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  • District Court dismisses discriminatory lending allegations

    Courts

    On January 27, the U.S. District Court for the Eastern District of California entered a stipulated final judgment and order dismissing the City of Sacramento’s suit against a national bank concerning alleged discriminatory lending following a decision issued by U.S. Court of Appeals for the Ninth Circuit, which affirmed in part and reversed in part the district court’s decision to partially dismiss an action brought by the City of Oakland, alleging a national bank violated the Fair Housing Act (FHA) and California Fair Employment and Housing Act. (Covered by InfoBytes here.) Oakland alleged that the national bank violated the FHA and the California Fair Employment and Housing Act by providing minority borrowers mortgage loans with less favorable terms than similarly situated non-minority borrowers, leading to disproportionate defaults and foreclosures causing (i) decreased property tax revenue; (ii) increases in the city’s expenditures; and (iii) reduced spending in Oakland’s fair-housing programs. (Covered by InfoBytes here.) In September 2021, as previously covered by InfoBytes here, the 9th Circuit issued an en banc decision concluding that the Fair Housing Act (FHA) “is not a statute that supports proximate cause for injuries further downstream.” The Oakland decision was binding in this action, and, following Oakland’s decision not to pursue a petition for writ of certiorari in the U.S. Supreme Court, the court dismissed Sacramento’s complaint with prejudice.

    Courts Fair Lending Fair Housing Act State Issues Appellate Ninth Circuit

  • 9th Circuit partially reverses FDCPA ruling

    Courts

    On January 24, the U.S. Court of Appeals for the Ninth Circuit affirmed in part and reversed in part a district court’s summary judgment for a collection law firm (defendant) that “expressly” informed an individual in a collection letter that any dispute must be filed in writing. The plaintiff sued after receiving a collection letter from the defendant that noted, “[u]nder the federal Fair Debt Collection Practices Act, if you dispute this debt, or any portion thereof, you must notify this office in writing within thirty (30) days of receipt of this letter. After notifying this office of a dispute, all debt collection activities will cease until this office obtains verification of the debt and a copy of such verification is mailed to you. If you do not dispute the validity of this debt or any portion thereof within thirty (30) days of receipt of this letter, the debt will be assumed valid. You may request in writing, within thirty (30) days of receipt of this letter, the name and address of the original creditor, if different from the current creditor, which is the homeowners association named above, and we will provide you with the information.” The district court granted summary judgment in favor of the defendant, ruling that the passage did not violate the FDCPA because the third sentence of the disclosure did not mention that the dispute had to be filed in writing.

    On appeal, the 9th Circuit noted that “the court must view the letter ‘through the eyes of the least sophisticated debtor,’” stating that “… the least sophisticated debtor would not extract each sentence of the challenged paragraph, line them up against the disclosures the FDCPA requires, and analyze whether each sentence, in isolation, accurately conveys the required warnings.” The 9th Circuit also noted that, “[i]nstead, the least sophisticated debtor would examine the letter as a whole and would conclude based on the bold text expressly stating that he must dispute the debt in writing that he was required to dispute the debt in writing.” The 9th Circuit also upheld the ruling in favor of the defendant over its assessment of a prelien fee as a reasonable attorney’s fee and “that any implication that the fee was an ‘attorney’s fee’ was true.” The case was remanded back to the district court to address remaining arguments and the plaintiff’s summary judgment motion.

    Courts FDCPA Appellate Ninth Circuit Debt Collection

  • 9th Circuit affirms judgment for defendant in TCPA autodialer suit

    Courts

    On January 19, the U.S. Court of Appeals for the Ninth Circuit affirmed summary judgment in favor of a defendant accused of violating the TCPA after allegedly using an automatic telephone dialing system (autodialer). The plaintiff claimed that the defendant’s platform qualifies as an autodialer since it “stores telephone numbers using a sequential number generator because it uploads a customer’s list of numbers and produces them to be dialed in the same order they were provided, i.e., sequentially.” According to the 9th Circuit, the plaintiff’s interpretation would mean that “virtually any system” with the capability to store a pre-produced list of telephone numbers would qualify as an autodialer if it could also autodial the stored numbers. The court noted that this interpretation was rejected in the U.S. Supreme Court’s 2021 decision in Facebook Inc. v. Duguid, which narrowed the definition of what type of equipment qualifies as an autodialer under the TCPA and held that an autodialer “must have the capacity either to store a telephone number using a random or sequential generator or to produce a telephone number using a using a random or sequential number generator.” (Covered by a Buckley Special Alert here.)

