Quarterly report pursuant to Section 13 or 15(d)

Legal Proceedings

Legal Proceedings
9 Months Ended
Sep. 30, 2023
Commitments and Contingencies Disclosure [Abstract]  
Legal Proceedings Legal ProceedingsThe Company is subject to claims, investigations, audits, and enforcement proceedings by private plaintiffs, third parties the Company does business with, and governmental and regulatory authorities charged with overseeing the enforcement of laws and regulations that govern the Company’s business. In the U.S., most of these matters arise under the federal Fair Credit Reporting Act and various state and local laws focused on privacy and the conduct and content of background reports. These claims are typically brought by individuals alleging process errors, inclusion of erroneous or impermissible information, or failure to include appropriate information in background reports prepared about them by the Company. Proceedings related to the Company’s U.S. operations may also be brought under the same laws by the Consumer Financial Protection Bureau or Federal Trade Commission, or by state authorities. Claims or proceedings may also arise under the European Union (“E.U.”) and U.K. General Data Protection Regulations and other laws around the world addressing privacy and the use of background information such as criminal and credit histories and may be brought by individuals about whom the Company has prepared background reports or by the Data Protection Authorities of E.U. member states and other governmental authorities.
In addition, customers of the Company may seek indemnity for negligent hiring claims that result from the Company’s alleged failure to identify or report adverse background information about an individual.
In addition to claims related to privacy and background checks, the Company is also subject to other claims and proceedings arising in the ordinary course of its business, including without limitation claims for indemnity by customers and vendors, employment-related claims, and claims for alleged taxes owed, infringement of intellectual property rights, and breach of contract.
The Company accrues for contingent liabilities if it is probable that a liability has been incurred and the amount can be reasonably estimated. If a range of amounts can be reasonably estimated and no amount within the range is a better estimate than any other amount, then the minimum of the range is accrued. The Company does not record liabilities when the likelihood that the liability has been incurred is probable, but the amount cannot be reasonably estimated or when the liability is believed to be only reasonably possible or remote.
Although the Company and its subsidiaries are subject to various claims and proceedings from time to time in the ordinary course of business, the Company and its subsidiaries are not party to any pending legal proceedings that the Company believes to be material.
On November 6, 2020, the Company entered into a settlement agreement related to 24 lawsuits that had been filed in 2009 and 2010 against HireRight Solutions, Inc. (“Old HireRight”), which is the predecessor to the Company’s subsidiary HireRight, LLC, by approximately 1,400 individuals alleging violation of the California Investigative Consumer Reporting Agencies Act by Old HireRight and one of its customers (“Customer”) related to background reports that Old HireRight prepared for the Customer about those individuals.
Pursuant to the settlement agreement, the Company paid $11.2 million on November 15, 2021, and the remaining balance of $0.3 million on March 31, 2022. The Company subsequently sued Old HireRight’s insurer to recover the costs of the settlement. The litigation involved substantial issues of law, and in order to avoid the risks of litigation, the Company and the insurer reached a settlement on September 14, 2023, pursuant to which the Company and the insurer agreed to release each other and the insurer agreed to pay the Company $7.0 million. Upon completion of the definitive settlement agreement, the Company’s recovery will be approximately $5.9 million, net of fees payable to the Company’s outside counsel in connection with the litigation. The settlement has been recorded within prepaid expenses and other current assets in the condensed consolidated balance sheets and within selling, general and administrative expenses in the condensed consolidated statements of operations.