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9th Circuit: Arbitration agreement authorizes public injunctive relief under California law
On February 19, the U.S. Court of Appeals for the Ninth Circuit affirmed a grant of a motion to compel arbitration filed by the operator of a smartphone app that offers financial services to consumers, holding that an agreement between a consumer and the lender authorizes the arbitrator to award all injunctive remedies available in an individual lawsuit under California law. In this case, the plaintiff took out a credit-builder loan and was required to enroll in a program offered by the lender as a prerequisite for applying for the loan, which required the payment of monthly fees. After the consumer fell behind on her fees, deposits, and loan payments, she filed a putative class action suit claiming that when she tried to cancel her membership in the program, the lender informed her that she first had to pay off the loan in full, which could only happen after she paid the still-accumulating past-due membership fees. The lender moved to compel arbitration, which the district court granted, ruling that the arbitration agreement was fully enforceable and that the agreement “explicitly” did not violate the ruling established in McGill v. Citibank NA, as it allowed the arbitrator to award “all remedies in an individual lawsuit,” including, without limitation, public injunctive relief. On appeal, the 9th Circuit rejected the consumer’s argument that she could only secure public injunctive relief by acting as a private attorney general, which the arbitration agreement explicitly prohibited. “Public injunctive relief is available under California law in individual lawsuits—not just in private-attorney-general suits,” the appellate court wrote. “It follows that [the consumer] may secure that relief in arbitration under the [a]greement.” As a result, the court affirmed the district court’s order to compel arbitration.
Court holds satellite provider not liable for telemarketer’s calls
On February 12, the U.S. District Court for the Northern District of Georgia granted summary judgment in favor of a satellite TV company as to a class action’s TCPA claims, concluding that the company was not liable for its telemarketing service provider’s cold calls. As previously covered by InfoBytes, a consumer filed a class action against the company alleging that the company failed to maintain an “internal do-not-call list,” which allowed the company and its telemarketing service provider to contact him eighteen times after he repeatedly asked to not be contacted. The consumer sought certification “of all persons who received more than one telemarketing call from [the telemarketing service provider] on behalf of [the company] while it failed to maintain an internal do-not-call list.” The district court certified two representative classes: the Internal Do Not Call (IDNC) class and the National Do Not Call (NDNC) class. The company appealed the IDNC class and the U.S. Court of Appeals for the Eleventh Circuit vacated the district court’s certification of the IDNC class. The company then moved for summary judgment on the certified NDNC class claims and plaintiff’s individual IDNC claim.
Upon review, the court granted summary judgment in favor of the company concluding that there was no evidence that (i) the cold calls were made by the telemarketing provider within its actual authority from the company; (ii) the company made representations sufficient to give the telemarketing provider the apparent authority to make the cold calls; or (iii) the company ever ratified the cold calls. Specifically, the court noted that not only did the company “categorically ban[] all residential and cellular cold calls,” it also “regularly issued reminders that [the telemarketing provider] was required to continue implementation of national-do-not-call procedures in compliance with the TCPA.”
Court again rejects “unconscionable” arbitration provision
On February 12, the U.S. District Court for the Northern District of West Virginia denied for a second time a satellite TV provider’s (defendant) motion to compel arbitration in a TCPA class action, concluding that the arbitration provision was “overbroad, absurd and unconscionable.” As previously covered by InfoBytes, the plaintiff filed a lawsuit against the defendant alleging the defendant violated the TCPA by making automated and prerecorded telemarketing calls to an individual even though her number was on the National Do Not Call Registry. The defendant moved to compel arbitration, claiming that the plaintiff’s dispute was covered by an arbitration agreement in the contract governing her cell phone service with a telecommunications company, which is an affiliate of the defendant. The district court denied the request, ruling that the allegations “did not fall within the scope of the arbitration agreement.” On appeal, the U.S. Court of Appeals for the Fourth Circuit issued a split opinion vacating a district court’s decision with the majority concluding that the allegations fit within the broad scope of the arbitration agreement, and that even though the plaintiff agreed to arbitration with a telecommunications company in 2012, the agreement extends to the TCPA allegations against the defendant after the telecommunications company acquired the defendant in 2015. Specifically, the appellate court stated that the arbitration agreement had a “forward-looking nature,” and that it seemed unlikely that the telecommunications company and its affiliates “intended to restrict the covered entities to those existing at the time the agreement was signed.” The 4th Circuit remanded the case back to the district court for consideration of unconscionability.
