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Lawsuit alleges bank is prioritizing lending clients for access to the PPP
On April 4, a group of plaintiffs filed an action against a national bank, alleging that prioritizing existing lending clients and limiting access to the Paycheck Protection Program (PPP) to depository clients and other small firms violates the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the Small Business Administration’s (SBA) 7(a) loan program. As previously covered by Buckley Special Alerts (see here and here), the PPP expands 7(a) eligibility for SBA-guaranteed loans that will provide loan forgiveness of up to eight weeks of payroll (based on employee retention and salary levels), as well as additional relief for eligible borrowers. (See Buckley’s dedicated SBA page for additional information.) The plaintiffs contend that the bank declined initially to accept PPP loan applications for small businesses that were not lending clients of the bank. According to the amended complaint, the bank updated its policy on April 4 to allow customers with depository relationships only to apply for PPP loans, provided they do not have a credit card or loan with another financial institution. The plaintiffs argue that the bank has “no legal authority under the CARES Act to deny access, restrict or otherwise impede” small business access, notwithstanding that there is no such prohibition in the CARES Act.
Supreme Court postpones April arguments
On April 3, the U.S. Supreme Court announced that oral arguments scheduled for the April session will be postponed in light of the Covid-19 pandemic. According to the announcement, the Court may, depending on public health conditions, reschedule some of the March and April session cases to a later date prior to the end of the term. In addition, the Court will continue to post opinions on the Court’s website and will “proceed with the resolution of all cases argued this term.”
District court denies request to lift OFAC sanctions despite EU decision
On March 31, the U.S. District Court for the District of Columbia granted the Treasury Department’s Office of Foreign Assets Control’s (OFAC) motion to dismiss and denied two Iranian corporations’ (plaintiffs) cross-motion for summary judgment. According to the opinion, the plaintiffs requested to be delisted from OFAC’s Specially Designated Nationals and Blocked Persons List (SDN List) following the Court of Justice of the European Union’s decision in 2013 to lift its own sanctions, which were, according to the plaintiffs, “the basis for OFAC including [the plaintiffs] in its SDN list in the first place.” The plaintiffs were added to the SDN List in 2011 after OFAC allegedly determined that they had assisted certain U.S. and United Nations-sanctioned Iranian companies in procuring goods for uranium enrichment activities. OFAC denied the plaintiffs’ request to be delisted in 2018, causing the plaintiffs to file a complaint seeking to remove the sanctions or “cause OFAC to request the information needed to remove [the plaintiffs] from the SDN List,” citing violations of their rights under the U.S. Constitution and the Administrative Procedure Act. Among other things, the plaintiffs argued that OFAC’s decision to reject the request for delisting was based on “undisclosed/secret information,” and further, OFAC “never provided any evidence to substantiate the[] allegations” that the plaintiffs had worked with other OFAC-sanctioned Iranian firms. Moreover, the plaintiffs contended that OFAC violated their “procedural and substantive due process rights because it failed to provide [the plaintiffs] notice and opportunity to be heard before designating [them] as an SDN.”
The court, however, found among other things that OFAC’s actions were not “arbitrary or capricious,” stating that while OFAC considered classified evidence of the plaintiffs’ involvement, it also provided unclassified summaries to the plaintiffs. “In denying [the plaintiffs’] request for removal, OFAC requested and reviewed information provided by [the plaintiffs], and it responded to [the plaintiffs’] arguments for reconsideration,” the court stated, noting that OFAC ultimately concluded that the plaintiffs failed to submit credible arguments or evidence “establishing that an insufficient basis exists for the company’s designation.” In addition, the court rejected the plaintiffs’ Fifth Amendment argument, stating that the constitutional claims fail because the “Supreme Court has long held that non-resident aliens without substantial connections to the United States are not entitled to Fifth Amendment protections.”
