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Split 11th Circuit says website not a “public accommodation” under ADA
On April 7, a split U.S. Court of Appeals for the Eleventh Circuit concluded that a website is not a “public accommodation” under the Americans with Disabilities Act (ADA). The plaintiff sued a supermarket chain under Title III of the ADA, alleging its website was incompatible with screen reader software and caused him injury by denying him the “full and equal enjoyment” provided to sighted customers. The district court issued a judgment ordering the supermarket chain to bring its website into compliance with the Web Content Accessibility Guidelines 2.0 standard after concluding that the plaintiff sufficiently demonstrated a sufficient “nexus” between the website and the supermarket chain’s physical premises. On appeal, the appellate court reviewed, among other things, the question of whether websites are public accommodations under the ADA. The majority vacated the district court’s ruling that the website was an intangible barrier to the supermarket chain’s physical stores and in violation of the ADA. Specifically, the majority reviewed the 12 types of locations listed as public accommodations under Title III, and found that none of them were “intangible places or spaces, such as websites.”
The majority further distinguished its conclusion from its holding in Rendon. v. Valleycrest Products, Ltd., in which it determined that the ADA covers both tangible, physical barriers as well as “intangible barriers, such as eligibility requirements and screening rules or discriminatory policies and procedures that restrict a disabled person’s ability to enjoy the defendant entity’s goods, services and privileges,” noting that the “limited use website, although inaccessible by individuals who are visually disabled, does not function as an intangible barrier to an individual with a visual disability accessing the goods, services, privileges or advantages of [the supermarket chain’s] physical stores.” Moreover, the majority rejected the plaintiff’s argument that Rendon established that a plaintiff only has to demonstrate a “nexus” between the service and the physical public accommodation, declining to adopt such a standard after finding no basis for it in the ADA or in previous precedent. This decision further divides the circuits over the scope of a “public accommodation.”
11th Circuit: Arbitration provision survives termination of subscriber agreement
On April 5, the U.S. Court of Appeals for the Eleventh Circuit held that an arbitration provision survived the termination of a subscriber agreement between a defendant cable company and a customer. According to the opinion, the plaintiff obtained services from the defendant in December 2016, and signed a subscriber agreement containing an arbitration provision covering claims that arose before the agreement was entered into and after it expired or was terminated. The plaintiff terminated the defendant’s services in August 2017, but later called the defendant in 2019 to inquire about pricing and services. The plaintiff filed a putative class action, alleging the defendant violated the FCRA when it accessed his credit report during the call without his permission, thus lowering his credit score. The defendant moved to compel arbitration, which the district court denied, ruling that while the parties may have intended for the arbitration provision to survive termination of the subscriber agreement, the plaintiff’s claim fell outside the scope of the subscriber agreement because “no reasonable person would believe that the Arbitration Provision was so all-encompassing as to apply to all claims regardless of when they occurred or whether they related to the agreement.” Moreover, the district court ruled that the Federal Arbitration Act (FAA) “could only compel [the plaintiff] to arbitrate his FCRA claim if it ‘arose out of’ or ‘relate[d] to’ the 2016 subscriber agreement, which the district court held it did not.
On appeal, the appellate court disagreed, concluding that the plaintiff’s FCRA claim relates to the 2016 subscriber agreement since the defendant was only able to conduct the credit check during the phone call because of its previous relationship with the plaintiff. The plaintiff argued that he was calling to obtain new services and not to reconnect services, but the appellate court countered that the “reconnection provision” contained within the subscriber agreement provides broad language that defines terminate, suspend, and disconnect as not necessarily being mutually exclusive. However, the 11th Circuit clarified that its holding is narrow, and that because it concluded that the plaintiff’s claim did arise out of the subscriber agreement the court did not need to and was not making a determination about whether the “broad scope” of the arbitration provision in the subscriber agreement is enforceable under the FAA.
