Another Troubling Future-Conduct Settlement

Last year, in Future Conduct and the Limits of Class-Action Settlements, I expressed grave concern about settlements like the one in the Google Books case, which tried to leverage a lawsuit about searching books into a settlement about selling them. A pending privacy case. Berry v. LexisNexis Risk & Information Analytics Group, provides another good illustration of the problem.

LexisNexis, through a subsidiary, sells a report called Accurint to help debt collectors, private investigators, and others “Detect fraud. Verify identities. Conduct investigations.” A group of attorneys brought a class action, alleging that Accurint contains the kind of personal information that can trigger the Fair Credit Reporting Act, but doesn’t comply with the FCRA’s other requirements. They claimed that LexisNexis doesn’t give consumers access to their files, doesn’t let consumers fix mistakes, and doesn’t require Accurint customers to comply with the FCRA.

Under the proposed settlement, LexisNexis would split Accurint’s service for debt collectors in two. One new service, “Collections Decisioning,” would fully comply with the FRCA; the other, “Contact and Locate,” would not. Consumers will have the right to see their Contact and Locate files once a year and to leave 100-word comments, protections well short of the FCRA’s. LexisNexis’s theory is that if Contact and Locate contains only personal information that “bears a reasonable relationship to the location of a debtor or to the location of assets securing the debt for purpose of repossession” and if customers are warned not to use the reports when granting credit, the service will fall outside the FCRA’s ambit.

There are reasons to like this new program. For consumers, it’s a substantial improvement over LexisNexis’s current you get nothing! stance toward consumer rights. Half a loaf is better than none. But to use a class-action settlement to get there is troubling. The settlement doesn’t just redesign Accurint to keep it clear of the FCRA; it also rewrites the FCRA to keep it clear of Accurint. Class members “agree that from the Effective Date until the Sunset Date that Post Settlement Products shall not be ‘consumer reports’ within the meaning of the FCRA.”

This is a future-conduct release: it forgives LexisNexis for torts as yet uncommitted. It does not settle presently existing claims the class members have against LexisNexis based on Accurint. It does not settle any claims class members will have in the future based on Accurint. Instead, it allows LexisNexis to create a new service that is different from Accurint and exempts that new service from the FCRA.

LexisNexis argues that it is “entitled to the releases” in the settlement because it “should be permitted to sell Accurint® products to its customers … without fear of harassing, repeated litigation concerning its purported obligations under an inapplicable statute.” But if LexisNexis truly believes that Contact and Locate will not be covered by the FCRA, let it launch the service and defend itself in court if necessary. The rest of us have to conform our conduct to the law, as best we are able; we bear the risk that our understanding of our obligations is mistaken. Why should LexisNexis deserve anything more? Indeed, LexisNexis stands in a worse position than the rest of us: it is able to offer this settlement only because it has been sued for violating the FCRA. If breaking the law once is my ticket to a deal that lets me break the law in novel ways in the future, sign me up.

Of course, LexisNexis and the plaintiffs’ attorneys argue that the Contact and Locate deal is simply a permissible settlement of a genuine lawsuit. But this is where the differences between Accurint and Contact and Locate become significant. It is far from clear that a lawsuit about Accurint’s compliance with the FCRA could resolve the legality of Contact and Locate.

Contact and Locate doesn’t exist. No one knows what information LexisNexis thinks has a “reasonable relationship” to debt collection. No one has seen how LexisNexis will provide access to consumer files. No one knows what Contact and Locate users will actually do with the reports they request. Maybe Contact and Locate will fall outside the FCRA, and maybe it won’t. And if it doesn’t, it is inappropriate for a court to give LexisNexis prospective immunity for systematically violating the FCRA.

In an ordinary consumer lawsuit, prospective immunity would be a matter of individual consent. Parties can craft their own settlements, just as they can craft their own contracts. Here, however, the settlement’s releases will be imposed on class members through an exercise of the court’s judgment power. Consent gives contracts their legal and moral authority, but the “consent” here is purely a fiction. Rule 23 allows classes to litigate common “claims, issues, and defenses,” and to settle those “claims, issues, or defenses.” It does not confer a general power on class attorneys to bind class members to executory contracts.

To be sure, there is no shortage of cases holding that a consent decree in a class action can go beyond the relief available at trial. But that is because an individual defendant can agree to whatever onerous terms it is willing to live with. These cases simply do not speak to the scope of the releases given by the class.

As LexisNexis itself admits, “The Settlement will establish the rights and obligations between LexisNexis and class members on a going forward basis — in the absence of existing law.” (31). We have a word for that: it’s called “legislation.” LexisNexis will have obtained the equivalent of a private bill, setting up a new FCRA-lite regulatory regime just for it. But this regulation was drafted by the party it will govern, and it is being presented for approval to the branch of government worst positioned to evaluate it. Courts considering complex prospective settlements act without any of Congress’s safeguards: political accountability, legislative fact-finding, dedicated professional staff, the power to set its own agenda, the power to amend, the power to repeal.

Courts simply do not have this sort of authority. The settlement releases class members future FCRA claims based on LexisNexis’s future conduct in launching Contact and Locate. But a federal court lacks Article III jurisdiction over hypothetical claims concerning a hypothetical future service. If I tried to bring a class action against LexisNexis today, contending that Contact and Locate will violate the FCRA, my complaint would be dismissed as unripe. It wouldn’t become ripe simply because I changed the cover sheet to say “Proposed Settlement” rather than “Complaint.”

The only way to demonstrate that the court has authority to approve the LexisNexis settlement is to show that litigating the class’s Accurint claims could plausibly determine the legality of Contact and Locate. The parties have done nothing to show that it could, and some objectors have given reasons to show that it could not. The court will hold a fairness hearing on Tuesday the 10th. I hope it will probe the scope of the releases in the settlement. If it concludes that Contact and Locate’s compliance with the FCRA is not really at stake in the underlying lawsuit, it should reject this attempt to hijack its Rule 23 authority.

(There are many other provisions in the proposed settlement, and objectors have raised quite sharp concerns about many of them. I have chosen to focus on the future-conduct-release issue because it is the one on which I have something distinctive to say.)