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6th Circuit upholds dismissal of credit union’s indemnification suit
Recently, the U.S. Court of Appeals for the Sixth Circuit entered an opinion affirming a district court’s dismissal of a credit union’s lawsuit against a cellphone carrier. In this case, the plaintiff’s customers who were subject to a cellphone scam faced unauthorized electronic fund transfers, which the plaintiff reimbursed as required by the EFTA. The plaintiff claimed the defendant inadequately safeguarded its customers and was therefore liable to the plaintiff for indemnification and contribution. The district court dismissed the plaintiff’s complaint, finding it failed to state a claim for indemnification or contribution under the EFTA or state law.
On appeal, the plaintiff presented three arguments for its indemnification and contribution claims: (i) the EFTA implicitly provided these rights; (ii) the Michigan Electronic Funds Transfer Act (MEFTA) supported these claims because it was not preempted by the EFTA; and (iii) the EFTA did not preempt state common-law indemnification claims.
The 6th Circuit held that Congress enacted the EFTA to benefit consumers, not financial institutions, and did not mention a right to indemnification or contribution for financial institutions. Furthermore, the court stated, “the EFTA creates a cause of action for consumers, not financial institutions,” and sometimes allows consumers to seek treble damages. The court, quoting the U.S. Supreme Court, wrote that “[t]he very idea of treble damages reveals an intent to punish past, and to deter future, unlawful conduct, not to ameliorate the liability of wrongdoers.” The court also stated that the plaintiff selectively cited portions of the EFTA to suggest that Congress intended to establish a right for financial institutions to seek indemnification or contribution but failed to identify any specific provisions, structural elements, or legislative history of the EFTA that demonstrated Congress’s intent to do so.
Finally, the 6th Circuit held that the CFPB determined that the EFTA preempted the relevant portions of the MEFTA, which made customers liable for unauthorized transactions due to their negligence. Because the plaintiff was not liable under MEFTA, the court found that it had no claim for state law indemnification or contribution.
Fed Chair Powell discusses monetary policy
On July 9 and 10, Fed Chair Jerome Powell testified at the respective financial committees under the U.S. Senate and U.S. House of Representatives. Lawmakers asked questions on various Fed initiatives, such as the long-term debt proposal, debit interchange fee cap proposal, reforms to the discount window, potential changes to liquidity requirements, and the incentive-based compensation arrangements proposal.
On long-term debt proposal, Powell stated that he was unsure if it would be “inappropriate” to move forward with finalizing a long-term debt proposal rule before finalizing Basel III. The Fed is currently considering comments on the proposal to correct the issues experienced by banks in Spring 2023. On the debit interchange fee cap proposal, Rep. Ann Wagner (R-MO) pointed out how the Fed seemed to propose a rule, Regulation II, despite the Fed releasing research that found negative consequences of the debit interchange fee cap. Chair Powell stated he would have to review the research. On liquidity requirements and Basel III, Chair Powell alluded that the Fed was “pretty close” to releasing that proposal publicly, noting that the Fed’s liquidity proposals may be released “sometime later this year.”
On the incentive-based compensation arrangements proposal, Sen. Elizabeth Warren (D-MA) questioned Powell on how none of the ten largest banks put in policies to delay annual bonuses to those who engaged in risky behaviors. Warren alleged that the Fed did not join the other financial regulators in implementing Section 956 of Dodd-Frank. Thus, there are “no rules” to stop banks from rewarding executives’ risky behaviors, despite Warren quoting Powell that the Fed would be proposing such a rule. Additionally, the testimonies also included discussions about high housing prices, the Fed’s balance sheet, U.S. fiscal policy, stablecoins, digital assets, and synthetic risk transfers.
Healthcare providers reach $3.5 million settlement in FDCPA suit after eight years of litigation
On November 2, two healthcare providers settled with plaintiffs after eight years of litigation between the district court and the U.S. Court of Appeals for the 6th Circuit, stemming from alleged violations of the FDCPA, breach of contract, and violations of the Ohio Consumer Sales Practices Act, among other things. According to the order, the defendants allegedly contacted plaintiffs and their legal counsel, requesting that their legal counsel sign a letter to forego any legal settlement or judgment against the defendants to prevent plaintiffs’ accounts from being sent to collections, despite having plaintiffs’ health insurance information. While the defendants deny any fault, wrongdoing, or liability in connection with the claims, the parties agreed to a settlement amount of $3.5 million, with each claimant receiving a cash payment of $25. The class is comprised of 12,000 individuals with health insurance plans accepted by the healthcare provider who were patients at an Ohio facility from 2009 to 2023, and subsequently made payments or were asked to make payments for their treatment, excluding co-pays or deductibles. Additionally, certain class members will also receive a cash payment equal to fifty percent of the amount paid to the healthcare provider.
