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On March 29, the U.S. District Court for the Northern District of Illinois granted a telecommunication company’s summary judgment motion in a putative TCPA class action involving text messages. The plaintiff asserted that the company sent him text messages asking survey questions, even though he did not consent and was registered on the Do Not Call list. The company argued that it did not use an automated dialing system (autodialer) to send the text messages to the plaintiff. The court agreed. Citing to the D.C. Circuit’s decision in ACA International v. FCC and analyzing the definition of an autodialer under the TCPA, the court concluded that the system used by the company to send the text messages was not an autodialer because it could not “generate telephone numbers randomly or sequentially.” The court also rejected the consumer’s argument that the system had “the capacity” to generate numbers randomly by selecting numbers to dial from a compiled list of accounts, noting that the TCPA “does not support a reading where ‘using a random or sequential number generator’ refers to the order numbers from a list are dialed.”
On March 25, the U.S. District Court for the Southern District of Florida granted in part and denied in a part a motion to dismiss a putative class action alleging that an auto dealer violated the TCPA by using a “ringless” voicemail platform to leave pre-recorded telemarketing voicemails on consumers’ cell phones without obtaining prior express consent. The defendant moved to dismiss the putative class claims arguing that (i) the plaintiff lacked standing and failed to state a claim because he did not receive a “call” within the meaning of the TCPA; (ii) the plaintiff lacked standing to seek declaratory or injunctive relief; (iii) the TCPA was unconstitutional; and (iv) the complaint failed to adequately allege that the defendant “willfully or knowingly violated the TCPA.”
The court rejected the defendant’s argument that the plaintiff did not receive a “call” as defined by the TCPA, concluding that a ringless voicemail is a call subject to the TCPA restrictions. The court found that the plaintiff had Article III standing because he sufficiently alleged an injury-in-fact and actual harm, including, among other things, invasion of privacy, aggravation, annoyance, and intrusion. The court further found that the plaintiff’s complaint alleged sufficient facts to support the TCPA claim and the allegation that defendant acted willfully or knowingly. The court also rejected defendant’s challenge to the TCPA’s constitutionality. However, the court found the plaintiff could not seek declaratory or injunctive relief because the plaintiff failed to show real and immediate threat of future harm or proffer a basis that would allow the court to infer that the defendant would ever send ringless voicemails again.
On March 22, the U.S. Court of Appeals for the 9th Circuit reversed a lower court’s decision to dismiss TCPA claims against a student loan administrator (defendant), finding that the administrator could be held vicariously liable for a contractor’s alleged debt collection attempts. The plaintiff claimed in her suit that the companies hired by the contracted student loan servicer violated the TCPA by using an autodialer when attempting to contact borrowers to collect payment. The plaintiff argued that the defendant was “vicariously liable” for the alleged TCPA violations of the companies that were hired to collect the plaintiff’s debts, and that the defendant was “similarly liable under the federal common law agency principles of ratification and implied actual authority.” The claims against the collectors and the servicer were dismissed for lack of personal jurisdiction, and the lower court ruled on summary judgment that a jury could not hold the defendant responsible for the actions of the servicer.
On appeal, the split three-judge panel held that a reasonable jury could find that the defendant knew of the alleged TCPA violations, and that because the defendant “ratified the debt collectors’ calling practices by remaining silent,” or alternatively, willfully ignored potential violations through its collections arrangement with the servicer, a jury could find a “principal-agent” relationship—even if one did not exist in the contract—and the court should hold it liable for the collectors’ TCPA violations. According to the panel, there was evidence in the record that the defendant “had actual knowledge” of the alleged violations through audit reports provided by the servicer and “did nothing” to ensure that the debt collectors complied with the law. However, the entire panel agreed that the defendant was not per se vicariously liable for the debt collectors’ alleged TCPA violations.
In dissent, Judge Bybee agreed with the panel that the defendant is not per se vicariously liable for the debt collectors’ practices, and noted in addition that there is not enough evidence to show that the defendant consented to practices that violate the TCPA or that it granted the debt collectors authority to violate the law. He wrote, “there is no evidence whatsoever that [the defendant] approved of such practices. In fact, the only evidence in the record is to the contrary: when [the defendant] learned of wrongful practices, it reported them to [the servicer] and asked [the servicer] to correct the problem.”
