Class action settlement tossed after long fight over standing

A recent decision of the 8th U.S. Circuit Court of Appeals obliterated a $333,600 class action settlement that a federal judge approved more than five years ago. But, after reconsidering the matter, the appellate panel sent the case back to Missouri state court to try again.

The 8th Circuit’s May 3 opinion was the last in a series of twists in the case, which originally was filed in Cole County Circuit Court in 2016 and then removed to the U.S. District Court for the Western District of Missouri.

Plaintiff Ria Schumacher alleged that SC Data Center had violated the Fair Credit Reporting Act when it declined to hire her. Schumacher had been offered a job at the company, but the offer was rescinded after a background check found she had felony convictions that she had failed to disclose.

Among other things, Schumacher’s class action lawsuit alleged that SC Data took adverse employment action based on her consumer report without first showing her the report so that she could explain and provide context regarding her criminal history. When she was 17, Schumacher was implicated in a drug deal that resulted in a murder. Although not directly involved in the crime, she was tried as an adult and sentenced to 25 years in prison but was released after serving 12 years.

SC Data denied the claims, but the parties were able to reach a tentative settlement a few months after the case landed in federal court. However, that same year the U.S. Supreme Court decided Spokeo v. Robins, which re-examined how a plaintiff’s standing should be analyzed in a case that involved alleged violations of a statute, such as the FCRA.

Citing Spokeo, SC Data argued that Schumacher lacked standing and that the case should be dismissed because the court lacked subject matter jurisdiction. Judge Nanette K. Laughrey enforced the settlement anyway. But in 2019, the 8^th Circuit sent the case back and said the judge had to determine Schumacher’s standing first.

Laughrey, finding that Schumacher did have standing, once again approved the settlement, which called for a payment of $333,600 to approximately 4,400 people to whom SC Data allegedly had failed to disclose background reports.

But following a second round of appeals, the 8th Circuit disagreed, finding that although Schumacher had demonstrated that several requirements of the FCRA were violated, none of those violations had resulted in a concrete harm to her. For instance, Judge Ralph R. Erickson wrote, the FCRA doesn’t provide a right to provide context about accurate but negative information in the report.

“SC Data wrote on the report the reason for the job offer withdrawal — the undisclosed felony convictions,” he wrote. “Schumacher may have demonstrated an injury in law, but not an injury in fact.”

Judge L. Steven Grasz concurred. Judge Jane Kelly wrote separately to stress that the opinion shouldn’t be read to require heightened standing rules for FCRA cases.

The opinion initially was released on April 4, but after Schumacher requested a rehearing the court reissued the opinion. Although its bottom line remained the same, the court agreed that, in the absence of federal jurisdiction, the case should return to Cole County Circuit Court, where the suit potentially could proceed.

C. Jason Brown of Brown & Watkins in Gower, an attorney for the class, said he was considering filing a motion for the entire 8th Circuit to review the case, but he otherwise declined to comment. In his earlier motion for rehearing, Brown argued that the panel decision conflicted with 8th Circuit precedent “and just as importantly strips millions of Americans of their right to a timely copy of their Consumer Report before adverse action.”

The case is Schumacher v. SC Data Center Inc., 19-3266.