6th Circuit: Single RVM confers standing
The U.S. Court of Appeals for the Sixth Circuit recently held that receiving one ringless voicemail (RVM) was enough to confer standing upon a plaintiff under the TCPA. In that case, plaintiff asserted he received several RVMs to his cell phone but never consented to receiving the messages. He filed a putative class action suit for violations of the TCPA, alleging the defendant used an automated telephone dialing system (autodialer) to deliver multiple RVMs to his cell phone advertising its services. According to the plaintiff, the RVMs tied up his phone line, cost him money, and invaded his privacy. During discovery, an expert concluded that only one of the 11 voicemails plaintiff claimed to have received was from the defendant. The defendant moved to dismiss, arguing the plaintiff lacked standing because he did not suffer a concrete injury. The district court granted defendant’s motion, ruling that receiving a single RVM did not constitute a concrete harm sufficient for Article III standing, because, among other things, plaintiff could not recall what he was doing when the RVMs were sent, he was not charged for the RVM, the RVM did not tie up his phone line, and he spent a very small amount of time reviewing the message.
On appeal, the 6th Circuit noted that it had not previously considered whether receiving a single RVM for commercial purposes is sufficient to confer standing under the TCPA. To determine whether an intangible harm—such as receiving an unsolicited RVM—rises to the level of concrete injury, the appellate court reviewed U.S. Supreme Court rulings on standing. “[Plaintiff’s] receipt of an unsolicited RVM bears a close relationship to the kind of injury protected by the common law tort of intrusion upon seclusion; and his claimed harm directly correlates with the protections enshrined by Congress in the TCPA,” the 6th Circuit wrote, reversing and remanding the district court’s judgment and stating that “[plaintiff] suffered a concrete injury in fact sufficient for Article III standing purposes.”
6th Circuit: Tennessee judicial foreclosure time-barred
On May 4, the U.S. Court of Appeals for the Sixth Circuit affirmed a lower court’s decision in a judicial foreclosure action, holding that a bank’s lawsuit was barred by Tennessee’s 10-year statute of limitations for actions to enforce liens on real property. The appellate court also refused to establish an equitable lien on the property in favor of the bank. According to the opinion, the home equity line of credit at issue in the case matured in 2007, requiring a final balloon payment, but the bank did not demand this payment, refinance the loan, or foreclose on the property. Instead, the bank continued to accept monthly interest payments totaling around $100,000 until 2017. The opinion reflected that the bank did not contend there to be a written instrument showing an extension of the loan or that such an extension was recorded. Rather, the bank raised several arguments, including that there was an oral modification to the loan and that it had the unilateral right to extend the loan based on “a future advances provision that could extend the maturity date for up to twenty years.” The bank further argued that the defendants’ monthly interest payments excused any writing requirement and evidenced an agreement to extend the loan’s maturity date. The appellate court disagreed, concluding that because the bank could not show, as a matter of law, that the loan’s maturity date was extended, its suit is untimely. The appellate court stated that the bank was aware that the loan “was in default as early as 2011 (well within the statute of limitations period) but took no action to foreclose or refinance.” The 6th Circuit further noted that if the bank had “simply memorialized an extension to the [l]oan’s maturity date in writing as required by Tenn. Code Ann. § 28-2-111(c), it would not be in this situation.”
6th Circuit: Each alleged FDCPA violation carries its own statute of limitations
On March 1, the U.S. Court of Appeals for the Sixth Circuit reversed the dismissal of a debt collection action, holding that every alleged violation of the FDCPA has its own statute of limitations. According to the opinion, the plaintiff financed a furniture purchase through a retail installment contract. While making payments on the contract, the company purportedly sold the debt to a third party. After the plaintiff defaulted on the debt, the third party—through the defendant attorney—sued the plaintiff in state court to recover the unpaid debt and attorney’s fees. After the third party eventually voluntarily dismissed the suit due to questions of whether the debt transfer was valid, the plaintiff sued the attorney for violating the FDCPA, alleging the defendant doctored the retail installment contract (RIC) to make it appear as if the debt assignment was legal. The defendant moved to dismiss the complaint as time-barred by the FDCPA’s one-year statute of limitations. The district court dismissed the case citing the complaint was filed more than a year after the third party filed the state court complaint and later denied both the plaintiff’s motion for reconsideration and the defendant’s motion for attorney’s fees. Both parties appealed.
