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  • Supreme Court denies writ challenging data breach standing

    Courts

    On February 20, the U.S. Supreme Court denied without comment a medical insurance company’s petition for writ of certiorari to challenge an August 2017 D.C. Circuit Court of Appeals decision, which reversed the dismissal of a data breach suit filed by the company’s policyholders in 2015. According to the D.C. Circuit opinion, the policyholders sued the medical insurance company after the company announced that an unauthorized party had accessed personal information for 1.1 million members. The lower court dismissed the policyholder’s case, holding that they did not have standing because they could not show an actual injury based on the data breach. In reversing the lower court’s decision, the D.C. Circuit, citing the Supreme Court ruling in Spokeo, Inc. v. Robins, held that it was plausible that the unauthorized party “has both the intent and the ability to use [the] data for ill.” This was sufficient to show that the policyholders had standing to bring the claims because they alleged a plausible risk of future injury.

    Courts Privacy/Cyber Risk & Data Security Spokeo Class Action U.S. Supreme Court Appellate D.C. Circuit

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  • Supreme Court denies cert petition in Spokeo

    Courts

    On January 22, the U.S. Supreme Court denied a second petition for writ of certiorari in Spokeo v. Robins, thereby declining to reconsider its position on Article III’s standing to sue requirements or to provide further clarification on what constitutes injury in fact. Citing “widespread confusion” over how to determine whether intangible injuries qualify as injury in fact, and therefore meet the standing threshold, Spokeo argued in its petition that review is “warranted to ensure that the jurisdiction asserted by the federal courts remains within constitutional limits.” The second petition was filed by Spokeo last December to request a review of the U.S. Court of Appeals for the Ninth Circuit’s August 2017 decision—on remand from the Supreme Court (see Buckley Sandler Special Alert here)—which ruled that Robins had established standing to sue for alleged violations of the Fair Credit Reporting Act (FCRA) by claiming an intangible statutory injury without any additional harm. The 9th Circuit opined that information contained in a consumer report about age, marital status, educational background, and employment history is important for employment and loan applications, home purchases, and more, and that it “does not take much imagination to understand how inaccurate reports on such a broad range of material facts about Robins’s life could be deemed a real harm.” Further, guaranteeing the accuracy of such information “seems directly and substantially related to FCRA’s goals.” The 9th Circuit reversed and remanded the case to the Central District of California after finding that Robins had adequately alleged the essential elements of standing (see previous InfoBytes coverage here).

    Courts U.S. Supreme Court Ninth Circuit Appellate FCRA Litigation Spokeo

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  • Servicemember and bank settle SCRA issue, dismiss Supreme Court request

    Courts

    On January 5, the Supreme Court dismissed a servicemember’s petition for a writ of certiorari after receiving a Stipulation of Dismissal from both parties who agreed to settle the dispute. As previously covered by InfoBytes, the servicemember filed the petition after the U.S. Court of Appeals for the Fourth Circuit affirmed the lower court’s decision that the servicemember was not entitled to the protections against non-judicial foreclosures under the Servicemembers Civil Relief Act (SCRA). The lower court concluded that because the servicemember “incurred his mortgage obligation during his service in the Navy, the obligation was not subject to SCRA protection” even through the servicemember, after a discharge period, later re-enlisted with the Army.

    Courts U.S. Supreme Court SCRA Foreclosure Settlement Fourth Circuit Appellate

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  • City of Philadelphia’s discriminatory lending lawsuit moves forward

    Lending

    On January 16, a federal judge in the U.S. District Court for the Eastern District of Pennsylvania denied a national bank’s motion to dismiss the City of Philadelphia’s (City) claims that the bank engaged in alleged discriminatory lending practices in violation of the Fair Housing Act (FHA). As previously covered in InfoBytes, the City filed a complaint in May of last year against the bank alleging discrimination under both the disparate treatment and disparate impact theories. The City asserted that the bank’s practice of offering better terms to similarly-situated, non-minority borrowers or refusing to make loans in minority neighborhoods has led to foreclosures and vacant homes, which in turn, has resulted in a suppression of property tax revenue and increased cost of providing services such as police, fire fighting, and other municipal services. In support of its motion to dismiss, the bank argued, among other things, that the City’s claim (i) is time barred; (ii) improperly alleges the disparate impact theory; and (iii) fails to allege proximate cause as required by a recent U.S. Supreme Court ruling (see previous Special Alert here).

