InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
Lawsuits Alleging Digital Barriers on Websites Continue
Recently, a legally blind plaintiff filed a class action complaint against a leading home improvement and construction products and services retailer alleging that the company violated state law and the American Disabilities Act (ADA) by denying blind individuals equal access to products, services, and opportunities offered on its website. Diaz v. Home Depot, Inc., No. 15-cv-09178 (S.D.N.Y. Nov. 20, 2015). The complaint asserts that the company’s website contains barriers that “make it impossible for blind users to even complete a transaction on the website . . . thus exclude[ing] the blind from the full and equal participation in the growing Internet economy that is increasingly a fundamental part of the common marketplace and daily living.” The complaint further alleges that the company chooses “to rely on an exclusively visual interface” despite having access to technology that could make the website more accessible, such as limiting the use of tables and javascript and making use of alternative text, descriptive links, and resizable text. The plaintiff seeks (i) a permanent injunction requiring the company to take the necessary steps to ensure its website fully complies with ADA requirements so that it is accessible and usable by blind individuals; and (ii) compensatory damages to the plaintiff and a proposed subclass of blind customers.
The lawsuit is one of a number filed in 2015 – including a November 6 complaint against the NBA – under the ADA against companies operating websites with alleged digital barriers preventing blind individuals from accessing the electronic marketplace. According to a DOJ statement regarding its regulatory plans, rulemaking initiatives regarding the accessibility of web information and services provided by public accommodations are not scheduled to be included in the agency’s long-term actions until fiscal years 2017 and 2018.
Ninth Circuit Rules Against Title Insurer in Long-Running RESPA Litigation
On August 24, the Ninth Circuit held that a title insurer’s equity investments in title agencies in exchange for agreements that the agencies would refer customers to the insurer violated the anti-kickback provisions of the Real Estate Settlement Procedures Act (RESPA). Edwards v. First Am. Corp., 2015 WL 4999329 (9th Cir. Aug. 24, 2015). In this long-running case (covered in InfoBytes here, here, here, and here), borrowers filed a putative class-action lawsuit against the title insurer claiming violations of Section 8 of RESPA, which prohibits payments for the referral of settlement service business. In prior phases of the litigation, courts declined to certify the class, and the U.S. Supreme Court eventually granted certiorari but declined to rule on the merits of the litigation. In this appeal, the plaintiff-borrowers asked the Ninth Circuit to review the district court’s most recent denial of class certification, and the CFPB filed an amicus brief in the appeal as well. The Ninth Circuit affirmed the denial of the certification, finding that common issues did not predominate over individual issues for the proposed class. The court further stated that, while RESPA exempts payments for “goods,” “facilities,” and “services” from Section 8’s prohibition on referral fees, the title insurer’s equity investments in the title agencies were not payments for “goods,” “facilities,” or “services.” Further, the court found that RESPA’s exemption from Section 8 available to affiliated business arrangements did not apply because no compensable services were performed by the title agencies in exchange for the payments and the title insurer did not receive any payments from the title agencies as a return on its ownership interests.
PetroChina Class Action Dismissed
On August 3, a federal district court in New York dismissed with prejudice a securities class action suit filed against Chinese oil and gas company PetroChina Co. Ltd. The suit alleged that statements in the company’s 2011 and 2012 financial statements claiming the company was in compliance with its internal rules and securities regulations were false or misleading. The plaintiffs filed the suit after the Chinese government announced that it was investigating four of the company’s top executives for corruption.
The court dismissed the complaint in its entirety, finding that the plaintiffs failed to allege any acts of bribery or corruption that predated the filing of the 2011 and 2012 financial statements. The court wrote: “[T]his Court is not requiring that Plaintiffs allege a detailed account of the particular illicit deals that PetroChina officials were allegedly engaged in. Plaintiffs are required, nonetheless, to establish—at a bare minimum—that the underlying fraud took place during the time period covered by the purportedly false public statements and that someone at PetroChina knew or had reason to know about it.”
Similar class action suits against Wal-Mart and Avon have also been dismissed in the past year.
District Court Rejects Lender's Motion to Dismiss in Ongoing Litigation with CFPB
On June 12, the United States District Court for the Eastern District of California denied Castle & Cooke Mortgage’s motion to dismiss in a putative class action brought by affected borrowers stemming from Castle and Cooke’s 2013 settlement with the CFPB. The underlying complaint is based on the allegation that the “loan officer who sold plaintiff his mortgage loan was paid a bonus that was based, at least in part, on the fact that plaintiff received a more expensive and/or less favorable loan than he otherwise would have received.” The complaint seeks various remedies, including actual and statutory damages under the Truth in Lending Act. The complaint contains four separate causes of action: (i) violations of TILA, (ii) violations of the Utah Residential Mortgage Practices and Licensing Act, (iii) unjust enrichment under Utah law, and (iv) violations of the California Unfair Competition Law. Castle & Cooke only moved to dismiss the final two claims. In denying Castle & Cooke’s motion to dismiss, the court found that both challenged claims could be pursued, rejecting Castle & Cooke’s arguments that the claims were inappropriate given the remedies available under TILA. With this denial, the plaintiffs will be able to continue pursuing all four causes of action as the litigation continues.