    The plaintiff attempted to rely on a footnote in the Court’s ruling, which endeavored to explain why the terms “produce” and “store” were used in the definition of an autodialer, but the 9th Circuit concluded that the footnote discussion was not central to the Court’s analysis in Duguid and therefore did not require it to adopt the plaintiff’s interpretation. After finding that the defendant’s system does not qualify as an autodialer “merely because it stores pre-produced lists of telephone numbers in the order in which they are uploaded,” the appellate court concluded that the plaintiff’s TCPA claims failed. It further determined that even if Duguid did not foreclose the plaintiff’s argument, the district court was correct to conclude that the system at issue “does not have the capacity to automatically dial telephone numbers.”

    Courts Appellate Ninth Circuit U.S. Supreme Court TCPA Autodialer

  • District Court denies plaintiff’s motion to remand FDCPA

    Courts

    On December 22, the U.S. District Court for the Northern District of California denied a plaintiff’s motion to remand, ruling that a default judgment allegedly obtained fraudulently in an underlying collection lawsuit qualifies as a concrete injury in fact to the plaintiff in an FDCPA suit. According to the order, the plaintiff sued the defendants, a process server and its employee, for fraudulently certifying that service of process had been made to the plaintiff in a state debt collection action and obtaining a default judgment against the plaintiff as a result, which the plaintiff described as engaging in the practice of “sewer service.” The plaintiff sued the defendants in state court and the action was removed to federal court by the defendants. The plaintiff filed a motion to remand for lack of standing, claiming that his complaint “does not sufficiently allege a concrete harm to confer [Article III] standing to Plaintiff” because the complaint “solely asserts a bare procedural violation of the [FDCPA].” While “Article III requires plaintiff to show ‘(i) that he suffered an injury in fact that is concrete, particularized, and actual or imminent; (ii) that the injury was likely caused by the defendant; and (iii) that the injury would likely be redressed by judicial relief,’” the court noted that the plaintiff’s argument “focuses only on the ‘concreteness’ of the ‘injury in fact.’” Applying the U.S. Court of Appeals for the Ninth Circuit’s two-step framework for determining whether a statutory violation is a “concrete” harm, and considering the U.S. Supreme Court’s decision in TransUnion LLC v. Ramirez decision (covered by InfoBytes here), the court found that the plaintiff’s complaint sufficiently alleged a “concrete” injury in fact for alleged violations of the FDCPA arising from alleged sewer service.

    Specifically, the court indicated that the 9th Circuit’s first step requires the court “‘[t]o identify the interests protected by the FDCPA’ by examining the ‘[h]istorical practice’ and the ‘legislative judgment’ underlying the provisions at issue’” and determine whether “the FDCPA ‘provisions at issue were established to protect the plaintiff’s concrete interests.’” Although the defendants failed to identify any historical or common-law practices, the court found that legislative history of the FDCPA indicates that Congress enacted the statute to protect consumers from abusive collection practices, which include engaging in sewer service. The court further cited to district courts’ decisions concluding that “the ‘FDCPA codifies Plaintiff's concrete interest in being free from abusive debt collection practices.’” Turning to step two of the 9th Circuit’s framework, the court considered whether the sewer service allegations present a material risk of harm that had materialized and “actually harm[ed] Plaintiff’s interests under the FDCPA.” The court found that the “Complaint sufficiently allege[d] that the risk of harm to Plaintiff’s concrete interests materialized” because the “Complaint plead[ed] that the fraudulent proof of service specifically targeted Plaintiff, advanced the state debt collection action against Plaintiff to a stage where default judgment was pending, and caused Plaintiff to obtain legal representation to defend Plaintiff in the state debt collection action [which] do more than present a ‘risk of harm’ to Plaintiff’s interests under step two.” On this basis, the court denied the plaintiff’s motion to remand the action.

