Der-Hacopian v. Darktrace, Inc.

Background

Nicholas Der-Hacopian brought this consumer class action against Darktrace, Inc. under the Fair Credit Reporting Act (FCRA). He alleged that Darktrace used background checks during its employment application process and that it violated the FCRA in two ways: first, by including a release of future liability in the authorization form applicants had to sign; and second, by making adverse employment decisions without timely giving applicants a copy of the report and a written summary of their rights.

The complaint asserted claims under 15 U.S.C. § 1681b(b)(2), which requires an employment-related authorization to consist only of the disclosure that a consumer report may be obtained for employment purposes, and § 1681b(b)(3), which requires notice and a copy of the report before an adverse action based on the report. Der-Hacopian sought to represent two groups of consumers corresponding to those alleged violations.

Settlement Terms and Notice

The settlement class includes applicants for employment with and employees of Darktrace from whom Darktrace obtained consent to procure a consumer report using a form substantially similar to the authorization form signed by Der-Hacopian, and for whom Darktrace procured or caused to be procured a consumer report between November 5, 2016, and entry of the final approval judgment.

Under the agreement, Darktrace will comply with the FCRA’s disclosure, authorization, and notice requirements for obtaining and providing employment-related consumer reports. Each class member will receive a $300 settlement check. Checks that are undeliverable or not cashed within 60 days will become void, and the funds will be donated to the National Consumer Law Center as the agreed recipient. The settlement releases class members’ claims under the specified FCRA provisions. Der-Hacopian separately agreed to a broader release of claims described in the agreement.

A third-party administrator mailed 274 class notices. After address verification and tracing, 256 class members—approximately 93.4 percent—were presumed to have received notice. The administrator received no objections or requests for exclusion, and the parties reported no responses to the notices sent to attorneys general under the Class Action Fairness Act.

Final Settlement Approval

The court applied Federal Rule of Civil Procedure 23, which governs class actions and requires court approval of class settlements. The court found that the notice plan complied with the rule and provided the best practicable notice under the circumstances. It also found the settlement fair, adequate, and reasonable.

In reaching that conclusion, the court considered the strength of Der-Hacopian’s claims, the risks and costs of continued litigation, the difficulty of maintaining class certification, the settlement amount, the parties’ investigation and discovery, and the class members’ reaction. The court noted that proving entitlement to statutory or punitive damages would require showing that Darktrace acted willfully rather than carelessly, and that Darktrace had indicated it would appeal a decision favoring Der-Hacopian, including class certification. The court found that the $300 payment per class member—approximately $76,800 overall—was within the reasonable range given the litigation risks and costs. Darktrace also agreed to pay approximately $15,000 in administration expenses and to revise its background-check practices.

The court granted Der-Hacopian’s motion for final approval of the class action settlement.

Attorneys’ Fees, Costs, and Incentive Award

Class counsel requested $150,000 in attorneys’ fees and costs and a $15,000 incentive award for Der-Hacopian. The court found counsel’s billing rates reasonable for the Northern District of California and found the time spent reasonable. Counsel reported more than 375 hours of work, $202,120 in billed time, and $19,019 in expenses. The court also considered the results achieved, including the settlement payments and the absence of objections or opt-outs.

The court granted attorneys’ fees and costs totaling $150,000. It found the requested $15,000 incentive award disproportionate because it was 50 times the payment to other class members. Based on the benefit Der-Hacopian helped obtain for the class, the court found $1,500 adequate and appropriate and granted in part the incentive-award request. Overall, the court granted in part and denied in part the motion for attorneys’ fees and an incentive award.

Final Directions

The court approved the $300 payment to each class member, $15,000 in settlement-administrator costs, $150,000 in attorneys’ fees and costs, and a $1,500 incentive award for Der-Hacopian. The parties and settlement administrator were directed to implement the settlement and file a short stipulated final judgment within 21 days of the order.