Class Action Defense Blog

New Jersey Supreme Court Holds that Provision in Arbitration Agreement Prohibiting Class Actions is Unconscionable but Severable so that Plaintiff may Pursue Class-Wide Arbitration

A part-time college student filed a class action against a lender for alleged violations of New Jersey consumer-fraud statutes; the defense moved to compel arbitration of plaintiff’s individual claim based on a class-action bar in an arbitration agreement. Muhammad v. County Bank of Rehoboth Beach, Delaware, ___ A.2d ___, 2006 WL 2273448 (N.J. August 9, 2006). The student had received a short-term unsecured loan in the amount of $200 on May 23, 2003, which she promised to repay, together with a “finance charge” of $60, on June 13, 2003. This meant that the annual percentage rate of the loan was 608.33%. Slip Opn., at 4. She extended the loan twice; each extension required an agreement to pay a $60 finance charge. Unable to pay the loan, plaintiff filed a class action against the lender. Id., at 8.

The loan application signed by plaintiff contained an arbitration clause requiring that any dispute be arbitrated, and that barred “bring[ing], join[ing] or participat[ing] in any class action,” Slip Opn., at 5-6. Plaintiff also executed a “Loan Note and Disclosure” form that reiterated the prohibition against class actions. Id., at 6-7. The defense moved to compel arbitration; the trial court granted the motion and the appellate court affirmed. Id., at 9-10. The New Jersey Supreme Court addressed “whether a provision in an arbitration agreement that is part of a consumer contract of adhesion is unconscionable and therefore unenforceable because it forbids class-wide arbitration.” Slip Opn., at 2-3.

Continue reading "Muhammad v. County Bank-Class Action Defense Cases: FAA (Federal Arbitration Act) Governed Arbitration Clause Forbidding Class Actions Unconscionable New Jersey Supreme Court Holds" »

Posted In: Arbitration, Class Action Court Decisions

Federal Court Remands Putative Class Action Over Defense Objection Because at Least One Member of Class Must Satisfy Jurisdictional Requirement for Damages and Because Under Alabama State Law Class Action was Commenced Prior to CAFA Even Though Summons Issued After CAFA's Effective Date

Issues regarding removal and remand, and regarding federal court jurisdiction under the Class Action Fairness Action of 2005 (CAFA), have been covered in several separate articles. On May 22, 2006, an Alabama federal court remanded to state court a putative class action over defense claims that the court had either diversity jurisdiction or jurisdiction under CAFA. Eufaula Drugs, Inc. v. Tmesys, Inc., 432 F.Supp.2d 1240 (M.D. Ala. 2006). Plaintiff filed the putative class action on February 14, 2005 - four days before the effective date of CAFA - but the summons was not issued until February 28 because plaintiff's lawyer "did not file the summons or a completed certified mail card or provide the appropriate postage to the state court clerk's office until then." Id., at 1242. Defense attorneys removed the action to federal court. The defense urged that federal diversity jurisdiction existed and, alternatively, that the action was removable under CAFA. Id., at 1243.

The federal court rejected both arguments. As to diversity jurisdiction, while the district court agreed that the parties were diverse, Eufaula Drugs, at 1243 n.4, "at least one class representative or named plaintiff must meet the amount-in-controversy requirement before supplemental jurisdiction can arise," id., at 1244 (citing Exxon Mobil Corp. v. Allapattah Servs., Inc., ___ U.S. ___, 125 S.Ct. 2611, 2615 (2005)). As to CAFA, the court recognized that "commencement" for purposes of CAFA turned on state law, id., at 1245-46. and under its analysis of Alabama state law, on the particular facts of the case, the action would be deemed "commenced" as of the date the complaint was filed and accordingly remanded the action to state court, id., at 1246-50.

