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Court grants class certification to consumers alleging law firm collection letters violated FDCPA
On October 31, the U.S. District Court for the Eastern District of Pennsylvania granted class certification for a group of debtors in three states who alleged that the debt collection letters they received that were printed on law firm letterhead violated the FDCPA by falsely implying attorneys reviewed the underlying debts. The debt collector argued against certification because not all of the recipients of the letter at issue had consumer debts covered by the FDCPA, arguing “that there is no administratively feasible way to ascertain class members without doing individualized fact-finding.” The court disagreed, finding the plaintiff met the burden of demonstrating class members can be identified. Specifically, the court noted that the plaintiff’s proposed methodology would rely on the business unit that sent the letters, as well as information in the debt collector’s records, to determine which accounts are covered by the FDCPA. Because the plaintiff “demonstrated an administratively feasible and reliable method for identifying class members,” the court granted class certification.
9th Circuit denies petition for en banc rehearing of TCPA action against gym
On October 30, the U.S. Court of Appeals for the 9th Circuit denied a California gym’s petition for a rehearing en banc of the court’s September decision reviving a TCPA putative class action. As previously covered by InfoBytes, the appeals court vacated a district court order granting summary judgment in favor of the gym, concluding that there was a genuine issue of material fact as to whether the text system used by the gym—which stores numbers and dials them automatically to send the messages—qualified as an “autodialer” under the TCPA. Notably, in vacating the summary judgment order, the 9th Circuit performed its own review of the statutory definition of an autodialer in the TCPA, because the recent D.C. Circuit opinion in ACA International v. FCC (covered by a Buckley Sandler Special Alert) set aside the FCC’s definition. Through this review, the appeals court concluded that the TCPA defined an autodialer broadly as “equipment which has the capacity—(i) to store numbers to be called, or (ii) to produce numbers to be called, using a random or sequential number generator—and to dial such numbers automatically (even if the system must be turned on or triggered by a person).”
7th Circuit: Courts, not arbiters, decide class arbitration questions
On October 22, the U.S. Court of Appeals for the 7th Circuit held that the availability of class or collective arbitration within an employment agreement is a threshold “question of arbitrability” that must be decided by a court. According to the opinion, an employee filed class and collection action claims against her employer for wage and hour violations. The district court compelled arbitration pursuant to an agreement between the employee and her employer but struck as unlawful a waiver clause that forbid class or collective arbitration of any claim. The case proceeded to arbitration and the arbitrator issued an award of over $10 million in damages to the employee and the other 174 claimants who had opted-in to the arbitration proceeding. The employer appealed the award, arguing that the waiver of collective arbitration provision was valid, rendering the collective arbitration in violation of the employment agreement.
On appeal, the 7th Circuit reversed and remanded the case to the district court, pointing to the Supreme Court’s recent decision in Epic Systems Corp. v. Lewis, which upheld the validity of similar provisions. (Epic held that “an arbitration agreement does not violate the National Labor Relations Act when it requires plaintiffs to pursue employment-related claims in single claimant arbitrations.”). The plaintiff also argued, however, that despite the presence of the waiver, the arbitration agreement still permitted collective arbitration. This left open the question of who interprets the agreement to determine whether collection arbitration applies—the arbitrator or the court. The 7th Circuit found for the latter, concluding that the availability of class or collective arbitration is a threshold question of arbitrability and therefore a district court, and not the arbitrator should decide its permissibility.
Georgia Supreme Court holds legal settlement advances are not loans under state laws
On October 22, the Georgia Supreme Court held that legal settlement cash advances are not “loans” under the state’s Payday Lending Act (PLA) and the Industrial Loan Act (ILA) when the obligation to repay is contingent upon the success of the underlying lawsuit. The decision results from a class action lawsuit bought by clients of a legal funding company. After being involved in automobile accidents, appellants signed financing agreements with a legal funding company, which advanced them funds while their personal injury lawsuit was pending. Per the terms of their financing agreements, appellants were required to repay the funds only if their personal injury lawsuits were successful. They were successful and the settlement company soon sought to recover funds pursuant to the terms of the agreement. The appellants objected and brought suit, alleging, among other things, that the financing agreements they executed violated the state’s PLA and ILA because they were usurious loans and a product of unlicensed activity. The state trial court concluded that the PLA applied to the agreements but that the ILA did not. The state appeals court concluded that neither statute applied, determining that because the repayment obligation was contingent on the success of the lawsuit, it was not a “loan” under either the PLA or the ILA. The state supreme court agreed, holding that “an agreement that involves . . . a contingent and limited obligation of repayment is not a ‘contract requiring repayment,’” as required by the ILA’s definition of “loan.” Similarly, the financing arrangement did not constitute an agreement pursuant to which “funds are advanced to be repaid,” which would make it a loan under the PLA. Appellants also argued that the contingent repayment obligation in the financing agreement was illusory, contending that the legal funding company agrees to such an arrangement only when the risk the lawsuit will fail is “close to null.” The court rejected this claim, however, noting that nothing in the pleadings suggested that the agreements were shams.
