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2nd Circuit affirms dismissal of whistleblower lawsuit alleging FCA violations
On October 30, the U.S. Court of Appeals for the 2nd Circuit affirmed a district court order dismissing a whistleblower lawsuit alleging violations of the False Claims Act (FCA). The three-judge panel concluded that they did not need to “address the public disclosure bar because the [second amended complaint]… fails to state a claim for a violation of the FCA.” According to the panel, the plaintiff did not allege that the defendant knowingly made a misrepresentation material to the government’s decision and that “failure to adequately plead either of these requirements is fatal to a relator's claim."
The original whistleblower complaint, filed in 2014, alleged that the defendant covered losses on loans that it acquired by taking advantage of a shared loss agreement with the FDIC. The complaint also stated that the defendant knowingly reported write-downs on loans already paid off, sold, or irrelevant to the portfolio. The FDIC declined to intervene, and the case was dismissed. The plaintiff appealed and oral arguments were heard on October 12; however, the order found that the plaintiff failed to identify a false claim or false record and did not establish scienter or motive to commit fraud.
Healthcare providers reach $3.5 million settlement in FDCPA suit after eight years of litigation
On November 2, two healthcare providers settled with plaintiffs after eight years of litigation between the district court and the U.S. Court of Appeals for the 6th Circuit, stemming from alleged violations of the FDCPA, breach of contract, and violations of the Ohio Consumer Sales Practices Act, among other things. According to the order, the defendants allegedly contacted plaintiffs and their legal counsel, requesting that their legal counsel sign a letter to forego any legal settlement or judgment against the defendants to prevent plaintiffs’ accounts from being sent to collections, despite having plaintiffs’ health insurance information. While the defendants deny any fault, wrongdoing, or liability in connection with the claims, the parties agreed to a settlement amount of $3.5 million, with each claimant receiving a cash payment of $25. The class is comprised of 12,000 individuals with health insurance plans accepted by the healthcare provider who were patients at an Ohio facility from 2009 to 2023, and subsequently made payments or were asked to make payments for their treatment, excluding co-pays or deductibles. Additionally, certain class members will also receive a cash payment equal to fifty percent of the amount paid to the healthcare provider.
District Court grants payday lender's motion to stay CFPB case pending Supreme Court decision
On November 3, the U.S. District Court of Nevada granted a payday lender’s motion to stay a case brought by the CFPB, pending a SCOTUS’s decision in Community Financial Services Association of America v. Consumer Financial Protection Bureau (see InfoBytes here and here). The CFPB issued a civil investigative demand (CID) in late 2022 to the lender, as part of an investigation into its lending practices. The lender complied with the CID initially, but later requested a stay due to the impending SCOTUS decision regarding the constitutionality of the CFPB’s funding structure, which could impact the CFPB’s enforcement authority. Although the CFPB opposed the stay by arguing that the extensive delay could hinder its ability to investigate the lender, the court granted the lender’s motion, in line with other district courts that have faced similar issues.
2nd Circuit: Reverse and remand a buy-now-pay-later suit
On November 3, the U.S. Court of Appeals for the Second Circuit reversed and remanded a district court’s decision to deny a buy now pay later servicer’s (defendant) motion to compel arbitration in a class action. The plaintiffs alleged the defendant violated the Connecticut Unfair Trade Practices Act, among other things, after the defendant’s charges incurred overdraft fees on the plaintiff’s checking account. The defendant argued that the consumer agreed, on multiple occasions, to the mandatory arbitration provisions in the servicer’s terms and conditions when she used its services. The district court concluded that the plaintiff did not have “reasonably conspicuous notice of and unambiguously manifest assent to [defendant’s] terms” and therefore plaintiff was not bound by the mandatory arbitration provisions in the defendant’s terms.
The 2nd Circuit panel of three judges identified “several factors” in its finding that the plaintiff had reasonably conspicuous notice, including that defendant’s interface was “uncluttered” adding that “[a] reasonable internet user, therefore, could not avoid noticing the hyperlink to [defendant’s] terms when the user selects ‘confirm and continue’ on the [application].” Further, the court found that the plaintiff “unambiguously manifested her assent” to the defendant’s terms and conditions.
Minnesota AG files complaint against a tribal company for steep rates
On October 30, the Minnesota Attorney General’s office filed a complaint against a Montana tribal economic development entity claiming that the entity’s lending subsidiaries violated state and federal usury laws through deceptive trade practices and false advertising. The complaint alleges that “[d]efendants ignore these laws and have in recent years made thousands of loans to consumers in Minnesota at interest rates exponentially higher than what is permitted. They do so while deceiving Minnesotans to believe the defendant lenders are immune from Minnesota law because they are owned by a federally recognized Indian tribe. But even sovereign entities and their subsidiaries must comply with Minnesota and federal law when they transact business in Minnesota.” The complaint claims that the company’s lending subsidiaries charged interest rates up to 800 percent and led state residents to believe that the entity was exempt from state laws that protect against predatory loans. Minnesota laws cap interest rates for written contracts at 8% unless otherwise exempted. Loan contracts that violate the law may be voidable and have no legal effect. The Attorney General is seeking an injunction to block the company from operating in Minnesota, a declaration that “marketing, offering, issuing, servicing, collection, and providing of [these] loans” is in violation of federal and state laws, and compensation for the residents affected by the defendants’ actions.