On March 14, the U.S. District Court for the Western District of North Carolina issued an order certifying a settlement class of individuals who alleged that, while they were subject to Chapter 13 bankruptcy proceedings, a national bank imposed “no-application loan modifications” (NAMs) to their mortgages without consent. The class members claimed that the bank filed payment change notices in their bankruptcy proceedings around the time it sent out the NAM solicitations, which asserted that the mortgage payments had been adjusted to the amount of the proposed NAM payment, even though borrowers had not requested or accepted the changes. As a result, class members’ mortgage loans went into contractual default. According to the class, the bank has since ended the alleged practice. Under the terms of the settlement approved by the court, the bank has agreed to pay approximately $13.8 million into a common fund that will go to class members, account remediation, and attorneys’ fees and costs, as well as to injunctive relief.
On March 1, plaintiffs filed a proposed class action settlement agreement with a debt collection firm in the U.S. District Court for the Southern District of New York, which would potentially end litigation dating back to 2011 concerning alleged violations of state usury limitations. The proposed settlement would resolve claims originally brought by the plaintiffs alleging that the defendants violated the FDCPA and New York state usury law when it attempted to collect charged-off credit card debt, purchased from a national bank, from borrowers with interest rates above the state’s 25 percent cap. As previously covered by InfoBytes, in 2015, the 2nd Circuit reversed the district court’s 2013 decision, and held that a nonbank entity taking assignment of debts originated by a national bank is not entitled to protection under the National Bank Act from state-law usury claims. This ruling contradicted the “Valid-When-Made Doctrine,” which is a longstanding principle of usury law that if a loan is not usurious when made, then it does not become usurious when assigned to another party. Following the U.S. Supreme Court’s decision to decline to hear the case, the district court issued a ruling in 2017 (covered by InfoBytes here) holding that New York’s fundamental public policy against usury overrides a Delaware choice-of-law clause in the plaintiff’s original credit card agreement. The court granted the plaintiff’s motion for class certification, and allowed the FDCPA and related state unfair or deceptive acts or practices claims to proceed. However, the court did not allow the plaintiff’s claims for violations of New York’s usury law to proceed, as it held that New York’s civil usury statute does not apply to defaulted debts and that the plaintiff cannot directly enforce the criminal usury statute.
Under the terms of the proposed settlement, the defendants are required to, among other things, (i) provide class members with $555,000 in monetary relief; (ii) provide $9.2 million in credit balance reductions; (iii) pay $550,000 in attorneys’ fees and costs; and (iv) agree to comply with all applicable laws, regulations, and case law regarding the collection of interest, including the collection of usurious interest.
On February 26, the U.S. District Court for the Middle District of Florida granted final approval and class certification, following a final approval hearing, to a settlement resolving class action allegations concerning a data breach involving an international fast-food chain. According to the amended motion for final approval, the data breach occurred in 2016 and involved third-party malware installation on certain franchises’ point of sale systems, which targeted and compromised customer payment card related data. The class ultimately asserted the following claims—breach of implied contract, negligence, and violations of several state consumer laws—and requested reimbursement for (i) costs associated with time spent addressing identity theft or fraud; (ii) losses caused by restricted access to funds; (iii) costs associated with credit reports and credit monitoring; (iv) bank and payment card fees; (v) unauthorized charges; and (vi) documented time spent dealing with the repercussions of the data breach. Under the terms of the settlement, the fast-food chain will pay up to $5,000 per eligible class member as reimbursement for documented out-of-pocket expenses, and up to $15 an hour for up to two hours of undocumented time spent dealing with the repercussions of the data breach. The court also approved $1.02 million in attorneys’ fees and approximately $139,000 in costs to class counsel.
On February 15, the U.S. District Court for the Southern District of New York denied class certification in an action brought by an investment company against a bank acting as trustee for five residential mortgage-backed securities trusts in which the company invested. The investment company filed a class action suit against the trustee asserting claims for breach of contract, breach of the duty of trust, and violations of the Trust Indenture Act. Among other things, the allegations concern whether the trustee “failed to fulfil certain contractual duties triggered by the discovery of breaches of ‘representations and warranties’” when the underlying mortgages allegedly were found not to be of the promised quality. The investment company also alleged that the trustee failed to exercise its rights to require the companies that sold the mortgages in question “to cure, substitute, or repurchase the breaching loans.”