On remand, the district court again denied the motion, stating that the “arbitration provision is overbroad, absurd and unconscionable, and far exceeds anything contemplated by Congress in enacting the [Federal Arbitration Act].” Specifically, the court stated the plaintiff was “an ordinary wireless consumer” given a “small electronic pinpad device” with a few lines of the agreement displayed at a time and an option to skip to an acknowledgment screen, which required her signature, in order to “obtain her line of service.” She would then be “irrevocably locked in to face demands that she arbitrate any dispute arising out of any relationship with virtually any of [the telecommunications company]’s corporate cousins—a list that could, overtime, comprise [] current competitors or not-yet created subsidiaries.” Because the arbitration provision was unconscionably broad, the court denied the motion to arbitrate.
8th Circuit affirms summary judgment for servicer without proof of RESPA injury
On February 11, the U.S. Court of Appeals for the Eighth Circuit affirmed summary judgment in favor of a mortgage loan servicer, concluding that the consumer failed to establish that he was injured by the servicer’s alleged violation of RESPA. As previously covered by InfoBytes, the U.S. District Court for the District of Minnesota ruled on a motion for summary judgment concerning whether the Minnesota Mortgage Originator and Servicer Licensing Act’s (MOSLA) provision prohibiting “a mortgage servicer from violating ‘federal law regulating residential mortgage loans’” provides a cause of action under state law when a loan servicer violates RESPA but where the consumer ultimately has no federal cause of action because the consumer “sustained no actual damages and thus has no actionable claim under RESPA.” The 8th Circuit previously overturned the district court’s earlier ruling to grant summary judgment in favor of the consumer, concluding that while the loan servicer failed to (i) conduct an adequate investigation following the plaintiff’s request as to why there was a delinquency for his account, and (ii) failed to provide a complete loan payment history when requested, its failure did not cause actual damages.
In affirming the district court’s recent order, the 8th Circuit agreed that for the consumer to pursue a MOSLA cause of action when a loan servicer violates a federal law regulating mortgage loans, such as RESPA, there must be a federal cause of action. Even though the 8th Circuit previously concluded the servicer violated RESPA, the plaintiff must still prove actual damages to establish an injury in order to prevail under MOSLA.
11th Circuit: Future identity theft risk does not confer standing
On February 4, the U.S. Court of Appeals for the Eleventh Circuit affirmed dismissal of a class action complaint, which raised several claims against a restaurant following a data breach that exposed customers’ financial information, for the named plaintiff’s lack of standing. According to the opinion, a restaurant chain suffered a data breach when hackers gained access to customers’ credit and debit card information through an outside vendor’s remote connection tool. The restaurant chain provided notice to customers that their information “‘may’ have been accessed.” A consumer, who made two purchases during the data breach period, cancelled the credit cards he used and filed a class action two weeks after the announcement of the breach, alleging the company was negligent in failing to safeguard the credit card data, and violated the Florida Unfair and Deceptive Trade Practices Act (FUDTPA), among others. The district court dismissed the action for lack of standing, concluding that the consumer failed to identify a “single specific, concrete injury in fact that he or anyone else [] suffered as a result of any misuse of customer credit card information.”
On appeal, the 11th Circuit affirmed the district court’s holding. The appellate court rejected the consumer’s theories of standing, which were predicated on (i) a threatened “future injury” of identity theft, and (ii) the consumer’s alleged suffering of “mitigation injuries” (i.e., lost time, lost rewards points, and loss of access to accounts). The appellate court explained that in data breach cases like this, to have Article III standing the consumer must show a “substantial risk” of harm or that harm (e.g., identity theft) is “certainly impending.” The appellate court noted that despite the consumer still carrying “some risk of future harm involving identify theft,” that risk “is not substantial and is, at best, speculative” because the consumer “immediately cancelled his credit cards following disclosure [of the breach], effectively eliminating the risk of credit card fraud in the future.” Moreover, according to the appellate court, the consumer did not sufficiently allege an actual, present injury, through “inflicting injuries on himself to avoid an insubstantial, non-imminent risk of identity theft.” The appellate court reasoned that “[t]o hold otherwise would allow an enterprising plaintiff to secure a lower standard for Article III standing simply by making an expenditure based on a nonparanoid fear.”
