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District Court grants preliminary approval of $1.5M class action settlement for insurance company data breach
On August 27, the U.S. District Court for the Eastern District of North Carolina granted a plaintiff’s unopposed motion for preliminary approval of a class action settlement related to an insurance company’s data breach that occurred in December 2022. The court certified a plaintiff class, including all individuals in the U.S. whose private information was compromised in the breach.
The court found the proposed $1.5 million settlement to be “fair, reasonable, and adequate.” The settlement included both monetary and non-monetary benefits and according to the court, the parties agreed to the settlement through “good faith, arms’ length negotiations.” The court has approved the proposed notice program, which included informing class members of their rights and the process for submitting claims, objecting to the settlement, or opting out. Class members wishing to exclude themselves must submit a written request by the specified opt-out date, while those wishing to object must file a written notice by the objection deadline. Participating class members can claim a period of free credit monitoring and request up to $10,000.
Court approves final settlement in class action against credit union alleging discriminatory loan denial based on DACA status
On August 15, the U.S. District Court for the Northern District of California, issued a final order approving settlement of a loan discrimination class action against a credit union, entering final judgment and ordering dismissal pursuant to the settlement. In this case, the plaintiff claimed that she and other class members experienced discrimination on the basis of immigration status after attempting to finance the purchase of her vehicle with the defendant credit union. According to the complaint, the plaintiff’s auto loan application was denied after disclosing her status as a DACA recipient to a representative of the defendant. The plaintiff alleged that the representative communicated that the defendant does “not lend on DACA status.” In a previous motion to dismiss, the credit union had argued the ECOA and Regulation B allow creditors to consider immigration and residency status in creditworthiness and repayment analyses. The District Court, however, disagreed with the defendant, denying the motion to dismiss, and holding that “Regulation B does not allow a creditor to decline credit solely on the basis of residency or immigration status.”
The approved settlement established an $86,750 settlement fund to be distributed to the 95 members of two settlement classes (a California class and a national class). The settlement provided that each California class member will receive $2,500 from the settlement fund, while other national class members will receive $250 each. The approved settlement will also require the credit union to implement corrective action to ensure that it does not deny consumer credit applications based solely on immigration status.
3rd Circuit vacates order compelling arbitration in FDCPA suit
Recently, the U.S. Court of Appeals for the Third Circuit vacated District Court orders compelling arbitration of an FDCPA class action on the basis that the plaintiff’s allegations of harm were insufficient to establish standing. In this case, plaintiff sought to represent a class and obtain damages from defendant debt collector and its officers, alleging violations of the FDCPA. The plaintiff claimed that a collection letter she received was misleading because it failed to correctly identify the creditor “to whom the debt was owed” and, rather, identified the collection arm of the credit card company. The District Court granted defendant’s motion to stay and compel individual arbitration.
On appeal, the 3rd Circuit concluded that the plaintiff lacked Article III standing, as she did not sufficiently allege a concrete injury. Accordingly, the court vacated the lower court’s orders and remanded with instructions to dismiss the case. The 3rd Circuit, however, declined to address the validity and enforceability of the arbitration award itself, noting that “that question lies with a court of competent jurisdiction — presumably a New Jersey state court or an AAA tribunal.”
Court grants motion to compel arbitration in class action
On August 14, the U.S. District Court for the Western District of Pennsylvania decided an arbitration provision was valid and enforceable in a class action regarding interest rates against a lender. The plaintiffs had filed a putative class action complaint alleging violations of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law, Loan Interest and Protection Law, and Consumer Discount Company Act related to the interest rates charged on loans obtained through the defendant’s website. The defendant filed a motion to compel individual arbitration pursuant to the Federal Arbitration Act, arguing that the plaintiffs had agreed to a broad arbitration provision contained within a “clickwrap agreement” during the loan application process. The plaintiffs opposed the motion, challenging the validity and enforceability of the arbitration provision.
The court determined that the arbitration provision was valid and enforceable. The court found that the plaintiffs had been adequately informed of the arbitration provision through the clickwrap agreement and binding. The court also noted that the arbitration provision included clear and unambiguous language that the plaintiffs waived their right to litigate claims in court. As a result, the court granted the defendant’s motion to compel arbitration individually.
Bank agrees to overdraft fee settlement for $1.5M
On July 25, a bank agreed to a class action settlement relating to overdraft fees in a case filed in May 2022. If the court approves, the settlement will provide $1.5 million to the class via a settlement fund. The lawsuit alleged that the bank improperly charged overdraft fees on debit card transactions that were authorized when sufficient funds were in the account but that resulted in a negative account balance when the transactions settled — a practice the bank called “Authorize Positive, Settle Negative” (APSN).
In addition to the $1.5 million award to the settlement class, the bank also agreed to cease its APSN practice for at least five years. The settlement class encompassed all holders of the bank’s consumer checking accounts, specifically on their charged overdraft fees from APSN transactions made on or before April 2020. It excluded the members of a settlement class from another case. The settlement will be subject to final approval by the U.S. SDNY.