Southern District of New York Denies Class Certification in Fair Lending Suit Against Global Investment Bank
On May 14, the District Court for the Southern District of New York denied class certification status in a fair lending suit brought by the ACLU and NCLC against a global investment bank. Adkins v. Morgan Stanley, No. 12-CV-7667 (VEC) (S.D.N.Y. May 14, 2015). The Plaintiffs had alleged that the bank, as a significant purchaser of subprime residential mortgage loans, had caused a disparate impact on African-American borrowers in Detroit in violation of the Fair Housing Act and the Equal Credit Opportunity Act. In an exhaustive 50-page opinion, the court denied class certification on multiple grounds, including the variation in loan types and the role of broker discretion. BuckleySandler anticipates the ruling will be widely cited in future fair lending class actions.
Fed and OCC Assert Bank Examination Privilege in Mortgage-Backed Securities Class Action
On March 23, the Federal Reserve and the Office of the Comptroller of the Currency – both non-parties in the suit – filed briefs requesting that a district court reject a motion to compel discovery of over 30,000 documents held by a large bank. Arguing that the documents contain confidential supervisory information, the regulators asserted the bank examination privilege – “a qualified privilege that protects communications between banks and their examiners in order to preserve absolute candor essential to the effective supervision of banks.” As for scope, the regulators argued that the privilege covers the documents because they provide agency opinion, not merely fact, and that any factual information was nonetheless “inextricably linked” with their opinions. Additionally, they contended that the privilege is not strictly limited to communications from the regulator to the bank – instead, it may also cover communications made from the bank to the regulator and communications within the bank. As for procedure, the regulators claimed that a plaintiff is required to request the disclosure of privileged documents through administrative processes before seeking judicial relief, a requirement they contend exists even where a defendant bank also holds copies of the documents. Finally, the regulators argued in the alternative that the lead plaintiff has not shown good cause to override the qualified privilege, as the interests of the government in protecting the supervisory information outweighs the interest of the plaintiffs in production.
Large Retailer Agrees to Pay $10 Million Related to Data Breach Incident
On March 19, a district court granted preliminary approval in which a large retailer agreed to pay $10 million to settle a class-action action suit related to a 2013 data breach, which resulted in the compromise of at least 40 million credit cards and theft of personal information of up to 110 million people. Under the proposed settlement, the retailer will deposit the settlement amount into escrow to pay individual victims up to $10,000 in damages. In addition, the proposed settlement requires the retailer to (i) maintain a written information security program and (ii) appoint a Chief Information Security Officer. The proposed settlement is pending court approval.
Financial Institutions File Class Action Suit In Response to Data Breach
On March 13, a federal credit union filed a class action suit against a national retailer and parent company, alleging their actions during a September 2014 data breach injured credit unions, banks, and other financial institutions. Greater Chautauqua FCU v. Kmart Corp and Sears Holdings Corp., No. 15-cv-2228, (N.D.Ill. Mar.13,2015) The complaint contends that financial institutions (i) were required to, among other things, refund fraudulent charges, respond to a higher volume of customer complaints, and increase fraud monitoring efforts, and (ii) lost revenue due to a decrease in card usage after the breach was disclosed. The complaint alleges that the retailer failed to maintain adequate data security under applicable payment card industry standards, particularly in the wake of well-publicized data breaches at other retailers by third parties using similar techniques and malicious software. Moreover, the retailer failed to detect or notify customers for a period of at least five weeks. The complaint was filed in US District Court for the Northern District of Illinois, and alleges damages in excess of $5,000,000 for violations of the Illinois Personal Information Protection Act, the Illinois Consumer Fraud and Deceptive Business Act, and New York General Business Law, as well as negligence, and negligent misrepresentation and/or omission.
Eleventh Circuit Ruling Gives Large Bank Another Chance at Arbitration
On an appeal of five putative class actions alleging the unlawful charging of overdraft fees on consumer checking accounts, On February 10, the U.S. Court of Appeals for the Eleventh Circuit vacated a lower court order holding that the defendant’s waiver of its right to compel arbitration with the named plaintiffs precludes the Bank from compelling arbitration with any unnamed members of the putative classes. In re Checking Account Overdraft Litigation, No. 13-12082 (11th Cir. Feb. 10, 2015). The panel held that the lower court lacked jurisdiction to resolve the question. Additionally, it held that the named plaintiffs lacked standing, under Article III of the U.S. Constitution, to advance claims on behalf of those unnamed putative class members, who—in the absence of class certification—have “no justiciable controversy” with the Bank.
Large National Bank Faces Class Action Suit Over Alleged SCRA Violations
On January 15, an Army Reserve sergeant filed a class action suit against a large national bank for allegedly violating the SCRA limitation on a lender's ability to foreclose on an active duty service member's property. According to the complaint, the bank violated the law by foreclosing on the plaintiff’s home and seizing personal property while the sergeant was on active duty. Wensel et al v. The Bank of New York, No 2:15-cv-00068, (W.D. Penn. Jan. 15, 2015)