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District Court grants summary judgment for debt collector over dunning emails
On June 23, the U.S. District Court for the Northern District of Illinois granted a defendant’s motion for summary judgment, ruling that dunning emails sent to collect unpaid credit card debt did not violate the FDCPA. The plaintiff received an email from the defendant stating that it was attempting to collect the debt on behalf of the creditor, and that due to the age of her debt, the creditor could not sue her for it. While the email stated that “making a payment on a time-barred debt has the potential to restart the statute of limitations for suit on the debt,” it went on to say that it was the creditor’s policy “never to file suit on a debt after the original statute of limitations has expired” and that it never sells such debt. A few days later, the defendant sent the plaintiff an email attempting to collect a separate debt owed to a different creditor. The plaintiff’s attorney sent a letter informing the defendant that she represented plaintiff and requested that plaintiff not be contacted again. After the plaintiff received a third email from the defendant, she sued alleging the defendant violated Section 1692e by urging her to pay a debt without disclosing that the defendant could not sue or report the debt. She further alleged that the defendant violated the FDCPA by continuing to send communications even after the defendant knew she was represented by an attorney. The plaintiff argued that she suffered an injury—and had standing—because she refrained from making purchases and because the defendant had wasted her time.
The court disagreed, writing that the plaintiff failed to put forth evidence demonstrating some form of financial harm in order to have Article III standing. The court observed that “[o]ne does not suffer a monetary injury by refraining from making a purchase; one still has her money if she refrains from making a purchase. Paying too much for an item constitutes an economic injury but refraining from paying for an item does not. At best, plaintiff’s action might have left her with a feeling of want or desire, but such feelings are not concrete injuries.” Moreover, “[e]ven if plaintiff could be thought to have suffered an injury, her decision to refrain from any particular purchase is not fairly traceable to defendant,” the court wrote. And though the court found standing on her claim related to defendant’s continued contact, the court held that “Section 1692c(a)(2) applies only where the debt collector knows the consumer is represented by an attorney with respect to the specific debt being collected.” The defendant needed to be informed that the attorney was representing the plaintiff on both creditors’ debts for the third email to be a violation of the FDCPA, the court concluded.
District Court grants defendant’s judgment in FDCPA suit over dispute response
On June 21, the U.S. District Court for the Western District of North Carolina granted a defendant’s motion for judgment on the pleadings in an FDCPA case concerning dispute responses over a debt. According to the order, the defendants—who represented a bank—sent a letter to the plaintiff attempting to collect an unpaid credit card debt. The letter included information about the creditor, the outstanding balance, and a validation notice. The plaintiff disputed the debt and requested validation of charges, payments, and credits on the account. The defendants responded with another letter, providing information about the original creditor and the balance of the unpaid debt. The plaintiff then sent another letter to the defendants requesting the original account agreement, all original account level documentation, and a “wet ink signature of the contractual obligation.” The defendants filed a collection suit against the plaintiff. The plaintiff filed suit in response, alleging the collection lawsuit violated the FDCPA and North Carolina state law because it “unjustly” condemned and vilified plaintiff for his non-payment of the alleged debt.
The court found that the “[p]laintiff’s allegations misconstrue the obligations of the debt collector in verifying the debt.” The court also noted that the FDCPA did not require the defendants provide “account level documentation,” stating that “[v]erification only requires a showing that the amount demanded ‘is what the creditor is claiming is owed,’ not conclusive proof of the debt.”
District Court approves $1.4 million FCRA settlement
On June 17, the U.S. District Court for the Southern District of California granted final approval of a class action settlement resolving claims that a hospitality company violated the FCRA and various California laws. According to the order, plaintiffs filed a putative class action alleging that the company violated the FCRA by failing to make proper disclosures and obtain proper authorization during its hiring process. Additionally, the plaintiffs claimed that the company’s background check forms were allegedly defective because they “contained information for multiple states for whom background checks were run” in violation of California’s Investigative Consumer Reporting Agencies Act and other California laws. Under the terms of the settlement, the defendant will pay nearly $1.4 million, of which class members will receive $821,714 in total ($63.29 per class member), $10,127 will go towards settlement administration costs, $349,392 will cover attorneys’ fees, and $5,000 will be paid to each of the two named plaintiffs.
