Timing is everything. A settlement inked between parties in a Fair Credit Reporting Act case four days before the Supreme Court issued its ruling in Spokeo v. Robins has led a Missouri Appeals Court to overturn a lower court’s dismissal of that settlement.
The background: The dispute traces back to an employment application. The plaintiff applied for a job with the defendant and was offered a position conditioned on a background check. The plaintiff later alleged the defendant shared her personal information with a consumer reporting agency without proper authorization, then revoked her offer after discovering her criminal history. That triggered a class action asserting three FCRA violations.
- The parties entered mediation after the case was removed to federal court.
- On May 12, 2016, counsel signed a handwritten agreement titled Settlement Terms. It committed the defendant to create a $333,600 fund covering class payments, costs, and attorneys fees, and set specific dollar amounts for class members depending on the nature of their claims.
- Four days later, Spokeo was decided. That led the defendant to move to dismiss the lawsuit for lack of standing.
- Multiple rounds of appellate activity followed.
- Ultimately, the Court of Appeals for the Eighth Circuit ruled the plaintiff lacked standing, vacated all federal orders, and sent the matter back to Missouri state court.
- Once back in state court, the plaintiff sought to enforce the pre-Spokeo settlement, while the defendant argued the agreement was not binding and that the plaintiff lacked standing to enforce it.
The ruling: The Missouri Court of Appeals held that the lower court had both jurisdiction and authority to enforce the settlement and that the settlement was a binding contract that must now move to the judicial approval stage required for class settlements.
- The court explained that while Missouri follows Spokeo’s injury in fact principles for standing, standing in state court is a prudential matter and does not limit subject matter jurisdiction. More importantly, the plaintiff’s motion to enforce the settlement constituted a collateral action seeking specific performance, which stands independently from the underlying FCRA claims.
- The panel rejected the defendant’s arguments that the settlement lacked consideration or that it was too indefinite to enforce. The court emphasized that compromising even a doubtful claim provides valid consideration. It also highlighted the defendant’s own admission that it viewed the settlement as insurance against an unfavorable Spokeo outcome. As the opinion noted, “The choice to settle implicitly acknowledges calculated risks and reflects the deliberate decision of both parties to opt for certainty in terminating their litigation.”
- The court also dismissed the assertion that the need for judicial approval prevented the agreement from becoming binding.