11th Circuit: Debt owner not vicariously liable for affiliate’s actions
On January 27, the U.S. Court of Appeals for the Eleventh Circuit held that a debt owner (defendant) cannot be held liable under the FDCPA or Florida Consumer Collection Practices Act (FCCPA) for the allegedly false representations made by another entity acting on its behalf. According to the opinion, after a consumer defaulted on three credit cards, the debts were sold to the defendant, and its affiliate began collection efforts in Florida state court against the consumer. The lawsuits were filed under the defendant’s name, “but [the affiliate] was ‘responsible for reviewing, processing, and entering all hearing results.’” The parties agreed to a settlement agreement and the consumer made his first payment. However, on each subsequent occasion the consumer visited the affiliates’ website, the website displayed a balance over three times as high as the settlement amount. The consumer filed suit against the defendant, alleging multiple violations of the FDCPA and FCCPA. The district court granted summary judgment in favor of the defendant, concluding that the defendant could not be liable under the FDCPA or the FCCPA, notwithstanding the fact that it qualifies as a debt collector.
On appeal, the 11th Circuit agreed with the district court, affirming summary judgment in favor of the defendant. Specifically, the appellate court rejected the consumer’s arguments that the defendant should be held indirectly liable for the affiliate’s representations made on their website. The appellate court noted that if the defendant qualified as a debt collector under the “principle purposes” clause of the FDCPA, “it cannot be held liable based on the use of ‘indirectly’ in the separate and inapplicable ‘regularly collects’ definition.” Moreover, the appellate court rejected the consumer’s argument that the definition of “communication” under the FDCPA supports indirect liability, concluding it is similarly “irrelevant to [the consumer]’s false representation claims under Section 1692e.” Lastly, because the district court properly granted summary judgment on the consumer’s FDCPA claim, “it correctly granted summary judgment on his FCCPA claim as well.”
7th Circuit affirms dismissal of FDCPA claims for lack of standing
On January 21, the U.S. Court of Appeals for the Seventh Circuit affirmed a lower court’s ruling dismissing a plaintiff’s FDCPA lawsuit for lack of standing. According to the opinion, the plaintiff claimed a debt collector violated the FDCPA when it sent her a collection letter including the following statement: “If you dispute this balance or the validity of this debt, please let us know in writing. If you do not dispute this debt in writing within 30 days after you receive this letter, we will assume this debt is valid.” The plaintiff argued that section 1692g(a)(3) of FDCPA does not specify how a consumer may dispute the validity of a debt, claiming that consumers should be allowed to dispute debts in whatever manner they choose. Instead of determining whether the debt collector violated section 1692g(a)(3) by requiring consumers to dispute debts in writing, the 7th Circuit determined that the plaintiff lacked standing to sue in the first place. The appellate court referenced an observation made by the district court that the plaintiff “‘did not allege she had any doubt that she owed the creditor the stated amount of money,” and that “she failed to allege any injury that flowed from her failure to dispute the debt.” Noting, however, that not all alleged section 1692g(a)(3) violations lack standing, the appellate court stated that in this case, the plaintiff “did not allege injury, because she did not try to show what good a dispute would have done her. She is no worse off than if the letter had told her that she could dispute the debt orally.”
