FCRA Class Actions

Posted On: June 23, 2010 by Michael J. Hassen Email This Post

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FACTA Class Action Defense Cases–Ehrheart v. Verizon Wireless: Third Circuit Court Reinstates Preliminary Approval Of Class Action Settlement Holding Passage Of Clarification Act Did Not Allow Defendant To Withdraw From Settlement Agreement

Verizon’s Decision to Enter into Proposed Class Action Settlement of Class Action Alleging Violation of FACTA (Fair and Accurate Credit Transactions Act) while Clarification Act was Pending before Congress did not Allow Verizon to Back Out of Settlement After Passage of Clarification Act Third Circuit Holds

Plaintiffs filed two putative class actions against Verizon Wireless, one in Pennsylvania and one in Tennessee, alleging that it violated the Fair and Accurate Credit Transactions Act (FACTA), which prohibits merchants in credit or debit card transactions from providing consumers at point of sale with a printed receipt that displays more than the last five digits of the card or its expiration date; specifically, the class action complaint alleged that plaintiffs received a receipt that contained the expiration date of their credit or debit card. Ehrheart v. Verizon Wireless, ___ F.3d ___ (3d Cir. June 15, 2010) [Slip Opn., at 3; Dissenting Opn., at 7-8]. The parties entered into a proposed class action settlement; at the time, the Credit and Debit Card Receipt Clarification Act of 2007 (the Clarification Act) was pending before Congress, and if it passed then plaintiffs’ claims would fail as a matter of law because the Clarification Act insulated merchants from liability for claims based solely on the failure to redact expiration dates during the time period that subsumed plaintiffs’ claims. Slip Opn., at 3-4. The parties moved the district court for preliminary approval of the proposed class action settlement, which the district court granted on April 22, 2008. Id., at 4. The Clarification Act was signed into law on June 22, 2008, and six days later Verizon filed a motion to vacate the approval of the class action settlement. Id. The district court granted Verizon’s motion, and subsequently granted Verizon’s motion for judgment on the pleadings. Id. In vacating its approval of the class action settlement, the district court explained that the Clarification Act applied to any lawsuit that was not yet final and so it applied to the instant class action lawsuit because the proposed class action settlement had not yet received final approval. Dissenting Opn., at 12. “Because Congress eliminated the plaintiffs’ cause of action, the District Court reasoned, it had to vacate its preliminary approval of the Settlement Agreement.” Id. In the district court’s view, “no class action settlement can be fair, adequate or reasonable when Congress has determined that such relief is unfair and unreasonable.” Id., at 13. Plaintiffs appealed, and the Third Circuit reversed.

The Third Circuit explained that “the District Court lost sight of three important points” in granting Verizon’s motion to vacate preliminary approval of the class action settlement: “First, there is a restricted, tightly focused role that Rule 23 prescribes for district courts, requiring them to act as fiduciaries for the absent class members, but that does not vest them with broad powers to intrude upon the parties’ bargain. Second, a strong public policy exists, which is particularly muscular in class action suits, favoring settlement of disputes, finality of judgments and the termination of litigation. Third, our jurisprudence holds that changes in the law after a settlement is reached do not provide ground for rescission of the settlement.” Ehrheart, at 5 (footnote omitted).

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Posted On: December 3, 2009 by Michael J. Hassen Email This Post

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FACTA Class Action Defense Cases–Pezl v. Amore Mio: Illinois Federal Court Denies Class Action Certification/Grants Defense Summary Judgment In FACTA Class Action Because FCRA Does Not Cover Corporations

FACTA Class Action Alleging Defendant Printed more than Last Five Numbers of Credit Card on Customer Receipt not Entitled to Class Action Treatment because Plaintiff Utilized Business Card for Business Purposes and Corporations do not have Private Rights of Action under FCRA Illinois Federal Court Holds

Plaintiff filed a putative class action in Illinois state court against Amore Mio alleging violations of the federal Fair and Accurate Credit Transactions Act (FACTA), which is part of the Fair Credit Reporting Act (FCRA); specifically, the class action complaint alleged that plaintiff used his business credit card at an Amore Mio Restaurant and received a credit card receipt that contained more than the last five digits of his credit card number in violation of FACTA. Pezl v. Amore Mio, Inc., 259 F.R.D. 344, 345 (N.D.Ill. 2009). The original class action complaint was filed by plaintiff’s business, CE Design, but an amended class action complaint substituted in plaintiff as an individual in place of his business. Id., at 345-46. Defense attorneys removed the class action to federal court, id., at 345. Plaintiff moved the district court to certify the litigation as a class action; defense attorneys opposed class action treatment and moved for summary judgment. Id., at 346. The district court denied plaintiff’s motion for class certification and granted defendant’s motion for summary judgment. In ruling on the motions, the district court noted that class action certification generally should be determined prior to addressing the merits, see id., at 346 n.4, so the court began by analyzing plaintiff’s request for class action treatment.

The federal court readily concluded that the numerosity test of Rule 23(a)(1) had been met because the putative class contained thousands of members. See Pezl, at 346. The district court also easily found that the commonality requirement of Rule 23(a)(2) had been satisfied because the “common nucleus of operative fact” involved defendant’s “standardized conduct” of allegedly “printing of receipts in violation of FACTA.” See id., at 346-47. But the court found that plaintiff failed to satisfy the typicality test of Rule 23(a)(3) because of the existence of “defenses particular to the named plaintiff” – specifically, that plaintiff’s claim was “based on a credit card number belonging to a corporation,” id., at 347. As previously noted, plaintiff used a business credit card to pay for a transaction that “was for business purposes,” id. The FCRA, however, excludes business transactions; the FCRA provides for liability to a “consumer,” which is defined as “an individual.” Id. (citations omitted). Plaintiff’s business therefore did not have a private right of action under the FCRA, id. The district court rejected plaintiff’s argument that FACTA claims may be treated differently, holding that “only consumer cardholders have a private right of action under FACTA.” Id., at 347-48 (citation omitted). Accordingly, plaintiff’s claims were not “typical” of the putative class and so the complaint did not warrant class action certification. Id., at 348. (For the same reasons, the federal court additionally found that plaintiff failed to satisfy the adequate representation test of Rule 23(a)(4). See id., at 348 n.8.)