11th Circuit affirms dismissal of RESPA suit
On March 31, the U.S. Court of Appeals for the Eleventh Circuit affirmed dismissal of an action for failure to state a claim against a mortgage servicer, agreeing with the district court that the consumer failed to plausibly allege a “causal link” between the alleged RESPA violation and actual damages. According to the opinion, the plaintiff alleged he never received notice of a foreclosure sale on his deceased mother’s property, although he was the administrator of her estate. He filed suit, claiming the servicer failed to respond to his qualified written requests within 30 days as required under RESPA, and that as a result of the foreclosure, he allegedly “suffered actual damages from the loss of his mother’s home, loss of her belongings, and his mental anguish.” The servicer countered that the alleged “actual damages” did not result from the servicer’s failure to respond properly to the plaintiff’s letters, but rather were a result of the estate’s failure to pay the mortgage and the resulting foreclosure. In affirming the dismissal of the plaintiff’s claims, the 11th Circuit agreed with the district court that the plaintiff never asked the servicer to rescind the foreclosure sale (noting that under RESPA, a borrower is not authorized to request rescission of a foreclosure sale), and that, moreover, the servicer’s failure to do what the plaintiff actually asked it to do—provide information about the mortgage—did not cause his damages.
5th Circuit: Oral agreement to accept past-due mortgage payments is unenforceable under statute of frauds
On March 26, the U.S. Court of Appeals for the Fifth Circuit affirmed summary judgment for a national bank, upholding its foreclosure sale in a 2-1 opinion. According to the opinion, after the borrowers missed several payments the bank foreclosed on their property. The borrowers filed suit alleging, among other things, that the bank “violated the deed of trust and the Texas Property Code” by failing to send proper notices prior to the foreclosure of their home, and also violated the Texas Debt Collection Act (TDCA). The bank argued that it had properly served notice, and the district court agreed, granting summary judgment on the foreclosure-sale claims, concluding “that there was no genuine dispute over whether [the bank] properly sent notice in compliance with both the deed of trust and the Texas Property Code.” The district court also agreed with the bank that an oral agreement between the borrowers and a bank representative to accept a $14,000 payment “to bring the loan current” was “unenforceable under the statute of frauds because it modified the terms of the loan agreement.”
On appeal, the majority opinion considered, among other things, whether the statute of frauds barred consideration of the alleged oral agreement under the TDCA. The majority concluded that alleged oral agreement “cannot alone” sustain the borrowers’ claims under the TDCA. In order for the $14,000 to be considered “an actual, enforceable acceptance” as either part of the repayment plan or to bring the loan current, the agreement would have to be in writing under Texas law, the majority held. The dissenting judge argued, however, that the bank violated the TDCA by “misrepresenting, in a March 2017 phone call, that $14,000 would be automatically deducted from the [borrowers’] account to pay off the bulk of their past-due mortgage payments.” According to the dissent, “the phone call plausibly muddled the [borrowers’] understanding of whether they had a past-due mortgage debt, how much they owed, and whether they were in default,” thus creating a false sense of security about their mortgage—the kind of conduct the TDCA is intended to guard against.
5th Circuit: Law firm may send debt dispute letters on behalf of clients
On April 1, the U.S. Court of Appeals for the Fifth Circuit upheld a district court’s ruling in favor of defendant credit repair organizations (including a law firm), holding that plaintiff data furnishers failed to provide sufficient evidence supporting their claims of fraud and fraud by nondisclosure. The plaintiffs filed suit, alleging that the defendants were sending dispute letters that appeared to have come directly from the defendants’ debtor clients. Under the FCRA and the FDCPA, the plaintiffs are obligated to investigate disputed debts that come directly from debtors. Letters from law firms, the plaintiffs argued, do not trigger such requirements. According to the plaintiffs, the disputes they were receiving were costing them money to investigate, which they would not have spent if had they known the letters were coming from a law firm. A jury returned a verdict in favor of the plaintiffs on their claims of fraud and fraud by non-disclosure and awarded them roughly $2.5 million. The district court ultimately vacated the jury’s verdict, however, explaining that the evidence failed to show that the defendants made any false misrepresentations, material or otherwise, when they signed their clients’ names on letters mailed to the plaintiffs. The law firm defendant “had the legal right to sign its clients’ names on the correspondence it sent on their behalf to data furnishers who reported inaccurate information about the clients’ credit,” the district court wrote.
