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  • Pennsylvania appeals court upholds broad standard for “deception” under state consumer protection law

    Courts

    On September 12, the Superior Court of Pennsylvania held that Pennsylvania’s Uniform Trade Practices and Consumer Protection Law (UTPCPL) imposes strict liability on businesses who deceive consumers and does not require proof of fraud or negligent misrepresentation to state a claim. The plaintiffs brought common law claims of fraudulent and negligent misrepresentation and a statutory claim under the UTPCPL against insurance companies related to the sale of various insurance products. The common law claims of fraudulent and negligent misrepresentation went to a jury, which returned verdicts on both counts in favor of the insurance companies. The trial judge, however, found that the insurance companies violated the “deceptive” provision of the UTPCPL and awarded damages to the consumers. The insurance companies appealed, arguing that (i) the jury verdict on the common law claims required the court to dismiss the UTPCPL claim, and (ii) challenging the judge’s damages award calculation.

    The appellate court affirmed the trial court’s determination that the defendants acted deceptively under the UTPCPL. The insurance companies argued that the UTPCPL claim was barred by the doctrines of collateral estoppel and res judicata based on the jury’s determination that the defendants had not committed a negligent misrepresentation. The appellate court, however, explained that these doctrines do not apply because the UTPCPL raises distinct issues. The court rejected the argument that the consumer must prove common law negligent misrepresentation to bring a claim under the deceptive prong of the UTPCPL. The court concluded that “any deceptive conduct, ‘which creates a likelihood of confusion or of misunderstanding,’” is actionable under the UTPCPL “whether committed intentionally (as in a fraudulent misrepresentation), carelessly (as in a negligent misrepresentation), or with the upmost care (as in strict liability).” The court also upheld the trial court’s damages determination under the UTPCPL, finding that the judge’s calculation was appropriate and consistent with the statute.

    Courts State Issues Deceptive Insurance Consumer Protection

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  • President Trump issues Executive Order authorizing sanctions in the event of foreign interference in U.S. elections

    Financial Crimes

    On September 12, President Trump announced the issuance of Executive Order 13848 (E.O.), which authorizes sanctions against foreign persons found to have engaged in, assisted, or otherwise supported foreign interference in U.S. elections. Should an intelligence assessment determine such activity has occurred, Section 2 of the E.O. requires that transactions in property and interests of such interfering persons that are in the U.S. or under control of a U.S. person be blocked, and Section 3 of the E.O. directs the Secretaries of State and Treasury—in consultation with the heads of other appropriate agencies—to recommend to the President additional sanctions against “the largest business entities licensed or domiciled in a country whose government authorized, directed, sponsored, or supported election interference, including at least one entity from each of the following sectors: financial services, defense, energy, technology, and transportation.” Such additional sanctions may include, with respect to the targeted entities, (i) blocking all transactions related to property and interests subject to U.S. jurisdiction; (ii) prohibitions on U.S. financial institutions making loans or extending credit to identified entities; (iii) prohibitions on transfers of credit or payments between, by, or through financial institutions for the benefit of such an entity; and (iv) prohibitions on U.S. persons investing in equity or debt of such entities.

    Financial Crimes OFAC Department of Treasury Sanctions Executive Order Trump

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  • SEC confirms staff statements create no enforceable legal obligations

    Agency Rule-Making & Guidance

    On September 13, Securities and Exchange Commission (Commission) Chairman, Jay Clayton, issued a statement confirming that staff communications, in the form of written statements, compliance guides, letters, speeches, responses to frequently asked questions, and responses to specific requests for assistance, are “nonbinding and create no enforceable legal rights or obligations of the Commission or other parties.” Clayton’s statement echoes a similar position taken in a joint statement by five federal agencies regarding supervisory guidance, released two days earlier (previously covered by InfoBytes here). Clayton emphasized that only Commission adopted rules and regulations have the force and effect of law and encouraged public engagement on staff statements in order to assist the Commission in developing future rules and regulations.

    Agency Rule-Making & Guidance SEC Supervision Enforcement Securities

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  • Florida appeals court finds consumer is entitled to attorney’s fees following debt collection suit

    Courts

    On September 14, a Florida appeals court held that a consumer was entitled to attorney’s fees after a debt collector voluntarily dismissed its “account stated” collection lawsuit for an unpaid credit card balance. Following the debt collector’s voluntary dismissal, the consumer moved for attorney’s fees under a provision in the credit card account agreement that provides for fees to the creditor in any collection action and the reciprocity provision in Section 57.105(7), Florida Statutes (2015). The Florida reciprocity statute permits a court to grant reasonable attorney’s fees to a prevailing party, whether as plaintiff or defendant, with respect to an action to enforce the contract. The appellate court reversed the trial court’s order and found that the consumer was entitled to attorney’s fees. The court concluded that, because the consumer was the prevailing party and the collection action was to enforce the contract, the reciprocity provision in section 57.105(7) applied to the consumer’s request for attorney’s fees under the terms of the agreement. The court remanded the case to the trial court to determine the attorney’s fee award.