Court grants $12 million final judgment but denies prejudgment interest in RICO class action
On June 18, the U.S. District Court for the Southern District of California entered an order granting plaintiffs’ motion for entry of final judgment against a large for-profit educational institution that has since gone bankrupt. According to the 2020 complaint, plaintiffs were left with debt for what they claimed to be a worthless education. After the school’s bankruptcy in 2016, plaintiffs alleged that they continue to be victimized by defendants’ student loan operation. Plaintiffs filed the motion following a jury trial where defendants were found liable under the Racketeer Influenced and Corrupt Organizations Act (RICO). The jury awarded plaintiffs $4 million in compensatory damages, which was trebled to $12 million under the RICO statute.
In addition to the judgment, plaintiffs applied for an additional $4 million in prejudgment interest. In denying the application for prejudgment interest, the court declined to award the discretionary interest based on allegations that defendants “repeatedly attempted to pick off the class representatives for the very purpose of eliminating this action, or at the very least, delaying it.” The court recognized that defendants’ tactics may have delayed the litigation but did not find them to be unreasonable or unfair to a degree that would warrant prejudgment interest, noting that the plaintiffs’ own post-trial motions contributed to the delay in judgment.
The court entered final judgment against the defendants in the amount of $12 million, with attorneys’ fees and costs to be determined later.
District Court approves $3.65 mil. settlement against student loan servicer
On June 24, the U.S. District Court for the Western District of Pennsylvania approved a class action settlement involving student loan borrowers brought against a student loan servicer. The class alleged that from December 2018 to October 2023, the defendant assessed improperly certain convenience fees to process Perkins loan payments from student borrowers by telephone, IVR, or over the internet. The settlement fund of $3.65 million represents 25 percent of the total processing fees collected from hundreds of thousands of borrowers over roughly five years. The parties agreed that, in the event any funds remain after the first distribution, a second distribution will be made to class members.
Bank granted motion to dismiss in credit card sign-up bonus class action
On April 15, the U.S. District Court for the Northern District of California entered an order granting a defendant bank’s motion to dismiss a plaintiff’s claims relating to alleged false advertising in connection with a credit card, with leave to amend. Plaintiff alleged that after responding to a social media advertisement for a credit card in December 2022, promising a $200 cash sign-up bonus for spending $500 within the first three billing cycles, he applied for and was approved for the card. However, the terms of the agreement he entered into with defendant did not mention the sign-up bonus, and he never received it. Consequently, plaintiff sued for "Breach of Contract Including Breach of the Covenant of Good Faith and Fair Dealing," asserting that defendant’s actions are part of a broader marketing strategy to entice customers to apply for defendant’s credit cards. Defendant filed a motion to dismiss the case based on two arguments: (i) plaintiff lacks the necessary Article III standing; and (ii) plaintiff failed to state a claim upon which relief can be granted.
The court sided with the defendant on both arguments determining that (i) the plaintiff failed to establish the “traceability” element of standing because it is not clear when the advertisement was seen or what it specifically promised; and (ii) the contract did not include a promise for a sign-up bonus, such that no breach of contract had occurred.
The court provided plaintiff with leave to amend within 45 days from entry of the order.
HUD sued for allegedly failing to refund mortgage insurance premiums for early-terminated FHA-insured mortgages
On March 12, a putative class action complaint was filed against the Department of Housing and Urban Development (HUD) for allegedly denying homeowners their Mortgage Insurance Premium (MIP) refunds upon the early termination of their FHA-insured mortgages. According to the complaint, HUD must refund unearned MIPs, but has refused to refund homeowners by creating “unnecessary bureaucratic hurdles.” The plaintiffs alleged that the OIG had confirmed “the validity of complaints regarding HUD’s handling of MIP refunds.”
Citing HUD regulations, the plaintiffs alleged that when an FHA mortgage is terminated early, within seven years of the purchase of the refinancing of the property, there is an overpayment of the MIP which should be refunded by HUD. According to the plaintiffs it is a “widespread practice” for HUD not to automatically refund MIPs, but instead require a burdensome, lengthy process which hindered the prompt refund of fees in multiple ways. The 2022 OIG report cited by plaintiffs allegedly found, among other things, that HUD did not have adequate controls in place to ensure that refunds were appropriately tracked, monitored, and issued. The plaintiffs alleged that Floridians are owed over $21.7 million in refunds.
The plaintiffs are seeking injunctive and declaratory relief and a return of all unfairly retained refunds “together with damages in the amount of the total earned interest and other investment monies accrued by Defendant with Plaintiff’s and Class Members’ monies.”
Plaintiffs seek preliminary approval of $9 million class action settlement involving unsolicited texts
On February 8, the U.S. District Court for the Western District of Washington received an unopposed motion for preliminary approval of a class action settlement against a broker-dealer alleging that the defendant violated the Washington Commercial Electronic Mail Act (CEMA) and the Washington Consumer Protection Act (CPA) by having consumers send “unsolicited advertising text messages” to other Washingtonians through a referral program. The proposed settlement would establish a $9 million settlement fund that would compensate an estimated one million affected class members, consisting of consumers who received a referral program text message during the relevant period, were Washington residents, and did not “clearly and affirmatively” consent to receive referral program text messages.