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Posted On: November 4, 2009 by Michael J. Hassen Email This Post

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Class Action Defense Cases–Premium Mortgage v. Equifax: Second Circuit Affirms Dismissal Of Class Action Against Credit Reporting Agencies Holding State-Law Claims Preempted By Fair Credit Reporting Act (FCRA)

Class Action Complaint Against Credit Reporting Agencies Alleging State Law Claims Arising from Sale of “Trigger Leads” to Mortgage Lenders Properly Dismissed because Class Action Claims were Preempted by Federal Fair Credit Reporting Act (FCRA) Second Circuit Holds

Plaintiff, a mortgage lender, filed a putative class action against various consumer reporting agencies, including Equifax, Trans Union and Experian, alleging various state-law claims based on defendants’ “sale of mortgage ‘trigger leads’ to third party lenders”; the class action complaint explained that “trigger leads” reflect a consumer’s interest in obtaining a loan. Premium Mortgage Corp. v. Equifax, Inc., 583 F.3d 103, 2009 WL 3163225, *1 (2d Cir. 2009). According to the allegations underlying the class action complaint, “defendants’ practice of permitting other lenders to purchase ‘pre-screened’ consumer reports…that, in essence, contain trigger leads” results in the disclosure of “proprietary customer information” because “such information is not readily known in the industry and it cannot be obtained except through extraordinary effort.” Id. Specifically, “the prescreened reports in question use the information conveyed by a trigger lead as a screening criterion in order to generate a list of consumers who are in the market for mortgages and other loan facilities” and “[t]he lenders purchasing these lists then compete with plaintiff and similarly situated mortgage brokers by offering terms on loans to the customers.” Id. Defense attorneys moved to dismiss the class action on the grounds that the claims were preempted by the federal Fair Credit Reporting Act (FCRA); the district court granted the motion and dismissed the class action. Id. The Second Circuit affirmed.

The Circuit Court reviewed the district court order de novo. Premium Mortgage, at *2. The Second Circuit readily affirmed the district court’s order with respect to “the bulk of plaintiff’s state common-law claims” based on the FCRA’s unambiguous language that “no requirement or prohibition may be imposed under the laws of any State ... with respect to any subject matter regulated under ... subsection (c) or (e) of section 1681b of this title, relating to the prescreening of consumer reports.” Id. (quoting § 1681t (b)(1)(A)). The class action’s claims concerned “consumer reports,” within the meaning of the FCRA, because “trigger leads are simply one of the constituent parts” of such reports; the Circuit Court therefore rejected plaintiff’s argument that “its claims are not preempted because the trigger leads themselves are not “consumer reports” under the FCRA.” Id. The Second Circuit also rejected plaintiff’s attempt to create a distinction, for preemption purposes, between the class action’s statutory and common-law claims. See id., at *2-*4. Because the claims fell squarely within the FCRA, the Circuit Court affirmed the district court order dismissing the class action complaint on grounds of preemption. Id., at *4.

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Posted On: October 27, 2009 by Michael J. Hassen Email This Post

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FCRA Class Action Defense Cases–Gelman v. State Farm: Third Circuit Affirms Dismissal Of Class Action Complaint Holding Mailer Constituted “Firm Offer” Within Meaning Of Fair Credit Reporting Act (FCRA)

Class Action Alleging Violations of FCRA (Fair Credit Reporting Act) Properly Dismissed because Mailer Constituted “Firm Offer” within Meaning of FCRA Third Circuit Holds

Plaintiff filed a putative class action against State Farm Mutual Automobile Insurance Company alleging violations of the federal Fair Credit Reporting Act (FCRA); specifically, the class action complaint alleged that State Farm obtained credit information in order to send out “prescreened offers” but that it did so in violation of the FCRA. Gelman v. State Farm Mut. Auto. Ins. Co., 583 F.3d 187, 2009 WL 3163553, *2 (3d Cir. 2009). According to the allegations underlying the class action complaint, in November 2004 State Farm asked Experian for plaintiff’s consumer credit report without his consent, and that he did not learn about it until April 2006, “when he received a copy of his consumer credit report from Experian.” Id. State Farm claimed that it obtained plaintiff’s credit report for a “permissible purpose” within the meaning of the FCRA, and “used it to select [plaintiff] to receive materials pertaining to insurance products that he might qualify for and/or be interested in.” Id. The mailer sent to plaintiff stated that it was a “prescreened offer,” and invited him to contact State Farm for a quote in order to determine whether switching to State Farm as his auto insurance carrier could save him money. Id. The mailer also contained a “prescreen & opt-out notice,” id. The class action alleged that the mailer is nothing more than “an invitation to call State Farm to find out about the various insurance products that State Farm might attempt to sell”; in other words, “the State Farm mailing is nothing more than promotional material soliciting him to contact State Farm regarding its various insurance products and that it is therefore not the kind of firm offer of insurance that would legitimize State Farm's access to his credit report under federal law.” Id., at *2. Defense attorneys moved to dismiss the class action; the district court granted the motion as to all claims in the class action complaint, id. The Third Circuit affirmed.

The class action alleged that State Farm intentionally or negligently obtained plaintiff’s credit report under false pretenses and without a permissible purpose, and sent an offer of insurance that failed to include the “clear and conspicuous” disclosures required by the FCRA. Gelman, at *2. The complaint sought declaratory and injunctive relief, id. The district court granted State Farm’s motion to dismiss the class action because it found that the mailer “constituted an offer of insurance under the FCRA,” that “the FCRA does not provide for a private right of action to recover for disclosures that are contrary to provisions of the FCRA,” and that “the FCRA does not provide private litigants declaratory and injunctive relief.” Id. We do not here summarize the Circuit Court’s discussion of the legal background behind the FCRA, see id., at *3-*4. The Circuit Court began its legal analysis by addressing the district court’s conclusion that State Farm’s mailer satisfied the FCRA because the offer of insurance need not have “value” to the consumer. Id., at *4. Plaintiff’s theory was premised “exclusively” on the Seventh Circuit opinion in Cole v. U.S. Capital, Inc., 389 F.3d 719 (7th Cir. 2004), which held that a “firm offer” under the FCRA “must have sufficient value for the consumer to justify the absence of the ... protection of his privacy.” Id. (quoting Cole, 389 F.3d at 726). (The Third Circuit’s summary of Cole may be found at pages *4 and *5 of its opinion.)

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Posted On: September 14, 2009 by Michael J. Hassen Email This Post

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FCRA Class Action Defense Cases–Beaudry v. Telecheck: Sixth Circuit Reverses Dismissal Of FCRA Class Action Holding Private Right Of Action Under FCRA Does Not Require Proof Of Actual Damages

District Court Erred in Dismissing Class Action Complaint Alleging Violations of Fair Credit Reporting Act (FCRA) on Ground that Plaintiff had not Suffered any Actual Injury because FCRA Allows for Recovery of Statutory Damages for Willful Violations Without Showing of Actual Injury Sixth Circuit Holds

Plaintiff filed a putative class action against Telecheck Services and others alleging violations of the federal Fair Credit Reporting Act (FCRA); specifically, the class action complaint alleged that defendants – “a group of foreign corporations who provide check-verification services” – “failed to account for a 2002 change in the numbering used by the Tennessee driver’s license system, leading their systems to reflect incorrectly that many Tennessee consumers…were first-time check-writers.” Beaudry v. Telecheck, ___ F.3d ___ (6th Cir. August 28, 2009) [Slip Opn., at 1, 2]. According to the allegations underlying the class action complaint, defendants’ actions constituted a “willful failure to provide accurate information [and] entitled the class members to ‘declaratory relief, injunctive relief, statutory damages, punitive damages, attorneys’ fees, costs and expenses.’” Id., at 2. Defense attorneys moved to dismiss the class action complaint on the grounds that (1) plaintiff “failed to allege that she had been injured by a FCRA violation,” and (2) “that the statute of limitations had run.” Id. The district court dismissed the class action , holding that plaintiff “had not alleged any injury and that the statute does not authorize courts to grant injunctive relief.” Id. Plaintiff appealed. The Sixth Circuit stated at page 1, “Because FCRA’s private right of action does not require proof of actual damages as a prerequisite to the recovery of statutory damages for a willful violation of the Act, we reverse.”