In dismissing class certification, the court found that questions of law or fact common to all class members did not dominate individual issues. The court held that there was no proof that the liability claims of potential class members who held certificates in one trust would be relevant to the claims of other potential class members in one of the other trusts, and that the individualized questions “involve relatively complex legal and factual inquiries—requiring considerable resources in comparison to those questions which are capable of class-wide resolution.”
On February 13, the U.S. Court of Appeals for the 7th Circuit vacated a lower court’s decision to rescind class certification for a group of automotive dealerships (plaintiffs), concluding the lower court did not provide a sufficiently thorough explanation of its decision for the appeals court to reach a decision. According to the opinion, the plaintiffs were granted class certification of breach of contract and RICO claims, among others, brought against an inventory financing company for allegedly improperly charging interest and fees on credit lines before the money was actually extended by the company for the automobile purchases. The company had moved the district court to reconsider the class certification, arguing the plaintiffs admitted the financing agreements were ambiguous on their face, and therefore extrinsic evidence on an individual basis would be required to establish the parties’ intent. In response, the plaintiffs had argued that patent ambiguity in the contract does not require consideration of extrinsic evidence and individualized proof. The district court had agreed with the company, concluding that “ambiguity in the contracts requires consideration of extrinsic evidence, necessitates individualized proof, and undermines the elements of commonality and predominance for class certification.”
On appeal, the 7th Circuit concluded the denial of class certification lacks “sufficient reasoning” to ascertain the basis of the decision, noting that while the original decision to grant certification was a “model of clarity and thoroughness,” the decision to withdraw certification provides only a conclusion. Moreover, the appellate court concluded that the mere need for extrinsic evidence does not in itself render class certification improper and therefore the court needed a more thorough explanation of its reasoning to decertify the class.
On January 31, the U.S. District Court for the Southern District of New York granted final approval and class certification to a $22 million settlement resolving class action allegations that a national bank improperly charged overdraft fees on “one-time, non-recurring” transactions made with a ride-sharing company. The court found that the bank mischaracterized these one-time charges as recurring transactions, which allowed the bank to charge overdraft fees of $35. Prior to the court’s approval of the settlement, 12 state Attorneys General sent a letter to the court arguing that the agreement’s release of liability to the ride-sharing company was inequitable. The court found, however, that the release “does not compromise the fairness, reasonableness, and adequacy of the settlement,” where, among other things, plaintiffs’ counsel investigated the viability of claims against the ride-sharing company and concluded that litigation against the company could present problems for the proposed class and for individual recovery. The $22 million settlement constitutes 80 percent of all revenues charged by the bank as a result of the overdraft fees. The court also approved $5.5 million in attorneys’ fees and $50,000 in costs.
On January 28, the U.S. District Court for the Northern District of California denied preliminary approval of a proposed class action settlement after identifying several deficiencies with the deal. The proposed settlement was intended to resolve allegations concerning security failures by a global internet company, which led to three data breaches between 2013 and 2016 that exposed consumers’ personal information (previously covered by InfoBytes here). The proposed settlement would have required the internet company to (i) establish a $50 million settlement fund; (ii) pay additional attorneys’ fees of up to $35 million; (iii) pay costs and expenses of up to $2.5 million, as well as service awards of up to $7,500 for each class representative; (iv) provide customers with two years of credit monitoring and identity theft protection services; and (v) improve its data security. However, the court stated that the proposed settlement agreement, among other things, inadequately disclosed the sizes of the settlement fund and class, as well as the scope of non-monetary relief, and “appears likely to result in an improper reverter of attorneys’ fees.” Moreover, the court held that the proposed agreement provided insufficient detail about how much the settlement would cost the defendant in total, and did not disclose the costs of credit monitoring or how much the defendant would budget for data security, thus preventing class members from assessing the reasonableness of the settlement or the attorneys’ fee request—which the court indicated seem “unreasonably high.” The court also noted that “[t]he parties’ lack of disclosure also inhibits the court's ability to assess the reasonableness of the settlement.”
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