Grissom v. Sterling Infosystems, Inc.

Background

Grace Grissom filed this proposed class action under the Fair Credit Reporting Act, a federal law governing consumer reports, against Sterling Infosystems, Inc., a company that creates background-check reports. Grissom alleged that Sterling’s Social Security-number tracing tool associated her with an alternative name, Martell Scott, and five criminal charges. She alleged that the information was false, that she had no connection to Martell Scott, and that she lost a nanny position by the time the report was corrected.

Grissom alleged that Sterling’s tracing process did not use reasonable procedures to ensure the maximum possible accuracy of its consumer reports, as required by 15 U.S.C. § 1681e(b). The parties conducted discovery for at least twelve months, reviewing more than 7,000 pages of documents and millions of pieces of information. They later mediated the dispute and reached an agreement in principle.

Proposed Settlement

The agreement proposed two settlement classes:

- The Injunctive Relief Class consists of consumers for whom Sterling matched a record to a report using a name developed through a Social Security-number trace between September 25, 2018, and June 4, 2021, even though the names did not exactly match. The parties estimated that this class contained about 44,658 members. In exchange for releasing their ability to bring the covered claims in mass or aggregated proceedings, members would receive changes to Sterling’s Social Security-number tracing tool intended to prevent similar misattributions. - The Damages Class consists of consumers meeting the same criteria who either disputed the report and received an amended report or received a pre-adverse-action notice. The parties estimated that this class contained about 7,469 members. Sterling would deposit $2.5 million into a common fund for payments to class members. The expected payment was approximately $175 to $200 per member, with double payments for members who disputed the information and received an amended report or who attested that they suffered further harm.

The agreement also proposed a $10,000 service award for Grissom. Counsel anticipated seeking attorney fees of up to one-third of the damages fund plus reasonable costs, and up to $500,000 for work on behalf of the Injunctive Relief Class. The court stated that these requests appeared reasonable for preliminary-approval purposes but required billing records and attorney affidavits before final approval.

Court’s Analysis

Federal Rule of Civil Procedure 23(e) requires court approval of a class-action settlement. At the preliminary stage, the court evaluates whether the proposed settlement appears fair, reasonable, and adequate and whether the court will likely be able to approve it after the final approval process. The court considered the adequacy of representation, the negotiation process, the relief provided, and whether class members were treated fairly.

The court found that Grissom’s interests were aligned with those of the proposed class members because they allegedly suffered the same type of inaccurate or misleading Social Security-number tracing results and sought the same forms of relief. The court also found that Grissom’s attorneys were qualified and experienced, based on their prior class-action work and their work in this case.

The court concluded that the settlement resulted from good-faith, arm’s-length negotiations. The parties had completed substantial discovery before using a mediator, and the court determined that they had enough information to assess the strengths and weaknesses of their positions.

The court found the proposed relief adequate. It determined that the expected damages payments were within the range of recoveries in other Fair Credit Reporting Act settlements and that the changes to Sterling’s tracing tool provided meaningful relief to the Injunctive Relief Class. The court also found that the distribution process was not unduly demanding and that the different payment amounts were equitable because they reflected differences in the harm described in the agreement.

For settlement purposes, the court found that the proposed classes met Rule 23’s requirements. The estimated size of each class satisfied the numerosity requirement; common factual and legal issues predominated; Grissom’s claims were typical of the class claims; and Grissom and her attorneys could adequately represent the class. The court also found that a class action was the superior method for resolving the common issues. Because certification was sought only for settlement, the court did not need to address whether the classes could be managed through trial.

Ruling and Next Steps

Judge Vernon S. Broderick granted Grissom’s unopposed motion for preliminary approval of the settlement. The order conditionally certified the two settlement classes, appointed class counsel, approved and directed the notice plan, appointed a settlement administrator, and set a final approval hearing for May 7, 2025, at the Thurgood Marshall U.S. Courthouse in New York City.

Pending the final approval hearing, the court stayed the action’s deadlines except for deadlines stated in the opinion and the preliminary approval order for carrying out the agreement. The court retained jurisdiction over matters arising from or connected with the agreement and directed the clerk to terminate the pending motion. The opinion did not constitute final approval of the settlement or a final decision on the underlying Fair Credit Reporting Act claims.