The Circuit Court began by summarizing the FCRA, and the differences between negligent violations of the FCRA and willful violations of the FCRA. See Beaudry, at 2-3. Of particular relevance is the fact that willful violations allow a party to recovery statutory damages without showing actual injury. Id., at 4-5. Defense attorneys nonetheless argued that the FCRA requires a showing of some form of “consequential damages” – in this case, however, plaintiff “‘has not…had a check rejected or any other transaction terminated as a result of a TeleCheck recommendation’; nor has she ‘suffered any harm with respect to the availability of credit.’” Id., at 4. The Sixth Circuit disagreed, noting that the FCRA “imposes no such hurdle on willfulness claimants.” Id. Rather, the FCRA allows for the recovery of either actual damages (in the event the violation was negligent) or statutory damages as fixed by Congress (in the event the violation was willful). Id., at 5-6. Accordingly, the district court erred in dismissing the class action complaint on the ground that plaintiff had not suffered any actual injury, id., at 9. The Circuit Court therefore reversed the district court order and remanded the class action for further proceedings. Id., at 10.

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Posted On: May 14, 2009 by Michael J. Hassen Email This Post

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FACTA Class Action Defense Cases–Leysoto v. Mama Mia: Florida Federal Court Denies Class Action Treatment Of FACTA Class Action Because Potential Liability Vastly Disproportionate To Actual Damages Suffered By Putative Class

FACTA Class Action Seeking $4.6 Million to $46 Million in Statutory Damages from Restaurant with Net Worth of $40,000 did not Warrant Class Action Treatment because Class Action not “Superior” Method of Resolving Dispute Florida Federal Court Holds

Plaintiff filed a putative class action in Florida state court against Mama Mia, “a local restaurant in Hollywood, Florida, with approximately $40,000 in net assets”; the class action alleged that defendant violated the Fair and Accurate Credit Transactions Act (FACTA), which requires that merchants truncate credit card and debit card numbers on electronically-printed customer receipts. Leysoto v. Mama Mia I., Inc., 255 F.R.D. 693, 694 (S.D.Fla. 2009). According to the allegations underlying the class action, the receipts defendant provided to customers “displayed both the expiration date and full number of [the customers’] credit card.” Id. (The district court noted that defendant “ceased this practice, and began truncating customer receipts to merely four (4) card numbers, no later than June 26, 2008.” Id.) The class action complaint sought “statutory and actual damages, as well as attorneys' fees and costs,” id. Defense attorneys removed the class action to federal court, id., and plaintiff moved for class certification, arguing a Rule 23(b)(3) class action should be certified, id., at 694-95. Defense attorneys opposed class action certification on the grounds that class action treatment would expose defendant to statutory damages of $4.6 million - $46 million, even though plaintiff concedes he did not suffer any actual economic injury and even though there was no evidence that any member of the putative class suffered actual economic injury. Id., at 695 and n.5. The district court denied plaintiff’s motion.

The district court explained that the class certification motion “turns on two related questions: (1) whether potential class damages are a proper consideration at the motion to certify stage; and, if so; (2) whether the potential class damages in this matter preclude certification under Fed.R.Civ.P. 23(b)(3).” Leysoto, at 694. Of course, plaintiff bears the burden of establishing that class action treatment was warranted, id., at 695 (citations omitted). FACTA provides for recovery of actual damages or statutory damages of “not less than $100 and not more than $1,000.” Id. (citation omitted). This is important because under Eleventh Circuit authority the district court “may consider potential class damages in adjudicating Plaintiff's Motion, and given the vast disparity between the requested statutory damages and the actual injury caused by Defendant, the class vehicle is not the superior method for fairly and efficiently adjudicating this dispute.” Id., at 694.

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Posted On: May 6, 2009 by Michael J. Hassen Email This Post

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FACTA Class Action Defense Cases–Harris v. Mexican Specialty: Eleventh Circuit Reverses Dismissal Of FACTA Class Actions Holding FCRA's Statutory-Damages Provision Not Unconstitutional

District Court Erred in Dismissing FACTA Class Actions based on Conclusion that FCRA’s Statutory-Damages Provision was Unconstitutional Facially and As-Applied, Requiring Reversal of Court Order and Reinstatement of Class Actions Eleventh Circuit Holds

Plaintiffs filed two separate class action complaints against Mexican Specialty Foods and Rave Motion Pictures alleging violations of the federal Fair and Accurate Credit Transactions Act (FACTA), which is part of the federal Fair Credit Reporting Act (FCRA); the class action complaints asserted that the defendants willfully violated FACTA by providing customers with “electronically-generated receipt[s] [that] included more than the last five digits of the customer's card number and/or its expiration date.” Harris v. Mexican Specialty Foods, Inc., 564 F.3d 1301, 2009 WL 944201, *1-*2 (11th Cir. 2009). FACTA provides, in pertinent part, that “no person that accepts credit cards or debit cards for the transaction of business shall print more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of the sale or transaction.” Id., at *1 (quoting 15 U.S.C. § 1681c(g)(1)). Each class action sought statutory damages, punitive damages and attorney fees and costs, pursuant to 15 U.S.C. § 1681n(a). Id., at *2. Defense attorneys in each class action moved for summary judgment on the grounds that the FCRA’s statutory-damages provision was unconstitutional, id.; the motion was directed toward that provision of the FCRA which authorizes the recovery of statutory damages “of not less than $100 and not more than $1,000.” Id., at *1 (quoting 15 U.S.C. § 1681n(a)(1)(A)). The federal government intervened as a party-plaintiff to argue in favor of the statute’s constitutionality. Id., at *2. The district court issued a single order covering both class actions: the court order “declar[ed] the FCRA's statutory-damages provision unconstitutionally vague on its face and unconstitutionally excessive on its face and as applied to the defendants, in violation of the Fifth Amendment Due Process Clause.” Id. The district court therefore dismissed both class actions with prejudice, id. The plaintiffs in each class action appealed; the Eleventh Circuit consolidated the cases for purposes of appeal and reversed.

Reviewing the district court’s order de novo, the Eleventh Circuit first addressed whether the case “is ripe for adjudication,” that is, whether there is an actual case and controversy. Harris, at *3. This analysis required a determination of whether the district court found the statutory-damage provision unconstitutional on its face or as-applied, id. The Circuit Court held that the matter was ripe as to a facial challenge to the statute’s constitutionality, because the district court held that “the statute provides no guidance for juries in determining whether to award damages at the upper or lower end of the $100 to $1,000 statutory-damages range” thus leaving the amount of damages to be awarded “to the whim of the jury” creating the potential of inconsistent “willy nilly” verdicts. Id. However, the Eleventh Circuit held that the matter was not ripe for adjudication as to an as-applied challenge “[b]ecause such a challenge asserts that a statute cannot be constitutionally applied in particular circumstances, it necessarily requires the development of a factual record for the court to consider.” Id. (citation omitted). The district court’s ruling in this regard had been premised on a number of assumptions that the Circuit Court found to be unwarranted “because many of the court's assumptions required the resolution of issues which are directly disputed.” Id., at *4. The Court therefore concluded that an as-applied challenge was not ripe for adjudication, id., at *5.

