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On July 2, the U.S. Court of Appeals for the D.C. Circuit reversed a district court’s ruling that a consumer lacked Article III standing to allege a violation of the Fair and Accurate Credit Transaction Act (FACTA) when a merchant included all 16 digits of her credit card account number, her full name, and the expiration date on a receipt, because the receipt was not thrown away. Under FACTA, merchants are prohibited from including on a receipt (i) more than the last five digits of a consumer’s credit card number; and (ii) a credit card’s expiration date. The consumer alleged that the merchant violated the restriction, but the district court ruled that the consumer lacked standing to sue because she failed to describe a concrete risk of “actual or imminent” injury to a protected interest as defined in the U.S. Supreme Court’s decision in Spokeo, Inc. v. Robins. According to the district court, because the consumer did not dispose of the receipt, and was the only person who ever saw the receipt, her risk of identity theft had not increased. Moreover, the district court stated that the burden of protecting the non-compliant receipt did not constitute a concrete injury.
On appeal, the D.C. Circuit reversed, holding that printing a receipt containing all 16 digits of a consumer’s credit card number is an “egregious” enough violation of FACTA to confer standing. According to the panel, the harm inflicted on the consumer by the merchant’s mishandling of her receipt had a “close relationship” to the type of harm that gives rise to a “breach of confidence” claim. Moreover, the panel stated that it was irrelevant that the consumer had been able to protect herself by safeguarding the receipt because: (i) FACTA protects an interest in avoiding an increased risk of identity theft, which the panel considered to be sufficiently concrete; and (ii) under the facts presented, the violation of the truncation requirement created a “risk of real harm” to such concrete interest. The D.C. Circuit remanded the case for further proceedings consistent with its findings. Notwithstanding, the panel was clear that not every violation of FACTA’s truncation requirement creates a risk of identity theft.
Notably, while the D.C. Circuit’s decision is in agreement with an 11th Circuit opinion issued in April (prior InfoBytes coverage here), it conflicts with other appellate decisions, including an opinion issued by the 3rd Circuit in March (covered by InfoBytes here), wherein the 3rd Circuit held that, without concrete evidence of harm, a consumer lacks standing under FACTA to sue a merchant for including too many digits of a credit card account number on a receipt. The D.C. Circuit noted, however, that the 3rd Circuit “recognized its analysis would be different if it were presented with the facts [the consumer] presents to us.”
On October 30, the U.S. Court of Appeals for the 9th Circuit denied a California gym’s petition for a rehearing en banc of the court’s September decision reviving a TCPA putative class action. As previously covered by InfoBytes, the appeals court vacated a district court order granting summary judgment in favor of the gym, concluding that there was a genuine issue of material fact as to whether the text system used by the gym—which stores numbers and dials them automatically to send the messages—qualified as an “autodialer” under the TCPA. Notably, in vacating the summary judgment order, the 9th Circuit performed its own review of the statutory definition of an autodialer in the TCPA, because the recent D.C. Circuit opinion in ACA International v. FCC (covered by a Buckley Sandler Special Alert) set aside the FCC’s definition. Through this review, the appeals court concluded that the TCPA defined an autodialer broadly as “equipment which has the capacity—(i) to store numbers to be called, or (ii) to produce numbers to be called, using a random or sequential number generator—and to dial such numbers automatically (even if the system must be turned on or triggered by a person).”
On September 20, the U.S. Court of Appeals for the 9th Circuit vacated the district court’s order granting summary judgment in a TCPA action, in light of the recent D.C. Circuit opinion in ACA International v. FCC (covered by a Buckley Sandler Special Alert). The case arises from a plaintiff’s allegations that a California gym violated the TCPA by sending three text messages to the plaintiff’s cell phone. In October 2014, the district court granted summary judgment for the gym, holding that the automatic text messaging system used by the gym was not an “automatic telephone dialing system” (autodialer) under the TCPA because it lacked the capacity “to store or produce telephone numbers to be called, using a random or sequential number generator.” In 2016, the 9th Circuit stayed the appeal of the district court’s ruling pending the ACA International decision, which was issued in March of this year. In ACA International, the D.C. Circuit struck down the FCC’s definition of an autodialer, reasoning that the FCC’s definition “unreasonably, and impermissibly” included all smartphones while inadequately describing the functions that made a device an autodialer.
