By Amanda Whorton

On December 4, 2015, the Fourth Circuit issued a published opinion in the civil case Berry v. LexisNexis Risk and Information Analytics Group. The court affirmed the district court’s approval of the Federal Rules of Civil Procedure (“FRCP”) 23(b)(2) settlement and found that the release of the statutory damages claims as part of the settlement was proper.

The Class Action Lawsuit

LexisNexis Risk and Information Analytics Group (“Lexis”) is a data broker that sells an identity report to debt collectors that is used to locate people and assets, authenticate identities, and verify credentials. This report is called Accurint for Collections. The Fair Credit Reporting Act (“FCRA”) regulates the sale of “consumer reports” that contains consumer information dealing with credit eligibility. Based on the theory that Accurint is not a “consumer report” within the FCRA, Lexis sold the report without complying with the FCRA provisions. The underlying lawsuit in this case was the third class action lawsuit brought by counsel against Lexis alleging that Lexis violated the FCRA by selling Accurint without abiding by the FCRA. Lexis argued that Accurint does not constitute a “consumer report.”

Counsel also argued that Lexis “willfully” violated the FCRA. If a court were to find that Lexis acted “willfully,” they would face liability not only for actual damages, but for statutory damages as well. However “willfulness” is hard to prove—unless Lexis was “objectively unreasonable” in concluding that Accurint reports were not “consumer reports” under the FCRA, they would not face liability for statutory damages.

After extensive discovery and litigation, the parties finally reached a settlement agreement. There were two classes that the settlement agreement called for: a class under 23(b)(3), not at issue in the appeal, and one under 23(b)(2).

FRCP 23(b)(2)

If requirements of 23(a) are met, the proposed class must fit into one of the three types of classes in 23(b). At issue was 23(b)(2), which allows certification as a class where “the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole.” These classes are mandatory and do not provide “opt-out rights.” The 23(b)(2) class in this case covered all individuals in the U.S. whom the Accurint database contained information about during a certain time frame. While the individuals in this class retain the right to individually seek actual damages under the FCRA, they waive any statutory damages claim, as well as punitive damages.

The Relief Sought Applies Uniformly to All Class Members

The Fourth Circuit agreed with the district court’s reasoning that certification of a settlement class under 23(b)(2) was proper because the relief sought was not monetary, but rather injunctive and would apply to every class member. Each class member retained the individual right to seek actual damages, but rather only waived the non-individualized statutory damages, which is uniform across all class members. If Lexis was liable for a willful violation and therefore subject to statutory damages, each class member would be entitled to the same amount of damages. Furthermore, the statutory damages claims released by the settlement agreement were incidental to the injunctive relief.

The district court also reasoned that the recovery of statutory damages for a willful violation was “speculative at best,” making the waiver of statutory damages claims fair and adequate.

The Fourth Circuit Affirmed

The Fourth Circuit affirmed the district court’s approval of the FRCP 23(b)(2) settlement in finding no error in the release of the statutory damages claims.