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Posted On: April 13, 2009 by Michael J. Hassen Email This Post

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FCRA Class Action Defense Cases–Harris v. Mexican Specialty Foods: Eleventh Circuit Reverses Dismissal Of FACTA Class Actions Holding FCRA’s Statutory Damage Provision Not Unconstitutional On Its Face

District Court Erred in Dismissing FACTA Class Action Complaints on Grounds that Statutory Damages Awardable under FCRA were Unconstitutional Facially and As-Applied because As-Applied Challenge not Ripe and because Statute not Unconstitutional on its Face in part because Members of Class Actions may have Suffered Actual Damages Eleventh Circuit Holds

Two separate class action lawsuits were filed, one against Mexican Specialty Foods and one against Rave Motion Pictures, alleging violations of the federal Fair and Accurate Credit Transactions Act (FACTA), which is part of the Fair Credit Reporting Act (FCRA); specifically, the class action complaints asserted that defendants willfully violated FACTA by including more than the last 5 digits of a customer’s credit or debit card number and/or its expiration date on customer receipts, and sought both statutory damages and punitive damages. Harris v. Mexican Specialty Foods, Inc., ___ F.3d ___ (11th Cir. April 9, 2009) [Slip Opn., at 5-6]. Defense attorneys in each class action moved for summary judgment on the ground that the statutory damages provision of the FCRA is unconstitutional; the federal government intervened as a party-plaintiff “to defend the constitutionality of the statute.” Id., at 6. By way of background, and in overly broad terms, the FCRA seeks in part to protect consumer privacy by requiring that merchants safeguard credit information. Id., at 3. Toward that end, Congress enacted FACTA, “which is aimed at protecting consumers from identity theft” and which requires that merchants truncate credit/debit numbers on receipts provided to customers at point of sale, id., at 3-4 (citing 15 U.S.C. § 1681c(g)(1)). The statutory scheme authorizes private rights of actions for willful violations of the FCRA, including statutory damages of “not less than $100 and not more than $1,000.” Id., at 4 (quoting 15 U.S.C. § 1681n(a)(1)(A)). In a single order covering both class actions, the district court held that the statutory damage provision of the FCRA was “unconstitutionally vague on its face and unconstitutionally excessive on its face and as applied to the defendants, in violation of the Fifth Amendment Due Process Clause.” Id., at 6. Accordingly, it dismissed the class action complaints with prejudice, id. The plaintiffs in each class action appealed and the Eleventh Circuit consolidated the class actions, id., at 6-7. The Circuit Court reversed the dismissal of the class action complaints and remanded the class actions to the district court.

After noting that the district court’s ruling on the constitutionality of the FCRA’s statutory damage provision is subject to de novo review, see id., at 7, the Eleventh Circuit turned to whether the case was ripe for adjudication, and it noted that analysis of this issue in facial challenges is different than in as-applied challenges, id., at 8. The Circuit Court readily found that “defendants’ facial challenges to the FCRA are sufficiently ripe for adjudication.” Id., at 9. However, it found the question of whether the as-applied challenge was ripe to be “more problematic.” Id. In connection with its as-applied analysis, the district court assumed that if the class actions succeeded on the merits, then “the plaintiffs would be entitled to monetary awards that would be grossly disproportionate to the harm caused, and that the award would likely bankrupt the defendants.” Id., at 10-11. In the district court’s view, the FCRA mandated a statutory award of $100-$1000 “thus stripping courts of discretion to reduce the verdict below $100 per violation”; as applied, then, the court found that the statutory damage provision of the FCRA would “impose an unconstitutionally excessive penalty” as applied against defendants. Id., at 11. In reversing this finding, the Eleventh Circuit found that the district court assumptions were unwarranted. First, the Court found a dispute existed as to whether defendants would contest class action treatment of the actions. Id. Second, “at this early stage in the proceedings” it was unclear whether putative class members had suffered actual damages, id., at 11-12. And third, it was unclear whether defendants’ violation of FACTA was “willful” within the meaning of the FCRA, which is a prerequisite to an award of statutory damages, id., at 12-13. Accordingly, contrary to the district court’s conclusion, the as-applied challenge to the FCRA was not ripe for adjudication, id., at 13. The Eleventh Circuit therefore limited its review of the district court order to whether the statute was facially unconstitutional. Id.

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Posted On: February 16, 2009 by Michael J. Hassen Email This Post

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Class Action Defense Cases–Hauk v. JP Morgan Chase: Ninth Circuit Affirms Summary Judgment On Class Action’s TILA Claim But Reverses As To Class Action’s UCL And False Advertising Claims

District Court Properly Granted Summary Judgment in Favor of Bank as to Claim Alleging Violation of Federal Truth In Lending Act (TILA) because Bank’s Disclosures were Accurate, but Genuine Issue of Material Fact Precluded Summary Judgment as to Unfair Competition Law (UCL) and False Advertising Law (FAL) Claims Ninth Circuit Holds

Plaintiff filed a class action against JP Morgan Chase alleging violations of the federal Truth in Lending Act (TILA), the federal Fair Credit Reporting Act (FCRA) and California’s Consumers Legal Remedies Act (CLRA); plaintiff’s amended class action complaint added claims for alleged violations of California’s Unfair Competition Law (UCL) and False Advertising Law (FAL). Hauk v. JP Morgan Chase Bank USA, ___ F.3d ___ (9th Cir. January 23, 2009) [Slip Opn., at 827]. The class action complaint asserted that plaintiff opened a Chase credit card, subject to a Cardmember Agreement (CMA), and later took advantage of a “balance transfer offer” that promised a promotional fixed 4.99% APR by transferring $10,000 to his Chase card. Id., at 825. According to the allegations underlying the class action, the CMA allowed Chase to increase the interest rate if plaintiff made a late payment to Chase or any other creditor, id. The class action centered on the allegation that Chase charged plaintiff an APR of 28.74% because it maintained that “he was no longer eligible to receive the promotional 4.99% APR,” id., at 825-26; specifically, Chase argued that plaintiff had made a late payment to another creditor three months before he accepted the balance transfer offer from Chase, id., at 826. While Chase would have automatically canceled the balance transfer offer to plaintiff had it discovered the late payment as part of its monthly cardmember account review, which includes reviewing Experian credit reports, Chase claimed that it did not discover the late payment until after plaintiff had accepted the offer to transfer a balance to his credit card. Id. Defense attorneys removed the class action to federal court, and moved for summary judgment on the grounds that the class action’s state law claims were preempted by federal law and that plaintiff’s TILA and CLRA claims were defeated by the disclosures in Chase’s CMA. Id., at 827. The district court rejected the preemption argument, but agreed with the defense that plaintiff could not prove Chase knew of the late payment before accepting the balance transfer offer and so plaintiff’s state law claims could not survive. Id. The Ninth Circuit reversed as to the UCL and FAL claims for relief.