    Courts FDCPA California Debt Collection Ninth Circuit Appellate U.S. Supreme Court

  • 9th Circuit partially reverses unauthorized EFTs action

    Courts

    On December 20, the U.S. Court of Appeals for the Ninth Circuit affirmed in part and reversed in part a district court’s dismissal of an action under the EFTA against a national bank related to alleged unauthorized electronic fund transfers. The plaintiff, a foreign national who resided primarily outside the U.S., held several accounts with the defendant, including the checking account at issue. According to the plaintiff, “through unknown means, unidentified individuals gained access to her [] checking account in October 2017 and began making unauthorized withdrawals without her knowledge.” A separate bank flagged a large transfer from the plaintiff’s account and reached out to the defendant’s fraud department. That bank ultimately refunded the plaintiff’s money; however, according to the opinion, the defendant allegedly did not change the plaintiff’s account number and password, freeze her account, or inform her of the unauthorized transfer. From November 2017 through March 2019, more than 100 additional unauthorized withdrawals were made. The plaintiff acknowledged that she did not report any of these unauthorized transactions until March 2019, claiming she had been overseas with “‘very limited or no’ internet access to check her bank statements.” While some of the unauthorized withdrawals were reimbursed through the defendant’s internal dispute-resolution process, the defendant allegedly “refused to reimburse her for $300,000 of the losses she suffered, citing her failure to report the initial unauthorized withdrawals within 60 days of their appearance on her bank statements, as the EFTA ordinarily requires.” The plaintiff sued, claiming that the defendant violated the EFTA or, alternatively, California’s EFTA counterpart, and asserting various other state law claims. The district court granted the defendant’s motion to dismiss, ruling that because the plaintiff “failed to report the withdrawals at issue” within the required time frame, “the EFTA bars her claim as a matter of law.”

    On appeal, the 9th Circuit determined that the plaintiff plausibly alleged sufficient facts under the EFTA to suggest that “the subsequent unauthorized transfers for which she sought reimbursement would still have occurred.” While the plaintiff did not dispute that she failed to report any of the unauthorized withdrawals to the defendant within EFTA’s 60-day reporting period, she argued that her compliance was excused based on her limited access to her banking records and that the defendant “was already aware of the initial $29,000 withdrawal in November 2017[.]” The appellate court agreed with the district court that the plaintiff failed to “plausibly explain how someone with [her] financial means lacked adequate internet access to view her banking records for more than a year.” The 9th Circuit also rejected the plaintiff’s argument that she did not need to report the unauthorized withdrawals by virtue of the defendant’s communications with the other bank, agreeing that the EFTA “says nothing about a bank receiving notice from third-party sources unaffiliated with the consumer”

    However, the 9th Circuit disagreed with the district court’s decision to dismiss the EFTA claim or its California counterpart, after concluding that the plaintiff satisfied her pleading burden by alleging facts “plausibly suggesting that even if she had reported an unauthorized transfer within the 60-day period, the subsequent unauthorized transfers for which she [sought] reimbursement would still have occurred.” The panel emphasized that a consumer may be held liable for unauthorized transfers occurring after the 60-day period only where the bank establishes that those transfers “‘would not have occurred but for the failure of the consumer’” to report the earlier unauthorized transfer within the 60-day period. The district court “overlooked this requirement, and the error was not harmless,” the appellate court explained.

    Courts Appellate Ninth Circuit EFTA Consumer Finance Electronic Fund Transfer State Issues California

  • 9th Circuit: Israeli company is not entitled to foreign sovereign immunity over malware claims

    Courts

    On November 8, the U.S. Court of Appeals for the Ninth Circuit affirmed a district court’s order denying a private Israeli company’s motion to dismiss claims based on foreign sovereign immunity. The Israeli company (defendant) designs and licenses surveillance technology to governments and government agencies for national security and law enforcement purposes. According to the opinion, the defendant markets and licenses a product that allows law enforcement and intelligence agencies to covertly intercept messages, take screenshots, or extract information such as a mobile device’s contacts or history. The plaintiffs (a messaging company and global social media company) sued the defendant claiming it sent malware through the messaging company’s server system to approximately 1,400 mobile devices to gather users’ information in violation of state and federal law, including the Computer Fraud and Abuse Act and the California Comprehensive Computer Data Access and Fraud Act. The defendant moved to dismiss, claiming foreign sovereign immunity protected it from the suit. The defendant further contended that even if the plaintiffs’ allegations were true, it was “acting as an agent of a foreign state, entitling it to ‘conduct-based immunity’—a common-law doctrine that protects foreign officials acting in their official capacity.” The district court disagreed, ruling that common-law foreign official immunity does not protect the defendant in this case because the defendant “failed to show that exercising jurisdiction over [the defendant] would serve to enforce a rule of law against a foreign state.”

