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9th Circuit: Plaintiffs’ face-scanning claims can proceed
On August 8, the U.S. Court of Appeals for the 9th Circuit affirmed a district court order certifying a class action suit that alleged a social media company’s face-scanning practices violated the Illinois Biometric Information Privacy Act (BIPA). The court found that the plaintiffs alleged a sufficiently concrete injury necessary to establish Article III standing as defined in the U.S. Supreme court’s decision in Spokeo, Inc. v. Robins. The plaintiffs contended that the defendant’s use of the facial-recognition technology did not comply with Illinois law designed to regulate “the collection, use, safeguarding and storage of biometrics”—which, under BIPA, includes the scanning of face geometry. The district court denied the defendant’s motion to dismiss for lack of standing and certified the class. The defendant appealed, arguing, among other things, that even if the plaintiffs have standing to sue, (i) BIPA is not intended to be applied extraterritorially; (ii) the collection of biometric data occurred on servers located outside of Illinois; and (iii) it is unclear that the alleged privacy violations “occurred ‘primarily and substantially within’” within the state. Additionally, the defendant argued that the district court abused its discretion by certifying the class because the state’s “extraterritoriality doctrine precludes the district court from finding predominance,” and that a class action was not superior to individual actions due to the potential for a large statutory damages award.
On appeal, the 9th Circuit held that the plaintiffs’ claims met the standing requirement of Spokeo because the defendant’s alleged development of a face template that uses facial-recognition technology without users’ consent constituted an invasion of an individual’s private affairs and concrete interests. “Because we conclude that BIPA protects the plaintiffs’ concrete privacy interests and violations of the procedures in BIPA actually harm or pose a material risk of harm to those privacy interests, the plaintiffs have alleged a concrete and particularized harm, sufficient to confer Article III standing,” the appellate court stated. The 9th Circuit also dismissed the defendant’s extraterritoriality argument, stating that predominance is not defeated because the threshold questions of exactly which consumers BIPA applies to can be decided on a classwide basis.
District Court allows case exploring whether cryptocurrency acquisitions are “cash-like” to proceed
On August 1, the U.S. District Court for the Southern District of New York allowed breach of contract and clear and conspicuous disclosure claims brought by a proposed class of consumers against a national bank to proceed, finding that ambiguity exists over whether credit card cryptocurrency purchases are “cash-like transactions.” The plaintiffs claimed that the bank breached their cardholder agreements when it changed the classification of cryptocurrency acquisitions from “purchases” to “cash advances” between January 23 and February 2, 2018. Plaintiffs contended that this change subjected cardholders to higher interest rates and transaction fees in violation of their cardholder agreements. Moreover, the plaintiffs claimed that the bank’s failure to clearly and conspicuously disclose the different types of transactions and varying rates, as well as its failure to provide advance notice of significant changes in its account terms and accurate disclosures in periodic account statements, violated TILA and Regulation Z.
The bank countered that no breach of contract occurred because cryptocurrency acquisitions are “cash-like transactions” that, under the cardholder agreement, are properly classified as cash advances. Specifically, the bank stated that because cryptocurrency can be a “medium of exchange, a measure of value, or a means of payment” under the definition of “cash,” it is therefore “cash-like.”
The court concluded that the plaintiffs offered a reasonable argument that purchases of cryptocurrency did not constitute cash advances. Plaintiffs argued that the contractual term “cash-like”—which was used in the cardholder agreement to describe a cash advance—referred only to financial instruments formally tied to physical, government-issued “fiat” currency, such as checks, money orders, and wire transfers. “Because, as plaintiffs plausibly allege, cryptocurrency does not imbue its holder with a legal right to any government-issued currency, acquisitions of cryptocurrency could not be classified as a cash-like transaction,” the court stated. As such, “[b]ecause plaintiffs have identified a reasonable interpretation of ‘cash-like transactions’ that would exclude purchases of cryptocurrency, the breach of contract claim survives the motion to dismiss.” The court also allowed plaintiffs’ “clear and conspicuous” disclosure claim under TILA to survive because the contract was not clear that purchases of cryptocurrency would result in cash advance fees. However, the court dismissed the plaintiffs’ remaining TILA claims, finding that (i) the bank did not change the contract terms themselves, but rather their application; and (ii) the periodic account statements did not inaccurately convey what the plaintiffs owed to the bank for those particular periods of time.