The Ninth Circuit noted that plaintiff voluntarily withdrew his FCRA claim and did not appeal from the dismissal of the class action’s CLRA claim; accordingly, the appeal was directed to the grant of summary judgment as to plaintiff’s TILA, UCL and FAL claims. Hauk, at 827. The Circuit Court devoted most of its attention to the TILA claim. The Ninth Circuit summarized TILA and Regulation Z, see id., at 828-29, and the disclosures made by Chase in conjunction with the balance transfer offer, see id., at 830-31. In pertinent part, Chase may waive its right to increase a cardholder’s APR because of a late payment if it knows of, but does not promptly act on, that default, id., at 830-31; however, Chase does not waive its right to increase the APR “based on a late payment it discovered after it mailed the [balance transfer offer], even if that late payment occurred before it mailed the [balance transfer offer],” id., at 831 (citations omitted). The Circuit Court noted further that “TILA is only a ‘disclosure statute’ and ‘does not substantively regulate consumer credit,’” id. In this case, then, the district court properly granted summary judgment on the class action’s TILA claim because “the injury [plaintiff] suffered neither resulted from any lack of TILA disclosures nor gave rise to a claim under TILA.” Id. The Ninth Circuit explained that “while an inaccurate disclosure that itself breaches a credit agreement may also violate TILA…, the breach of a credit agreement based on conduct independent of the disclosures does not necessarily give rise to a TILA claim.” Id., at 832-33 (citation omitted). In affirming the dismissal of the TILA claim, the Ninth Circuit recognized contrary authority out of the Third Circuit, see id., at 833-34 (citing Rossman v. Fleet Bank (R.I.) Nat’l Ass’n, 280 F.3d 384, 399-400 (3d Cir. 2002)), but rejected that circuit’s “expansive reading of Regulation Z,” id., at 833. Rather, the Ninth Circuit concluded at page 835, “We hold that a creditor’s undisclosed intent to act inconsistent with its disclosures is irrelevant in determining the sufficiency of those disclosures under sections 226.5, 226.6, and 226.9 of Regulation Z.” And because defendant’s disclosures complied with TILA and Regulation Z, summary judgment was proper, id.

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Posted On: January 2, 2009 by Michael J. Hassen Email This Post

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Class Action Defense Cases—In re Countrywide: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiff Motion To Centralize Class Action Litigation But Selects Western District of Kentucky As Transferee Court

Judicial Panel Grants Plaintiff Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Supported by All Responding Parties including Other Class Action Plaintiffs and Countrywide Defendants, but Transfers Class Actions to Western District of Kentucky

Six class actions –three in California, two in Florida, and one in Missouri – were filed against Bank of America and various Countrywide entities, together with other defendants, alleging violations of the federal Fair Credit Reporting Act (FCRA). In re Countrywide Financial Corp. Customer Data Security Breach Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. December 2, 2008) [Slip Opn., at 1 and n.2.]. Specifically, the class action complaints alleged that Countrywide failed “to limit access to and/or adequately safeguard private customer information” in violation of the FCRA, id., at 2. Plaintiff in one of the Florida class actions filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Western District of Missouri or the District of Kansas. Id., at 1. All responding parties, which included more than 20 of the 26 plaintiffs in related “tag-along” class action lawsuits, supported centralization, and while some of the class action plaintiffs requested transfer to California, Florida, Missouri, North Carolina or Ohio, the vast majority – including more than 20 plaintiffs tag-along class actions and the Countrywide defendants – supported transfer to the District of Kansas. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, but rejected each of the district requested by the parties. Id., at 2. The Judicial Panel concluded, “Given that this litigation involves 32 known actions pending throughout the United States, any number of districts would be an appropriate transferee forum.” Id. And without discussion or explanation, the Panel selected the Western District of Kentucky as the transferee court, id.

Download PDF file of In re Countrywide Financial Corp. Customer Data Security Breach Litigation Transfer Order

Posted On: December 2, 2008 by Michael J. Hassen Email This Post

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FACTA Class Action Defense Cases–Bateman v. American Multi-Cinema: California Federal Court Denies Class Action Certification Motion Holding Putative FACTA Class Action Failed Superiority Test Because Of Risk Of Excessive Damage Award

Putative Class Action Alleging Violations of FACTA not Entitled to Class Action Treatment because Rule 23(b)(3)’s Superiority Requirement for Class Action Certification not Met California Federal Court Holds

Plaintiff filed a putative class action against American Multi-Cinema for violating the federal Fair and Accurate Credit Transactions Act (FACTA); specifically, the class action complaint alleged that defendant printed not only the last four digits of a consumer’s credit or debit card on the customer’s receipt, but the first four digits as well. Bateman v. American Multi-Cinema, Inc., 252 F.R.D. 647, 648 (C.D. Cal. 2008). Notably, the class action complaint did not allege that plaintiff, or any putative member of the class action, suffered any harm as a result of the violation. Id. Defendant corrected its sales practices within two weeks of the filing the class action, id. Plaintiff moved the district court to certify the litigation as a class action; the district court denied the motion on the grounds that Rule 23(b)(3)’s superiority requirement had not been met: “The Court found that if certified, the potential statutory damages to be awarded could be enormous and completely out of proportion to any harm suffered by Plaintiff.” Id. (A copy of the district court order denying plaintiff's initial motion for class action treatment may be found here.) However, the district court denied class action treatment without prejudice pending the Ninth Circuit’s decision in Soualian v. Int’l Coffee & Tea LLC, CV 07-502-RGK (JCx), 2007 WL 4877902 (C.D. Cal. filed June 11, 2007). Soualian, however, was settled so the Ninth Circuit dismissed the appeal. Id. The district court permitted plaintiff to renew his motion for class action certification, and again denied the motion.

After summarizing the legal standard for class action certification under Rule 23, see Bateman, at 648-49, the district court summarized the legislative history of FACTA and the statutory penalties provided for FACTA violations, see id., at 649. The federal court also discussed the 2007 Congressional amendment to FACTA, which clarified that the statute was not intended to provide for private rights of action based solely on the failure of a merchant to include the expiration date of the credit/debit card on the customer’s receipt. See id., at 649-50. The amendment, however, “does not provide Defendant with a safe-harbor for truncating its credit card receipts to eight (8) digits rather than five (5).” Id., at 650. Plaintiff argued that class action treatment was warranted because Congress essentially reaffirmed that the failure to truncate the credit or debit card account numbers supported such lawsuits. Id. But the district court observed that the purpose of the statute was to prevent identity theft, and that “the congressional record also supports an inference that members of Congress were primarily concerned with credit card receipts displaying the entire credit card account number.” Id. Accordingly, the federal court concluded that “it is far from clear whether Congress intended to approve class actions for printing eight (8) digits rather than five (5).” Id. However, the court found persuasive the purpose of the statute – viz., “The purpose of this Act is to ensure that consumers suffering from any actual harm to their credit or identity are protected while simultaneously limiting abusive lawsuits that do not protect consumers but only result in increased cost to business and potentially increased prices to consumers.” Id. (quoting Pub.L. 110-241, § 2(b), 122 Stat. 1565 (June 3, 2008)). Because no one suffered any harm as a result of the technical violation of the statute, the court denied class action treatment. Id.

