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District Court preliminarily approves data breach suit
On January 9, the U.S. District Court for the District of New Mexico granted preliminary approval of a class action settlement in a data breach suit that allegedly compromised approximately 191,000 individuals’ personally identifiable information (PII). According to the plaintiffs’ motion, the class alleged that their PII and personal health information were compromised when cybercriminals breached the defendant’s systems. If granted final approval, the settlement class would consist of four categories of relief: (i) reimbursement for lost time (up to four hours at $15 per hour) and out-of-pocket expenses up to $500; (ii) reimbursement for extraordinary losses up to $3,500; (iii) two years’ free credit monitoring services; and (iv) equitable relief in the form of security improvements to the defendant’s system.
District Court grants $11.9 million settlement in ATM fees suit
In December, the U.S. District Court for the District of New Jersey granted preliminary approval of a $11.9 million settlement in a class action suit resolving allegations pertaining to a defendant national bank’s out-of-network ATM fees. According to the plaintiff’s motion, the plaintiffs challenged a fee assessed by the defendant “when its accountholders check their account balance at a [an out-of-network] ATM, referred to herein as an ‘Out of Network ATM Balance Inquiry Fee’ or ‘OON ATM Balance Inquiry Fee.’” The plaintiffs alleged that such fees on balance inquiries, when combined with fees assessed by the bank and by the out-of-network ATM owner, resulted in three total fees on a single cash withdrawal at an out of network ATM, and violated the terms of the defendant’s account agreement.
On July 19, 2023 the court granted final approval to the settlement.
National bank to pay $2 million in mortgage fee violation class action
On December 19, the U.S. District Court for the Central District of California granted final approval of a settlement in a $2 million class action resolving allegations that a national bank violated California’s Rosenthal Fair Debt Collection Practices Act (RFDCPA) and Unfair Competition Law (UCL). According to the order for preliminary approval, the plaintiff class alleged that the bank improperly charged and collected transaction fees when processing mortgage payments. The district court certified the class, which included “all persons who have or had a California address, and at any time between June 1, 2016 and the date of the Court’s order preliminarily approving the settlement, paid at least one transaction fee to [the defendant] for making a payment on a residential mortgage loan serviced by [the defendant] by telephone, IVR, or the internet.” The district court determined that the settlement agreement was “reasonable and adequate.” The two class representatives who filed the suit were awarded $1,500 each, and their attorneys were awarded $499,000 in fees.
District Court approves $2.8 million settlement in FDCPA convenience fee class action
On December 22, the U.S. District Court for the Southern District of Florida granted preliminary approval of a $2.8 million settlement in an FDCPA class-action suit resolving allegations that convenience fees were charged when consumers made payments on their mortgages over the phone or online. According to the suit, the plaintiffs claimed the defendant did not charge processing fees if borrowers made payments by check or signed up for automatic monthly debits from their bank accounts. The plaintiffs further argued that the processing fees were “illegal and improper because neither the mortgages themselves nor applicable statutes authorize such fees.” The parties agreed to mediation in April 2022, and a motion for preliminary approval of a settlement was filed in August. A coalition of state attorneys general from 32 states and the District of Columbia, led by the New York AG filed an amicus brief in the district court opposing the original proposed $13 million settlement in the suit (covered previously by InfoBytes here). The AGs outlined concerns with the proposed settlement, including that (i) the relief provided to class members violates various state laws, and that the defendant seeks to ratify fees in an “unwritten, mass amendment” that violates state laws and regulations; (ii) class members only receive an “inadequate” one-time payment, while the defendant may continue to charge excessive fees for the life of the loan; and (iii) low- and moderate-income borrowers are not treated equitably under the proposed settlement. Under the terms of the new settlement, members of the class who do not opt out of the settlement will receive a share of the $2.8 million. The settlement also reduces the fees class members will have to pay when making payments online or via the telephone for the next two years. The defendant also agreed to add additional disclosures to its website to increase borrower awareness of alternative payment methods that could have lower fees or no fees. Defendant’s representatives will also receive additional training to ensure they provide additional information and disclosures about convenience fees when speaking with customers.
On June 16, the court granted final approval of the settlement.
District Court preliminarily approves lending discrimination settlement
On December 15, the U.S. District Court for the Northern District of California preliminarily approved a $480,000 class action settlement concerning whether an online lender allegedly denied consumers’ applications based on their immigration status. Plaintiffs filed a putative class action against the defendants, alleging the lender denied their loan applications based on one of the plaintiff’s Deferred Action for Childhood Arrivals (DACA) status and the other plaintiff’s status as a conditional permanent resident (CPR). Plaintiffs claimed that these practices constituted unlawful discrimination and “alienage discrimination” in violation of federal law and California state law. Plaintiffs also alleged that the defendants violated the FCRA by accessing their credit reports without a permissible purpose. (Covered by InfoBytes here.) Under the terms of the preliminarily approved settlement, the defendants would be required to pay $155,000 into a settlement fund, as well as up to $300,000 in attorneys’ fees and $25,000 in administrative costs. The defendants have also agreed to change their lending policies to ensure DACA and CPR applicants are evaluated for loan eligibility based on the same terms as U.S. citizens.
