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  • District Court: Approval of data breach settlement denied due to several deficiencies

    Courts

    On January 28, the U.S. District Court for the Northern District of California denied preliminary approval of a proposed class action settlement after identifying several deficiencies with the deal. The proposed settlement was intended to resolve allegations concerning security failures by a global internet company, which led to three data breaches between 2013 and 2016 that exposed consumers’ personal information (previously covered by InfoBytes here). The proposed settlement would have required the internet company to (i) establish a $50 million settlement fund; (ii) pay additional attorneys’ fees of up to $35 million; (iii) pay costs and expenses of up to $2.5 million, as well as service awards of up to $7,500 for each class representative; (iv) provide customers with two years of credit monitoring and identity theft protection services; and (v) improve its data security. However, the court stated that the proposed settlement agreement, among other things, inadequately disclosed the sizes of the settlement fund and class, as well as the scope of non-monetary relief, and “appears likely to result in an improper reverter of attorneys’ fees.” Moreover, the court held that the proposed agreement provided insufficient detail about how much the settlement would cost the defendant in total, and did not disclose the costs of credit monitoring or how much the defendant would budget for data security, thus preventing class members from assessing the reasonableness of the settlement or the attorneys’ fee request—which the court indicated seem “unreasonably high.” The court also noted that “[t]he parties’ lack of disclosure also inhibits the court's ability to assess the reasonableness of the settlement.”

    Courts Class Action Settlement Data Breach

  • District Court approves $30 million settlement for post-payment interest charges on FHA mortgages

    Courts

    On January 25, the U.S. District Court for the Northern District of California granted final approval of a $30 million settlement resolving allegations that a national bank improperly collected post-payment interest on FHA-insured mortgages but did not use the FHA-approved form to provide the appropriate disclosures to consumers before doing so. The settlement covers a nationwide class of borrowers who, between June 1996 and January 2015, obtained an FHA-insured mortgage loan. Participating class members are expected to receive between $25 and $33 each. The court also approved a $7.5 million award for class counsel attorneys’ fees, of which $7,500 and $5,000 will be awarded to the named plaintiffs.

    Courts Class Action Settlement FHA Mortgages

  • District Court allows TCPA action to proceed, citing 9th Circuit autodialer definition as binding law

    Courts

    On January 17, the U.S. District Court for the District of Arizona denied a cable company’s motion to stay a TCPA action, disagreeing with the company’s arguments that the court should wait until the FCC releases new guidance on what constitutes an automatic telephone dialing system (autodialer) before reviewing the case. A consumer filed a proposed class action against the company, arguing that the company violated the TCPA by autodialing wrong or reassigned telephone numbers without express consent. The company moved to stay the case, citing the FCC’s May 2018 notice (covered by InfoBytes here), which sought comments on the interpretation of the TCPA following the D.C. Circuit’s decision in ACA International v. FCC (setting aside the FCC’s 2015 interpretation of an autodialer as “unreasonably expansive”). The company argued that the FCC would “soon rule on what constitutes an [autodialer], a ‘called party,’ in terms of reassigned number liability, and a possible good faith defense pursuant to the TCPA,” all of which would affect the company’s liability in the proposed class action. The court rejected these arguments, citing as binding law Marks v. Crunch San Diego, LLC, a September 2018 decision from the U.S. Court of Appeals for the 9th Circuit that broadly defined what constitutes an autodialer under the statute (covered by InfoBytes here), and therefore, determining there was nothing to inhibit the court from proceeding with the case. As for the FCC’s possible future guidance on the subject, the court concluded, “there seems little chance that any guidance from the FCC, at some unknown, speculative, future date, would affect this case.”