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Posted On: November 7, 2008 by Michael J. Hassen Email This Post

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Class Action Defense Cases—In re Toys “R” Us: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In Central District of California

Judicial Panel Grants Defense Request for Pretrial Coordination of Two Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Opposed by Illinois Class Action Plaintiffs, and Transfers Actions to Central District of California

Two putative nationwide class actions were filed in the Central District of California and the Northern District of Illinois against Toys “R” Us alleging violations of the federal Fair and Accurate Credit Transactions Act (FACTA); specifically, the class action complaints allege that defendant printed “certain credit and debit card information on customer receipts” in violation of FACTA.” In re Toys "R" Us - Delaware, Inc., Fair & Accurate Credit Transactions Act (FACTA) Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. October 9, 2008) [Slip Opn., at 1]. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Central District of California; plaintiffs in California class action – which is “significantly more advanced” than the Illinois action – did not oppose the motion, but plaintiffs in the Illinois class action did oppose the motion. Id. The Illinois class action plaintiff argued in part that centralization was unnecessary because there are only two actions pending; the Judicial Panel, however, concluded, “Although only two actions are now pending, they are brought on behalf of nearly identical putative nationwide classes, and there is a risk of inconsistent rulings on class certification.” Id. Even though there were only two actions, centralization was appropriate under Section 1407 because “[it] will eliminate duplicative discovery; prevent inconsistent pretrial rulings, especially with respect to class certification; and conserve the resources of the parties, their counsel and the judiciary.” Id. Accordingly, the Judicial Panel granted the motion to centralize the class action lawsuits and agreed that the Central District of California was the appropriate transferee court because the “first-filed action has been pending there for almost two years.” Id., at 1-2.

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Posted On: October 31, 2008 by Michael J. Hassen Email This Post

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Class Action Defense Cases—In re Lending Tree: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiff Motion To Centralize Class Action Litigation In Western District of North Carolina

Judicial Panel Grants Plaintiff Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Unopposed by any Responding Parties, and Transfers Actions to Western District of North Carolina

Three class actions – one in California, Illinois and North Carolina – were filed against LendingTree and other defendants alleging that LendingTree failed to “limit access to and/or adequately safeguard private customer information in violation of the Fair Credit Reporting Act.” In re Lending Tree, LLC, Customer Data Security Breach Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. October 7, 2008) [Slip Opn., at 1]. Plaintiff’s lawyer for the North Carolina class action filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Western District of North Carolina; no responding party opposed centralization, but the parties could not agree on the appropriate transferee court. Id. Certain other plaintiffs, and defendants LendingTree and Home Loan Center supported the motion; plaintiffs in the Illinois and California class actions argued for transfer to the Central District of California. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, id., at 1-2. The Panel also agreed that the Western District of North Carolina was the appropriate transferee court “because (1) LendingTree is headquartered in Charlotte, North Carolina, and parties, witnesses and documents may be found there, and (2) this district has the capacity to handle this docket and, in the past, has been underutilized as a transferee district.” Id., at 2.

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Posted On: July 18, 2008 by Michael J. Hassen Email This Post

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FACTA Class Action Defense Cases—In re Make-Up Art Cosmetics: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In Central District of California

Judicial Panel Grants Defense Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, Rejects Transferee Court Proposed by Class Action Plaintiffs, and Transfers Class Actions to Central District of California

Three class actions – two in California and one in Illinois – were filed against Make-Up-Art Cosmetics (MAC) alleging violations of the federal Fair and Accurate Credit Transactions Act (FACTA); specifically, the class action complaints alleged that MAC printed “certain credit and debit card information on customer receipts” in violation of FACTA. In re Make-Up Art Cosmetics (M.A.C.) Fair & Accurate Credit Transactions Act (FACTA) Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 9, 2008) [Slip Opn., at 1]. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Central District of California; plaintiffs in the class actions supported the motion but argued for transfer to the Northern District of Illinois. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, finding that centralization will eliminate duplicative discovery and prevent inconsistent pretrial rulings, particularly with respect to class action certification. Id. The Panel agreed also that the Central District of California was the appropriate transferee court because two of the three class actions were pending in that district, “including the first-filed and broadest actions.” Id.

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Posted On: July 16, 2008 by Michael J. Hassen Email This Post

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FCRA Class Action Defense Cases–Cavin v. Home Loan Center: Seventh Circuit Affirms Summary Judgment In Favor Of Defense In FCRA Class Action Holding Letters Sent To Class Action Plaintiffs Constituted Firm Offers Of Credit

District Court Properly Granted Defense Motion for Summary Judgment in Class Action Alleging Violations of Fair Credit Reporting Act (FCRA) because Mailer need not Contain Every Material Loan Term and because Offer may be Conditioned on Additional Information such as Verification of Employment and Income Seventh Circuit Holds

Plaintiffs filed a class action complaint against Home Loan Center, doing business as HomeLoanCenter.com, alleging violations of the federal Fair Credit Reporting Act (FCRA); specifically, the class action alleged that Home Loan Center sent them a mailer for a “SmartLoan mortgage program” but that the mailer was not a “firm offer of credit” and therefore violated the FCRA. Cavin v. Home Loan Center, Inc., ___ F.3d ___ (7th Cir. July 2, 2008) [Slip Opn., at 1]. The letters referenced in the class action were sent “to thousands of Illinois residents” and stated that the recipient had been “pre-approved to receive HomeLoanCenter.com’s exclusive SmartLoan program.” Id., at 2. The mailers contained a box with the figures of 1.00%/4.27%, adjacent to two columns that listed various monthly payments for various loan amounts. Id. The letters stated that no fees would be charged to get the loan process started, and that defendant could “prequalify [the recipient] right over the phone in minutes and provide [the recipient] with a customized loan program that suits [the recipient’s] needs.” Id. The letter also provided, “This offer may not be extended if, after responding to this offer you do not meet the criteria used in the selection process. Further, HomeLoanCenter.com will verify income and employment, review credit, and analyze debt and your equity position in the subject property prior to final loan approval.” Id., at 2-3. The mailers stated that not all applicants would be approved and reiterated that terms and conditions applied to the offer, id., at 3. The parties filed cross-motions for summary judgment; the district court agreed with defense attorneys that the mailers did not violate the FCRA and accordingly entered judgment in favor of defendant. Id., at 1-2. The Seventh Circuit affirmed.

