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Schumacher v. S.C. Data Center, Inc.

United States District Court, W.D. Missouri, Central Division

November 29, 2016

RIA SCHUMACHER, Individually and on Behalf of All Others Plaintiffs,
v.
SC DATA CENTER, INC. d/b/a COLONY BRANDS, INC., Defendant.

          ORDER

          NANETTE K. LAUGHREY United States District Judge.

         Defendant S.C. Data Center, Inc. moves under Federal Rule of Civil Procedure 12(b)(1) to dismiss this Fair Credit Reporting Act case in its entirety for lack of subject matter jurisdiction, based on the United States Supreme Court's recent decision in Spokeo v. Robins, 136 S.Ct. 1540');">136 S.Ct. 1540 (2016). [Doc. 16]. At oral argument on this motion and in her supplemental briefing, Plaintiff Ria Schumacher requested that the Court enforce the parties' May 12, 2016 settlement agreement. [Doc. 51]. For the following reasons, the Court grants Schumacher's request to enforce the settlement and denies S.C. Data's motion to dismiss.

         I. Background

         On behalf of a class, Plaintiff Ria Schumacher brings three claims under the Fair Credit Reporting Act arising out of her employment application with Defendant S.C. Data Center, Inc. In August of 2015, Schumacher applied online for employment with S.C. Data. In Count I, titled “Adverse Action Violation, ” Schumacher alleges that S.C. Data violated 15 U.S.C. § 1681b(b)(3)(A) of the FCRA by failing to provide her with pre-adverse action notice. Specifically, she alleges that S.C. Data did not provide her with a copy of her consumer report and a reasonable time to cure or explain any inaccuracy in the consumer report prior to rescinding her employment offer. [Doc. 1-1, p. 7, 12].

         Count II concerns improper disclosure. Schumacher alleges S.C. Data violated § 1681b(b)(2)(A)(i) of the FCRA by using a form containing extraneous information to procure consumer reports, even though S.C. Data “knew” its form should consist solely of the FCRA disclosure. [Doc. 1-1, p. 14]. Also related to S.C. Data's use of this form, Count III concerns improper authorization. Schumacher alleges that S.C. Data violated § 1681b(b)(2)(A)(ii) by acting with deliberate or reckless disregard of its FCRA obligations and procuring her consumer report without her proper authorization.

         Schumacher filed this action on February 3, 2016, in the Circuit Court of Cole County, Missouri. S.C. Data removed the matter to this Court on March 4, 2016. On May 12, 2016, the parties attended mediation with Richard Sher, an experienced mediator in Saint Louis, Missouri. During this mediation, the parties reached a settlement. On May 16, 2016, the Supreme Court decided Spokeo v. Robins, 136 S.Ct. 1540');">136 S.Ct. 1540 (2016), which addressed Article III standing within the context of FCRA claims. Then, on July 15, 2016, SC Data filed the present motion to dismiss, citing Spokeo for the proposition that Schumacher's FCRA claims lacked sufficient concreteness to provide standing.

         At oral argument on S.C. Data's motion to dismiss, Schumacher requested that the Court enforce the parties' previous May 12, 2016 settlement agreement. On August 17, 2016, the Court invited supplemental briefing on its subject matter jurisdiction to enforce the settlement, which the parties filed. [Docs. 51 and 52].

         II. Discussion

         SC Data moves for dismissal under Federal Rule of Civil Procedure 12(b)(1) contending that this Court lacks subject matter jurisdiction over the present action. Specifically, SC Data argues that Schumacher lacks Article III standing to bring her claims in light of the United States Supreme Court's recent decision in Spokeo v. Robins, 136 S.Ct. 1540');">136 S.Ct. 1540 (2016). However, because the parties entered into a settlement agreement that Schumacher wishes to enforce, the issue is not whether the Court has subject matter jurisdiction over her FCRA claims. Instead, the issue is whether the Court has subject matter jurisdiction to enforce the parties' settlement agreement.

         The Third Circuit addressed a similar situation in Ehrheart v. Verizon Wireless, 609 F.3d 590 (3rd Cir. 2010). Ehrheart involved a class action in which the plaintiff buyers alleged that the defendant Verizon Wireless violated the Fair and Accurate Credit Transaction Act. Id. at 592. Like Schumacher and S.C. Data, the Ehrheart parties participated in mediation. Id. Meanwhile, legislation was pending before Congress that, if passed, would eliminate all of the plaintiffs' FACTA claims. Id. Following mediation, the parties agreed to a settlement, which they submitted to the district court for approval under Federal Rule of Civil Procedure 23(e). Id. The district court entered a preliminary order approving the settlement. Id. Then, the legislation was signed into law, eliminating all of the plaintiffs' FACTA claims. Id. Six days later, Verizon moved the district court to vacate its order granting preliminary approval of the settlement, which the district court granted. Id.

         On appeal, the Third Circuit reversed the district court's vacature of its settlement order. Id. In its decision, the Third Circuit emphasized three principles, each of which influenced its holding that a later change in the law eliminating the plaintiffs' cause of action did not render the parties' settlement agreement moot or unenforceable. Id. at 593. First, the Third Circuit noted the “restricted, tightly focused role . . . for district courts” prescribed by Rule 23, a role that “requir[es] them to act as fiduciaries for the absent class members, but that does not vest them with broad powers to intrude upon the parties' bargain.” Id. Second, the court emphasized the strong public policy favoring settlement of disputes, finality of judgments, and the termination of litigation-a public policy that is “particularly muscular in class action suits.” Id. Finally, the court reflected on “jurisprudence hold[ing] that changes in the law after a settlement is reached do not provide ground for rescission of the settlement.” Id. These principles apply with equal force to Schumacher's case.

         First, like the settlement agreement in Ehrheart, the settlement agreement reached by S.C. Data and Schumacher is a binding enforceable contract under general principals of contract interpretation. Ehrheart, 609 F.3d at 594 (citing In re Cendant Corp. Litig., 188');">233 F.3d 188, 193 (3d Cir. 2000)). The parties make no allegations of bad faith or illegality with respect to the formation of this contract. Further, the parties reached this settlement during mediation with an experienced mediator, and the agreement was negotiated and executed by qualified counsel on both sides.

         SC Data argues the settlement is not an enforceable contract because Rule 23(e) court approval of the parties' settlement is a condition precedent, [1" name="FN1" id= "FN1">1] required as an express term of the contract. This argument is incorrect. The Third Circuit dismissed a similar argument in Ehrheart, reasoning that “if this argument [were to be] accepted . . . the settlement process would become meaningless since either party to a class action settlement (or any other type of settlement that requires court approval) could back out of an agreement at any time before court approval and avoid any legal repercussions for breaching the earlier offer and acceptance.” Ehrheart, 609 F.3d at 594. Likewise, this Court will not allow S.C. Data to “replay its hand” by using this argument to back out of its settlement. Id.

         Furthermore, Rule 23 requires the Court to act as a fiduciary for absent class members, not defendants to a class action. Id. SC Data attempts to characterize Rule 23 court approval as a condition precedent protective of S.C. Data, but this approval requirement is meant to protect absent class members. Id. By virtue of being a defendant to the lawsuit and represented by its own counsel, SC Data-unlike absent class members-is sufficiently equipped to protect its own interests during settlement negotiations. Id. (clarifying ‚Äúthat this [Rule 23] fiduciary protection does not extend to defendants in a class action, who are in a position to protect their own ...


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