New Jersey appeals court says choice-of-law exception may apply in interest rate class action suit
On October 9, the Superior Court of New Jersey Appellate Division reversed a trial court’s decision to revive a proposed class action that challenged, among other things, interest rates of over 30 percent on car title loans. According to the appellate court, the trial court dismissed the case because Delaware, not New Jersey, had a more substantial relationship with the parties’ dispute. While the plaintiff’s contract with the Delaware-based title loan company stipulated that Delaware law applied even though she resided in New Jersey, the appellate court said that under the second exception of the test established by Instructional Systems Inc. v. Computer Curriculum Corp., New Jersey courts will uphold the contractual choice unless the “application of the law of the chosen state would be contrary to the fundamental policy of the state which has a materially greater interest than the chosen state in the determination of the particular issue and which . . . would be the state of the applicable law in the absence of an effective choice of law by the parties.”
“In her certification, plaintiff asserted that she applied for the title loan from her home in New Jersey and that defendant advised her that the loan had been approved by calling and advising her that all she had to do to pick up the money was to come to Delaware and sign the contract.” The appellate court stated that these additional facts may be sufficient to satisfy the second exception’s prerequisites, and that from a procedural standpoint, the trial court should have either converted the title loan company’s motion to dismiss to a motion for summary judgment in order to consider the new information or granted the plaintiff’s motion to file a second amended complaint.
California state appeals court partially reverses proposed class action suit addressing arbitration terms
On October 2, a California state appeals court partially reversed a trial court’s denial of class certification in a putative class action alleging that a written cardmember agreement issued by a credit card company contained unconscionable and unenforceable arbitration terms. According to the opinion, after the cardmember and his company failed to make timely and sufficient payments on their accounts, the credit card company closed the accounts and filed a collection action. The cardmember subsequently filed a putative class action cross-complaint against the credit card company and two other card issuers, alleging the arbitration terms in the cardmember agreements he signed are unlawful under California’s Unfair Competition Law, and asserting, among other things, that the legally unenforceable contract terms prevented negotiations, prohibited injunctive relief, and failed to communicate to cardholders what the rules would be at the time of arbitration. The cardmember further alleged that cardholders were overcharged annual credit card fees or purchase fees “as consideration for the promises contained in the cardmember agreement.” During the course of the litigation, the credit card companies sent certain cardmembers modified contract terms, which allowed cardmembers the option to reject arbitration altogether if a written rejection notice was provided within a specific time period.
The trial court denied class certification, finding, among other things, that the cardmember was not an adequate class representative and did not have claims typical of the putative class because there was no evidence he paid annual fees and that individual issues would predominate with respect to procedural unconscionability and each individual class member’s entitlement to declaratory relief. On appeal, the court held that the trial court “used improper criteria and erroneous assumptions” when reaching its decision that “procedural unconscionability would involve predominantly individualized issues.” Moreover, the appellants and absent class members were linked by common questions, including whether it was unreasonable for the respondent to modify its arbitration terms during pending litigation, since this denied cardholders who opted out of arbitration the right to join the class.
Court denies motion to certify classes in TCPA action against national mortgage servicer
On September 27, the U.S. District Court for the Northern District of Illinois denied certification of two proposed classes in a TCPA action against a national mortgage servicer, concluding that plaintiff had failed to meet his burden of demonstrating, under FRCP 23(b)(3), that common issues of fact or law predominated over any questions affecting only individual members. According to the opinion, plaintiff alleged the mortgage servicer contacted consumer phones, without express consent, using an automatic telephone dialing system (autodialer) in violation of the TCPA. One of the four named plaintiffs sought to represent two classes of consumers who were contacted by the servicer two or more times between October 2010 and November 2014: (i) those who received calls or texts and told the servicer to cease contact; and (ii) those who received calls and told the servicer it had called the wrong number.
