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District court preliminarily approves $650 million biometric privacy class action settlement
On August 19, the U.S. District Court for the Northern District of California granted preliminary approval of a $650 million biometric privacy settlement between a global social media company and a class of Illinois users. If granted final approval, the settlement would resolve consolidated class action claims that the social media company violated the Illinois Biometric Information Privacy Act (BIPA) by allegedly developing a face template that used facial-recognition technology without users’ consent. A lesser $550 million settlement deal filed in May (covered by InfoBytes here), was rejected by the court due to “concerns about an unduly steep discount on statutory damages under the BIPA, a conduct remedy that did not appear to require any meaningful changes by [the social media company], over-broad releases by the class, and the sufficiency of notice to class members.” The preliminarily approved settlement would also require the social medial company to provide nonmonetary injunctive relief by setting all default face recognition user settings to “off” and by deleting all existing and stored face templates for class members unless class members provide their express consent after receiving a separate disclosure on how the face template will be used.
District court certifies class in a lawsuit against an unlicensed debt collector
On August 17, the U.S. District Court for the District of Utah certified two classes related to a debt collector’s efforts to pursue judgments on defaulted debts without being appropriately registered with the state. The order certified two classes: one for class claims arising under the FDCPA, and another for class claims brought under the Utah Consumer Sales Practices Act (UCSPA). The court certified the UCSPA class for liability purposes only, as the statute does not allow a plaintiff to seek statutory damages on behalf of a class, leaving “issues related to what relief may be available for which class members to subsequent proceedings.” According to the order, the lead plaintiff filed a lawsuit against the defendant after it attempted to collect unpaid medical debt. The defendant obtained a judgment but was not registered as a debt collector in the state when it filed the action. The defendant argued that Utah’s registration requirement did not apply to it and filed a motion for summary judgment, but the court disagreed and allowed the plaintiff to seek certification for two classes of individuals who had debt collection lawsuits filed against them in Utah by the defendant while it was unlicensed. Among other things, the defendant argued that the plaintiff’s proposed class included individuals without an underlying consumer debt, which destroyed commonality under Rule 23. The court agreed and limited the proposed FDCPA class to individuals who were sued for a “debt” as defined by 15 U.S.C. § 1692a(5). However, the court stated that the need for individualized determinations concerning each class member’s debt did not upset Rule 23’s predominance requirement, and concluded that the issue does not predominate over the question of whether the failure to register as a debt collector was a violation of the FDCPA and UCSPA. The court also disagreed with the defendant’s res judicata argument to defeat the certification request, ruling that even though the defendant ultimately obtained a judgment against the lead plaintiff—which it also allegedly did for at least 645 other members of the class—that was not enough to prove a conflict existed between the lead plaintiff and the other unaffected members of the class.
Bank settles overdraft fee litigation for $7.5 million
On August 10, the U.S. District Court for the Southern District of Florida granted final approval of a $7.5 million settlement, resolving a decade-long multidistrict litigation concerning overdraft fees. The settlement covers allegations that a U.S.-based affiliate of an international bank charged improper assessment and collection of overdraft fees due to “high-to-low posting.” In 2012, the bank was purchased by a U.S. national bank and the national bank inherited the litigation as the successor in interest. The settlement involves over 148,000 class members, “who, from October 10, 2007 through and including March 1, 2012, incurred one or more Overdraft Fees as a result of [the bank]’s High-to-Low Posting.” The $7.5 million settlement includes $10,000 to the sole class representative and over $2.6 million to the class attorneys (representing 35% of the settlement fund).
9th Circuit affirms $142 million settlement in bank sales practices action
On July 20, the U.S. Court of Appeals for the Ninth Circuit affirmed (in a published and an unpublished opinion) a $142 million class action settlement between a nationwide class of consumers and a national bank, concluding the class was unified by a claim under federal law. The published opinion specifically affirmed the district court’s holding that the class satisfied the predominance requirement under Rule 23 of the Federal Rules of Civil Procedure. In the unpublished memorandum disposition, the 9th Circuit affirmed the district court’s certification of the settlement class, approval of the settlement, award of attorneys’ fees, and approval of notice.