5th Circuit remands nonjudicial foreclosure suit back to state court
On June 16, the U.S. Court of Appeals for the Fifth Circuit held that a plaintiff borrower’s requested damages in a foreclosure lawsuit did not exceed the federal jurisdictional threshold amount of $75,000, and sent the case back to Texas state court. The plaintiff sued the financial institution in state court after it sought a nonjudicial foreclosure on his house, asserting violations of the Texas Debt Collection Act, breach of the common-law duty of cooperation, fraud, and negligent misrepresentation. The suit was removed to the U.S. District Court for the Northern District of Texas, with the defendant arguing that the suit automatically stayed its nonjudicial foreclosure sale, thus putting the value of the house ($427,662) as the amount in dispute, instead of the plaintiff’s requested relief of $74,500. The plaintiff moved to remand the case to state court on the premise “that the amount in controversy could not exceed the stipulated maximum of $74,500.” The district court denied the plaintiff’s motion, ruling that it “had to measure the amount in controversy ‘by the value of the object of the litigation,’” and not by what the plaintiff’s complaint says the damages were not to exceed.
In reversing and remanding the case to state court, the 5th Circuit concluded that, because the defendant did not show that the automatic stay brought the house’s value into controversy, it “failed to establish by a preponderance of the evidence that the amount in controversy exceeded $75,000.” The appellate court agreed with the plaintiff’s assertion that the house was simply collateral and “thus irrelevant to the amount in controversy,” writing that “[i]t is well-settled that neither the collateral effect of a suit nor the collateral effect of a judgment may count toward the amount in controversy.” The 5th Circuit also determined that the plaintiff expressly stipulated in both his original state-court petition and in a declaration “that he is seeking total damages not to exceed $74,500,” and that this stipulation is legally binding.
District Court certifies class in website accessibility ADA suit
On June 10, the U.S. District Court for the Western District of Pennsylvania certified a putative class action against an online apparel company related to alleged violations of the Americans with Disabilities Act (ADA). The plaintiff claimed that he was unable to access the defendant’s website because the website did not facilitate access to customers using screen readers or other auxiliary aids. This lack of access made the website not fully accessible to individuals who are blind or visually impaired—a “violation of the effective communications and equal access requirements of Title III” of the ADA. The plaintiff sued, seeking to include a class of similarly situated blind and visually impaired individuals who use screen readers or other auxiliary aids to access the defendant’s website and/or mobile app. According to the plaintiff, the defendant failed to have in place adequate policies and practices to ensure its website was fully accessible, and that, although the defendant maintains a single brick-and-mortar location, most of its sales are digital. In certifying the class, the court determined, among other things, that the defendant’s “website and other digital properties affected all members of the class, and thus the class as a whole shares the same interest in obtaining the injunctive relief provided by the settlement—prospective changes to [defendant’s] digital properties.” The court also preliminarily approved the proposed class action settlement, which requires, among other things, that the defendant make several changes to its policies and procedures to ensure accessibility of its digital properties and to make sure it complies with the Web Content Accessibility Guidelines 2.1.
California appeals court says lender cannot move bitcoin loan suit to Delaware
On June 14, the California Court of Appeal for the Second Appellate District reversed a trial court’s decision staying a suit against a lender and its loan payment processor (collectively, “defendants”) and enforcing a Delaware forum selection clause. The appeals court held that the plaintiff borrower’s unwaivable right to a jury trial under California law could be violated if the case proceeded in Delaware. According to the opinion, the plaintiff obtained $2.275 million in loans secured by bitcoin from the lender (a Delaware LLC that is licensed and regulated by California’s Department of Financial Protection and Innovation). When the value of bitcoin dropped, the lender sold the plaintiff’s bitcoin under the terms of the governing loan agreements. The plaintiff sued, “seeking, among other things, damages, return of his bitcoin, and cancellation of the loan agreements.” The defendants moved to stay the case because the Delaware forum selection clause required the case to be litigated in Delaware. The plaintiff countered that transferring the case to Delaware would “substantially diminish” his unwaivable rights under California law. The trial court eventually concluded that transferring the case to Delaware would not diminish the plaintiff’s rights and granted the stay pending litigation in Delaware. The trial court also stayed a second suit brought by the plaintiff alleging violations of California’s Unfair Competition Law and False Advertising Law, holding that the second suit involved the same primary rights as the first suit.