The FCRA permits a finance company to obtain an individual’s credit report, but “the company needs to obtain it with the intent of extending a firm offer of credit to the potential customer.” Cavin, at 4 (citing 15 U.S.C. § 1681b(c)(1)(B)(I)). Under the FCRA, a “firm offer of credit” is “any offer of credit or insurance to a consumer that will be honored if the consumer is determined, based on information in a consumer report on the consumer, to meet the specific criteria used to select the consumer for the offer except that the offer may be further conditioned…” 15 U.S.C. § 1681a(l). In this case, class action plaintiffs argued that defendant accessed their credit information “without a permissible purpose” because the mailers sent to them and other members of the putative class did not constitute a firm offer of credit within the meaning of the FCRA. Id., at 3-4. Specifically, plaintiffs argued that material terms of the loan program were not disclosed and/or were not adequately explained, id., at 5. The Seventh Circuit disagreed, explaining at page 5, “The mailer identified the basis for calculating interest, the length of the loan, the possibility of a rate change after thirty days, the minimum payment option with accompanying deferred interest, and the information needed to obtain the loan.” That is all that was required because the FCRA does not require the initial communication “‘contain all of the important terms that must be agreed on before credit is extended.’” Id., at 5 (citation omitted). On the contrary, requiring a financial institution to disclose all material terms would result in the mailer being more difficult for the consumer to understand. Id., at 5-6 (citation omitted). The Circuit Court explained that “the proper inquiry in ascertaining whether a letter is a firm offer is whether the offer will be honored, not whether all of the material terms are listed.” Id., at 6.

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Posted On: May 23, 2008 by Michael J. Hassen Email This Post

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FACTA Class Action Defense Cases—In re Texas Roadhouse: Judicial Panel On Multidistrict Litigation (MDL) Grants Plaintiff Motion To Centralize Class Action Litigation In Northern District of Illinois

Judicial Panel Grants Plaintiff Request for Pretrial Coordination of Class Action Lawsuits Pursuant to 28 U.S.C. § 1407 over Defense Objection

Two class action lawsuits – one in Illinois and one in Pennsylvania – were filed in against defendants Texas Roadhouse Holdings LLC and Texas Roadhouse, Inc., for violations of the Fair and Accurate Credit Transactions Act (FACTA), alleging that defendants printed information on credit card and debit card customer receipts that FACTA required be excluded therefrom. In re Texas Roadhouse Fair & Accurate Credit Transactions Act (FACTA) Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 7, 2008) [Slip Opn., at 1]. Plaintiff’s lawyer in the Pennsylvania class action filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the litigation pursuant to 28 U.S.C. § 1407 in the Northern District of Illinois; plaintiff in the Illinois class action supported the motion. Id. Defense attorneys opposed pretrial coordination, and alternatively filed motions under 28 U.S.C. § 1404 to transfer the class actions to Kentucky, id. The Judicial Panel granted the motion to centralize the class action lawsuits, explaining at page 1: “Common discovery is likely, as defendants have suggested that discovery related to their credit and debit card receipt policies will be company-wide. Centralization under Section 1407 will eliminate duplicative discovery; prevent inconsistent pretrial rulings, especially with respect to class certification; and conserve the resources of the parties, their counsel and the judiciary.” The Judicial Panel also agreed that the Northern District of Illinois was the appropriate transferee court. Id., at 1-2.

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Posted On: May 22, 2008 by Michael J. Hassen Email This Post

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FCRA Class Action Defense Cases–Sullivan v. Greenwood Credit Union: In Case Of First Impression First Circuit Affirms Summary Judgment In Favor Of Defense In FCRA Class Action Holding Creditor’s Letter Was A “Firm Offer” Under FCRA

Affirming Summary Judgment in Favor of Defense in Class Action Alleging Violations of FCRA (Fair Credit Reporting Act), Class Action Complaint Properly Dismissed because, as Matter of First Impression, Offer of Credit Satisfies FCRA if Creditor will not Deny Credit to Consumers who Meet Pre-Selection Criteria First Circuit Holds

Plaintiff filed a putative class action against Greenwood Credit Union alleging violations of the Fair Credit Reporting Act (FCRA) arising out of “an unsolicited letter to a consumer about the offering of credit for a home loan.” Sullivan v. Greenwood Credit Union, 520 F.3d 70, 71 (1st Cir. 2008). Greenwood had purchased credit reports for purposes of pre-screening individuals, and then sent home loan offers to “a list of individuals meeting certain minimal credit requirements”: the class action complaint alleged that the unsolicited letters fall within the FCRA and that consumer credit information had been obtained for an improper purpose; defense attorneys argued that the FCRA permits obtaining credit reports for various purposes, including extending a “firm offer of credit.” Id. The First Circuit explained at page 71, “This case is about plaintiff's efforts to collect that statutory penalty for a class of consumers; there is no claim [he] was wrongfully denied credit.” The thrust of the class action claims was that the offer of credit “was based on such minimal criteria and the actual extension of credit was so contingent on other conditions that the letter could not be a firm offer of credit.” Id. Defense attorneys moved for summary judgment on the class action complaint, and the district court granted the motion. As a matter of first impression in the First Circuit, the Circuit Court considered the phrase “firm offer of credit” and affirmed.

Defense attorneys argued that Greenwood limited its offer of credit to homeowners “having at least $10,000 in revolving debt and a credit score of 500 or greater.” Sullivan, at 71. Greenwood did not obtain a consumer’s entire credit report; rather, it obtained from the credit reporting agency only contact information for consumers who met these criteria. Id., at 71-72. Greenwood then sent consumers a letter offering them, for a limited time, loans up to 100% of the value of their home at “some of the lowest rates in decades”; however, the letter did not provide the interest rate being offered, nor did it state the duration of the loan. Id., at 72. The letter noted, however, “Limited time offer to customers who qualify based on equity, income, debts, and satisfactory credit. Rates and terms subject to change without notice. Most loan programs require both a satisfactory property appraisal and title exam for final approval.... If at time of offer you no longer meet initial criteria, offer may be revoked.” Id. The letter also informed consumers as to the steps they could take if they wanted to stop receiving prescreened offers of credit. See id. Plaintiff responded to the letter by filing the class action complaint, id. Plaintiff’s theory was that Greenwood had not extended a “firm offer of credit” because the letter “‘is lacking crucial terms for it to be an offer’ and ‘is so vague and lacking in terms as not to constitute an “offer capable of acceptance”.’” Id. The class action complaint sought statutory damages of $1,000 per class member on behalf of approximately 2 million individuals, id.

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Posted On: May 21, 2008 by Michael J. Hassen Email This Post

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CAFA Class Action Defense Cases–Korn v. Polo Ralph Lauren: California Federal Court Denies Motion To Remand Class Action To State Court Holding Defense Established Class Action Alleging Song-Beverly Act Violations Involved More Than $5 Million

Defense Evidence in Support of Removal of Class Action to Federal Court Adequately Established Removal Jurisdiction under Class Action Fairness Act (CAFA) California Federal Court Holds

Plaintiff filed a putative class action lawsuit in California state court against Polo Ralph Lauren alleging violations of California’s Song-Beverly Act; specifically, the class action complaint alleged that defendant requested personal information from customers as part of credit card transactions in violation of California Civil Code § 1747.08. Korn v. Polo Ralph Lauren Corp., 536 F.Supp.2d 1199, 1202 (E.D. Cal. 2008). Defense attorneys removed the class action to federal court alleging removal jurisdiction under the Class Action Fairness Act (CAFA); plaintiffs moved to remand the class action to state court on the grounds that defendant failed to establish the requisite diversity or amount in controversy. Id. As the district court explained, “CAFA grants district courts original jurisdiction over civil class actions filed under federal or state law in which any member of a class of plaintiffs is a citizen of a state different from any defendant and the amount in controversy for the putative class members in the aggregate exceeds the sum or value of $5,000,000, exclusive of interest and costs.” Id. (citing 28 U.S.C. § 1332(d)(2)). The district court refused to remand the class action to state court, holding that defendant sufficiently established CAFA removal jurisdiction.