    Courts TCPA ACA International Autodialer Ninth Circuit Appellate FCC Class Action

  • District Court dismisses TCPA action against ride-sharing company, allows plaintiff to correct deficiencies

    Courts

    On January 16, the U.S. District Court for the Southern District of California granted in part and denied in part a ride-sharing company’s motion to dismiss a proposed TCPA class action, holding that the plaintiff sufficiently alleged the company is vicariously liable for the sent text messages but that the plaintiff failed to sufficiently allege the use of an “automatic telephone dialing system” (autodialer). According to the opinion, the plaintiff received two unsolicited text messages from a commercial messaging system instructing him to download the ride-sharing company’s app and providing a link to download the app. The plaintiff filed suit arguing the commercial text system was acting as an agent of the company for the company’s financial benefit and that the texts were sent using an autodialer in violation of the TCPA. The company moved to dismiss the action. With regard to the use of an autodialer, the court agreed with the company, determining that the plaintiff “merely parrots [the] statutory definition of an [autodialer]” and fails to assert facts that could support a reasonable inference that the company used an autodialer to send the texts. As for vicarious liability, the court concluded that the plaintiff sufficiently alleged the company’s actual authority over the commercial messaging system by asserting the company “instructed its agent or vendor as to the content of the text messages and timing of the sending of the text messages.” The court dismissed the plaintiff’s amended complaint but allowed 30 days for the plaintiff to amend the deficiencies.

    Courts TCPA Class Action Autodialer

  • District Court certifies class action against lead generator’s payday lending practices

    Courts

    On January 11, the U.S. District Court for the District of Minnesota granted a motion for class certification in a case challenging a company’s payday lending practices under several Minnesota consumer protection statutes and common law. The plaintiffs filed the proposed class action alleging, among other things, that the company, which generates leads for payday lenders, failed to disclose that it was not licensed in the state, and that the loans may not be legal in Minnesota. The Minnesota Attorney General had notified the company in 2010 and 2012 that it was subject to Minnesota law restricting payday loans and that it was “aiding and abetting lenders that violate Minnesota law.” The court found that the plaintiffs identified “questions of law or fact common to the class that are capable of class-wide resolution,” which “predominate over any questions affecting only individual members.” The court noted that a class action would fairly promote the interests of the class and ensure judicial economy, and that even though the plaintiffs’ proposed method for measuring the amount of damages would require individual inquiry, “it is less consuming than issues requiring individual testimony and will not overwhelm the liability and damages issues capable of class-wide resolution.”

    Courts Payday Lending Class Action State Issues Consumer Lending

  • District Court approves class action settlement over threatening collection letters

    Courts

    On January 10, the U.S. District Court for the Southern District of West Virginia approved an $861,000 class settlement resolving allegations that a bank violated the West Virginia Consumer Credit Protection Act by falsely threating “legal action” in the collection of foreclosure fees. According to the complaint, the bank, in an attempt to collect foreclosure and attorney’s fees, sent letters to consumers stating “notice of pending litigation,” misrepresenting that a legal proceeding had been filed, when no filings had occurred. The settlement covers any West Virginia automobile or home loan consumer who received one of three specified letters since 2012 and 2013, and awards the plaintiffs’ attorneys one-third of the cash settlement. The three lead plaintiffs will each receive $5,000 “in recognition of service to the class.”

    Courts Debt Collection State Issues Class Action Foreclosure

  • District Court holds “dead air” is indicative of a predictive dialer, denies TCPA dismissal bid

    Courts

    On December 10, the U.S. District Court for the District of New Jersey denied a medical laboratory’s motion to dismiss a putative TCPA class action against the company, holding the plaintiff sufficiently alleged the equipment used to make unsolicited calls qualified as an “autodialer.” According to the opinion, the plaintiff filed the class action against the company after receiving an unsolicited call to her cell phone and hearing a “momentary pause” before a representative started speaking, allegedly indicating the company was using an automatic telephone dialing system (autodialer). The plaintiff argues the company violated the TCPA by placing non-emergency calls using an autodialer without having her express consent. The company moved to dismiss the action, arguing the plaintiff did not sufficiently allege the company called her using an autodialer. The court disagreed, stating that “[d]ead air after answering the phone is indicative that the caller used a predictive dialer.” The court noted that a predictive dialer is a device considered an autodialer under binding precedent, citing to the opinion of the U.S. Court of Appeals for the 3rd Circuit in Dominguez v. Yahoo, which held that it would interpret the definition of an autodialer as it would prior to the FCC’s 2015 Declaratory Ruling, which was invalidated by the D.C. Circuit. (Previously covered by InfoBytes here.) The court acknowledged that the actual configuration of the dialing equipment should be explored in discovery, but at this stage, the plaintiff sufficiently alleged the use of an autodialer for purposes of the TCPA.  