11th Circuit interprets FDCPA statute of limitations
On March 31, the U.S. Court of Appeals for the Eleventh Circuit partially affirmed a district court’s dismissal of federal and state law claims against a loan servicer, concluding that while a 1099-A form sent to the plaintiff was not an attempt to collect a debt under the FDCPA, the district court erred in determining that the claim was time-barred. The plaintiff filed suit alleging violations of the FDCPA, the Florida Consumer Collection Practices Act, the Florida Deceptive and Unfair Trade Practices Act, and the Florida Mortgage Brokerage and Lending Laws (MBBL). After the district court dismissed her initial and amended complaints, the plaintiff appealed, arguing, among other things, that the district court erred when it (i) determined that the defendant’s mailing of IRS form 1099-A was not an attempt to collect a debt under the FDCPA; (ii) dismissed her FDCPA claim as time-barred because the statute of limitations had expired; (iii) found that the defendant was not involved in the original loan transaction and therefore could not be liable for damages under the MBLL; and (iv) declined “to exercise supplemental jurisdiction” over the other state law claims after dismissing the FDCPA claims with prejudice.
On appeal, the 11th Circuit agreed that the form 1099-A “was not a communication in connection with debt collection” because it did “not demand payment, state that it was an attempt to collect a debt, or state to whom or how to make a payment of the debt.” The appellate court also agreed that the district court properly dismissed the plaintiff’s MBLL claim because she failed to plead that the defendant made her mortgage loan as required under the MBLL. The district court’s decision to dismiss the remainder of the state-law claims was also affirmed. However, the 11th Circuit disagreed with whether the plaintiff’s FDCPA claim was time-barred, concluding that while the one-year statute of limitations under the FDCPA begins to run on the date the communication is mailed, the appellate court has “never held that, when the date of mailing is in dispute and a plaintiff alleges receipt of a letter on a certain date, a court could presume a mailing date based on the date of receipt and the parties’ addresses.” (Emphasis in the original.) According to the 11th Circuit, “the district court erred in dismissing [the plaintiff’s] FDCPA claims as untimely when her complaint did not allege a date of mailing of the February mortgage statement, and it was not apparent from the face of her complaint whether her claim was time-barred.”
District court dismisses class action overdraft fee claims
On March 31, the U.S. District Court for the Northern District of Illinois dismissed proposed class action overdraft fee claims brought against a national bank and the national bank’s parent company. The plaintiff argued that the bank unfairly charged him overdraft fees for debit transactions he made using two separate merchant debit cards (known as “decoupled debit cards”) that linked to his bank account. The plaintiff contended that because the bank’s contract language stated it would not charge overdraft fees on “non-recurring” debit transactions, this language should control despite the fact that the decoupled debit cards were not issued by the bank. The plaintiff brought multiple claims against the bank, including “breach of contract, breach of the covenant of good faith and fair dealing, unconscionability, conversion, and unjust enrichment.” The bank moved to dismiss for failure to state a claim.
The court first dismissed all claims brought against the national bank’s parent company, saying that the plaintiff combined and conflated the two entities. The court then dismissed with prejudice the plaintiff’s claims against the national bank for breach of the implied covenant of good faith and fair dealing, conversion, and unjust enrichment. The court also dismissed, but without prejudice, the claims against the national bank for breach of contract and unconscionability, although the court noted that the bank’s contract language “only applies to debit cards or access devices that were issued by [the bank], unlike the decoupled debit cards at issue here.”
3rd Circuit: No written dispute requirement under FDCPA Section 1692g(a)(3)
On March 30, the U.S. Court of Appeals for the Third Circuit overturned previous precedent set in Graziano v. Harrison, holding that there is no written dispute requirement under Section 1692g(a)(3) of the FDCPA. In affirming a district court’s judgment on the pleadings in favor of a debt collector (defendant), the en banc panel joined several other appellate courts in concluding that disputes under Section 1692g(a)(3) can be made orally, as well as in writing. According to the opinion, the plaintiff filed suit against the defendant alleging violations of Section 1692g(a)(3) after she received a letter in which she was provided multiple options for contacting the defendant, instead of an explicit requirement that any dispute be done in writing. The district court granted the defendant’s motion for judgment on the pleadings.
