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Financial Services Law Insights and Observations


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  • District Court receives proposed settlement agreement of $6.3 million for alleged breach of contract


    On February 6, the U.S. District Court for the Eastern District of Tennessee received the plaintiffs’ unopposed motion for preliminary approval of a class action settlement agreement as part of their lawsuit against a large bank for alleged breach of contract. According to the motion, the class action started when the plaintiffs allegedly sustained damages after the bank’s predecessor breached its contract. The contract in dispute provided consumers a high-interest market investment account that had an interest rate that was “guaranteed [to] never fall below 6.5%”; however, in 2018, the predecessor bank dropped the interest rate on all accounts below the “guaranteed” floor of 6.5 percent, down to 1.05 percent, and then to nearly zero. While the plaintiffs alleged this to be a breach of contract, the bank’s representative allegedly testified they did not have to honor the guaranteed interest rates “because the signature cards (signed by some account holders) allowed FNB to ‘adjust’ the interest rate.”

    One hundred and twenty-one plaintiffs are seeking court approval of their class action settlement. As part of the proposed settlement, plaintiffs want the defendant to pay $6.3 million to settle the class action. Additionally, the named plaintiffs want to receive $10,000 per plaintiff. The court neither granted nor denied the plaintiffs’ motion, but the defendant bank did not oppose the plaintiffs’ motion. A final hearing to consider entry of a final order is outstanding.

    Courts Settlement Agreement Class Action Breach of Contract

  • California Court of Appeal: Plaintiffs bound to arbitration in online license agreement


    On March 29, the California Court of Appeal for the Fourth Appellate District held that plaintiffs are bound to the terms of an arbitration agreement contained in a defendant video game company’s online license agreement, reversing a trial court’s finding that there was no conspicuous notice of an arbitration agreement and that a reasonably prudent user would not have had notice. According to the opinion, the plaintiff minor used “real money” to make in-game purchases of “loot boxes,” which offered players “randomized chances” to obtain desirable or helpful items. The minor and his father (collectively, “plaintiffs”) sued the defendant, alleging the sale of these loot boxes constituted unlawful gambling, and, thus, violated the California Unfair Competition Law. The defendant moved to compel arbitration based on a dispute resolution policy incorporated into various iterations of the online license agreement that users were presented when they signed up for, downloaded, and used the defendant’s service. The trial court denied the defendant’s motion for the reasons stated above, which the defendant appealed. In addition to agreeing to an end-user license agreement containing an arbitration provision when the plaintiff initially registered and downloaded the game, the defendant maintained that the plaintiff agreed to arbitration several times when the license agreement was updated.

    Reviewing whether the defendant’s various notices sent to the plaintiff minor before the purchase of the loot boxes were sufficient to compel arbitration, the Court of Appeal concluded that the pop-up presenting an updated license agreement, which was the operative agreement when the plaintiff minor purchased the loot boxes, “provided sufficiently conspicuous notice.” The court also determined that the notice of arbitration itself appeared in a scrollable text box that included a section clearly titled dispute resolution, and that by clicking the “Continue” button the user was agreeing to all the terms of the license agreement. Specifically, the Court of Appeal held that the plaintiff minor could not have continued to use the defendant’s service if he did not click the “Continue” button. “In the context of the transaction at issue, we conclude [defendant’s] pop-up notice provided sufficiently conspicuous notice of the arbitration agreement such that Plaintiffs are bound by it,” the Court of Appeal wrote.

    Courts State Issues California Arbitration Agreement

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