On May 26, preliminary approval was sought to resolve a proposed class action, pending in the U.S. District Court for the District of Minnesota, against background screening company Inflection Risk Solutions LLC (Inflection). The proposed settlement seeks to resolve claims that Inflection violated the Fair Credit Reporting Act by allegedly reporting misdemeanor convictions as felonies in criminal background reports, without noting that such convictions, though originally categorized as felonies, had been deemed misdemeanors by operation of Minnesota law. The case is Taylor v. Inflection Risk Solutions LLC, No. 0:20-cv-02266-PAM-JFD (D. Minn.).

Plaintiff Tony Taylor filed the complaint after being informed by Airbnb, following a rent application, that due to the results of his criminal background report, Taylor was permanently barred from making any reservations via Airbnb, and his account was deactivated. Inflection’s screening report indicated that Taylor had a felony conviction, despite allegations that this conviction was deemed a misdemeanor under the Minnesota Criminal Code due to Taylor’s successful completion of his probation terms without a prison sentence. Further, the report categorized his conviction as a violent offense, despite Taylor’s allegations that Minnesota court records never included this classification. Taylor asserted two putative class action claims under Section 1681(e)(b) of the Fair Credit Reporting Act for (1) misreporting misdemeanors as felonies on behalf of a deemed misdemeanor class, and (2) misreporting a nonviolent offense as violent on behalf of a nationwide inaccurate offense characterization class and a Minnesota inaccurate offense characterization subclass.

The proposed settlement includes a $4 million common fund divided between the deemed misdemeanor class and the nationwide inaccurate offense characterization class, with no reversion of any portion of the fund to Inflection. The deemed misdemeanor class includes an estimated 994 individuals whose convictions were reported as felonies despite being deemed misdemeanors under the Minnesota Criminal Code. The nationwide inaccurate offense characterization class includes an estimated 38,916 individuals who were the subject of a report that characterized an offense as “violent,” but where the description of the crime on the report is one of the parties’ agreed-upon list of offenses that do not involve a violent act (included in an exhibit to the settlement agreement). The nationwide inaccurate offense characterization class is further divided into two subclasses based upon whether class members are entitled to automatic payment or must submit a claim form.

The common fund will allocate $747,000 to the deemed misdemeanor class, with estimated payments of $470 per class member, and $3,253,000 to the nationwide inaccurate offense characterization class, with estimated payments of $95 per class member. To address the alleged reporting errors raised in the litigation, Inflection has made changes to its offense categorization system to characterize certain offenses as “other,” rather than as “violent,” and has reduced its error rate with respect to its review of Minnesota conviction records.