Posted In: Class Action Fairness Act (CAFA), Removal & Remand, Class Action Court Decisions

Federal District Court Adopts "Statutory" Approach to Determining FCRA Preemption and Denies Defense Motion to Dismiss Consumer's Common Law Defamation Claim on Grounds of FCRA Preemption

In Beuster v. Equifax Information Serv., 435 F.Supp.2d 471, 2006 WL 1669790 (D. Md. 2006), a Maryland federal court rejected a defense motion to dismiss a defamation claim against a lender on the grounds that it was preempted by the federal Fair Credit Reporting Act (FCRA), 15 U.S.C. §§ 1681 et seq. A consumer, Hans Beuster, failed to qualify for a loan to refinance his home because of a derogatory report in his credit history concerning a credit card account with Bank One. The report stated that Beuster's owed more than $10,000 on his Bank One account and that it had been sent to collection; Beuster disputed the item, insisting that he never applied for or received the credit card in question. In January 2005, in response to his inquiry, Bank One told Beuster that it was unable to find his credit card application. Nonetheless, when Beuster contacted consumer reporting agency Experian to dispute the derogatory report, Experian responded in February 2005 that the information had been verified by Bank One. In March, Beuster sent letters to consumer reporting agencies Experian, Equifax and Trans Union - enclosing an affidavit and a police report - disputing the derogatory information. This time, Experian agreed to remove the account information from Beuster's credit report; Equifax and Trans Union, however, responded that Bank One had verified the derogatory item and so they would continue to reflect it in their reports. Slip Opn., at 1-3.

Beuster filed suit in federal court against Bank One, Equifax and Trans Union: as to Bank One, Beuster alleged an FCRA violation and a claim for common law defamation. Slip Opn., at 3. The defense moved to dismiss the defamation claim on the grounds that section 1681t(b)(1)(F) "is a total bar to any state statutory or common law causes of action." Id., at 6-7. The district court disagreed.

Continue reading "Beuster v. Equifax-Class Action Defense Issues: Federal Fair Credit Reporting Act (FCRA) Does Not Preempt State Law Defamation Claim Maryland District Court Holds" »

Posted In: FCRA Class Actions, Class Action Court Decisions

In Case Of First Impression of Cash-Balance Pension Plans Under ERISA § 204(b)(1)(H)(i), Seventh Circuit Agrees with Defense that Time Value of Money is not Age Discrimination and Reverses Judgment in Favor of Class Action Plaintiffs

Older employees filed a class action against IBM alleging that its cash-balance defined-benefit pension plan violates the federal Employee Retirement Income Security Act (ERISA) prohibition against age discrimination. Cooper v. IBM Personal Pension Plan and IBM Corp., ___ F.3d ___ (7th Cir. August 7, 2006). Unlike a defined-contribution plan, "the personal account in a cash-balance plan is not separately funded"; rather, "IBM imputes value to the account in the form of 'credits.'" Slip Opn., at 1. The district court rejected defense arguments that the plan did not violate ERISA because its terms are age-neutral, and entered judgment in favor of the class action plaintiffs because "younger employees receive interest credits for more years." Id., at 2. The district court's decision turned on its interpretation of the phrase "benefit accrual" under ERISA § 204(b)(1)(H)(i), which is not defined in ERISA or its regulations. Id., at 4. The district court used the definition of "accrued benefit" under ERISA, which is "an amount' expressed in the form of an annual benefit commencing at normal retirement age.'" Id. In so doing, "the rule against discrimination then refers not to what IBM puts into the plan, but what the employee takes out on retirement" and thus discriminates against older employees because younger workers will receive a greater payout because they benefit from compound interest. Id. "This approach treats the time value of money as age discrimination." Id., at 4.

Continue reading "IBM Class Action Defense Case-Cooper v. IBM: Defense Prevails On Appeal From Class Action Judgment On Employees' ERISA Claims Alleging Age Discrimination In Pension Plan Due To Time Value Of Money" »

Posted In: Employment Law Class Actions, Class Action Court Decisions

Federal Court Holds Lawyer’s Failure to Disclose Investigation and Duty Court Owes Transferee Plaintiffs Requires Removal from Plaintiffs’ Steering Committee and Notice to, and Consent of, Lawyer’s Individual Clients

Product liability actions – filed against Medtronic, Inc., concerning its implantable defibrillator – were transferred to a Minnesota federal court by the Multidistrict Litigation (MDL) Panel. Mitchell Breit, a partner in the New York office of Milberg Weiss Bershad & Schulman, was selected to serve on the Plaintiffs’ Steering Committee. Following the indictment of Milberg Weiss, the district court judge sua sponte initiated a telephone conference to discuss Breit’s continued involvement on the committee. In re Medtronic, Inc. Implantable Defibrillator Prod. Liab. Litig., 434 F.Supp.2d 729 (D. Minn. 2006). Lead counsel and Breit requested that he be allowed to continue to serve; the court rejected their pleas “finding that it is in the best interest of the transferee plaintiffs that Mr. Breit and the Milberg Weiss firm be severed from the service” on the committee. Id., at 730.