Because the ACA International decision set aside the FCC’s definition, the 9th Circuit performed its own review of the statutory definition of an autodialer in the TCPA. Through this review, the court concluded that the TCPA defined an autodialer as “equipment which has the capacity—(i) to store numbers to be called, or (ii) to produce numbers to be called, using a random or sequential number generator—and to dial such numbers automatically (even if the system must be turned on or triggered by a person).” Because the text system used by the gym stores numbers and dials them automatically to send the messages to the stored list of phone numbers, the 9th Circuit held there is a genuine issue of material fact as to whether the system qualified as an “autodialer” and remanded the case to district court for further proceedings.
On September 19, the U.S. Court of Appeals for the D.C. Circuit remanded an SEC case against an investment adviser and his company for a new hearing before another Administrative Law Judge (ALJ) or before the Commission in accordance with the U.S. Supreme Court decision in Lucia v. SEC. As previously covered by InfoBytes, in June, the Supreme Court held that SEC ALJs are “inferior officers” subject to the Appointments Clause of the Constitution. After the decision in Lucia, the SEC moved to remand the case for a new hearing. In response, the investment adviser moved to have the SEC’s previous orders, including those imposing penalties, set aside in whole, arguing that remand is not authorized in this circumstance; citing to Lucia, the investment adviser argued the penalties resulted from an unconstitutional hearing and the language concerning remand for a new hearing in Lucia was dicta and carried no weight. The D.C. Circuit rejected this argument and denied the motion to set aside in part, citing D.C. Circuit precedent in stating “carefully considered language of the Supreme Court, even if technically dictum, generally must be treated as authoritative.”
CFPB Succession: Leandra English steps down, seeks to dismiss appeal; Mulvaney selects close advisor to be new deputy
On July 9, Leandra English filed a motion for voluntary dismissal with the U.S. Court of Appeals for the D.C. Circuit, effectively ending her eight-month legal battle over the appointment of Mick Mulvaney as acting director of the CFPB. The motion follows an announcement released via Twitter on July 6 that English will be stepping down from her position as deputy director of the Bureau “in light of the recent nomination of a new Director.” (As previously covered by InfoBytes, President Trump nominated Kathy Kraninger, currently serving as the associate director for general government at the Office of Management and Budget (OMB), to be the director of the Bureau for a five-year term.) In April, the D.C. Circuit heard oral arguments in English’s litigation. Unlike previous arguments, which focused on the president’s authority to appoint Mulvaney under the Federal Vacancies Reform Act (FVRA), the court spent considerable time discussing Mulvaney’s concurrent role as head of the OMB, and whether that dual role is inconsistent with the Bureau’s independent structure as established by the Dodd-Frank Act. A decision was pending at the time English submitted her dismissal of the case.
Following English’s resignation, Mulvaney announced the selection of Brian Johnson as the Bureau’s acting deputy director. Johnson was Mulvaney’s first advisor hire at the Bureau, and he currently serves as a principal policy director. Prior to joining the Bureau, Johnson was a senior counsel at the House Financial Services Committee.
On April 27, the U.S. Court of Appeals for the D.C. Circuit dismissed a challenge to a November 2016 FTC staff letter, which announced the FTC would treat calls using soundboard technology as robocalls. According to the D.C. Circuit opinion, the FTC’s 2016 staff letter rescinded a 2009 staff letter, which reached the conclusion that soundboard technology was not subject to robocall regulation. The Soundboard Association filed suit, seeking to enjoin the rescission of the 2009 letter, arguing that the 2016 staff letter violated the Administrative Procedures Act (APA) by issuing a legislative rule without notice and comment and that it unconstitutionally restricted speech in violation of the First Amendment. The lower court granted summary judgment for the FTC holding that the 2016 letter did not violate the First Amendment and that the letter was an interpretive rule and therefore not subject to the notice and comment requirements of the APA. Upon appeal, the D.C. Circuit vacated the lower court’s decision and dismissed the action in its entirety, holding that the 2016 letter was not a “final agency action” and therefore, the plaintiffs failed to state a cause of action under the APA.
On May 14, the FCC’s Consumer and Governmental Affairs Bureau released a notice seeking comment on the interpretation of the Telephone Consumer Protection Act (TCPA) in light of the recent D.C. Circuit decision in ACA International v. FCC. (Covered by a Buckley Sandler Special Alert.) The notice requests, among other things, comment on what constitutes an “automatic telephone dialing system” (autodialer) due to the court setting aside the FCC’s 2015 interpretation of an autodialer as “unreasonably expansive.” Specifically, the FCC requests comment on how to interpret the term “capacity” under the TCPA’s definition of an autodialer (“equipment which has the capacity—(A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers”) and requests comment on the functions a device must be able to perform to qualify as an autodialer, including how “automatic” the dialing mechanism must be. Additionally, the notice seeks comment on (i) how to treat reassigned wireless numbers under the TCPA; (ii) how a party may revoke prior express consent to receive robocalls; and (iii) three pending petitions for reconsideration, including the 2016 Broadnet Declaratory Ruling and the 2016 Federal Debt Collection Rules. Comments are due by June 13 and reply comments are due by June 28.
