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State AGs oppose proposed settlement in FDCPA processing fees class action
On January 29, a coalition of state attorneys general from 32 states and the District of Columbia, led by the New York AG, filed an amicus brief in the U.S. District Court for the Southern District of Florida opposing a proposed settlement in a class-action FDCPA suit against a mortgage servicer that allegedly charged “processing fees” or “convenience fees” for mortgage payments made over the phone or online. The plaintiffs filed the lawsuit last March claiming the defendant did not charge processing fees if borrowers made payments by check or signed up for automatic monthly debits from their bank accounts. They further argued that the processing fees were “illegal and improper because neither the mortgages themselves nor applicable statutes authorize such fees.” The parties agreed to mediation in April, and a motion for preliminary approval of a settlement was filed in August.
In their brief, the AGs outlined concerns with the proposed settlement, including that (i) the relief provided to class members violates various state laws, and that the defendant seeks to ratify fees in an “unwritten, mass amendment” that violates state laws and regulations; (ii) the class members only receive an “inadequate” one-time payment, while the defendant may continue to charge excessive fees for the life of the loan; and (iii) low- and moderate-income borrowers are not treated equitably under the proposed settlement. Additionally, the AGs emphasized concerns “about the speed with which this case was settled,” arguing that entering into the proposed settlement quickly during the Covid-19 pandemic has deprived the court and the AGs “of the ability to determine the adequacy, fairness and reasonableness of the settlement.”
Court addresses alternative theories of liability in BIPA class action
On January 28, the U.S. District Court for the Northern District of Illinois denied a motion to reconsider and a motion to certify questions for appeal and stay proceedings pending appeal in a matter concerning class claims that an auto leasing company and its parent company (collectively, “defendants”) violated the Illinois Biometric Information Privacy Act (BIPA) by unlawfully collecting biometric fingerprint data without first receiving informed consent. The court previously denied the defendants’ motion to dismiss after concluding the plaintiff stated a BIPA claim against both defendants. However, the auto leasing company argued, among other things, that the parent company should not be held liable because it was never the plaintiff’s employer, did not control her work environment, and had nothing to do with the fingerprint timekeeping system. The court disagreed, finding that under BIPA, the plaintiff’s allegations of the parent company were not “legal conclusions,” and “control over employee timekeeping and privacy [] describes a relevant factual aspect of her personal experience working for defendants.” According to the court, “[t]his factual allegation raises the reasonable inference that [the parent company] administered the alleged fingerprint-scanning system, and in turn, plausibly suggests that [the parent company] collected, retained, and disseminated her fingerprints.” The parent company will have the opportunity to address alternative theories of liability while seeking summary judgment against the plaintiff or at trial, the court wrote.
Courts say TCPA not invalidated by Supreme Court decision
On January 31, the U.S. District Court of the Central District of California denied dismissal of a putative class action alleging that a consumer lender violated the TCPA, concluding that the U.S. Supreme Court’s decision in Barr v. American Association of Political Consultants Inc. (AAPC) (covered by InfoBytes here) does not bar the claims. According to the order, a consumer filed the putative class action alleging that the lender violated the TCPA by placing telemarketing calls to residential numbers listed on the National Do Not Call Registry. The lender moved to dismiss the action, arguing that the Court’s decision in AAPC (holding that the government-debt exception in Section 227(b)(1)(A)(iii) of the TCPA is an unconstitutional content-based speech restriction, and severing the provision from the statute), invalidated the entire TCPA from the time the offending exception was added in 2015 to July 2020 when the Court severed the provision from the statute. The district court disagreed, concluding that the Court’s decision in AAPC was limited to the specific provision for robocalls to cell phones in Section 227(b) and did not extend to Section 227(c)’s do not call provisions. Additionally, the court concluded that the “Court in AAPC did not conclude that the entire TCPA was unconstitutional.” Thus, Section 227(c) “remained ‘fully operative as law’” from 2015 through July 2020.
