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  • Fourth Circuit States Violation of FCRA that Fails to Demonstrate a Concrete Injury Not Enough for Standing

    Courts

    On May 11, the U.S. Court of Appeals for the Fourth Circuit issued an opinion vacating a nearly $12 million judgment in a class action brought on behalf of a 69,000 member class, concluding that a credit reporting agency’s decision to list a defunct credit card company—rather than the name of its current servicer—on an individual’s credit report does not, without more, create a sufficient injury under the Fair Credit Reporting Act (FCRA)for purposes of Article III standing. Furthermore, although the lead plaintiff alleged that he suffered a cognizable “informational injury,” in that he was denied the source of the adverse information on the report, the appeals court found that he failed to “demonstrate a concrete injury” as a result of the allegedly incorrect information listed on the credit report. (See Dreher v. Experian Info. Sols., Inc., No. 15-2119, 2017 WL 1948916 (4th Cir. May 11, 2017).)

    The 2014 class action complaint against the credit reporting agency was filed by an individual who—when undergoing a background check for a security clearance—received a credit report that listed a delinquent credit card account with a creditor that had transferred the debt to a new servicer that was not listed as a source of information. When servicing the defunct company’s accounts, the new servicer had decided to do business using the creditor’s name, and directed the credit reporting agency to continue to reflect that name on the tradeline appearing for those specific accounts on its credit reports. The plaintiffs asserted that the credit reporting agency “deliberately [withheld] and inaccurately [stated] the identity of the source of reported credit information,” in violation of the FCRA. The credit reporting company sought summary judgment on the claims, arguing that the individual and the class lacked standing under the FCRA. However, the district court ruled in favor of the member class finding that the credit reporting company “committed a willful violation of . . . the [FCRA].”

    In vacating the district court’s ruling, the Fourth Circuit opined that under the FCRA, a plaintiff “must have (1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision.” The Fourth Circuit concluded that the individual could not clear the first hurdle. To establish “injury in fact,” the plaintiff must show that he or she suffered an invasion of a legally protected interest that is concrete and particularized. While the plaintiff alleged that the credit reporting agency had violated the FCRA by failing to “clearly and accurately disclose to the consumer . . . [t]he sources of the information [in the consumer’s file at the time of the request],” the Fourth Circuit concluded that the statutory violation alone did not create a concrete informational injury sufficient to support standing. “Rather, a constitutionally cognizable informational injury requires that a person lack access to information to which he is legally entitled and that the denial of that information creates a ‘real’ harm with an adverse effect.” In this instance, “the account had no legitimate effect on the [plaintiff’s] background check process, and [t]hus receiving a creditor’s name rather than a servicer’s name—without hindering the accuracy of the report of efficiency of the credit report resolution process—worked no real world harm.” Instead, the Fourth Circuit categorized the plaintiff’s allegations as chiefly “customer service complaints”—a type of harm unrelated to those Congress sought to prevent when enacting the FCRA.

    Courts FCRA appellate Class Action

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  • Ninth Circuit Grants Petition to Hear FTC v. AT&T Appeal En Banc

    Courts

    On May 9, the Court of Appeals for the Ninth Circuit granted a petition for rehearing en banc filed by the FTC in a case involving whether the Commission may regulate an internet service provider’s slowing down of data after a customer has used a specified amount of data under an “unlimited” plan.

    The FTC’s 2014 complaint alleged that AT&T’s practice of “data throttling,” and its subsequent failure to adequately inform its customers of this practice, violated Section 45(a) of the FTC Act. A federal district court dismissed the complaint, rejecting AT&T’s argument that it was exempt from FTC Section 45(a) enforcement because it is a common carrier. Section 45(a) allows the Commission to “prevent persons, partnerships or corporations, except . . . common carriers . . . from using . . . unfair or deceptive acts or practices” (emphasis added). The court held, however, that the common carrier exception applies only when the entity has the status of a common carrier and is engaging in common carrier activity. The district court order also held that “[w]hen this suit was filed, AT&T’s mobile data service was not regulated as common carrier activity by the [FCC],” and that “[o]nce the Reclassification Order of the [FCC] (which now treats mobile data [service] as common carrier activity) goes into effect, that will not deprive the FTC of any jurisdiction over past alleged misconduct as asserted in this pending action.”

    In 2016, a three-judge Ninth Circuit panel reversed, holding that AT&T is exempt from Section 45(a) as a common carrier. See Fed. Trade Comm'n  v. AT&T Mobility LLC, 835 F.3d 993 (9th Cir. 2016). The en banc court’s order vacates that ruling pending review by the full Ninth Circuit. Per the Ninth Circuit’s May 10 order, en banc oral argument will occur the week of September 18, 2017. The exact date and time will be announced in a separate order. Notably, given the recent uncertainty over which regulatory agency will oversee common carriers—the FTC or the FCC—the timing of this ruling is important.