Ohio AG files FDCPA suit against debt collectors
On October 31, Ohio State AG Dave Yost filed a complaint against debt collectors for violations of the FDCPA and Ohio Consumer Sales Practices Act. The complaint alleged that the defendants frequently changed the names they used to engage in collection activities and purposefully used names to sound like law firms to mislead consumers. The AG’s complaint also included allegations that the debt collectors failed to honor written requests to verify debts, threatened legal action, engaged in harassing or abusive behavior, and made false, misleading, and deceptive representations.
Judge dismisses FDCPA suit for communication with CRAs
On October 26, a U.S. District Court for the Eastern District of New York granted a motion to dismiss an FDCPA suit holding that there is nothing in the FDCPA that prohibits debt collectors from reporting information about a debt to a credit reporting agency. The plaintiff filed a complaint in January 2023 alleging that the defendant violated the FDCPA by communicating with the plaintiff after the plaintiff requested that the debt collector stop all communications. The plaintiff further alleged that the defendant violated the FDCPA by reporting this debt to the major credit reporting agencies, which subsequently led to the plaintiff being denied credit. While the judge ruled that the plaintiff had standing to sue because of the denial of credit, the judge also ruled that the statute “expressly permits communications with ‘a consumer reporting agency if otherwise permitted by law,’” and that the plaintiff did not allege that negligence was the proximate cause of damages.
2nd Circuit: Court upholds dismissal of whistleblower suit alleging Iran sanctions violations
On October 27, the U.S. Court of Appeals for the Second Circuit denied a petition for a panel rehearing en banc in a False Claims Act (FCA) suit that was dismissed in 2020. The whistleblower suit, filed in 2019, alleged violations of the U.S.’s sanctions on Iran by exchanging foreign currency for U.S. dollars on behalf of Iranian and related terrorist entities. In July 2020, the whistleblower suit was dismissed after the court agreed with U.S. Attorney for the Southern District of New York’s motion to dismiss because the compliant was “legally deficient as it is premised on an incorrect legal theory of liability that is inconsistent with both the FCA and the law regarding civil forfeiture.” The plaintiff appealed to the 2nd Circuit arguing that the district court needed to hold a hearing; however, the 2nd Circuit found the suit had been properly dismissed and that the judge considered extensive briefing before making the determination of the dismissal.
Credit reporting agency, collector granted MTD in FCRA and FDCPA case
On October 26, the U.S. District Court for the District of New Jersey dismissed without prejudice a FCRA and FDCPA lawsuit filed against a law firm and credit reporting agency. The plaintiff alleged that the defendants published inaccurate and incomplete information regarding a trade line for debt allegedly owed to a healthcare facility. The plaintiff claimed that the credit reporting agency refused to validate the debt. The judge held that the FDCPA did not apply to the credit reporting agency because it was not a debt collector, and that plaintiff did not provide any facts that the tradeline was inaccurate. The judge also found that plaintiff failed to state a claim under the FDCPA against the law firm because “merely furnish[ing] a trade line to a credit reporting agency does not violate any provision of the FDCPA.” The plaintiff is allowed to move for leave to file an amended complaint within thirty (30) days if a stronger factual basis for the claims is provided.
7th Circuit: Court upholds dismissal of FDCPA lawsuit over debt information sharing
On October 23, the U.S. Court of Appeals for the Seventh Circuit affirmed the dismissal of a consumer’s putative class action lawsuit alleging that a collection agency violated the FDCPA by sharing the consumer’s debt information with a third-party vendor. The court ruled that the consumer lacked standing because she did not sustain an injury from the sharing of her information.
To collect a defaulted credit-card debt, the defendant collection agency used a third-party vendor to print and mail a collection letter to the consumer. The consumer alleged that the collection agency violated the FDCPA by disclosing to the vendor the consumer’s personal information, and the disclosure was analogous to the tort of invasion of privacy. The appeals court disagreed, reasoning that the sharing of a debtor’s data with a third-party mail vendor to populate and send a form collection letter that caused no cognizable harm, legally speaking. The court also noted that the U.S. Courts of Appeal for the Tenth and Eleventh Circuits have reached similar conclusions. “The transmission of information to a single ministerial intermediary does not remotely resemble the publicity element of the only possibly relevant variant of the privacy tort.”