On appeal, the 6th Circuit agreed that the plaintiff made a timely claim. Plaintiff argued that at least one of her claims fell within the one-year statute of limitations—the attorney’s filing of the updated RIC that allegedly showed the “contrived transfer” of debt—and maintained that she filed within one year of that alleged violation. The defendant countered, among other things, that the plaintiff’s claim was time-barred because it was a continuing effect of the third party’s initial filing of the state court complaint. The 6th Circuit reviewed caselaw on the “continuing-violation doctrine” and determined that the doctrine was not relevant to the case, stating that the plaintiff never invoked it because she was not “trying to sweep in acts that would otherwise be outside of the filing period,” but rather sought “redress for a single claim that is not time-barred.” The 6th Circuit emphasized that the plaintiff’s “single claim is independent of [the third party’s] initial filing of the lawsuit—not a continuing effect of it—because it is a standalone FDCPA violation.” The opinion further stated that the only date considered for the statute of limitations is the date a lawsuit is filed when subsequent FDCPA violations within that lawsuit occurred, and wrote that “[i]f we were to only consider the date [the third party] filed suit . . . we would create a rule that disregards the fact that §1629k(d) creates an independent statute of limitations for each violation of the FDCPA . . . . And if we adopted [the defendant’s] approach, we’d be saying that ‘so long as a debtor does not initiate suit within one year of the first violation, a debt collector [is] permitted to violate the FDCPA with regard to that debt indefinitely and with impunity.’”
6th Circuit affirms FCRA summary judgment
On November 4, the U.S. Court of Appeals for the Sixth Circuit affirmed a district court’s summary judgment ruling in favor of a credit reporting agency (defendant) accused of violating the FCRA. According to the opinion, a father and son (plaintiff) filed Chapter 7 bankruptcy petitions just over a year apart with the same attorney. Both petitions had their similar names, identical address, and, mistakenly, the plaintiff’s social security number. Although the attorney corrected the social security number on the father’s bankruptcy petition the day after it was filed, the defendant allegedly failed to catch the amendment and erroneously reported the father’s bankruptcy on the plaintiff’s credit report for nine years. When the plaintiff noticed the error, he sent the defendant a letter and demanded a sum in settlement. The defendant removed the father’s bankruptcy filing from the plaintiff’s credit report. The plaintiff sued two credit reporting agencies, alleging they violated the FCRA by failing to “follow reasonable procedures to assure maximum possible accuracy” of his reported information. One of the agencies settled with the plaintiff. A district court granted the other defendant’s motion for summary judgment, which the plaintiff appealed.
On the appeal, the 6th Circuit noted that the plaintiff “has standing to bring this action, but also agree that he cannot establish that [defendant’s] procedures were unreasonable as a matter of law.” The appellate court found that, because the defendant gathered information from reliable sources and because someone “with at least some legal training” would have had to manually review the bankruptcy docket to notice that the Social Security number had been updated, the defendant did not violate the FCRA. The appellate court wrote that the defendant’s “processes strike the right balance between ensuring accuracy and avoiding ‘an enormous burden’ on consumer credit reporting agencies.” Furthermore, the 6th Circuit stated that, “[g]iven the sheer amount of data maintained by these companies, we know that consumers are ‘in a better position . . . to detect errors’ in their credit reports and inquire about a fix.”
6th Circuit reverses and remands judgment in debt collection suit
On June 15, the U.S. Court of Appeals for the Sixth Circuit reversed and remanded a district court’s summary judgment ruling in favor of a defendant-appellee law firm, holding that it did not first exhaust all of its efforts to collect from the actual debtor. According to the opinion, the plaintiff’s husband was convicted of embezzlement and willful failure to pay taxes and was sent invoices for his legal fees by another law firm, which he did not pay. The law firm hired the defendant to collect on the debt. The defendant filed a lawsuit against the plaintiff and her husband, arguing under the Ohio Necessaries Statute that the husband was liable to third parties for necessaries, such as food, shelter, and clothing that were provided to his wife. An Ohio state court ruled in favor of the plaintiff, and an interlocutory appeal by the defendant was denied. The plaintiff then filed suit against the defendant, alleging that defendant’s underlying suit violated the FDCPA by attempting to collect under the claim that she was liable for her spouse’s debt. The district court granted the defendant’s summary judgment motion, which the plaintiff appealed.
On the appeal, the 6th Circuit found that the defendant did not follow the express commands of the Ohio Supreme Court's 2018 decision in Embassy Healthcare v. Bell, which held that spouses who are not debtors are liable only if the debtor does not have the assets to pay the debt themselves. The 6th Circuit found that the defendant did not satisfy those prerequisites to collect from the plaintiff when it filed a joint-liability suit against her and her husband. Thus, the collection efforts against the spouse who incurred the debt must be exhausted “before attempting to collect from a spouse.” The 6th Circuit reversed the district court’s judgment and remanded for further proceedings with instructions to enter judgment in favor of the plaintiff.