On May 3, the U.S. Chamber of Commerce, the American Bankers Association, and over a dozen more trade associations petitioned the FCC seeking a declaratory ruling on the definition of an autodialer under the TCPA, previously covered by InfoBytes here.
PHH will not seek to appeal the January 31 decision by the U.S. Court of Appeals for the D.C. Circuit, which upheld the CFPB’s constitutionality in a 7-3 decision. (Covered by a Buckley Sandler Special Alert.) The Supreme Court requires petitions for writ of certiorari to be filed within 90 days of the decision, which would have put PHH’s deadline around May 1. According to reports, a PHH spokesperson confirmed the company did not file the petition but declined to provide further comment.
As previously covered by InfoBytes, the U.S. Court of Appeals for the 5th Circuit recently agreed to hear a similar challenge to the constitutionality of the CFPB’s single-director structure by two Mississippi-based payday loan and check cashing companies.
CFPB Succession: Mulvaney pleads for Congress to restructure the CFPB; oral arguments held in English litigation
On April 11 and 12, acting Director of the CFPB, Mick Mulvaney, testified before the House Financial Services Committee and the Senate Banking Committee regarding the Bureau’s semi-annual report to Congress. (Previously covered by InfoBytes here). Mulvaney’s prepared testimony, which was submitted to both committees, covers the salient points of the semi-annual report but also includes the same request to Congress that he made in the report: change the law “in order to establish meaningful accountability for the Bureau.” This request, which includes four specific changes (such as, subjecting the Bureau to the Congressional appropriations process and creating an independent Inspector General for the Bureau), was the focus of many of Mulvaney’s responses to questions posed by members of each committee. Specifically, during the House Financial Services hearing, Mulvaney encouraged the members of the committee to include the CFPB restructure in negotiations with the Senate regarding the bipartisan regulatory reform bill, S.2155, which passed the Senate last month. (Previously covered by InfoBytes here).
Mulvaney also fielded many questions regarding the Bureau’s announcement that it plans to reconsider the final rule addressing payday loans, vehicle title loans, and certain other extensions of credit (Rule); however, his responses gave little indication of what the Bureau’s specific plans for the Rule are. As previously covered by InfoBytes, resolutions have been introduced in the House and the Senate to overturn the rule under the Congressional Review Act. Additionally, on April 9, two payday loan trade groups filed a lawsuit in the U.S. District Court for the Western District of Texas asking the court to set aside the Rule because, among other reasons, the CFPB is unconstitutional and the Bureau’s rulemaking failed to comply with the Administrative Procedure Act. The complaint alleges that the Rule is “outside the Bureau's constitutional and statutory authority, as well as unnecessary, arbitrary, capricious, overreaching, procedurally improper and substantially harmful to lenders and borrowers alike.” The complaint also argues that the rule is a product of an agency that violates the Constitution’s separation of powers due to the Bureau’s structure of a single director who may only be removed by the president “for cause.” A similar argument in CFPB v. PHH Corporation was recently rejected by the U.S. Court of Appeals for the D.C. Circuit (covered by a Buckley Sandler Special Alert).
Additionally, on April 12, the U.S. Court of Appeals for the D.C. Circuit heard oral arguments in English v. Trump. In this suit, Leandra English, the current deputy director of the CFPB, challenges Mulvaney’s appointment as acting director. Unlike previous arguments, which focused on the president’s authority to appoint Mulvaney under the Federal Vacancies Reform Act (FVRA), the court spent considerable time discussing Mulvaney’s concurrent role as head of the Office of Management and Budget (OMB), and whether that dual role is inconsistent with the independent structure of the Bureau, as established by the Dodd-Frank Act.
On March 16, the D.C. Circuit issued its much anticipated ruling in ACA International v. FCC. The D.C. Circuit’s ruling significantly narrows a Federal Communication Commission order from 2015, which, among other things, had broadly defined an “autodialer” for purposes of the Telephone Consumer Protection Act.
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Click here to read the full special alert.
If you have questions about the ruling or other related issues, please visit our Class Actions practice page, or contact a Buckley Sandler attorney with whom you have worked in the past.
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