On appeal, the 3rd Circuit considered the question of whether a collection letter “must require all disputes to be in writing, or whether [Section] 1692g(a)(3) permits oral disputes.” According to the appellate court, while other sections of 1692g specifically include the word “written,” Section 1692g(a)(3) “refers only to ‘disputes,’ without specifying oral or written.” The en banc court reversed its prior holding in Graziano v. Harrison, in which a panel of the 3rd Circuit held that Section 1692g(a)(3) “must be read to require that a dispute, to be effective, must be in writing.” It determined that after “reading the statutory text with fresh eyes”—as well as considering “the past three decades of Supreme Court statutory-interpretation caselaw”—it now believes Section 1692g(a)(3) allows for oral disputes. According to the appellate court, because Congress did not write Section 1692g(a)(3) to include a written dispute requirement, it must rely on the language Congress chose. “By expressing our view today, we put an end to a circuit split and restore national uniformity to the meaning of §1692g,” the 3rd Circuit wrote.
DOJ unveils charges against Maduro, Venezuelan government officials
On March 26, the DOJ announced criminal charges against numerous current and former Venezuelan government officials, including “Former President” Nicolás Maduro Moros and two Fuerzas Armadas Revolucionarias de Colombia (FARC) leaders. The charges include allegedly engaging in drug trafficking, laundering drug proceeds using Florida real estate and luxury goods, corruption, and bribery. According to an unsealed four-count superseding indictment filed in the Southern District of New York, Maduro, along with five other high-ranking officials, participated in a “narco-terrorism conspiracy,” conspired to import large-scale cocaine shipments into the U.S., and used—or conspired to use—“machine guns and destructive devices” to further the narco-terrorism conspiracies. The charges also allege that Maduro and the officials negotiated and facilitated FARC-produced cocaine shipments, coordinated “foreign affairs with Honduras and other countries to facilitate large-scale drug trafficking,” and solicited assistance from FARC leadership with respect to militia training.
A separate indictment unsealed in the District of Columbia charges the current Venezuelan Minister of Defense with conspiracy to distribute cocaine on a U.S.-registered aircraft. That individual was previously sanctioned in 2018 by the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC). (Covered by InfoBytes here.)
A criminal complaint was also filed in the Southern District of Florida charging the current Chief Justice of the Venezuelan Supreme Court with accepting “tens of millions of dollars and bribes to illegally fix dozens of civil and criminal cases,” including a case in which the defendant authorized the dismissal of charges brought against a Venezuelan who was “charged in a multibillion-dollar fraud scheme against the Venezuelan state-owned oil company.” According to the complaint, the defendant laundered the proceeds through U.S. bank accounts, and spent approximately $3 million in South Florida on a private aircraft and luxury goods.
Another unsealed indictment in the Southern District of New York charges three additional Venezuelans with evading OFAC sanctions by working “with U.S. persons and U.S.-based entities to provide private flight services for the benefit of Maduro’s 2018 presidential campaign.”
Additional separate indictments accuse various former Venezuelan officials of drug trafficking and military aircraft smuggling. In addition, several individuals were charged with FCPA violations, including: (i) two individuals for allegedly receiving bribes to award business to U.S.-based companies; and (ii) several individuals for allegedly participating in an international money laundering scheme and conspiring to solicit Petróleos de Venezuela, S.A. (PDVSA) vendors “for bribes and kickbacks in exchange for providing assistance to those vendors in connection with their PDVSA business.” According to the DOJ’s press release, the scheme involved “bribes paid by the owners of U.S.-based companies to Venezuelan government officials to corruptly secure energy contracts and payment priority on outstanding invoices.”
District court approves $2.3 million class settlement resolving violations of Massachusetts debt collection laws
On March 23, the U.S. District Court for the District of Massachusetts issued an order granting final approval to a nearly $2.3 million class action settlement, reached through mediation, to resolve allegations that a subsidiary of a large U.S. retailer (defendant) made excessive debt collection calls to Massachusetts consumers. The named plaintiff claimed that the defendant violated the Massachusetts Consumer Protection Act and state debt collection regulations by calling consumers more often than twice in a seven-day period. The order also lowered the plaintiff’s attorneys’ fees because, according to the court, the case was not as risky as the attorneys claimed and not complex enough to warrant taking approximately one-third of the settlement fund.