    Courts TCPA Autodialer Class Action Third Circuit Appellate

  • District Court rules text message inviting a responsive text does not violate TCPA

    Courts

    On November 29, the U.S. District Court for the District of New Jersey partially denied a company’s motion to dismiss proposed class action allegations that it violated the TCPA when it used an automatic telephone dialing system (ATDS) to send unsolicited text messages to customers’ cell phones that resulted in additional message and data charges. According to the opinion, the company sent three text messages to the plaintiff who responded to two of them. The first message gave the plaintiff the option to send “STOP” to opt out or “HELP” to receive assistance. Because the plaintiff texted “HELP” in response, the court found that the plaintiff consented to receiving the company’s second message; the court found that the third follow-up message was permissible because it was a single “confirmatory message” sent after the plaintiff texted “STOP” after receiving the second follow-up message. However, the court determined that the plaintiff satisfied the burden of showing at this stage in the proceedings that the first text message was sent from a company with whom he had no prior relationship and had not provided consent. “When an individual sends a message inviting a responsive text, there is no TCPA violation,” the judge ruled. “The TCPA prohibits a party from using an ATDS ‘to initiate any telephone call to any residential telephone line using an artificial or prerecorded voice to deliver a message without the prior express consent of the called party,’ unless the call falls within one of the statute’s enumerated exemptions.”

    The court further denied the company’s motion to stay pending the FCC’s interpretation of what qualifies as an ATDS in light of the decision reached by the D.C. Circuit in ACA International v. FCC, stating, among other things, that the company “has not established the FCC proceedings will simplify or streamline the issues in this matter” and that the plaintiff is entitled to discovery concerning the company’s communication devices.

    Courts TCPA Autodialer Class Action FCC ACA International

  • Court certifies class in FDCPA action against student loan debt collector

    Courts

    On December 3, the U.S. District Court for the District of New Jersey granted class certification to a group of borrowers alleging that a debt collection company misrepresented late charges accruing on student loan debt after default, in violation of the FDCPA section 1692e, among other sections. The lead plaintiff brought the action against the debt collector after receiving a letter regarding her defaulted federal Perkins student loans, which stated “[d]ue to interest, late charges, and other charges that may vary from day to day, the amount due on the day you pay may be greater” even though the plaintiff later learned that Perkins loans cannot accrue late charges after default. After the FDCPA’s 1692e claim survived summary judgment, the plaintiff moved to certify the class, while the debt collector opposed the certification and separately moved to dismiss the class claim for lack of standing. In denying the motion to dismiss and granting certification, the court held the borrower had standing as she met the requirement of showing a concrete and particularized injury, stating “when a debt collector violates Section 1692e by providing false or misleading information, the informational injury that results—i.e., receipt of that false or misleading information—constitutes a concrete harm under Spokeo.” The court found that the borrower met the requirements for class certification, including the numerosity requirement as evidenced by the almost 3,000 letters sent by the debt collection company to New Jersey loan holders. Moreover, the court found that the class claims would predominate over individual ones since there exist common questions of law or fact insofar as class members received the same or substantially similar letters from the collector.

    Courts FDCPA Debt Collection Student Lending Class Action Spokeo

  • Court holds credit union must face breach of contract claims over overdraft practices

    Courts

    On November 8, the U.S. District Court for the District of Massachusetts granted in part and denied in part a credit union’s motion to dismiss a putative class action challenging the institution’s overdraft practices. As summarized in the order, the plaintiff alleged the credit union improperly charged overdraft fees when the “available balance” of her account, which was calculated by deducting pending debits and deposit holds, was insufficient to cover a transaction, even though the “actual” or ledger balance would have covered the transaction. The plaintiff brought multiple claims against the credit union, including breach of contract and Electronic Funds Transfers Act (EFTA) claims.

    The credit union moved to dismiss arguing, in part, that the relevant account agreements referenced the “available balance” method for overdraft purposes and that the term is a “well-known bank term that has long been understood to mean the money in an account minus holds placed on funds to account for uncollected deposits and for pending debit transaction.”

    The court disagreed, concluding that “available balance” is not a defined term, is ambiguous, and therefore its meaning presents a factual dispute that cannot be resolved on a motion to dismiss. The court allowed, however, the EFTA claim to proceed only for violations that occurred within one year of the complaint filing.

    Courts Credit Union Overdraft EFTA Class Action Breach of Contract

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