As previously covered by InfoBytes, the settlement covers a 2015 class action lawsuit regarding retail sales practices that involved bank employees creating deposit and credit card accounts without obtaining consent to do so. In April 2017, the bank agreed to expand the original settlement class to include claims dating back to May 2002, resulting in a settlement amount of $142 million. The district court certified the class and approved the settlement. Objectors appealed, arguing that the class did not satisfy the predominance requirement, because the court did not do a choice-of-law analysis.
On appeal, the 9th Circuit upheld the district court’s rulings on the settlement, concluding that the district court did not abuse its discretion in holding the class met the federal predominance requirements. Specifically, the appellate court held that the FCRA claim unified the class, allowing the class to “show that the FCRA’s elements were proven by a common course of conduct.” Moreover, the appellate court concluded that the “existence of potential state-law claims did not outweigh the FCRA claim’s importance.” In a separate unpublished memorandum opinion, the appellate court affirmed, among other things, the award of attorney’s fees, which were “well below the 25% benchmark.”
District court approves MDL data breach settlement
On July 21, the U.S. District Court for the Northern District of California issued an order approving a $117.5 million class action settlement, including $23 million in attorneys’ fees, with a global internet company to resolve multidistrict litigation concerning the exposure of class members’ sensitive information stemming from multiple data breaches. The settlement approval follows a fairness hearing, as the court originally denied preliminary approval due to several identified deficiencies (covered by InfoBytes here), including that the settlement inadequately disclosed the sizes of the settlement fund and class, as well as the scope of non-monetary relief, and “appear[ed] likely to result in an improper reverter of attorneys’ fees.” Last July, the court preliminarily signed off on a revised settlement, conditionally certifying a class of U.S. and Israeli residents and small businesses with accounts between 2012 and 2016 that were affected by the breaches. These class members have been certified in the final approved settlement, which requires the company to provide class members with either two years of credit monitoring services or alternative compensation for members who already have credit monitoring. Among other things, the company will allocate at least $66 million each year to its information security budget until 2022, will increase the number of full-time security employees from current levels, and will “align its information security program with the National Institute of Standards and Technology Cybersecurity Framework” and “undertake annual third-party assessments to ensure compliance” with the framework.
3rd Circuit: Arbitration clause limiting borrowers’ statutory rights is unenforceable
On July 14, the U.S. Court of Appeals for the Third Circuit affirmed a district court’s denial of defendants’ motion to compel arbitration, holding that an arbitration clause contained within an online tribal lender’s payday loan agreement impermissibly strips borrowers of their right to assert statutory claims and is therefore unenforceable. Specifically, because this “limitation constitutes a prospective waiver of statutory rights,” the lender’s arbitration agreement “violates public policy and is therefore unenforceable.” The plaintiffs filed a putative class action contending that they obtained payday loans from the lender, which included annual interest rates between 496.55 percent to 714.88 percent—an alleged violation of the Racketeer Influenced and Corrupt Organizations Act (RICO) and various Pennsylvania consumer protection laws. The defendants moved to compel arbitration. The district court denied the defendants’ arbitration request, ruling that “the arbitration agreement was unenforceable because the arbitrator is permitted only to consider tribal law,” and, therefore, the arbitrator could not consider any of plaintiffs’ federal or state law claims. The 3rd Circuit agreed, rejecting, among other things, the defendants’ argument that the plaintiffs could bring RICO-like claims under tribal law and possibly receive “similar relief.” The appellate court noted: “The question is whether a party can bring and effectively pursue the federal claim—not whether some other law is a sufficient substitute.”
District court preliminarily approves $6.8 million TCPA settlement
On July 6, the U.S. District Court for the Eastern District of California granted preliminary approval to a nearly $6.8 million settlement between class members and a collection agency that allegedly violated the TCPA, FDCPA, and California’s Rosenthal Fair Debt Collection Practices Act by making calls using an autodialer or prerecorded voice in an attempt to collect purported debts. The lead plaintiff filed a proposed class action suit in 2016 against the collection agency claiming he received at least 25 calls to his cell phone even though he never consented to receiving such calls in the first place and had instructed the collection agency to stop calling him.
According to the court’s order, the settlement consists of two sub-classes: (i) one class of individuals from anywhere in the U.S. who subscribed to call management applications and received automated calls from the defendant without providing the proper consent; and (ii) another class of individuals living in California who received automated calls from the defendant regarding their purported debts. The terms of the settlement provides for a $1.8 million cash fund and requires the forgiveness of nearly $5 million in outstanding debts for class members with existing accounts owned by either the collection agency or one of its affiliates.