The federal court reasoned a transferee judge “bears a particularly heavy burden to protect the transferee plaintiffs,” in addition to and separate from the duty attorneys owe their clients. Further, in selecting attorneys to serve on the steering committee, the Court directly investigated the ethics of every lawyer who offered to serve on it: “It asked each attorney seeking appointment to the [steering committee] to submit a letter touching his/her own ethics, and the ethical competence of his/her firm or professional association.” Id., at 730. The court noted with dissatisfaction that Briet’s December 2005 submittal failed to disclose the criminal investigation of the Milberg Weiss firm or its partners, and said nothing of the potential criminal charges until the federal criminal indictment issued. Id. Breit’s May 30, 2005 letter to the Court – sent in response to the Court’s sua sponte inquiry – failed to explain why the criminal investigation “was never disclosed to this Court until the indictment was handed up.” Id., at 731. The district court found this unacceptable, explaining at page 731:

Continue reading "Federal Court Sua Sponte Removes Milberg Weiss From Steering Committee Of Class Action Transferred To Minnesota District Court By Multidistrict Litigation (MDL) Panel—Class Action Defense Issues" »

Posted In: Class Actions In The News, Multidistrict Litigation, Class Action Court Decisions

District Court Granted Defense Motion to Dismiss Securities Fraud Class Action Lawsuit, Seeking Damages Under § 10(b) and § 20(a) of the Securities Exchange Act of 1934 and Common Law Fraud, but Second Circuit Reversed

A class action securities fraud lawsuit was filed against American Express and its subsidiaries, and against individual corporate officers of those companies (“Amex”), arising from high-risk junk bond investments and allegedly false statements concerning the profitability of those investments. Plaintiffs’ lawyer filed an amended class action complaint adding two causes of action; defense attorneys moved to dismiss the new claims as time-barred and the original claims on the merits. The district court granted the defense motion, finding that the new claims did not “relate back” to the filing of the original complaint, and that the original claims failed on the merits because plaintiffs had not adequately pleaded the requisite scienter. The Second Circuit reversed and remanded. Slayton v. American Express Co., 460 F.3d 215 (2d Cir. 2006).

Continue reading "American Express Class Action Defense Case-Slayton v. American Express: Second Circuit Adopts De Novo Review Of Relation Back Rulings Under FRCP Rule 15 In Vacating Judgment In Favor Of Class Action Defense" »

Posted In: Class Action Court Decisions

Federal District Court Refuses Defense Motion to Dismiss Class Action and Enforce Arbitration Agreement Holding FAA (Federal Arbitration Act) Provision Barring Class Action FLSA Claims Unconscionable Under Specific Facts of Case

Employees filed a putative class action alleging violations of the federal Fair Labor Standards Act (FLSA), 29 U.S.C. §§ 201 et seq., for failure to pay overtime. The defense filed a motion to dismiss the class action complaint and to enforce a enforce the company's "dispute resolution program" governed by the Federal Arbitration Act (FAA) which, in part, barred class actions. Skirchak v. Dynamics Research Corp., Inc., 432 F.Supp.2d 175 (D. Mass. 2006). (This class action defense has been raised in other cases discussed in separate articles.) The district court denied the defense motion, applying the well-settled rule that FAA agreements are subject to the standard defenses available in contract actions, including fraud, duress and unconscionability. Skirchak, at 178 (citing Doctor's Assocs., Inc. v. Casarotto, 517 U.S. 681, 687, 116 S.Ct. 1652 (1996)).

The court first addressed the language of FLSA itself, and acknowledged that Congress did not expressly guarantee the right to file class actions for FLSA claims. Skirchak, at 179 (citing Kuehner v. Dickinson & Co., 84 F.3d 316, 319-20 (9th Cir.1996)). But the court believed that the fact FLSA provides for collective actions, see 29 U.S.C. § 216, meant that Congress "implicitly" intended to allow such class actions, Skirchak, at 179.