    Courts State Issues Attorney Fees Debt Collection

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  • OFAC reaches $1.5 million settlement with electronics company for alleged Iranian sanctions violations

    Financial Crimes

    On September 13, the U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) announced a $1.5 million settlement with a California-based electronics company for alleged violations of the Iranian Transactions and Sanctions Regulations when it sold equipment to a Dubai-based distributor it knew or had reason to know distributed most, if not all, of its products to Iran. The settlement resolves litigation between the California company and OFAC stemming from a 2014 lawsuit challenging OFAC’s initial $4.07 million civil penalty. While the lower count ultimately granted summary judgment in favor of OFAC after finding enough evidence that the company knew the distributor’s business was primarily in Iran at the time the shipments were made, upon appeal, the D.C. Circuit reached a split decision in May 2017 setting aside OFAC’s initial penalty. While the appellate court affirmed that 34 of 39 shipments in question were in violation of the sanctions regulations, the company had produced emails indicating that the other shipments were intended for a retail store in Dubai. Because the penalty was calculated in such a way that the two shipments categories were “intertwined,” the court remanded the matter to OFAC for further consideration of the total penalty calculation.

    In arriving at the settlement amount, OFAC considered the following aggravating factors: (i) “the [a]lleged [v]iolations constituted or resulted in a systematic pattern of conduct”; (ii) the company exported goods valued at over $2.8 million; and (iii) the company had no compliance program in place at the time of the alleged violations. However, OFAC also considered mitigating factors such as the company’s status as a small business, the company not receiving a penalty or finding of a violation in the five years prior to the transactions at issue, and some cooperation with OFAC. OFAC further noted that following litigation, the company “took additional remedial actions to address the conduct that led to the [a]lleged [v]iolations, including terminating its relationship with [the Dubai-based distributor] and instituting an OFAC sanctions compliance program.”

    Financial Crimes Department of Treasury Sanctions OFAC Iran Courts Appellate Civil Money Penalties

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  • Federal and state financial regulatory agencies issue interagency disaster relief guidance for institutions affected by Hurricane Florence

    Federal Issues

    On September 14, the OCC, Federal Reserve Board, FDIC, NCUA, and the Conference of State Bank Supervisors (collectively, the “agencies”) issued a joint statement providing guidance to financial institutions impacted by Hurricane Florence. The agencies encouraged lenders to work with borrowers in impacted communities and to consider, among other things, (i) whether to modify loans based on the facts and circumstances, and (ii) requesting to operate temporary bank facilities if faced with operational difficulties. On the same day, the FDIC also provided guidance for depository institutions assisting affected customers (see FIL-48-2018), which may include “waiving fees, increasing ATM cash limits, easing credit card limits, allowing loan customers to defer or skip payments, and delaying the submission of delinquency notices to credit bureaus.” Furthermore, the FDIC encouraged depository institutions to use Bank Secrecy Act-permitted “non-documentary verification methods” for customers unable to provide standard identification documents.

    The agencies also reminded institutions to contact their appropriate federal and/or state regulator should they experience disaster-related difficulties when complying with publishing and regulatory reporting requirements, and further noted that institutions may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery. The statement also provides links to previously issued examiner guidance for institutions affected by major disasters.

    Find continuing InfoBytes coverage on disaster relief here.

    Federal Issues OCC Federal Reserve FDIC NCUA CSBS Consumer Finance Mortgages Bank Secrecy Act Disaster Relief

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  • Financial advisor pleads guilty to money laundering in Ecuadorian energy company case

    Financial Crimes

    On September 11, a Miami-based financial advisor pleaded guilty to one count of conspiracy to commit money laundering in connection with his role in making corrupt payments to officials of an Ecuador state-owned and state-controlled energy company. He is scheduled to be sentenced on Nov. 14 in the Southern District of Florida.

    He is the fourth individual, including two former officials of the company, to plead guilty in this case, which concerns efforts by an oil services contractor to make payments to the company's officials in an effort to retain existing contracts and win new business with the company. Another individual who was charged in the same indictment as him, has pleaded not guilty and is currently set to go to trial on October 15. His charges include one count of conspiring to violate the FCPA and one count of violating the FCPA.