    While the court expressed “serious concerns about the viability of the economic injury aspect of the City’s claim with regard to proximate cause,” the court found that the bank “has not met its burden to show why the City’s entire FHA claim should be dismissed.” Consequently, the court held that the case may proceed to discovery beyond the two-year statute of limitations period for FHA violations in order to provide the City an opportunity to prove whether the bank’s policy caused a racial disparity that constituted a violation continuing into the limitations period.

    Lending State Issues Fair Lending Redlining FHA U.S. Supreme Court Disparate Impact Mortgages

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  • Supreme Court to review whether SEC’s ALJ appointment process is constitutional

    Courts

    On January 12, the U.S. Supreme Court announced it had granted a writ of certiorari in Lucia v. SEC—a case which challenges the SEC’s practice of appointing administrative law judges (ALJs) and moves the Court to consider whether the ALJ appointment practice violates the Appointments Clause (Clause) of the Constitution. In Lucia, the petitioner—against whom an ALJ had issued sanctions, imposed a lifetime securities ban, and fined $300,000—appealed the decision to the D.C. Circuit Court of Appeals, and argued that ALJs are officers of the United States and therefore subject to provisions of the Clause, including the requirement that officers be appointed by the president, the head of a department, or a court of law. However, the D.C. Circuit upheld the ALJs sanctions and ruled that ALJs are not “inferior officers” subject to the Clause. In his petition for certiorari, the petitioner claimed that because he was subjected to a “trial before an unconstitutionally constituted tribunal,” the ALJ’s decision should be dismissed or a new hearing granted.

    Notably, last November, the Solicitor General of the United States submitted a brief on behalf of the SEC to the Supreme Court, arguing that the SEC views in-house judges as officers of the U.S. government—not mere employees—who are subject to the Clause. Additionally, on November 30, the SEC ratified the appointment of its ALJs to resolve “any concerns that administrative proceedings presided over by its ALJs violate the Appointments Clause.”

    A decision by the Court may resolve a split between the D.C. Circuit, which has ruled that ALJs are not “inferior officers” of the U.S. government, and the Tenth and Fifth Circuits, which disagreed and ruled separately that ALJs are officers.

    See also previous Lucia coverage in an InfoBytes blog post and a Special Alert concerning the effect a decision in Lucia may have on the ongoing litigation in PHH v. CFPB.

    Courts SEC ALJ U.S. Supreme Court PHH v. CFPB

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  • Supreme Court Rejects Tribal Lenders’ Petition to Avoid CFPB CID

    Courts

    On December 11, the U.S. Supreme Court rejected without comment a petition from online tribal lending entities to appeal a Ninth Circuit Court of Appeals decision that ordered the entities to comply with a CFPB investigation related to small-dollar loan products. As previously covered by InfoBytes, the entities argued that due to tribal sovereignty, the CFPB does not have jurisdiction over the small-dollar lending services. The CFPB urged the Supreme Court to deny the petition, arguing that the Court’s review is unnecessary because “[t]he question at this juncture is solely whether the Bureau may obtain information from petitioners pursuant to a CID,” not “whether petitioners are subject to the Bureau’s regulatory authority.” 

    Courts Consumer Finance CFPB U.S. Supreme Court Payday Lending

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  • CFPB Urges Supreme Court to Reject Tribal Lenders' Petition

    Courts

    On November 9, the CFPB filed a brief with the Supreme Court opposing the petition for a writ of certiorari submitted by online tribal lending entities.  The lenders are challenging a January decision by the Ninth Circuit Court of Appeals, which ordered the entities to comply with a CFPB investigation (previously covered by Infobytes). The litigation stems from the issuance of a civil investigative demand (CID) by the CFPB to online lending entities owned by Native American tribes. The entities argue that due to tribal sovereignty, the CFPB does not have jurisdiction over the small-dollar lending services in question. The district court and the Ninth Circuit concluded that the Consumer Financial Protection Act (CFPA) did not expressly exclude tribes from the CFPB’s enforcement authority and therefore, the entities cannot claim tribal sovereign immunity.

    In its brief opposing the certiorari petition, the CFPB argues that the Ninth Circuit’s holding does not conflict with any prior Supreme Court or court of appeals decision, making further review unwarranted. The CFPB also argues, among other things, that Supreme Court review is unnecessary because “[t]he question at this juncture is solely whether the Bureau may obtain information from petitioners pursuant to a CID,” not “whether petitioners are subject to the Bureau’s regulatory authority.” 

