Paniani Taafua v. Quantum Global Technologies, LLC

Background

Paniani Taafua brought this proposed class action under the Fair Credit Reporting Act, a federal law governing consumer reports. He alleged that Quantum Global Technologies, LLC used a form that combined a disclosure about obtaining an employment-related consumer report with an additional liability waiver. Taafua alleged that this violated the Act’s requirement that the disclosure appear in a document consisting solely of the disclosure and that the form did not provide valid authorization for obtaining the report.

The parties reached a proposed settlement before the class was certified. The proposed settlement covered people who applied for employment with or worked for Quantum Global Technologies in the United States and whose consumer reports were obtained through First Contact HR from October 30, 2013, through December 31, 2018. It provided for a $125,902 settlement fund, including estimated administration costs, attorneys’ fees and costs, a proposed $5,000 service award for Taafua, and distributions to an estimated 1,041 class members based on 1,476 consumer reports.

Standing

The court concluded that Taafua had standing, meaning that he alleged the concrete, personal injury required for a federal court to hear the case. His allegations that the form confused him, included an improper waiver, and was followed by the procurement of a consumer report were sufficient to establish an injury under the Fair Credit Reporting Act.

Class-certification problems

The court found no concerns about numerosity or commonality. The proposed class had approximately 1,041 members, and common questions included whether Quantum Global Technologies used an improper disclosure form and obtained reports without proper authorization.

The court concluded, however, that Taafua’s claims were not typical of the class as a whole. The Fair Credit Reporting Act requires claims to be filed within two years after discovery of the violation or five years after the violation occurred, whichever is earlier. Quantum Global Technologies argued that Taafua may have known about the background check several years before he filed suit, while Taafua argued that he did not learn about it until he received his personnel file in 2018. The court did not decide the strength of that defense or whether Taafua’s claims were timely. It instead found that approximately half of the proposed class faced the same potential timing defense and the other half did not.

For similar reasons, the court concluded that Taafua alone did not adequately represent the class. His potential timing defense made his claims weaker than those of class members whose claims were clearly timely and created a possible conflict of interest that had not been addressed.

The court found that a class action would be superior to individual lawsuits because the individual recoveries were likely too small to encourage separate cases and handling the claims together would be more efficient. But the court found that common issues did not predominate because, for about half of the class, the timing defense was at least as significant as the common questions about Quantum Global Technologies’ disclosure form. The court therefore concluded that provisional class certification was not appropriate for settlement purposes.

Settlement concerns

The court also concluded that the proposed settlement was not fair, reasonable, or adequate. It found that the parties overstated the risk associated with standing because relevant Ninth Circuit precedent provided substantial guidance supporting Taafua’s standing and the alleged willful violation. The court recognized the timing defense as a litigation risk but was concerned that Taafua’s potential weakness may have reduced the recovery for class members who did not face that defense.

The proposed net settlement fund was $59,934.67. Under the settlement’s distribution formula, the estimated payment was approximately $40.61 for each consumer report obtained. The court noted that the Fair Credit Reporting Act allowed statutory damages of between $100 and $1,000 for a willful violation, although a settlement discount alone did not automatically make a settlement inadequate. The court found the proposed recovery concerning in light of the legal precedent and the fact that the principal significant hurdle appeared to affect only about half of the class.

The court also questioned the requested attorneys’ fees and costs of $44,967.33, including fees equal to 33.33% of the settlement fund. It noted that courts in the Ninth Circuit generally use a 25% benchmark for common-fund settlements and that fee-shifting statutes such as the Fair Credit Reporting Act generally call for calculating fees using the lodestar method, based on time reasonably spent and a reasonable hourly rate. Taafua’s motion did not adequately explain why a higher percentage was justified.

The court found the requested $5,000 service award for Taafua unreasonable on the record presented. The case had settled early with little substantive litigation, and the motion provided only a minimal explanation for the award. The court concluded that the award would give Taafua preferential treatment, particularly at the expense of class members whose claims were not affected by the timing defense.

The proposed notice adequately described the action, class definition, and right to opt out in plain language. However, the court questioned whether sending one mailed notice, without a reminder notice, was the best practicable method under the circumstances. The motion did not adequately address that concern.

Disposition

The court was unable to preliminarily approve the settlement because Taafua had not shown that the proposed class could be certified under Rule 23 or that the settlement was fair, reasonable, and adequate. The court denied the motion for preliminary approval of the class settlement and set a further case-management conference for February 4, 2020.