3rd Circuit: Credit card customers’ claims against retailer and national bank fail
On June 9, the U.S. Court of Appeals for the Third Circuit affirmed a district court’s order granting summary judgment in favor of a retailer and a national bank (collectively, “defendants”), holding that the proposed class failed to assert their claims for implied covenant of good faith and fair dealing and unjust enrichment. The class, comprised of customers who applied for private-label credit cards offered and serviced by the retailer, argued they were prompted to purchase a debt-cancellation product, which would “cancel the balance on the customer’s account up to $10,000 when a covered person experienced a qualifying involuntary unemployment, disability, hospitalization, or loss of life.” The class’s first claim—that the debt cancellation product provided “‘little or no value,” and that they did not voluntarily enroll in the product because the retailer allegedly unilaterally enrolled card holders in the product—was no longer viable after discovery showed that customers voluntarily enrolled. The class posed a second claim asserting breach of the implied covenant of good faith and fair dealing, arguing, among other things, that any legal authorization they gave was to the retailer and to the original issuing bank who sold the cards to the defendant bank. However, the district court rejected this second theory and granted summary judgement in favor of the defendants, ruling that the debt cancellation product was assigned to the defendant bank and stating the class failed to show that the retailer did not honor the terms of the debt cancellation product because they received exactly what was described in their contracts. Nor were the defendants unjustly enriched “because their collection of [] fees was ‘legally justified.’”
On appeal, the 3rd Circuit, among other things, reviewed and rejected a third theory presented by the class, which blamed the district court for fundamentally misinterpreting their claims and asserted that the retailer failed to notify customers that it had stopped enforcing certain terms of the debt cancellation product and implemented a new refund policy, holding that this theory was not grounds for reversal because it was not argued in court. Moreover, the appellate court agreed with the district court that the retailer stopped enforcing its rights under amendments made to the debt cancellation product, but did not change the formal terms.
District court denies arbitration in mobile app BIPA suit
On June 1, the U.S. District Court for the Northern District of Illinois denied a mobile application company’s motion to, among other things, compel arbitration in a class action alleging the company used face-geometry scan technology in violation of the Illinois Biometric Information Privacy Act (BIPA). According to the opinion, the plaintiff brought the proposed class action against the company alleging the company used “facial recognition technology to scan, collect, and store his and other users' face geometries from videos and photographs they uploaded to [the company’s photo editing app] without satisfying [BIPA]’s requirements.” The company moved to compel arbitration of the claims on an individual basis. The court concluded that the plaintiff received reasonable notice of the terms of service when he signed up for his account and subscription plan in the app. However, the court noted that while the company’s terms of service include a binding arbitration agreement, the agreement does not cover potential violations of BIPA. Specifically, the court highlighted that the arbitration clause contained exceptions for “allegations of theft, piracy, invasion of privacy or unauthorized use,” and concluded that the BIPA claim is not within the scope of the agreement to arbitrate.
District court allows class autodialer claims to proceed against mortgage lender
On May 18, the U.S. District Court for the Eastern District of Michigan denied a request to dismiss a putative class action concerning alleged violations of the TCPA, ruling that the plaintiff plausibly alleged the mortgage lender (defendant) sent unsolicited texts through the use of an automatic telephone dialing system (autodialer). The plaintiff claimed, among other things, that (i) the texts came by way of SMS short codes, which are “reserved for automatically made text messages”; (ii) the messages were generic and non-personal; (iii) the messages followed a similar calling pattern; and (iv) the plaintiff continued to receive them after opting out. The defendant countered that the claims should be dismissed because the plaintiff’s argument is “devoid of plausible allegations” under the TCPA that it used an autodialer that has the capacity to produce telephone numbers using a random or sequential number generator. However, the court determined that, in the absence of direction from the U.S. Court of Appeals for the Sixth Circuit “as to the kind of supporting factual allegations that must be included to sufficiently allege the [autodialer] element of a TCPA case,” the court will follow other district courts that have allowed TCPA suits to continue if the plaintiff sufficiently alleges facts to plausibly support a finding that an autodialer was used.