    Courts CFPB Payday Lending Consumer Lending U.S. Supreme Court Appellate Ninth Circuit

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  • Servicemember Files Writ of Certiorari, Petitions Supreme Court to Review SCRA Protections for Non-Judicial Foreclosures

    Courts

    On October 11, a servicemember filed a petition for a writ of certiorari, requesting that the U.S. Supreme Court review an opinion issued by the U.S. Court of Appeals for the Fourth Circuit concerning whether the Servicemembers Civil Relief Act (SCRA) can be applied to a mortgage loan obligation incurred during a borrower’s earlier, distinct period of military service. (See previous InfoBytes summary on Fourth Circuit opinion.) 

    Under the SCRA, servicemembers are afforded certain protections against non-judicial foreclosures of their home while in active military service. Section 3953 provides that a home mortgage “originated before the period of the servicemember’s military service and for which the servicemember is still obligated” cannot be foreclosed upon unless allowed by a court order. However, the appellate court affirmed the district court’s decision in favor of the bank, concluding that because the servicemember “incurred his mortgage obligation during his service in the Navy, the obligation was not subject to SCRA protection” even through the servicemember, after a discharge period, later re-enlisted with the Army.

    The petition argues that the appellate court “misconstrued” and narrowly interpreted the SCRA’s definition of the term “period of military service” under section 3911 by treating the servicemember’s “separate and distinct periods of military service as a single period of service.”

    Courts U.S. Supreme Court SCRA Foreclosure

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  • Second Circuit Cites Spokeo, Rules No Standing to Sue for Violation of FACTA

    Courts

    On September 19, the U.S. Court of Appeals for the Second Circuit issued an opinion ruling that a merchant who had printed the first six numbers of a consumer’s credit card on a receipt violated the Fair and Accurate Credit Transactions Act (FACTA), but that because the violation did not cause a concrete injury, the consumer did not have standing to sue the merchant. Under FACTA, merchants are prohibited from including more than the final five digits of a consumer’s credit card number on a receipt. In this instance, the plaintiff filed a complaint in 2014, followed by an amended complaint later that same year, in which he alleged that he twice received printed receipts containing the first six digits of his credit card number, in violation of FACTA. The plaintiff claimed that the risk of identity theft was a sufficient injury to establish standing. The defendants argued that that the first six digits of the credit card account only identified the card issuer and did not reveal any information about the consumer, which did not “raise a material risk of identity theft.” Citing a Supreme Court ruling in Spokeo v. Robins, the district court opined that a procedural violation of a statute is not enough to allow a consumer to sue, because it must be shown that the violation caused, or at least created a material risk of, harm to the consumer—which, in this case, was not present. Accordingly, the appellate court affirmed the district court’s dismissal for lack of subject matter jurisdiction, but found that the district court erred in dismissing the suit with prejudice.

    Courts Litigation FACTA Second Circuit U.S. Supreme Court Spokeo

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  • Second Circuit Cites Escobar, Vacates and Remands FCA Suit

    Courts

    On September 7, the Second Circuit Court of Appeals issued an order concerning a False Claims Act (FCA) case on remand from the United States Supreme Court. In its order, the three-judge panel determined that the FCA complaint should be reviewed under the higher court’s Escobar standard, which “set out a materiality standard for FCA claims that has not been applied in the present case.” See Universal Health Servs., Inc. v. U.S. ex rel. Escobar, 136 S. Ct. 1989 (2016). As previously discussed in InfoBytes, Escobar holds that a misrepresentation must be material to the government’s payment decision to be actionable under the FCA and that the implied false certification theory can be a basis for liability under the FCA.

    In issuing the order, the appellate court vacated the district court’s dismissal of the relators’ complaint (which it had affirmed the first time around) and remanded for further proceedings to determine whether the bank’s certification was materially false. At issue is a qui tam suit filed against a national bank, in which plaintiffs claimed the bank violated the FCA when it certified to the Federal Reserve that the bank and its predecessors were obeying the law in order to “borrow money at favorable rates” during the financial crisis. The decision originally relied upon two requirements cited in a case overturned by Escobar—“the express-designation requirement for implied false certification claims and the particularity requirement for express false certification claims.”

    Courts False Claims Act / FIRREA Second Circuit Federal Reserve U.S. Supreme Court

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