In reviewing the consolidated cases, the appeals court determined, among other things, that the Delaware forum selection clause in this case contains a predispute jury waiver. “Because California has a fundamental policy against such a waiver, Defendants carry the burden of proving that Delaware would not diminish this important right,” the appeals court wrote, adding that under Delaware law “contractual provisions that waive the contracting parties’ right to trial by jury have been upheld, and relevant case law provides insufficient assurance that Delaware courts will apply California’s important public policy to this dispute.” Additionally, the appeals court concluded that the defendants’ proposed “offer to stipulate that the Delaware court should apply California law” provides “little assurance that a Delaware court would enforce such a stipulation under the facts present here.”
6th Circuit reverses and remands judgment in debt collection suit
On June 15, the U.S. Court of Appeals for the Sixth Circuit reversed and remanded a district court’s summary judgment ruling in favor of a defendant-appellee law firm, holding that it did not first exhaust all of its efforts to collect from the actual debtor. According to the opinion, the plaintiff’s husband was convicted of embezzlement and willful failure to pay taxes and was sent invoices for his legal fees by another law firm, which he did not pay. The law firm hired the defendant to collect on the debt. The defendant filed a lawsuit against the plaintiff and her husband, arguing under the Ohio Necessaries Statute that the husband was liable to third parties for necessaries, such as food, shelter, and clothing that were provided to his wife. An Ohio state court ruled in favor of the plaintiff, and an interlocutory appeal by the defendant was denied. The plaintiff then filed suit against the defendant, alleging that defendant’s underlying suit violated the FDCPA by attempting to collect under the claim that she was liable for her spouse’s debt. The district court granted the defendant’s summary judgment motion, which the plaintiff appealed.
On the appeal, the 6th Circuit found that the defendant did not follow the express commands of the Ohio Supreme Court's 2018 decision in Embassy Healthcare v. Bell, which held that spouses who are not debtors are liable only if the debtor does not have the assets to pay the debt themselves. The 6th Circuit found that the defendant did not satisfy those prerequisites to collect from the plaintiff when it filed a joint-liability suit against her and her husband. Thus, the collection efforts against the spouse who incurred the debt must be exhausted “before attempting to collect from a spouse.” The 6th Circuit reversed the district court’s judgment and remanded for further proceedings with instructions to enter judgment in favor of the plaintiff.
District Court grants preliminary approval of class action settlement in data breach case
On June 21, the U.S. District Court for the Southern District of New York granted preliminary approval of a class settlement in an action against a cable TV and communications provider (defendant) for failing to protect current and former employees’ (plaintiffs) personal information and prevent a 2019 phishing attack. According to the plaintiffs’ supplemental memorandum in support of preliminary approval of settlement, the defendant notified the plaintiffs (as well as the attorneys general of several states) that a successful phishing campaign was launched against them. The phishing scheme resulted in cybercriminals being able to “access” and “download” a report containing the unencrypted personally identifiable information (PII) of 52,846 plaintiffs. The plaintiffs alleged that as a result of the data security incident they suffered concrete injuries, including, inter alia, identity theft, the exposure of their PII to cybercriminals, a substantial risk of identity theft, and actual losses. Under the terms of the preliminarily approved settlement, class members are eligible to enroll in three years of identity protection and credit monitoring, and may receive reimbursement of out-of-pocket expenses and compensation for up to three hours spent dealing with the security incident.