The district court noted, however, that the proposed settlement includes a “clear sailing arrangement,” which provides that the defendants will not oppose plaintiffs’ motion for attorneys’ fees and costs provided the requested amount does not exceed $300,000. Referring to an opinion issued by the U.S. Court of Appeals for the Ninth Circuit in which the appellate court warned that clear sailing arrangements are “important warning signs of collusion” because they show an increased “likelihood that class counsel will have bargained away something of value to the class,” the district court explained that it intends to “carefully scrutinize the circumstances and determine what attorneys’ fee awards is appropriate in this case.”
District Court approves $4.24 million overdraft settlement
On December 9, the U.S. District Court for the Southern District of Florida granted final approval to a $4.24 million class action settlement resolving allegations related to a defendant bank’s overdraft fee practices. Plaintiff alleged breach of contract claims related to the defendant’s practice of charging overdraft fees on checks and automated clearing house transactions that were paid by the defendant despite customer accounts having insufficient funds. The overdraft fees were allegedly charged after the transaction was resubmitted by a merchant or third party after having previously been returned unpaid by the defendant for insufficient funds. The parties reached a settlement in which the defendant will pay $4.24 million into a settlement fund to provide relief to class members (defined as all current and former consumer checking account holders who were charged at least one retry overdraft fee). The settlement also include $1.4 million in attorneys’ fees. A service award for the class representative was denied, however, with the court explaining that the law in its circuit makes “clear that incentive awards ‘that compensate a class representative for [her] time and rewards her for bringing a lawsuit’ are prohibited.”
District Court says consumer not provided meaningful opportunity to opt-out of arbitration provision
On December 9, the U.S. District Court for the Southern District of New York denied a defendant bank’s motion to compel arbitration in an action alleging the bank’s policy on overdraft fees caused customers to pay fees on accounts that were allegedly “never actually overdrawn.” Plaintiff filed a putative class action against the defendant seeking monetary damages from the defendant’s assessment and collection of these fees, and the defendant moved to compel arbitration. The court considered, among other things, whether 2014 and 2021 versions of the bank’s deposit account agreements constituted a request for the plaintiff to enter into a new agreement, in addition to whether “the extent to which a party subject to an agreement containing an arbitration provision with an optout clause . . . has a continuing obligation or opportunity to opt-out of arbitration each time the contract is amended or whether the party is bound by their assent to or rejection of arbitration at the first instance the opt-out procedure is offered.”
The court noted that the plaintiff’s account, which was opened in 2004, was governed by a 2002 version of an agreement that did not contain any dispute resolution provisions, nor did it require mandatory arbitration. However, the agreement did include a change of terms provision that stated customers “could be ‘bound by these changes, with or without notice.’” The agreement was amended in 2008 to include an arbitration provision and contained an opt-out clause allowing customers to reject the arbitration provision within 45 days of opening an account. In 2014, the defendant sent a notice to customers about further modifications made to initial account disclosures. The 2014 notice stated that customers could opt out of the entire amended agreement, which contained the arbitration clause, if they closed their account within 60 days. If they chose not to close the account, customers would be deemed to have accepted the amended agreement. A 2021 amendment agreement also included the arbitration provision. The defendant argued that the plaintiff is subject to the arbitration provision because he could have opted out as early as 2008 but chose not to and continued to use his account after receiving the 2014 notice.
The court disagreed, stating that the plaintiff would still have been obligated to arbitrate disputes under a survival clause in the 2008 contract, which said that the arbitration clause “shall survive the closure of your deposit account.” The court found that the 2014 notice did not provide the plaintiff a meaningful opportunity to opt out of arbitration. Moreover, because the plaintiff was unable to opt out under the 2008 agreement, “no contract to arbitrate was formed, and [the plaintiff] was not required to opt out again when [the defendant] amended the contract in or about January 2014 or thereafter.” “The lack of notice and absolute lack of opportunity for [the plaintiff] to opt out render the 2008 [agreement] unconscionable under New York law, which seeks to ‘ensure that the more powerful party’ — here, [the defendant] — ‘cannot ‘surprise’ the other party with some overly oppressive term,’ like an arbitration provision with an opt-out procedure that could never be exercised,” the court wrote.