    Courts FTC appellate

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  • Fourth Circuit Permits DOJ to Reject FCA Settlement After Government Declined to Intervene; Declines to Reach Issue of Statistical Sampling

    Courts

    In an opinion handed down on February 22, the Court of Appeals for the Fourth Circuit decided that the DOJ retains an unreviewable right to object to a proposed settlement agreement between a relator and a defendant even after the Government has declined to intervene in the case. See United States ex rel. Michaels v. Agape Senior Community, Inc., No. 15-2147 (4th Cir. Feb 14, 2017). The case concerned a qui tam relator who had alleged that Agape Senior Community and associated entities violated the FCA by submitting false claims to federal health care programs for nursing home related services that were not provided or provided to patients that were not eligible for them. After the Government declined to intervene in the case, the relator agreed to settle with defendants. However, the DOJ objected to the proposed settlement under 31 U.S.C. § 3730(b)(1)—which provides that an FCA lawsuit “may be dismissed only if the court and the Attorney General give written consent to the dismissal and their reasons for consenting”—arguing, among other things, that “the settlement amount was “appreciably less than . . . the Government’s estimate of total damages.”

    The Fourth Circuit concluded that, while a relator has the right to pursue his or her FCA claim after the United States declines to intervene, “the Attorney General possesses an absolute veto power over voluntary settlements in FCA qui tam actions.” In reaching this conclusion, the appellate panel emphasized the fact that, in an FCA case, the United States Government is a real party in interest, and, as such, it suffered damages as a result of the fraudulent conduct at issue. The holding largely aligns with existing Fifth and Sixth Circuit precedent, establishing an absolute veto power for the United States over settlements in declined FCA cases. However, the ruling stands at odds with the Ninth Circuit standard set forth in U.S. ex rel. Killingsworth v. Northrop Corp., 25 F.3d 715 (9th Cir. 1994), which ruled that, once it has declined to intervene, the Government can object to a proposed settlement only for “good cause,” and a settlement agreement may be invalidated only following a hearing to determine if the settlement is fair and reasonable.

    On the issue of statistical sampling, the district court had determined that the use of statistical sampling evidence would be improper when a case turns on the medical necessity for individual patients. Though the issue was certified for interlocutory review, the Appellate panel declined to decide this issue because, among other reasons, the use of statistical sampling is not a pure question of law and, as such, interlocutory review had been “improvidently granted.”

    Additional information and materials covering the FCA, the Financial Institutions Reform, Recovery, and Enforcement Act (FIRREA), and the Program Fraud Civil Remedies Act (PFCRA) can also be found in BuckleySandler’s False Claims Act and FIRREA Resource Center.

    Courts False Claims Act / FIRREA DOJ FCA appellate

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  • 9th Circuit Panel Reverses and Remands Dismissal of Pro Se Plaintiff’s Breach of Contract Claim in Connection with Bank’s Trial Loan Modification Process

    Courts

    In an opinion filed on March 13, a three-judge panel of the U.S. Court of Appeals for the Ninth Circuit reversed and remanded a district court’s dismissal of a homeowner-plaintiff’s breach of contract claim against a major bank for damages allegedly suffered when she unsuccessfully attempted to modify her home loan over a two-year period. Oskoui v. J.P. Morgan Chase Bank, N.A., [Dkt No. 47-1] Case No. 15-55457 (9th Cir. Mar. 13, 2017) (Trott, S.). The court also remanded with instructions to permit the pro-se plaintiff to amend her complaint to allege a right to rescind in connection with her previously-dismissed TILA claim in light of the Supreme Court’s January 2015 decision in Jesinoski v. Countrywide Home Loans, Inc. And, finally, the panel affirmed the district court’s ruling that the facts alleged demonstrated a claim under California’s Unfair Competition Law (“UCL”) because, among other reasons, the factual record supported a determination that the bank knew or should have known that the homeowner was plainly ineligible for a loan modification; yet, the bank encouraged her to apply for modifications (which she did), and collected payments pursuant to trial modification plans. 

    In reversing and remanding the district court’s ruling dismissing the breach of contract claim, the Ninth Circuit pointed to the styling on the first-page of the complaint—“BREACH OF CONTRACT”—along with allegations about the explicit offer language contained in the bank’s trial modification documents.  The Ninth Circuit relied on the Seventh Circuit’s opinion in Wigod v. Wells Fargo, which it identified as the “leading federal appellate decision on this issue of contract,” to “illuminate the viability” of plaintiff’s breach of contract claim in connection with trial plan documents.  673 F.3d 547 (7th Cir. 2012). The Ninth Circuit remanded the claim with instructions to permit the plaintiff to amend if necessary in order to move forward with her breach of contract claim.

    Courts Lending TILA UDAAP appellate Mortgages CA UCL

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  • New DOJ Official to Oversee Fraud Section

    Financial Crimes

    Trevor McFadden, previously a partner with the law firm Baker McKenzie, was appointed Deputy Assistant Attorney General last month, with oversight over the Fraud and Criminal Appellate Sections.  He takes over from Sung-Hee Suh, who was appointed to the role in September 2014.

    Criminal Enforcement Fraud Miscellany appellate

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