Plaintiff first argued that Polo Ralph Lauren did not establish that it was not a citizen of California, Korn, at 1201; the district court rejected this argument, noting that plaintiff is bound by the judicial admission in his complaint that defendant is a Delaware corporation with its principal place of business in New Jersey, id., at 1203. Accordingly, the federal court held plaintiff “bound by the allegations in his complaint that assert defendant's citizenship, for purposes of diversity jurisdiction, is in Delaware and New Jersey.” Id. Plaintiff next argued that the defense failed to establish the $5,000,000 amount in controversy requirement. Id., at 1201. While the class action complaint did not seek a specific amount of damages, the district court observed that the class action seeks “statutory civil penalties for the alleged violations [of] up to $1000 per violation.” Id., at 1202. Further, as part of the documentation supporting removal of the class action to federal court, defense attorneys had submitted a declaration establishing that Polo Ralph Lauren had “processed more than 5,000 credit card transactions over the last year in the state of California.” Id. The district court held that this was sufficient.

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Posted On: April 27, 2008 by Michael J. Hassen Email This Post

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FACTA Class Action Defense Cases—In re OSI Restaurant: Judicial Panel On Multidistrict Litigation (MDL) Grants Defense Motion To Centralize Class Action Litigation In Eastern District Of Pennsylvania

Judicial Panel Grants Defense Request for Pretrial Coordination of FACTA Class Action Lawsuits Pursuant to 28 U.S.C. § 1407, and Agrees with Defense Recommendation of Eastern District of Pennsylvania as the Transferee Court

Four class action lawsuits were filed against OSI Restaurant Partners (OSI) alleging violations of the federal Fair and Accurate Credit Transactions Act (FACTA) based on OSI’s failure to delete certain information from customer credit and debit card receipts. The class actions were pending in the Eastern District of Pennsylvania (two), and the Western District of Pennsylvania and Northern District of Illinois (one each). In re OSI Restaurant Partners, LLC, Fair & Accurate Credit Transactions Act (FACTA) Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. February 20, 2008) [Slip Opn., at 1]. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the litigation pursuant to 28 U.S.C. § 1407 in the Eastern District of Pennsylvania; all parties agreed that pretrial coordination was appropriate, but plaintiffs’ lawyers in two of the class actions argued that the Western District of Pennsylvania was the appropriate transferee court. Id. The Judicial Panel granted the motion for centralization, but agreed with defense attorneys that the Eastern District of Pennsylvania was the appropriate transferee court. Id.

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Posted On: April 17, 2008 by Michael J. Hassen Email This Post

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FCRA Class Action Defense Cases–Murray v. New Cingular: Seventh Circuit Limits Cole Opinion And Resolves Several Fair Credit Reporting Act (FCRA) Issues Of Importance To Class Action And Non-Class Action Cases Alike

Three Class Action Lawsuits Involving Six Issues Under the Federal Fair Credit Reporting Act (FCRA), Equally Important to Class Action and Non-Class Action Cases, Grouped Together for Resolution by Seventh Circuit

The Seventh Circuit yesterday issued an opinion that resolved various issues of interest under the federal Fair Credit Reporting Act (FCRA) presented by three lower court opinions – the putative class action styled Murray v. New Cingular Wireless Servs., Inc., out of the Northern District of Illinois, Case No. 04 CV 7666, the putative class action styled Bruce v. KeyBank N.A., out of the Northern District of Indiana, Case No. 2:05cv330, and the putative class action styled Price v. Capital One Bank (USA), N.A., out of the Eastern District of Wisconsin, Case No. 05-C-947 – explaining that the cases involve “issues that have arisen in numerous suits” and that each of the three cases “presents at least two issues, several of which recur in multiple appeals.” Murray v. New Cingular Wireless Servs., Inc., 523 F.3d 719 (7th Cir. 2008) [Slip Opn., at 2]. The Circuit Court organized its discussion around issues, rather than the facts of each appeal, id., so we summarize the opinion without providing an introductory factual summary of the cases. (For the convenience of the reader, the facts underlying the Murray class action may be found in lower court opinion at Murray v. New Cingular Wireless Servs., Inc., 432 F.Supp.2d 788 (N.D. Ill. 2006), the facts underlying the Bruce class action may be found in lower court opinion atBruce v. KeyBank N.A., 2006 WL 3743749 (N.D. Ind. December 15, 2006), and the facts underlying the Price class action may be found in the lower court opinion at Price v. Capital One Bank (USA), N.A., 2007 WL 1521525 (E.D. Wis. May 22, 2007). Additionally, our summary of the district court decision in Murray may be found here.) The issues addressed and conclusions reached by the Seventh Circuit, of importance to class action and non-class action cases alike, are: (1) whether an offer of credit must be valuable to all or most recipients, id., concluding the offer must be “firm” but need not be ‘valuable,” id., at 5, (2) whether an offer of “free” merchandise can constitute an offer of “credit,” id., concluding that it may, id., at 6, (3) whether flyers must contain all material terms of the offer of credit, id., concluding that it need not, id., at 8, (4) whether the fact that the terms of the offer may vary means that the offer is not “firm,” id., concluding that an offer may be firm even though “some matters [are left] for future determination,” id., at 10, (5) whether 6-point type is “conspicuous,” id., concluding that it is not, id., at 12, (6) whether use of 6-point type is a “willful” violation of the FCRA, id., concluding that it would be reckless “today” to do so but was not so at the time the documents in question were prepared, id., at 15.

Must an offer of credit must be valuable to all or most recipients? In Cole v. U.S. Capital, Inc., 389 F.3d 719 (7th Cir. 2004), the Seventh Circuit held that if one offers a product (such as furniture) along with a “token line of credit,” then the FCRA requires that the credit offer have value to the consumer: “’From the consumer’s perspective, an offer of credit without value is the equivalent of an advertisement or solicitation [for the product rather than the loan].’” Murray, at 3 (quoting Cole, at 726-27). The Circuit Court noted that plaintiffs have twisted Cole to argue that it requires “even a simple offer of credit [to be] valuable enough to justify the use of consumers’ credit files.” Murray, at 3. These efforts must fail, the Seventh Circuit held, because the FCRA “calls for a firm offer of credit but not a valuable firm offer of credit.” Id., at 4 (citing 15 U.S.C. § 1681b(c)(1)(B)(i)). By contrast, “[t]he problem in Cole was how to disentangle an offer of merchandise from an offer of credit when they are made jointly.” Id. Cole thus does not apply to cases involving “pure offers of credit.” Id., at 5.

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