    Although the 9th Circuit agreed with the district court that the defendant, as a private company, is not entitled to immunity, the panel affirmed on separate grounds. The 9th Circuit based its determination instead on the fact that “the Foreign Sovereign Immunity Act (FSIA or Act) occupies the field of foreign sovereign immunity as applied to entities and categorically forecloses extending immunity to any entity that falls outside the FSIA’s broad definition of ‘foreign state.’” Among other things, the 9th Circuit rejected the defendant’s claim that because governments use its technology it is entitled to the immunity extended to sovereigns. “Whatever [the defendant’s] government customers do with its technology and services does not render [the defendant] an ‘agency or instrumentality of a foreign state,’ as Congress has defined that term,” the appellate court wrote. In contrast to the district court, the 9th Circuit rejected the defendant’s argument that it could claim foreign sovereign immunity under common-law immunity doctrines that apply to foreign officials (i.e., natural persons), finding that “Congress [had] displaced common-law sovereign immunity doctrine as it relates to entities.”

    Courts Privacy/Cyber Risk & Data Security Ninth Circuit Appellate Of Interest to Non-US Persons State Issues Foreign Sovereign Immunities Act Sovereign Immunity

  • 9th Circuit: Plaintiffs may proceed with citizenship status claims

    Courts

    On October 26, the U.S. Court of Appeals for the Ninth Circuit reversed a district court’s dismissal of civil rights claims for lack of standing, holding in an unpublished opinion that the plaintiffs satisfied Article III standing requirements by alleging that a bank discriminated against non-U.S. citizens in barring them from opening accounts online. The plaintiffs, lawful residents with valid Social Security numbers, filed a putative class action complaint claiming the bank allowed U.S. citizens to apply for new checking accounts online, but required the plaintiffs (based solely on their status as non-U.S. citizens) to apply in person at a branch office. The district court dismissed the claims, ruling that the plaintiffs failed to establish standing for their discrimination claims on the basis of citizenship status. The 9th Circuit disagreed, finding that “discrimination itself . . . can cause serious non-economic injuries to those persons who are denied equal treatment solely because of their membership in a disfavored group,” and concluding that the plaintiffs alleged a concrete injury-in-fact sufficient to confer Article III standing. “The fact that [p]laintiffs would have ultimately obtained the same checking account given to U.S. citizens does not vitiate the alleged discriminatory injury: that [the bank] imposes on non-U.S. citizens a requirement to apply in person that it does not impose on others,” the appellate court said. The 9th Circuit added that this injury was directly linked to the bank’s policy and reversed the dismissal but declined to rule on the substance of the claims.

    Courts Ninth Circuit Appellate Of Interest to Non-US Persons State Issues

  • 9th Circuit denies bid to block Arizona’s dealer data privacy law

    Courts

    On October 25, the U.S. Court of Appeals for the Ninth Circuit affirmed a district court’s order denying a motion for preliminary injunction against enforcement of an Arizona statute designed to strengthen privacy protections for consumers whose data is collected by auto dealers. Under the Dealer Law, database providers are prohibited from limiting access to dealer data by dealer-authorized third parties and are required to create a standardized framework to facilitate access. The plaintiffs—technology companies that license dealer management systems (DMS)—sued the Arizona attorney general and the Arizona Automobile Dealers Association in an attempt to stop the Dealer Law from taking effect. The plaintiffs contended that the Dealer Law is preempted by the Copyright Act because it gives dealers the right to access plaintiff’s systems and create unlicensed copies of its dealer management system, application programming interfaces, and data compilations. The plaintiffs further claimed the Dealer Law is a violation of the U.S. Constitution’s contracts clause.

    On appeal, the 9th Circuit agreed that the plaintiffs were not entitled to a preliminary injunction. The appellate court concluded that the Dealer Law was not preempted by the Copyright Act, because, among other things, the plaintiffs could comply with the Dealer Law without having to create a new copy of its software to process third-party requests. Moreover, the 9th Circuit noted that even if the plaintiffs had to create copies of their DMS on their servers to process third-party requests, they failed to established that those copies would infringe their reproduction right, and the copies the plaintiffs took objection to “would be copies of its own software running on its own servers and not shared with anyone else.” The appellate court further held that the Dealer Law was not a violation of the U.S. Constitution’s contracts clause because, among other things, plaintiffs did not show that complying with the Dealer Law prevented them from being able to keep dealer data confidential. “Promoting consumer data privacy and competition plainly qualify as legitimate public purposes,” the appellate court wrote. “[Plaintiffs] point[] out that the Arizona Legislature did not make findings specifying that those were the purposes motivating the enactment of the statute, but it was not required to do so. The purposes are apparent on the face of the law.”

