Dan Churney Dec. 14, 2015, 11:16pm

A Chicago federal judge has ruled a plaintiff, who is leading a putative class action suit against Amazon for allegedly rejecting his job application after a background check turned up what the plaintiff said is a bogus report of a drug conviction, can’t stop the online retailer from using the plaintiff’s decision to reject a settlement offer as a defense to ward off the class action suit.

The reasoning behind this ruling, which concerns Federal Rule of Civil Procedure 68, was delivered in a memorandum opinion Dec. 7 by U.S. District Judge Gary Feinerman.

In November 2013, Gregory Williams, of Irmo, S.C., applied for a full-time seasonal job with the global retailer Amazon. After an interview, Williams was offered the position, but then the Chicago-based employment agency SMX, under contract with Amazon, allegedly provided a background check to Amazon that reported Williams had a felony conviction for possession of cocaine. Allegedly as a result, Amazon rescinded its job offer to Williams.

Williams said he had no such conviction, but alleged neither Amazon nor SMX gave him a chance to review and respond to the information, as required by the U.S. Fair Credit Reporting Act. The Act governs the use of background checks for employment purposes.

In April 2015, Williams filed suit in U.S. District Court for Northern Illinois against Amazon and SMX, claiming the companies violated the Fair Credit Reporting Act. Williams eventually made a motion to make his case a class-action suit, but before that happened, defendants put forward two settlement offers to Williams, the second one the more generous – $13,000 plus legal costs. However, Williams purportedly rejected both.

The settlement offers were tendered under Federal Rule of Civil Procedure 68, which dictates, should plaintiffs win a judgment that is no better than an offer they rejected, plaintiffs must reimburse defendants for costs defendant incurred after the offer was made.

After the first rejection, defendants sought to dismiss the case, arguing they offered to give Williams everything he wanted, but Williams continued to sue even though he had for all purposes won his court action. Judge Feinerman disagreed, ruling the relief offered Williams was incomplete. After the second rejection, defendants moved for leave to file an amended motion to again dismiss, but Feinerman denied the motion for leave.

In the meantime, Williams had lodged a motion to have the judge declare the second settlement offer invalid, so he would not be stuck with defendants’ legal costs if he won a judgment no more favorable than the relief presented in that offer.

On Nov. 17, Feinerman rejected Williams’ motion, delivering a fuller explanation of his thinking in a paper filed Dec. 7.

Williams had contended Rule 68 doesn’t apply in putative class actions. However, Feinerman said the defense has to be allowed to bring up rejected offers, because Rule 68 says defendants can present an affirmative defense of estoppel or waiver by showing their offer gave the plaintiff what he wanted. If such a defense is to be advanced, defendants must be able to bring forth the offer that was rejected.

Feinerman said he could find no support for Williams’ position in “rule or statute,” but he did track down support in several federal district court rulings from around the country, in which judges refused to apply Rule 68 in putative class actions.

Feinerman acknowledged those district rulings seek to prevent a defendant from using a paltry offer to “kneecap budding class actions and escape liability” in such suits. Nonetheless, Feinerman said he is obligated to follow precedent laid down by the Seventh Circuit Court of Appeals – which encompasses Chicago’s federal district court – holding, under Rule 68, putative class actions can be dismissed if plaintiffs turn down settlement offers.

The Seventh Circuit also has no problem imposing costs on the losing parties in putative class actions, according to Feinerman. The judge cited the 2001 Seventh Circuit decision in White v. Sundstrand Corp., which asserted nothing “suggests that cost-shifting is inapplicable to class actions.”

Feinerman noted the incentive to undertake class action suits is still in place, as lawyers handling class actions tend to profit much more than any of their clients. This arrangement encourages such lawyers to pursue class actions despite the danger of having to pay defendants’ costs in the event of loss, because the lawyers stand to gain significantly. Besides, class action lawyers usually handle a number of such cases, losing some and winning some. As a result, such lawyers spread their risk among a number of cases, establishing a form of insurance, the judge said. All of this serves to reduce the deterrent posed by the possibility of having to pay defendants’ legal costs, he said.

Williams is represented by the firms of Francis & Mailman, of Philadelphia; SmithMarco, of Chicago; and Christopher E. Green, of Seattle.

Amazon and SMX are defended by Ongarao PC, of San Francisco, and Baker & Hostetler, of Chicago.

A status hearing is set for Feb. 17.

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Organizations in this Story

SmithMarco PC
20 South Clark Street
Chicago, IL 60603

Baker and Hostetler
191 North Upper Wacker Drive
Chicago, IL 60606

Ongaro PC
50 California Street
San Francisco, CA 94111

Francis & Mailman
100 South Broad Street
Philadelphia, PA 19110

3680 Langley Dr
Seattle, WA 41048

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