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Fair Credit claims prompt $20M class action settlement

Telespectrum, a company that operates call centers, took over a Hampton Roads operation in 2005 and ordered background checks on its new employees.

About 30 reports showed felonies that required dismissal of the employees under Telespectrum’s personnel policies. Several employees insisted their records were wrong, and some of them were allowed to return to work after they were corrected.

One employee, Lisa D. Williams, was not taken back immediately, even though the report that showed that she had been convicted of two felonies and serious misdemeanors referred to a white woman who was barely 5 feet tall.

Williams is almost 6 feet tall and black.

She went to Christopher Colt North, a Newport News attorney who specializes in employment law. North at first suspected that Williams was the victim of racial discrimination, but an investigation of the company’s largely black and female workforce showed that was unlikely.

North then called Leonard A. Bennett, a consumer litigation specialist in Newport News, for a possible claim under the Fair Credit Reporting Act.

Williams’ case has led to proposed class action settlement of more than $20 million with LexisNexis Management Inc. on behalf of 272,000 people on whom a LexisNexis subsidiary had run background checks.

LexisNexis acquired Securint, which now operates as Express Screening, in 2005, a few months after it ran the background check on Williams.

U.S. District Judge Robert E. Payne gave preliminary approval to the settlement earlier this month, and a hearing on formal approval of it is set for June 25 in Richmond federal court.
The settlement involves two classes of claimants. In the larger one, class counsel allege that Securint violated 15 U.S.C. § 1681i by failing to provide notice to the consumer at the same time it delivered the background report to the employer.

North said discovery showed that the time varied from one day to 12 days. In denying liability, LexisNexis contended that the notice was reasonable and consistent with industry practice.
LexisNexis agreed to provide $19 million to settle those claims, and class counsel has requested attorneys’ fees of 30 percent of the fund. After deducting attorneys’ fees, each claimant would receive between $25 and $100, depending on the delay in providing the notice, with an average payment of about $49.

The second class is composed of 1,777 claimants who complained to Securint about the information in their reports. Before investigating the complaint, Securint required the consumers to provide two forms of identification. Counsel alleged that the procedure violated U.S.C. § 1681k’s requirement of a prompt reinvestigation once a complaint is received.

Again, LexisNexis contended that the procedures were reasonable and denied any violation.
Under the proposed settlement, each of those claimants would get $1,000, and LexisNexis would pay an additional $523,000 as attorneys’ fees to class counsel.

As the class action aspect of the case developed, Bennett and Cross added the Houston firm of Caddell & Chapman to the legal team. The firm specializes in class action litigation.

Claimants may opt out of the class and seek a larger recovery in cases in which they can show lost wages or other harm, North said. Class action for such claimants would have been impractical because the circumstances vary substantially, he said.

Before proposing the settlement on the two class action counts, Williams and the other five class representatives settled under confidential terms their allegation that Securint violated U.S.C. § 1681e(b) in their individual cases by failing to follow reasonable procedures to assure maximum possible accuracy in the preparation of the background reports.

The lead plaintiffs also have settled their FCRA claims against Telespectrum under confidential terms.

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