District Court strikes class certification from robocall suit
On July 18, the U.S. District Court for the Northern District of Illinois granted a rental car company’s (defendant) motion to strike class allegations in a TCPA suit over alleged robocalls. The plaintiff, whose telephone number was listed on a rental contract between his mother and the defendant in addition to the mother’s telephone number, claimed he received multiple prerecorded messages on his cellphone from the defendant after his mother failed to return the car when it was due, even though he had allegedly opted out of the communications. The plaintiff commenced the suit, ultimately seeking certification of an amended putative class of all noncustomers who received automated calls from the defendant “where such [a] call was placed after a request to stop calling that phone number.” In August 2018, the court denied summary judgment to the defendant, who subsequently moved to strike class allegations. The court granted the defendant’s motion, stating there were too many contested facts that raised unique defenses particular to the plaintiff’s case, including (i) the type of consent to receive calls that the plaintiff’s mother gave under her contract; (ii) whether the calls to the plaintiff’s phone were robocalls; and (iii) whether and how the plaintiff revoked the consent given by his mother.
8th Circuit affirms reduction in TCPA statutory damages from $1.6 billion to $32 million
On July 16, the U.S. Court of Appeals for the 8th Circuit affirmed a district court’s decision to reduce a $1.6 billion award in statutory damages for TCPA violations to $32.4 million after the court determined the original award violated the Fifth Amendment’s Due Process Clause. The named plaintiffs in the class action alleged that parties involved in the financing and marketing campaign of a film with religious and political themes violated the TCPA through the use of a telephone campaign in which approximately 3.2 million prerecorded robocalls were made in the course of a week. The plaintiffs—who received two of these messages on their answering machine—filed an appeal after the district court concluded that the original award was “‘obviously unreasonable and wholly disproportionate to the offense’” and reduced the statutory damages awarded by a jury from $500 per call to $10 per call.
On appeal, the 8th Circuit addressed several issues, including (i) whether the plaintiffs alleged a concrete injury under the TCPA; (ii) whether the district court abused its discretion concerning instructions on direct liability against one of the defendants; and (iii) whether the court erred in finding the amount of statutory damages to be unconstitutional. The appellate court first reviewed whether the plaintiffs had alleged a sufficiently concrete injury under the TCPA. According to the opinion, “[t]he harm to be remedied by the TCPA was ‘the unwanted intrusion and nuisance of unsolicited telemarketing phone calls and fax advertisements. . . .The [plaintiffs’] harm . . . was the receipt of two telemarketing messages without prior consent. These harms bear a close relationship to the types of harms traditionally remedied by tort law, particularly the law of nuisance.” However, the appellate court stated that the district court was correct to reject the plaintiffs’ direct liability instructions against the defendant who helped finance the film, writing that the plaintiffs “improperly blurred the line between direct and agency liability” and that “to be held directly liable, the defendant must be the one who ‘initiates’ the call,” which the financing defendant did not do. Finally, the appellate court agreed with the district court that the $1.6 billion award violated the Due Process Clause, and highlighted evidence that the advertiser “plausibly believed it was not violating the TCPA” and “had prior consent to call the recipients about religious liberty,” which was a predominant theme of the film being promoted. Moreover, the court noted,”[t]he call campaign was conducted for only about a week,” and recipients could only hear the message about the film if they voluntarily opted in during the call. The court further reasoned that “the harm to the recipients was not severe—only about 7% of the calls made it to the third question, the one about the film. Under these facts, $1.6 billion is ‘so severe and oppressive as to be wholly disproportioned to the offense and obviously unreasonable.’”
4th Circuit holds lenders sufficiently proved tribal immunity
On July 3, the U.S. Court of Appeals for the 4th Circuit reversed the district court’s denial of two tribal lenders’ motion to dismiss a putative class action lawsuit brought by Virginia residents, concluding the lenders properly claimed tribal sovereign immunity. The complaint alleged that the tribal lenders violated Virginia’s usury laws by charging Virginia residents interest rates 50-times-higher than those permitted under Virginia law. The tribal lenders moved to dismiss the action in district court on the grounds that they are entitled to sovereign immunity as an arm of the tribe. The district court denied the motion, concluding the tribal lenders (i) bore the burden of proof of immunity; and (ii) failed to prove they were an “arm-of-the-tribe.”