On appeal, the 5th Circuit determined, among other things, that the plaintiffs did “not provide any precedential support or explanation for their assertion that these facts demonstrate Defendants committed fraud and fraud by non-disclosure beyond the observation that the jury found for them on those claims.” Moreover, the appellate court disagreed with the plaintiffs’ argument that the engagement agreements that clients signed with the defendant law firm, which allowed it to send dispute letters on a client’s behalf, were fraudulent because the defendant law firm did not discuss the letters with the consumers first. According to the appellate court, the existence of any such discussion was immaterial because the engagement agreements allowed the defendant law firm to send letters on a client’s behalf. However, the appellate court noted that “[w]hile we do not hold today that there are no situations in which a third party may act fraudulently when it mails dispute letters (and leave for another day what those situations may be), we can safely say that this is not one of them.”
3rd Circuit: Plaintiff must arbitrate debt adjustment allegations
On March 24, the U.S. Court of Appeals for the Third Circuit determined that a plaintiff must arbitrate proposed class claims brought against a debt resolution law firm. The plaintiff alleged the law firm engaged in racketeering, consumer fraud, and unlawful debt adjustment practices in violation of various New Jersey laws. The district court denied the firm’s motion to compel arbitration, applied the law of the forum state, New Jersey, and ruled that the arbitration provision was invalid and unenforceable. The law firm appealed, arguing, among other things, that the arbitration provision would have been found valid if the district court had applied Delaware law in accordance with the parties’ 2013 professional legal services agreement. On appeal, the 3rd Circuit disagreed with the district court, holding that the arbitration provision demonstrated that the plaintiff gave up her right to litigate her claims in court, despite there appearing to be a true conflict between Delaware and New Jersey law. The appellate court concluded that the arbitration clause met the standard set forth in Atalese v. U.S. Legal Services Group, L.P., which held that an arbitration provision “will pass muster if it, ‘at least in some general and sufficiently broad way,. . .explain[s] that the plaintiff is giving up her right to bring claims in court or have a jury resolve the dispute.’” Moreover, the 3rd Circuit noted that the arbitration provision was also sufficiently broad enough to reasonably encompass the plaintiff’s statutory causes of action.
3rd Circuit: ECOA does not preempt NJ’s common-law doctrine of necessaries in FDCPA case
On March 16, the U.S. Court of Appeals for the Third Circuit held that because ECOA does not preempt New Jersey’s common-law doctrine of necessaries (where a spouse is jointly liable for necessary expenses incurred by the other spouse) a defendant debt collector was permitted to send medical debt collection letters to a deceased individual’s spouse without violating the FDCPA. The defendant was retained to collect the deceased spouse’s medical debt and sent collection letters to the plaintiff who maintained she was not responsible for the debt and subsequently filed suit alleging violations of the FDCPA. The defendant moved for dismissal, arguing that the plaintiff owed the debt under New Jersey’s doctrine of necessaries because her deceased spouse incurred the debt for medical treatment. The district court agreed and dismissed the case. The plaintiff appealed, arguing, among other things, that the doctrine of necessaries conflicts with the spousal-signature prohibition found in the ECOA.
In affirming the district court’s dismissal, the 3rd Circuit concluded that “ECOA does not preempt the doctrine of necessaries because the debt is ‘incidental credit’ exempt from the prohibition.” According to the 3rd Circuit, the Federal Reserve Board determined that incidental credit is exempt from the § 202.7(d) spousal-signature prohibition because it “refers to extensions of consumer credit. . .(i) [t]hat are not made pursuant to the terms of a credit card account; (ii) [t]hat are not subject to a finance charge. . .and (iii) [t]hat are not payable by agreement in more than four installments.” The 3rd Circuit determined that because the medical debt in question satisfied all three criteria, the spousal-signature prohibition did not apply, and therefore ECOA and its regulations did not conflict with the doctrine of necessaries. Further, the 3rd Circuit held that ECOA focuses “on ensuring the availability of credit rather than the allocation of liability between spouses.”