2nd Circuit: Confirmation email to consumer satisfies EFTA’s written authorization requirement
On March 20, the U.S. Court of Appeals for the Second Circuit partially affirmed a district court’s order granting summary judgment in favor of one of two defendants on plaintiff’s Electronic Funds Transfer Act (EFTA) claims, holding that the defendant satisfied its EFTA obligations by providing the plaintiff a confirmation email containing the material terms and conditions authorizing a recurring monthly charge to the plaintiff’s debit card. However, the appellate court vacated the district court’s dismissal of the plaintiff’s Connecticut Unfair Trade Practices Act (CUTPA) claims against the defendants for lack of subject matter jurisdiction and remanded for further proceedings. The plaintiff contended that one of the defendants—a discount club operator—failed to provide him with a written copy of the authorized electronic fund transfer after he joined the defendant’s fee-based monthly discount club. The plaintiff filed a putative class action lawsuit against the defendant club operator, as well as the retailer from whom he purchased a video game online, alleging, among other things, that the defendant violated the EFTA, and that both defendants engaged in “unfair or deceptive trade practices in violation of CUTPA.” The district could granted summary judgment in favor of the defendants on both claims.
The opinion discusses the 2nd Circuit’s holding from the plaintiff’s first appeal, in which the appellate court previously held “that the district court improperly rested its decision on evidence outside the scope of [the plaintiff’s] complaint,” with respect to the claim that the defendant failed to provide “‘a copy of such authorization’” to the plaintiff, as required by the EFTA. In addressing the plaintiff’s second appeal, the 2nd Circuit considered the plaintiff’s argument that the defendant failed to satisfy the EFTA’s requirements because it did not provide him with a “duplicate or facsimile of the Enrollment Page on which he authorized recurring payments.” The appellate court determined that: (i) the EFTA does not require the defendant to provide the plaintiff “with a duplicate of the webpage on which he provided authorization for recurring fund transfers”; and (ii) the defendant’s confirmation email to the plaintiff was sufficient to satisfy its EFTA obligations. The appellate court emphasized that, despite the parties’ “dueling dictionary definitions” of “copy” and “authorization,” the “EFTA’s stated purpose of consumer protection would be served whether the term ‘copy of such authorization’ is read to mean a duplicate or a summary of material terms.” The appellate court also highlighted the CFPB’s Official Interpretation of Regulation E, which states that a person “‘that obtains the [payment] authorization must provide a copy of the terms of the authorization to the consumer either electronically or in paper form.’ 12 C.F.R. Pt. 205, supp. I, §10(b), cmt. 5 (emphasis added).”
9th Circuit holds extraneous information violates FCRA standalone disclosure requirement
On March 20, the U.S. Court of Appeals for the Ninth Circuit partially reversed a district court’s dismissal of a Fair Credit Reporting Act (FCRA) action, concluding that a company’s disclosures contained “extraneous information” in violation of the FCRA’s standalone disclosure requirement. The plaintiff filed a putative class action lawsuit against his former employer (defendant) after his employment—which was contingent on passing a background check—was ultimately terminated based on the results of his credit report. According to the plaintiff, the defendant violated two sections of the FCRA: (i) that the disclosure form was not clear and conspicuous and was encumbered by extraneous information; and (ii) that the defendant failed to notify him in the pre-adverse action notice that he could discuss the consumer report directly with the defendant prior to his termination. The district court dismissed the allegations, concluding that the disclosure met the FCRA’s disclosure requirements because it was not overshadowed by extraneous information, and “that the FCRA does not require that pre-adverse action notices inform an employee how to contact and discuss a consumer report directly with the employer.”
On appeal, the 9th Circuit reversed the district court’s ruling on whether the signed disclosure form contained extraneous information, concluding that because the disclosure form also included information about plaintiff’s rights to obtain and inspect information gathered by the consumer reporting agency about the plaintiff, it went beyond the FCRA’s standalone disclosure requirement. Noting that the FRCA requires a standalone disclosure but does not define the term “disclosure,” the 9th Circuit stated that a company may “briefly describe what a ‘consumer report’ entails, how it will be ‘obtained,’ and for which type of ‘employment purposes’ it may be used.” Finding that the clear and conspicuous standard was established in a case decided after the district court had dismissed plaintiff’s case, the court remanded the case to the district court to determine whether the defendant’s disclosure form satisfied the clear and conspicuous standard. However, the appellate court affirmed the dismissal of the plaintiff’s other claim, agreeing with the district court that the FCRA only requires employers to provide “a description of the consumer’s right to dispute with a consumer reporting agency the completeness or accuracy of any item of information contained in the consumer’s file at the consumer reporting agency.”