On appeal, the 4th Circuit agreed with the district court that the burden of proof in the arm-of-the-tribe analysis should be placed on the defendant, stating “[u]nlike the tribe itself, an entity should not be given a presumption of immunity until it has demonstrated that it is in fact an extension of the tribe.” However, the appellate court rejected the district court’s conclusion that the tribal lenders failed to meet their burden, noting that while the tribal lenders were funded and controlled by a non-tribal company, ten percent of the tribe’s general fund comes from one of the lenders, and a judgment against either lender “could in fact significantly impact the tribal treasury.” Ultimately, the appellate court concluded that the lenders had “promoted ‘the Tribe’s self-determination through revenue generation and the funding of diversified economic development” and a finding of no immunity, “would weaken the Tribe’s ability to govern itself according to its own laws, become self-sufficient, and develop economic opportunities for its members.”
3rd Circuit: Each premium payment could violate RESPA’s prohibition on kickbacks
On June 19, the U.S. Court of Appeals for the 3rd Circuit affirmed the dismissal of a RESPA class action against a national bank, concluding the suit was not timely filed. According to the opinion, two consumers took out mortgages with the bank in 2005 and 2006. In 2011, the consumers were part of the putative class in a separate class action, alleging the bank violated RESPA by referring homeowners to mortgage insurers that then obtained reinsurance from a subsidiary of the bank, which the consumers claimed amounted to a kickback. After the class action was dismissed as untimely in 2013 and while it was pending appeal, the consumers filed a new class action as the named plaintiffs, which alleged the same violation of RESPA. The consumers argued that, while RESPA has a one-year statute of limitations, (i) RESPA makes each kickback a separately accruing wrong and that the insurers paid a kickback for each insurance premium payment, therefore, the suit is timely up to one year after the last premium payment and kickback; and (ii) the filing of the first class action tolled the limitation period for their claims and because the class action continued until November 2013, tolling extended their limitations period until then.
The appeals court upheld the district court’s dismissal of the action, agreeing with the consumers’ separate-accrual theory, but noting that the consumers paid no premiums in the year before they filed their complaint, so the limitations period had expired before the consumers filed the new action. Specifically, the appellate court rejected the bank’s argument that RESPA’s statute of limitations runs only from the mortgage closing, not from each later premium payment, holding that under RESPA the limitations period accrues separately for each kickback, stating “[s]o a party violates the Act anew each time it takes the discrete act of giving or receiving a kickback under an agreement to make referrals.”
As for whether the 2011 class action tolled the consumers’ claims, the appellate court cited the Supreme Court’s 2018 opinion in China Agritech, Inc. v. Resh, noting that the Court in that case held that such tolling is only available for individual claims, not class claims. The appellate court rejected the consumers’ arguments that China Agritech does not apply to new class claims filed before the first action has officially ended, stating, “[t]olling new class actions filed while the first one was pending would encourage more plaintiffs to seek second bites at the apple.” Because the consumers’ action was not timely filed, the appellate court affirmed the district court’s dismissal.
7th Circuit: Detailed creditor information does not violate FDCPA
On June 6, the U.S. Court of Appeals for the 7th Circuit, in a consolidated appeal, affirmed summary judgment in favor of a debt collector in actions alleging that the debt collector violated the FDCPA by naming the “original creditor” and the “client” in its collection letters, but declining to identify the current owner of the debt. According to the opinion, two consumers received collection letters naming an online payment processor as the “client” and a bank as the “original creditor,” and stating that, “upon the debtor’s request, [the collector] will provide ‘the name and address of the original creditor, if different from the current creditor.’” The consumers filed class actions against the debt collector, alleging that it violated, among other things, Section 1692g(a)(2) of the FDCPA by failing to disclose the current creditor or owner of the debt in the initial collection letters. In both cases, the respective district court granted summary judgment for the debt collector, concluding that the letter not only includes the original creditor—the bank—but also provides additional information for the unsophisticated consumer by including the online payment processor so that the consumer could better recognize the debt.
On appeal, the 7th Circuit agreed with the lower courts and concluded that the letters did not violate the FDCPA. The appellate court noted that “the letter identifies a single ‘creditor,’ as well as the commercial name to which the debtors had been exposed, allowing the debtors to easily recognize the nature of the debt.” The appellate court rejected the consumers’ argument that calling the bank the “original creditor” instead of the “current creditor” creates confusion, because the letter contained language that notified consumers that the original and current creditors may be one and the same. Because the letter “provides a whole picture of the debt for the consumer,” the court concluded it is not abusive or unfair and does not violate Section 1692g(a)(2) of the FDCPA.