5th Circuit says loan contract containing grace period should be enforced
On June 16, the U.S. Court of Appeals for the Fifth Circuit reversed a district court’s summary judgment ruling in favor of a defendant lender, holding that a deadline accompanied by a grace period in a loan modification trial plan should be enforced. The plaintiff defaulted on his loan and sought a loan modification. The defendant provided the plaintiff an opportunity to participate in a trial period plan, which required three monthly payments due by January 1, February 1, and March 1, 2019. The trial period plan (TPP) also specified that a payment would be considered timely provided it was made within the month in which it was due. According to the opinion, even though the plaintiff “effectively accepted the terms of the TPP when he made the first trial period payment” within the grace period, the defendant informed him “he was ‘ineligible’ for the loan modification because he failed to comply with the terms of the TPP” and posted his property for foreclosure. The plaintiff sued the defendant for breach of contract, but the district court granted summary judgment to the defendant, declining to “give force to the grace period provisions” and concluding that the plaintiff did not comply with the payment deadlines.
On appeal, the 5th Circuit held that it will enforce a grace period included in a valid, binding contract. “If a lender sets a deadline for payment, but allows the borrower to make that payment anytime ‘in the month in which it is due,’ then the borrower may make that payment anytime in the month in which it is due,” the appellate court wrote. “That’s exactly what [the defendant] offered the borrower here—a deadline accompanied by a grace period. Yet [the defendant] nevertheless contends that we should ignore the grace period.” The 5th Circuit also rejected the defendant’s argument that the trial period plan was not a valid binding contract, pointing out that the text of the TPP made it clear that the defendant intended to be bound by its terms upon the plaintiff’s performance. Deadlines and grace periods co-exist by design, the appellate court explained, noting that “[g]race periods facilitate contractual relationships by making clear which deadlines are aspirational and which are mission-critical.”
11th Circuit reversal emphasizes “harmonized” TILA, FDCPA statements
On June 7, the U.S. Court of Appeals for the Eleventh Circuit held that an individual claiming to have acted as a custodian of an account and not in her personal capacity must arbitrate claims brought against a national bank (defendant). The plaintiff and her mother co-owned an investment account that was eventually transferred to the defendant. The plaintiff’s mother notified the bank that the plaintiff would remain co-owner of the account and signed a brokerage account application containing an arbitration clause. Several years later, after the plaintiff noticed that numerous withdrawals were being made from the account by another family member, she obtained legal guardianship of her mother and applied for another brokerage account in order to move the funds to a new account she could access and oversee. The application included a brokerage agreement (which listed her mother as the account owner and was signed by the plaintiff as a joint account owner/custodian and as the primary applicant). The agreement contained a clause requiring arbitration of “[a]ll controversies that may arise between you, us and [the broker] concerning any subject matter, issue or circumstance whatsoever (including, but not limited to, controversies concerning any Account, order or transaction, or the continuation, performance, interpretation or breach of this or any other agreement between you, us and [the broker], whether entered into or arising before, on or after the date this Account is opened).”
The plaintiff eventually sued the bank alleging theft, aiding and abetting theft and fraud, and negligence, among other claims. The plaintiff contended that she was not bound by the arbitration agreement because she signed the agreement “not in her personal capacity, but as her mother’s guardian,” and that there is no arbitrable issue because her personal claims did not arise from the agreement. The district court granted the defendant’s motion to compel arbitration after determining the plaintiff had not alleged that the defendant fraudulently obtained her signature.
On appeal, the 11th Circuit interpreted the word “you” in the arbitration clause as referring to the plaintiff “as the person who applied for the account and signed the application.” In determining that the plaintiff is a signatory to the defendant’s agreement, the appellate court concluded that the plaintiff “has not alleged that her signature was nonvoluntary or otherwise fraudulently obtained[,]” and thus is bound by the arbitration clause. Moreover, the 11th Circuit rejected the plaintiff’s argument that her claims are not covered by the arbitration clause, writing that the “clause explicitly contemplates disputes arising from other issues or agreements ‘whether entered into or arising before, on or after the date this Account is opened.’”