Arnold v. DMG MORI USA, Inc.

Background

This consumer class action alleged that DMG MORI USA accessed consumer reports of prospective employees using an authorization form that violated the Fair Credit Reporting Act (FCRA), 15 U.S.C. §§ 1681 et seq. After more than three years of litigation, including class certification and summary judgment for the plaintiffs on DMG’s FCRA liability, the parties signed a settlement agreement in July 2021.

The court had conditionally certified a settlement class consisting of people residing in the United States for whom DMG obtained or caused to be obtained a consumer report for employment purposes on or after April 19, 2016, through May 21, 2021. Steven Arnold was the named class representative, and Aashish Desai and Adrianne De Castro of Desai Law Firm, P.C., were class counsel.

Final approval of the settlement

Under Federal Rule of Civil Procedure 23(e), a court may approve a class settlement only after notice and a hearing, and only if the settlement is fair, reasonable, and adequate. The court confirmed certification of the settlement class under Rule 23(a) and Rule 23(b)(3).

The settlement administrator mailed notice to 740 class members. Eleven notices were returned as undeliverable, meaning 729 class members—more than 98 percent—received mailed notice. The court found that this was the best practicable notice. There were no objections and one opt-out.

The settlement requires DMG to fund $825,000. The parties divided that amount into a $375,000 class distribution fund and a $450,000 attorneys’ fees fund. Litigation expenses, administration costs, and the incentive award are paid from the class distribution fund. After those amounts are paid, the remaining distribution fund will be divided pro rata among participating class members. The court estimated that each class member would receive approximately $469.54. The court found the relief fair and adequate, noting that the amount fell within the FCRA’s statutory-damages range of $100 to $1,000 and that the parties faced risks concerning the appropriate damages amount and standing under a then-pending Supreme Court decision.

Attorneys’ fees and costs

The court had previously denied the initial fee request because it lacked support for the claimed billing rates, did not explain the use of 2021 rates for work dating back to 2018, and did not explain why fees exceeding the class recovery were reasonable. The plaintiffs renewed the request with additional information.

The court applied the lodestar method, which calculates fees by multiplying the reasonable hours worked by reasonable hourly rates. Class counsel reported 406.5 hours for Desai at $950 per hour, 172 hours for De Castro at $550 per hour, and 34.3 hours for a paralegal at $250 per hour, for a stated lodestar of $489,350 based on 612.8 hours. The court found the number of hours reasonable despite identifying some entries that raised efficiency concerns. It also found the billing rates supported by attorney declarations and comparisons with rates in similar cases in the district.

Although the court expressed reservations about using 2021 rates for all work and about awarding lawyers more than the class would recover, it approved the requested $450,000 fee as a case-specific decision. The court emphasized that the requested fee was below the lodestar and that other courts had recognized circumstances in FCRA cases that could produce a disparity between attorneys’ fees and class recovery. The court also granted reimbursement of $13,011.56 in litigation expenses and approved up to $13,500 in additional settlement-administration costs.

Incentive award and disposition

The plaintiffs initially requested a $5,000 incentive award for Arnold and later reduced the request to $3,000. The court found that the record did not justify paying Arnold more than six times the estimated payment to other class members and awarded him $1,500 instead.

The court granted final approval of the class action settlement. It ordered the single person who opted out excluded from the settlement, awarded class counsel $450,000 in attorneys’ fees, ordered reimbursement of $13,011.56 in litigation expenses, approved up to $13,500 in administrator costs, and awarded Arnold a $1,500 incentive payment. The case will remain closed, although counsel must later file a post-distribution accounting document.