9th Circuit reaffirms order enforcing Seila CID
On December 29, the U.S. Court of Appeals for the Ninth Circuit reaffirmed a district court’s order granting the CFPB’s petition seeking to enforce a civil investigative demand (CID) sent to Seila Law. As previously covered by InfoBytes, the Bureau filed a supplemental brief arguing that the formal ratifications of then-Acting Director Mick Mulvaney and current Director Kathy Kraninger, paired with the U.S. Supreme Court’s ruling in Seila v. CFPB, are sufficient for the appellate court to enforce the CID previously issued against the law firm, and that “[s]etting aside the CID at this point would serve no valid purpose.” In reaffirming the order, the appellate court wrote that “Director Kraninger’s ratification remedied any constitutional injury that Seila Law may have suffered due to the manner in which the CFPB was originally structured. Seila Law’s only cognizable injury arose from the fact that the agency issued the CID and pursued its enforcement while headed by a Director who was improperly insulated from the President’s removal authority. Any concerns that Seila Law might have had about being subjected to investigation without adequate presidential oversight and control had now been resolved. A Director well aware that she may be removed by the President at will had ratified her predecessors’ earlier decisions to issue and enforce the CID.” The 9th Circuit also rejected Seila Law’s argument that the ratification occurred outside the limitations period for bringing an enforcement action against the law firm, determining that the “statutory limitations period pertains solely to the bringing of an enforcement action, which the CFPB had not yet commenced against Seila Law.”
9th Circuit affirms dismissal of data breach class action against online payment firm
On December 17, the U.S. Court of Appeals for the Ninth Circuit affirmed dismissal of a class action suit brought against an online payments firm and associated entities and individuals (collectively, “defendants”) for allegedly misleading investors (plaintiffs) about a 2017 data breach. As previously covered by InfoBytes, the district court concluded that, while the plaintiffs plausibly alleged the defendants’ November 2017 announcement about the data breach was misleading because it only disclosed a security vulnerability and did not disclose a breach that “potentially compromised” 1.6 million customers until a month later in December, plaintiffs failed to show that the defendants knew the breach had affected 1.6 million customers when they made the initial statement. Moreover, the court concluded the plaintiffs failed to allege that plaintiffs’ cybersecurity expert was familiar with, or had knowledge of, the defendants’ specific security setup or that he actually talked to the defendants’ employees about the breach.
On appeal, the 9th Circuit agreed with the district court, noting that the complaint lacked any allegation that the defendants had a motive to mislead investors in November, but not in December, such as the selling of stock during the relevant period. Thus, the appellate court could not conclude that the plaintiffs showed that the November announcement “was intentionally misleading or so obviously misleading that he must have been aware of its potential to mislead.” Therefore, the appellate court affirmed dismissal for failure to state a claim.
Eleventh Circuit affirms ruling in TCPA re-consent case
On December 4, the U.S. Court of Appeals for the Eleventh Circuit affirmed summary judgment in a TCPA action in favor of a student loan servicer and an affiliate responsible for performing default aversion services (collectively, “defendants”), concluding that the plaintiff re-consented to being contacted on his cell phone after filling out a form on the servicer’s website. According to the opinion, following a class action settlement in 2010—in which members of the class (including the plaintiff) who did not “submit revocation request forms were ‘deemed to have provided prior express consent’” to be contacted by the defendants—the plaintiff later claimed to have revoked consent to being contacted through the use of an automated telephone dialing system (autodialer) during a call with the servicer. While on the call, the plaintiff filled out an online automatic debit agreement to make payments on his delinquent loan. The agreement included a demographic form with an option for the plaintiff to update his contact information, which included an optional cell phone number field and a disclosure that granted consent to being contacted on his cell phone using an autodialer. The defendants began contacting the plaintiff on his cell phone after he fell behind on his loan payments, and the plaintiff sued, alleging the defendants violated the TCPA by placing calls using an autodialer without obtaining his prior express consent. The district court granted the servicer’s motion for summary judgment, ruling that the plaintiff “expressly consented” to receiving the calls and could not “unilaterally revoke” consent “given as consideration in a valid bargained-for-contract,” and that the plaintiff nonetheless “reconsented when he submitted the demographic form.” The plaintiff appealed, arguing, among other things, that he did not re-consent to being contacted because the form was submitted directly after his oral revocation to the servicer.
On appeal, the 11th Circuit agreed with the district court, holding that while it was true that the plaintiff “filled out the demographic form just moments after he orally revoked his prior consent, [the plaintiff] cites no authority that this temporal proximity should require this Court to consider the separate interactions (of revoking consent and later reconsenting) as one lumped-together interaction.” As such, the appellate court disagreed with the plaintiff’s argument “that the revocation of consent standard should stretch to apply to [his] later reconsent to [the servicer].”