The court found the issue of consent was decisive in this action, relying on authority holding that individual issues of consent predominate where a defendant “provides specific evidence that a significant number of putative class members consented to contact . . . .” The opinion notes that mortgage servicer’s policies contained a process for flagging accounts that withdrew consent to be contacted and if an account was flagged, the autodialer would not initiate calls to that number. The mortgage servicer argued that many consumers gave permission, retracted it, and gave the permission to be contacted again. The court found the servicer had “put forth specific evidence establishing that a significant percentage of the putative class consented to receiving calls.” The court reviewed expert reports by both parties and ultimately concluded that the method for determining class members suggested by the plaintiff and the plaintiff’s expert did not “adequately identify a common way to address the individual variations of consent and revocation that occurred in this case.” The court determined that it would need to conduct an individualized consent inquiry for accountholders in each putative class.
11th Circuit holds filed-rate doctrine bars class actions relating to lender-placed insurance
On September 24, the U.S. Court of Appeals for the 11th Circuit affirmed the district court’s dismissal of two class actions on grounds that the “filed-rate doctrine” precludes the plaintiffs’ claims. In their complaints, the plaintiffs alleged that their loan servicers charged “inflated amounts” for lender-placed insurance by receiving “rebates” or “kickbacks” from an insurance company without passing the savings on to consumers. The district court dismissed the actions with prejudice, holding that the filed-rate doctrine barred the plaintiffs’ claims. On appeal, the 11th Circuit upheld the lower court’s decision, finding that the plaintiffs’ allegations challenged the insurance company’s filed rate. As a result, the court determined that the plaintiffs’ allegations were textbook examples of claims barred by the nonjusticiability principle, which provides that duly-empowered administrative agencies have exclusive say over the rates charged by regulated entities because agencies are more competent than the courts at the rate-making process.
District court approves an $8.8 million TCPA class action settlement with an inmate telephone company
On September 24, the U.S. District Court for the Central District of California approved an $8.8 million class action settlement between consumers and an inmate telephone company. The settlement resolves allegations that the company violated the TCPA by playing a separate prerecorded “Notification Call” directing the receiving party to provide billing information for the inmate’s collect calls without obtaining the receiving party’s prior consent or providing the receiving party with an opt out mechanism for future calls. Under the terms of the settlement, the company will pay almost $175 to each class member and will change its practices to include both an interactive-voice/key activated opt-out mechanism and a toll-free number that the receiving party may use to opt-out of all future notification calls.
Court sends class action TCPA suit against global ride-sharing company to arbitration
On September 20, the U.S. District Court for the Northern District of Illinois granted a global ride-sharing company’s motion for summary judgment, ruling that a user had consented to arbitrate any disputes when he signed up for an account with the company. Specifically, the named plaintiff of the proposed class action brought the suit against the company for allegedly violating the TCPA when he received a single text message he claims he did not consent to after signing up for the company’s app, and that he claimed he received after he deleted the app. The company moved to compel arbitration, which initially was denied in 2017, when the court held that the company had not shown enough evidence that users were aware of the arbitration agreement and ordered the parties to engage in expedited discovery limited to the arbitration agreement formation. However, following both parties’ cross-motions for summary judgment, the court determined that the plaintiff “failed to raise a genuine dispute as to whether he entered into an enforceable agreement to arbitrate,” and that the app presented a statement that creating an account meant that users agreed to the terms of service and privacy policy, which was presented to users “in an easy-to-read font on an uncluttered screen” and required no scrolling.
According to the court, “the manner in which this statement and the Terms of Service were presented placed a reasonable person on notice that there were terms incorporated with creating an . . . account and that, by creating an account, he or she was agreeing to those terms.” Concerning the plaintiff’s argument that his TCPA claim does not fall under the arbitration agreement’s purview, the court stated that the question of what falls within the scope of the arbitration agreement is itself subject to arbitration, and also stated that the Terms of Service specifically permitted the texting of promotional offers to customers, arguably requiring the TCPA claim to be arbitrated. The court dismissed without prejudice the plaintiff’s claims against the company and stayed the case until arbitration proceedings are resolved.