Earlier on January 28, the U.S. District Court for the Southern District of California denied dismissal of a TCPA action for lack of subject matter jurisdiction, concluding that the Court’s decision in Barr, did not invalidate the TCPA in its entirety from 2015 until July 2020. According to the order, consumers filed a consolidated class action against a cruise line, alleging violations of, among other things, the TCPA for marketing calls made to class members’ cell phones using an automatic telephone dialing system between November 2016 and December 2017. The cruise line moved to dismiss the action, arguing that the Court’s decision in AAPC (holding that the government-debt exception in Section 227(b)(1)(A)(iii) of the TCPA is unconstitutional “because it favored debt-collection speech over political or other speech in violation of the First Amendment,” and severing the provision from the statute), invalidated the entire TCPA from when the offending exception was enacted in 2015, until the Court severed the amendment in July 2020. Disagreeing with other district courts (covered by InfoBytes here and here), the district court rejected the cruise line’s argument, concluding that the Court did not intend to have TCPA actions “cavalierly dismissed by a district court.” The district court relied on a statement made by Justice Kavanaugh in the Court’s plurality opinion, stating “our decision today does not negate the liability of parties who made robocalls covered by the robocall restriction.” The district court rejected the cruise line’s argument that Kavanaugh’s statement is dicta, because, among the fragmented decisions, seven justices “agree that the 2015 amendment should be severed and the liability of parties making robocalls who were not collecting a government debt is not negated.” Thus, because the cruise line was not attempting to collect a government debt, the district court denied the motion to dismiss.
Court approves grocery store data breach settlement
On January 25, the U.S. District Court for the Central District of Illinois preliminarily approved a class action settlement, resolving allegations that a grocery chain was responsible for a data breach that exposed the credit card information of consumers. The preliminary settlement would allow class members to receive reimbursement of up to $225 for out-of-pocket expenses related to the breach, including (i) unreimbursed bank, overdraft, and late fees; (ii) long distance and cell phone charges; and (iii) costs related to credit monitoring and identity theft protection. Additionally, class members may be awarded up to $5,000 for “extraordinary unreimbursed monetary losses” resulting from the compromise of personal information. Moreover, the grocery chain agreed to “establish and maintain security enhancements that are estimated to cost more than $20 million.” Class members who do not agree to the settlement may keep their right to independently sue if they opt out by May 24.
Court orders arbitration on non-signatory claims
On January 21, the U.S. District Court for the Eastern District of Pennsylvania granted a national cable provider’s motion to compel arbitration in a putative class action alleging the company violated the FCRA by checking consumer credit reports without a permissible purpose. According to the opinion, after the consumer filed the putative class action, the company moved to arbitrate the claims pursuant to a provision contained “in various written materials that were originally provided to [the consumer]’s household in 2006” upon the opening of a company account. In response, the consumer asserts that the arbitration provision is not binding on him, because he was not the signatory on the document that contains the provision. The court disagreed with the consumer, concluding that, even though he was a non-signatory, he “actively sought and obtained benefits provided pursuant to the Subscriber Agreement, such that he is equitably estopped from avoiding the Arbitration Provision contained therein.” Specifically, the court acknowledged the existence of the arbitration agreement was not in dispute, but whether the consumer was bound by it. The court found that, not only did the consumer obtain benefits from the household account, he also “exceris[ed] control over the account,” including placing servicing calls regarding the account. Moreover, because the claims filed by the consumer fall within the scope of the arbitration agreement, as they “relate[] to [company] and/or [consumer]’s relationship with [company],” and the court granted the company’s motion to compel arbitration.
District court approves $13 million settlement in ATM fee class action
On January 21, the U.S. District Court for the Southern District of California granted final approval of a $13 million class action out-of-network (OON) ATM fee settlement. As previously covered by InfoBytes, the plaintiffs filed the action asserting that the bank charges its customers two OON fees when an account holder conducts a balance inquiry and then obtains a cash withdrawal at an OON ATM. The bank moved for summary judgment on the breach of contract claim, which the district court denied, concluding that there were ambiguities regarding the fee terms provided in the contract and on the on-screen ATM warnings. After participating in a private mediation, the plaintiffs filed an unopposed motion for preliminary approval of the settlement. The $13 million settlement covers a total of over 1.6 million class members—defined as all bank account holders in the U.S. who incurred at least one OON balance inquiry fee during varying time periods based on location— and provides for a $10,000 incentive award to each of the named plaintiffs and $3.9 million for plaintiffs’ counsel. In exchange for their share of the settlement funds, the class members will agree to release the bank from all claims relating to the action.
National bank settles merchant processing fee class action for $40 million
On January 12, a national bank’s merchant services division agreed to pay up to $40 million to settle a class action alleging that the bank overcharged for payment processing services. According to the November 2017 amended complaint filed in the U.S. District Court for the Eastern District of New York, six small businesses alleged that the bank fraudulently induced merchant customers to enter into contracts by failing to properly disclose rates and charges that applied to their accounts. Specifically, the plaintiffs alleged that the bank induced merchants to retain its card payment processing services by promising low card processing fees at the time of enrollment but then charged higher rates and surcharges for the “vast majority of transactions.” Plaintiffs also alleged that the bank used an “upcharge” method, in which customers contract for “fixed” processing fees, but that the vast majority of transactions are ultimately deemed “non-qualified” and charged at higher rates than disclosed. Additionally, the bank allegedly told potential merchant customers that they could “cancel at any time without penalty,” when merchant customers that canceled prior to the expiration of the contract term were charged an “early termination fee [] of several hundred dollars.”