    Courts Privacy/Cyber Risk & Data Security State Issues Consumer Protection State Attorney General Arizona Ninth Circuit Appellate

  • Seila Law will not petition Supreme Court a second time

    Courts

    On October 8, counsel for the appellant in CFPB v. Seila Law LLC sent a letter to the U.S. Court of Appeals for the Ninth Circuit stating that, after further consideration, the law firm has decided not to seek further review from the U.S. Supreme Court in its long-running challenge with the Bureau. Seila Law’s last trip to the Court resulted in a decision that declared the director’s for-cause removal provision was unconstitutional but was severable from the statute establishing the Bureau (covered by a Buckley Special Alert). October 11 was the deadline for Seila Law to file a certiorari petition with the Court after the 9th Circuit granted the law firm’s request to stay a mandate ordering compliance with a 2017 civil investigative demand (CID) issued by the Bureau. As previously covered by InfoBytes, the order stayed the appellate court’s mandate (covered by InfoBytes here) for 150 days, or until final disposition by the Court if the law firm had filed its petition of certiorari. The letter did not explain Seila Law’s reasoning.

    This announcement follows the Court’s recent decision not to hear a petition filed by a New Jersey-based finance company accused by the CFPB and the New York attorney general of misleading consumers about high-cost loans allegedly mischaracterized as assignments of future payment rights (covered by InfoBytes here), and may mark the beginning of the end of litigation over former Director Kraninger’s July 2020 ratifications of the Bureau’s private actions (covered by InfoBytes here). Since the Court’s decision in Seila, several courts have heard challenges from companies claiming the Bureau could not use ratification to avoid dismissal of their lawsuits.

    Courts Ninth Circuit Appellate U.S. Supreme Court Seila Law CFPB Single-Director Structure Enforcement CIDs

  • En banc 9th Circuit: FHA does not support downstream injuries

    Courts

    On September 28, the U.S. Court of Appeals for the Ninth Circuit issued an en banc decision concluding that the Fair Housing Act (FHA) “is not a statute that supports proximate cause for injuries further downstream.” As previously covered by InfoBytes, the City of Oakland sued a national bank alleging violations of the FHA and the California Fair Employment and Housing Act, claiming the bank provided minority borrowers mortgage loans with less favorable terms than similarly situated non-minority borrowers, which led to disproportionate defaults and foreclosures and caused (i) decreased property tax revenue; (ii) increased city expenditures; and (iii) neutralized spending in Oakland’s fair-housing programs. In 2020, a three-judge panel affirmed both the district court’s denial of the bank’s motion to dismiss claims for decreased property tax revenue, as well as the court’s dismissal of Oakland’s claims for increased city expenditures. (Covered by InfoBytes here.) The panel further held that Oakland’s claims for injunctive and declaratory relief were also subject to the FHA’s proximate-cause requirement and, on remand, the district court must determine whether Oakland’s allegations satisfied this requirement. The bank filed a petition for panel rehearing and rehearing en banc last year arguing, among other things, that the panel had “fashioned a looser, FHA-specific proximate-cause standard” in conflict with the U.S. Supreme Court’s decision in Bank of America Corp. v. City of Miami. As covered by a Buckley Special Alert, in 2017, the Supreme Court held that municipal plaintiffs may be “aggrieved persons” authorized to bring suit under the FHA against lenders for injuries allegedly flowing from discriminatory lending practices, but that such injuries must be proximately caused by, rather than simply the foreseeable result of, the alleged misconduct. 

    The 9th Circuit agreed with the bank and remanded the case for dismissal of the FHA claims and proceedings consistent with the opinion. Citing the Miami decision as one of the leading factors, the panel stated that “[w]e begin where Miami began, with ‘[t]he general tendency. . .not to go beyond the first step,’” adding that “[t]here is no question that Oakland’s theory of harm goes beyond the first step—the harm to minority borrowers who receive predatory loans. Oakland’s theory of harm runs far beyond that—to depressed housing values, and ultimately to reduced tax revenue and increased municipal expenditures. Oakland thus fails a strict application of the general tendency not to stretch proximate causation beyond the first step.” The panel also affirmed the district court’s decision that Oakland failed to sufficiently plead claims related to increased municipal expenditures and reversed the district court’s denial of the bank’s motion to dismiss claims for lost property tax revenue and injunctive and declaratory relief.

    Courts Appellate Ninth Circuit Fair Housing Fair Housing Act Consumer Finance State Issues Fair Lending U.S. Supreme Court

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