)

         Following final approval, the Net Settlement Fund will be distributed pro rata in the form of a check to all class members who had not opted out of the settlement. (Id. at 8.) Class members will have 180 days to cash or deposit the settlement checks. (Id. at 9.) Any checks that are undeliverable, returned, uncashed, or not deposited after the 180-day period for negotiating checks will be pooled and distributed on a pro-rata basis to the class members who timely cashed or deposited their first checks. (Id.) After this second round of distribution, any ...


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