Under the proposed settlement, the bank will pay up to $40 million—and no less than $27 million—to class members and cover attorneys’ fees and expenses, service awards, and settlement administration costs. Additionally, the bank, among other things, has agreed to (i) continue to allow customers to switch, penalty-free to a newer standard pricing plan from the fixed pricing plan; and (ii) modify contract terms to allow customers to leave without termination fees within 45 days of being assessed new or increased fees.
Court grants preliminary approval of CCPA class action settlement
On December 29, the U.S. District Court for the Northern District of California granted preliminary approval of a proposed settlement in a class action alleging a children’s clothing company and cloud technology service provider (collectively, “defendants”) violated, among other things, the California Consumer Privacy Act (CCPA) after suffering a data breach and potentially exposing customers’ personal information (PII) used to purchase products from the company’s website. After the company issued a notice of the security incident in January 2020, the plaintiffs filed the class action alleging the company failed to (i) “adequately protect its users’ PII”; (ii) “warn users of its inadequate information security practices”; and (iii) “effectively monitor [the company]’s website and ecommerce platform for security vulnerabilities and incidents.”
After mediation, the plaintiffs filed an unopposed motion for preliminary approval of class action settlement, which provides for a $400,000 settlement fund to cover approximately 200,000 class members who made purchases through the company’s website from September 16, 2019 to November 11, 2019. Class members have the option of claiming a cash payment of up to $500 for a Basic Award or of up to $5,000 for a Reimbursement Award, with amounts increasing or decreasing pro rata based on the number of claimants. Additionally, the company agreed to certain business practice changes, including conducting a risk assessment of its data assets and environment and enabling multi-factor authentication for all cloud services accounts. When granting preliminary approval, the court concluded that the agreement does “not improperly grant preferential treatment to any individual or segment of the Settlement Class and fall[s] within the range of possible approval as fair, reasonable, and adequate.”
9th Circuit affirms dismissal of data breach class action against online payment firm
On December 17, the U.S. Court of Appeals for the Ninth Circuit affirmed dismissal of a class action suit brought against an online payments firm and associated entities and individuals (collectively, “defendants”) for allegedly misleading investors (plaintiffs) about a 2017 data breach. As previously covered by InfoBytes, the district court concluded that, while the plaintiffs plausibly alleged the defendants’ November 2017 announcement about the data breach was misleading because it only disclosed a security vulnerability and did not disclose a breach that “potentially compromised” 1.6 million customers until a month later in December, plaintiffs failed to show that the defendants knew the breach had affected 1.6 million customers when they made the initial statement. Moreover, the court concluded the plaintiffs failed to allege that plaintiffs’ cybersecurity expert was familiar with, or had knowledge of, the defendants’ specific security setup or that he actually talked to the defendants’ employees about the breach.
On appeal, the 9th Circuit agreed with the district court, noting that the complaint lacked any allegation that the defendants had a motive to mislead investors in November, but not in December, such as the selling of stock during the relevant period. Thus, the appellate court could not conclude that the plaintiffs showed that the November announcement “was intentionally misleading or so obviously misleading that he must have been aware of its potential to mislead.” Therefore, the appellate court affirmed dismissal for failure to state a claim.
Another district court dismisses PPP agent fee class action
On November 16, the U.S. District Court for the Central District of California issued an order dismissing a putative class action against several large banks over whether agents providing consulting, legal, accounting, and tax preparation services are entitled to “agent fees” from lenders for helping businesses secure loans under the Paycheck Protection Program (PPP). The agents argued that the banks received lender fees from the government and funded PPP loans for borrowers but failed to and refused to pay any agent fees. The court found, however, that the agents failed to allege facts sufficient to establish standing or to “inform any Defendant of its particular role in the alleged general harm,” and instead relied “merely on generalized, conclusory allegations.” While the court gave the agents 21 days to amend their complaint, it noted that “[b]ecause the CARES Act does not provide a private cause of action to recover agent fees absent an agreement between agent and lender, it appears unlikely that Plaintiffs can overcome the [identified] deficiencies.” The court’s decision follows decisions issued by other federal courts, which have also dismissed similar agent fee class actions (see InfoBytes here and here).