9th Circuit: Class decertification appropriate when representative lacks standing
On June 5, the U.S. Court of Appeals for the 9th Circuit affirmed a lower court’s decision to decertify a class of callers claiming their cellphone calls were unlawfully recorded, holding that the class representative lacked standing as to its individual claim. According to the opinion, customers of a concrete supplier alleged that calls placed to a phone system that the company began using in 2009 failed to inform callers that their cellphone calls were being recorded. In 2013, the company changed the recording to state that the calls maybe be “monitored or recorded.” The class representative sought to certify a class of all persons whose calls were recorded between the time that the company started using the call recording system in 2009 to when it updated the recording. The district court initially denied certification under the Federal Rule of Civil Procedure Rule 23’s predominance requirement, and later—after certifying the class based on evidence presented concerning the timing of certain recorded calls—decertified the class for failing to satisfy the “commonality” and “predominance” requirements once the concrete supplier identified nine customers who claimed they had actual knowledge of the recording practice during the class period. In addition, the court concluded that the class representative lacked standing to seek damages on its individual claim or injunctive relief because it lacked standing under the 2016 Supreme Court opinion Spokeo, Inc. v. Robins, which required that it show a concrete or particularized injury as a result of the concrete supplier's alleged violation.
On appeal, the 9th Circuit rejected the class’s argument that it “has standing to appeal the decertification order notwithstanding the adverse judgment against it on the merits” due to the following two exceptions to the mootness doctrine that may permit a class representative to appeal decertification even if its individual claims have been mooted: (i) the class representative “retains a ‘personal stake’ in class certification”; or (ii) “the claim on the merits is ‘capable of repetition, yet evading review,’” even though the class representative has lost “his personal stake in the outcome of the litigation.” The appellate court concluded that “neither of these mootness principles can remedy or excuse a lack of standing as to the representative's individual claims.”
9th Circuit upholds rejection of consumer’s class action against auto finance company
On May 30, the U.S. Court of Appeals for the 9th Circuit affirmed summary judgment in favor of an auto finance corporation and various dealerships (collectively, “defendants”) in a putative class action alleging the defendants failed to provide add-ons the plaintiff purchased with the vehicle. The case, which was originally brought in Washington state superior court, was removed to federal court over the consumer’s objection, where the consumer amended the complaint to include a federal TILA claim.
According to the opinion, plaintiff alleged that his purchased vehicle did not come with three add-ons listed in the “Dealer Addendum,” which was a sticker affixed to the car. At the time of purchase, the customer was not aware of what the add-ons were, nor were they explained to him; the add-ons were only listed in the addendum. Plaintiff argued that if he had known what the add-ons were, he would have declined them and paid a lower price for the vehicle. The district court rejected plaintiff’s arguments and granted summary judgment for the defendants on all claims.
On appeal, the 9th Circuit upheld the entirety of the district court’s ruling, concluding the consumer offered no evidence that the add-ons identified in the Dealer Addendum were made part of the vehicle purchase transaction. Moreover, the appellate court upheld the district court’s decision not to remand the case back to state court, determining that while the district court did not have subject-matter jurisdiction at the time of removal, it had subject-matter jurisdiction at the time it rendered its final decision, due to the consumer’s voluntary addition of the TILA claim to the complaint. The appellate court also found that the district court did not abuse its discretion in denying the consumer’s request for additional discovery based on plaintiffs failure to “identif[y] the specific facts that further discovery would have revealed or explained[ed].”
Class action alleges national bank’s grace period practices breach terms of cardholder agreement
On June 3, a consumer filed a class action complaint against a national bank alleging that the bank charges interest on credit card accounts even when consumers’ balances are paid in full by the billing cycle due date, in breach of the bank’s cardholder agreement. The complaint alleges that the cardholder agreement and monthly billing statements disclose to consumers that interest will not be charged on new purchases if those new purchases are paid off by the billing cycle’s due date, but that in practice the grace period is eliminated for new purchases “[i]f a consumer leaves even $1 on her account balance after a billing period due date.” The complaint alleges that the bank’s practice of only providing a grace period on new purchases for consumers “who have paid off their balances in full for two prior months” directly contradicts the cardholder agreement and consumer disclosures. In addition to breach of contract, the consumer alleges a violation of Delaware’s Consumer Fraud Act and breach of the covenant of good faith and fair dealing. The consumer is seeking certification of a class of similarly situated consumers; damages and restitution; and injunctive relief.