9th Circuit revives data breach class action against French cryptocurrency wallet provider
On December 1, the U.S. Court of Appeals for the Ninth Circuit affirmed in part and reversed in part a district court’s dismissal of a putative class action brought against a French cryptocurrency wallet provider and its e-commerce vendor for lack of personal jurisdiction. As previously covered by InfoBytes, plaintiffs—customers who purchased hardware wallets through the vendor’s platform between July 2017 and June 2020—alleged violations of state-level consumer protection laws after a 2020 data breach exposed the personal contact information of thousands of customers. Plaintiffs contended, among other things, that when the breach was announced in 2020, the wallet provider failed to inform them that their data was involved in the breach, downplayed the seriousness of the attack, and did not disclose that the attack on its website and the vendor’s data theft were connected. The district court held that it did not have jurisdiction over the French wallet provider, and ruled, among other things, that the plaintiffs did not establish that the wallet provider “expressly aimed” its activities towards California in a way that would establish specific jurisdiction, and “did not cause harm in California that it knew was likely to be suffered there.” The district court further held that the fact that the vendor was headquartered in California at the time the breach occurred was not sufficient to establish general jurisdiction because the vendor moved to Canada before the class action was filed. “Courts have uniformly held that general jurisdiction is to be determined no earlier than the time of filing of the complaint,” the district court wrote, dismissing the case with prejudice.
On appeal, the 9th Circuit concluded that dismissal was improper because the French wallet provider’s contracts with California were sufficient to establish jurisdiction under the “purposeful availment” framework. The appellate court explained that because the French wallet provider sold roughly 70,000 wallets in the state, collected California sales tax, and shipped wallets directly to California addresses, the “facts suffice to establish purposeful availment because [the French wallet provider’s] contacts with the forum cannot be characterized as ‘random, isolated, or fortuitous.’” However, the 9th Circuit limited the claims to only those brought by California residents under the state’s consumer protection laws. A forum-selection clause in the French wallet provider’s privacy policy and terms of use documents provided that disputes would be subject to the exclusive jurisdiction of French courts, the appellate court said, which was enforceable except with respect to the class claims of California residents brought under California law “because it violated California public policy against waiver of consumer rights under California’s Consumer Legal Remedies Act.”
The 9th Circuit also determined that the district court abused its discretion in disallowing any jurisdictional discovery concerning the defendant e-commerce vendor. Explaining that the e-commerce vendor employs more than 200 people who work remotely from California, including a data-protection officer (DPO) who may have played a role related to the data breach, the appellate court wrote that “[b]ecause more facts are needed to determine whether those activities support the exercise of jurisdiction, we reverse the district court’s denial of jurisdictional discovery with respect to the DPO’s role and responsibilities and his relationship to [the e-commerce vendor], which processed and stored the data.”
Hair clinic must pay $500,000 to resolve data breach
On November 21, the U.S. District Court for the Central District of California granted final approval to a $500,000 class action settlement resolving allegations that a ransomware attack and data breach exposed the personal information of over 100,000 of the defendant hair-restoration clinic’s customers. According to the order, the plaintiffs alleged that defendant violated California's consumer protection statutes by failing to: (i) protect consumers' personal information; (ii) notify them quickly enough about the breach; and (iii) monitor its network for vulnerabilities and breaches. The order provided attorneys’ fees of $262,500, and awards of $1,250 each to the class representatives.
District Court sends overdraft fee suit to arbitration
On November 16, the U.S. District Court for the District of Massachusetts granted a defendant’s motion to compel arbitration regarding claims that consumers are charged significant overdraft or non-sufficient funds fees on bank accounts linked to discount cards issued by the gas-discount company. According to the plaintiff’s putative class action suit, the defendant advertises fuel discounts through a mobile app and payment card system while claiming that its service acts “like a debit card” by “‘effortlessly deduct[ing]’ funds from linked checking accounts at the time of purchase[.].” While these payments and discounts are represented as being “automatically applied,” the plaintiff alleged that paying with the discount card results in significant processing delays. These delays, the plaintiff contended, cause users to run the risk of having insufficient fees in their checking accounts before the payment is processed, thus resulting in overdraft fees. Additionally, the plaintiff claimed that the defendant does not verify whether a consumer has sufficient funds in the checking account before payments are withdrawn. The defendant moved to compel arbitration, or in the alternative, moved to dismiss the complaint, claiming that during the sign-up process, the plaintiff was presented with terms and conditions that explicitly require users to arbitrate any disputes, claims, or controversies. Moreover, the defendant argued that users cannot sign up for the program unless they first check a button that says “I agree” with the terms of use. While the parties agreed that the plaintiff was presented at a minimum a hyperlink to the terms and conditions, they disputed whether the sign-up process required the plaintiff to affirmatively assent to them. According to the plaintiff, there was no such checkbox button when he signed up for the program.
The court disagreed, ruling that the plaintiff had notice of and agreed to terms and conditions that included an arbitration clause and class action waiver. According to the court, the defendant adequately showed that the checkbox button was part of the process when the plaintiff signed up and that the defendant obtained his affirmative asset to the agreement. Further, the plaintiff failed to support his claim with any specific evidence that the checkbox button may not have been there during the sign-up process, the court maintained.