3rd Circuit: Debt collection letter with invitation to call does not violate FDCPA
On March 16, the U.S. Court of Appeals for the Third Circuit affirmed a district court order granting summary judgment in favor of a defendant debt collection agency after concluding that a letter inviting recipients to call to “eliminate further collection action” did not deceive debtors. The plaintiff brought the putative class action lawsuit under the FDCPA claiming the defendant’s letter deceived debtors by making them think a phone call is a “legally effective” way of ending collection activity. The plaintiff also argued that the letter raised uncertainty about a debtor’s right to dispute a debt in writing. According to the plaintiff, because the letter placed the invitation to call above an acknowledgment that recipients can also respond in writing, debtors were left uncertain about which format to use. The district court disagreed and granted summary judgment to the defendant.
On appeal, the 3rd Circuit reasoned that the letter was not deceptive. According to the appellate court, the defendant never said “explicitly or implicitly[] that the phone call would, by law” end collection efforts. Further the letter did not create any confusion about whether a debtor should call or write to exercise their rights. Finally, the court rejected the argument that the order of paragraphs in the letter created confusion.
CFPB declines to stay $51 million order for online payday lender
On March 9, the CFPB denied a request made by a Delaware online payday lender and its CEO (collectively, “respondents”) to stay a January 2021 final decision and order requiring the payment of approximately $51 million in restitution and civil money penalties, pending appellate review. As previously covered by InfoBytes, in 2015, the Bureau filed a notice of charges alleging the respondents (i) continued to debit borrowers’ accounts using remotely created checks after consumers revoked the lender’s authorization to do so; (ii) required consumers to repay loans via pre-authorized electronic fund transfers; and (iii) deceived consumers about the cost of short-term loans by providing them with contracts that contained disclosures based on repaying the loan in one payment, while the default terms called for multiple rollovers and additional finance charges. Former Director Kathy Kraninger issued the final decision and order in January, affirming an administrative law judge’s recommendation that the respondents’ actions violated TILA, EFTA, and the CFPA’s prohibition on unfair or deceptive acts or practices by, among other things, deceiving consumers about the costs of their online short-term loans.
The Bureau’s March 9 administrative order determined that respondents (i) failed to show they have a substantial case on the merits with respect to their argument regarding ratification as an appropriate remedy for the respondents’ alleged constitutional violation; (ii) failed to show they “suffered irreparable harm” because the Bureau’s final decision does not infringe on the respondents’ constitutional rights and merely requires them to pay money into an escrow account; and (iii) failed to demonstrate that staying the final decision would not harm other parties and the public interest because the respondents might “dissipate assets during the pendency of further proceedings,” potentially impacting future consumer redress. The administrative order, however, granted a 30-day stay to allow respondents to seek a stay from the U.S. Court of Appeals for the Tenth Circuit.
7th Circuit: “Stress and confusion” not an injury under the FDCPA
On March 11, the U.S. Court of Appeals for the Seventh Circuit held that a consumer’s alleged “stress and confusion” did not constitute a concrete and particularized injury under the FDCPA. The plaintiff alleged that the defendant debt collector violated the FDCPA when it directly communicated with her by sending a dunning letter related to unpaid debt even though she had previously notified the original lender that she was represented by counsel and requested that all debt communications cease. The district court granted the defendant’s summary judgment motion on the grounds that the debt collector could not have violated the FDCPA “without having actual knowledge of [the consumer’s] cease-communication request.”
On appeal, the 7th Circuit concluded that the complaint should be dismissed for lack of subject-matter jurisdiction because the plaintiff lacked standing. The 7th Circuit held that the consumer’s allegations—that the dunning letter caused her “stress and confusion” and “made her think that ‘her demand had been futile’”—did not amount to a concrete and particularized “injury in fact” necessary to establish Article III standing under the FDCPA. The court further noted that “the state of confusion is not itself an injury”—rather, for the alleged confusion to be concrete, “a plaintiff must have acted ‘to her detriment, on that confusion.’” Here, the consumer pointed only to a statutory violation and “failed to show that receiving [the debt collector’s] dunning letter led her to change her course of action or put her in harm’s way.” Additionally, the appellate court found the consumer’s argument that the dunning letter also “invaded her privacy,” raised for the first time on appeal, unpersuasive because she did not allege that injury in the complaint.