Supreme Court blocks OSHA mandate
On January 13, a divided U.S. Supreme Court issued an order blocking a Department of Labor’s Occupational Safety and Health Administration (OSHA) rule mandating that employers with 100 or more employees require employees to be fully vaccinated or be subject to a weekly Covid-19 test at their own expense. However, in a separate order the Court allowed a separate rule issued by the Department of Health and Human Services requiring Covid-19 vaccinations for health care workers (unless exempt for medical or religious reasons) at Medicare- and Medicaid-certified providers and suppliers to take effect.
In November, the U.S. Court of Appeals for the Fifth Circuit issued a nationwide stay on the emergency temporary standard (ETS) that included the mandate to employers, describing enforcement of the ETS illegitimate and calling the OSHA rule “unlawful” and “likely unconstitutional.” (Covered by InfoBytes here.) However, last month, the 6th Circuit lifted the stay in a 2-1 ruling, stating that “[b]ased on [OSHA’s] language, structure and Congressional approval, OSHA has long asserted its authority to protect workers against infectious diseases.” (Covered by InfoBytes here.) The applicants, seeking emergency relief from the Court to reinstate the stay, argued that the rule exceeded OSHA’s statutory authority and is otherwise unlawful.
In agreeing that the applicants are likely to prevail, the Court majority granted the application for relief and stayed the OSHA rule pending disposition of the applicants’ petitions for review in the 6th Circuit, as well as disposition of any timely petitions for writs of certiorari. “Although Congress has indisputably given OSHA the power to regulate occupational dangers, it has not given that agency the power to regulate public health more broadly,” the majority wrote. Adding that the ETS is a “blunt instrument” that “draws no distinctions based on industry or risk of exposure to COVID-19,” the majority stated that the Occupational Safety and Health Act does not plainly authorize the rule.
The dissenting judges argued that the majority’s decision “stymies the Federal Government’s ability to counter the unparalleled threat that COVID–19 poses to our Nation’s workers. Acting outside of its competence and without legal basis, the Court displaces the judgments of the Government officials given the responsibility to respond to workplace health emergencies.”
With respect to the Department of Health and Human Services rule, the Government applied to stay injunctions issued by two district courts preventing the rule from taking effect. In granting the application and staying the injunctions, the majority of the Court found that one of the Department’s basic functions authorized by Congress “is to ensure that the healthcare providers who care for Medicare and Medicaid patients protect their patients’ health and safety,” concluding that “[h]ealthcare workers around the country are ordinarily required to be vaccinated for diseases” and that “addressing infection problems in Medicare and Medicaid facilities is what [the Secretary] does.”
In dissent, four justices argued that the efficacy or importance of Covid-19 vaccines was not at issue in assessing the injunctions, stating that the district court cases were about “whether [the Centers for Medicare and Medicaid Services] has the statutory authority to force healthcare workers, by coercing their employers, to undergo a medical procedure they do not want and cannot undo,” and arguing that “the Government has not made a strong showing that Congress gave CMS that broad authority.”
6th Circuit: OSHA required testing is allowed
On December 17, the U.S. Court of Appeals for the Sixth Circuit lifted the stay on the federal government’s rule requiring employers with 100 or more employees to ensure their employees are vaccinated against Covid-19 or be subjected to weekly Covid-19 testing. As previously covered by InfoBytes, the U.S. Department of Labor’s Occupational Safety and Health Administration (OSHA) published a rule in the Federal Register requiring employers to develop, implement, and enforce a mandatory Covid-19 vaccination policy, unless they adopt a policy requiring employees to choose between vaccination or regular testing for Covid-19 and wearing a face covering at work. The U.S. Court of Appeals for the Fifth Circuit issued a nationwide stay on the emergency temporary standard (ETS), which mandates that all employers with 100 or more employees require employees to be fully vaccinated or be subject to a weekly Covid-19 test (covered by InfoBytes here). The 5th Circuit stay, which was in response to a legal challenge filed by several states along with private entities and individuals, affirmed the court’s initial stay. The 5th Circuit said OSHA’s enforcement of the ETS is illegitimate and called it “unlawful” and “likely unconstitutional.” Furthermore, the 5th Circuit ordered OSHA to “take no steps to implement or enforce the Mandate until further court order.”
On the appeal, the 6th Circuit lifted the stay in a 2-1 ruling, stating that “[b]ased on [OSHA’s] language, structure and Congressional approval, OSHA has long asserted its authority to protect workers against infectious diseases." The appellate court also noted that “OSHA relied on public health data to support its observations that workplaces have a heightened risk of exposure to the dangers of COVID-19 transmission.” However, one judge dissented, writing that “[v]accines are freely available, and unvaccinated people may choose to protect themselves at anytime. And because the [Secretary of Labor] likely lacks congressional authority to force them to protect themselves, the remaining stay factors cannot tip the balance.”