    Financial Crimes Anti-Money Laundering Anti-Corruption FCPA

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  • Aircraft manufacturing company settles FCPA charges with SEC

    Financial Crimes

    On September 12, the SEC announced that an aircraft manufacturing company agreed to pay $13.9 million to settle FCPA charges related to payments made through a subsidiary in connection with the sales of elevator and airline equipment in Azerbaijan and China. According the SEC’s Order, from 2012 through 2014, the Connecticut-based company, through its wholly owned subsidiary, made illicit payments to Azerbaijani officials to facilitate the sales of elevator equipment.

    The Order also included other conduct that both the DOJ and SEC have focused on in recent years, including the use of agents and gifts and entertainment. For example, the Order detailed conduct by the company and a joint venture partner from 2009 to 2013 in which an agent in China received improper commissions totaling $55 million in connection with the company’s attempt to win airline business in China. The Order also found that the company, from 2009 through 2015, improperly “provided trips and gifts to various foreign officials in China, Kuwait, South Korea, Pakistan, Thailand, and Indonesia” in order to obtain business. The company consented to the SEC’s order without admitting or denying the findings that it violated the anti-bribery, books and records, and internal accounting controls provisions of the FCPA.

    Financial Crimes SEC DOJ FCPA

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  • DOJ secures additional guilty pleas in wide-ranging Venezuelan energy company case

    Financial Crimes

    On September 13, the DOJ announced two additional guilty pleas in its wide-ranging foreign bribery investigation into payments to officials of a Venezuela’s state-owned energy company. The first individual, a former manager of a Texas-based logistics and freight forwarding company, pleaded guilty to one count of conspiracy to violate the FCPA in connection with corruptly securing contracts, contract extensions, and favorable contract terms from the energy company. He pleaded guilty in the Southern District of Texas, as did the second individual, the energy company official who accepted the bribes, and whose guilty plea was also unsealed. As now revealed, in July 2017, the second individual pleaded guilty under seal to conspiracy to commit money laundering. Both individuals are scheduled to be sentenced in February 2019. Prior Scorecard coverage of the PDVSA matter can be viewed here.

    With these guilty pleas, DOJ has now brought charges against 18 individuals as part of its investigation into bribery at the company. Fourteen individuals have pleaded guilty. Due to the limits inherent in the FCPA, the DOJ’s charges against the corrupt foreign officials such as the second individual (i.e., the energy company's employees) have been based on money laundering and not FCPA (see Prior FCPA Scorecard Coverage here and here) whereas the charges against the U.S.-based individuals who made and/or directed the corrupt payments generally have included FCPA violations (see Prior FCPA Scorecard Coverage here).

    Financial Crimes DOJ FCPA

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  • 3rd Circuit: Failure to provide job applicants consumer reports has standing under Spokeo

    Courts

    On September 10, the U.S. Court of Appeals for the 3rd Circuit issued a precedential order reversing in part and affirming in part a lower court’s dismissal of claims brought by three individuals who claimed a company violated the Fair Credit Reporting Act (FCRA) when it failed to provide them with copies of their consumer reports. According to the opinion, the three plaintiffs applied for jobs with the company and were ultimately not hired due to information discovered in their background checks. The plaintiffs filed a putative class action asserting the company did not send them copies of their background checks before it took adverse action when deciding not to hire them, and also failed to provide them with notices of their rights under the FCRA. The district court dismissed the claims against the company, finding there was only a “bare procedural violation,” and not a concrete injury in fact as required under the Supreme Court’s 2016 ruling in Spokeo, Inc. v. Robins (covered by a Buckley Sandler Special Alert). On appeal, the 3rd Circuit reversed the lower court’s decision, concluding that the plaintiffs had standing to assert that the company violated the FCRA by taking adverse action without first providing copies of their consumer reports. Additionally, the court noted that “taking an adverse employment action without providing the required consumer report is ‘the very harm that Congress sought to prevent, arising from prototypical conduct proscribed’ by the FCRA.” However, the appellate court affirmed the lower court’s dismissal of the plaintiffs’ claim alleging the company failed to provide them with a notice of their FCRA rights, finding that the claim was a “‘bare procedural violation, divorced from any concrete harm,’” and lacked Article III standing under Spokeo. The 3rd Circuit remanded the case for further proceedings consistent with their findings.

    Courts Third Circuit Appellate Consumer Reporting FCRA Spokeo

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