Continue reading "Skirchak v. Dynamics Research-Class Action Defense Cases: Employer's Dispute Resolution Program Barring Class Action Claims For Alleged Violations Of Federal Fair Labor Standards Act (FLSA) Unconscionable Massachusetts District Court Holds" »

Posted In: Arbitration, Employment Law Class Actions, Class Action Court Decisions

Federal District Court Rejects Defense to Class Action Claims Under Fair Labor Standards Act (FLSA) and State Law Claims, and Grants Summary Judgment in Favor of Class

News reporters filed in California federal court a class action against their employer that alleged numerous violations of federal and state labor laws, as well as California Business and Professions Code §§ 17200 et seq. (unfair competition). Wang v. Chinese Daily News, Inc., ___ F.Supp.2d ___, 2006 WL 1663638 (C.D. Cal. June 7, 2006). The parties filed cross-motions for summary judgment; the court denied the defense motion and granted the plaintiffs' motion. In so doing, the court inter alia rejected the defense argument that the reporters were exempt under the FLSA's "creative professional exemption," and ruled against the defense on the applicable statute of limitations governing California Labor Code § 226.7 claims (meal and rest periods). The opinion is quite detailed; this article discusses only some of the court's holdings.

The employer had a policy that allowed vacation time to accrue and to carryover into following years, provided that "accumulated vacation days cannot exceed 30 days" and that "[m]oney shall be paid for unused vacation days exceeding 30 days at $64 per day " Slip Opn., at 3. California law permits employers to adopt "no additional accrual" policies, so the question before the federal court was whether $64 per day was lawful or whether the employer was required to "buy back" the vacation time at the employees' hourly rate of pay. The court concluded that this question turned on whether the "unused vacation days" should be deemed "vested" or "accrued." Id., at 4. The court suggested that if the employer had followed its vacation policy then it would have been lawful; however, the evidence before the court established that employees routinely accrued upwards of 70 days of vacation and held that the in "actual practice," then, the employer treated the vacation time as "accrued." Id., at 5. Accordingly, the employer was required to buy back the vacation days at the employees' hourly rate of pay. Id., at 6.

Continue reading "Class Action Defense Cases-Wang v. Chinese Daily News: Class Action Reporters Owed Overtime Under Federal FLSA And Defense Vacation "Buy Back" Policy Violated State Law And Required Payment At Employees' Hourly Rate Of Pay California Court Holds" »

Posted In: Employment Law Class Actions, Class Action Court Decisions

California Supreme Court Rejects Class Action Defense Argument that Employees were not Discharged by Completion of Job Assignment for Which They were Hired

A class action was filed on behalf of models that worked specific projects but were not paid immediately after the projects ended. Defense attorneys argued that the employees were not “discharged” within the meaning of California Labor Code § 201 because they were not fired or otherwise involuntarily terminated. Smith v. Superior Court, 39 Cal.4th 77, 45 Cal.Rptr.3d 394 (Cal. July 10, 2006). Plaintiff was hired as a “hair model” – an audience watched a stylist color and style her hair, she walked the runway, and she remained until defendant told her that she could leave. Plaintiff was to be paid $500, but defendant waited more than two months to pay her the money owed. Plaintiff filed a class action complaint alleging various causes of action, including violations of California Labor Code §§ 201 and 203. Slip Opn., at 2.

Section 201 of the Labor Code provides that if an employer “discharges” an employee, wages earned and unpaid at the time of discharge are due and payable immediately. Under section 203, an employer’s willful failure to pay wages to a “discharged” employee in accordance with section 203 subjects the employer to penalties. Slip Opn., at 1.

Continue reading "Class Action Defense Cases-Smith v. Superior Court: Employee Is "Discharged" Under California Labor Laws Not Only By Involuntary Termination But also By Completion Of Specific Assignment" »

Posted In: Employment Law Class Actions, Class Action Court Decisions

Federal District Court Holds Use of Word "Section" Instead of "Subsection" in FCRA (Fair Credit Reporting Act) § 1681m(h)(8) was a Drafting Error and Denies Defense Motion for Judgment on the Pleadings

The federal Fair Credit Reporting Act (FCRA), 15 U.S.C. §§ 1681 et seq., enacted in 1970, has been described by courts as both "comprehensive" and "complex." In part, it sets forth statutory requirements governing the use of consumer reports. See 15 U.S.C. § 1681m. In 2003, Congress amended the FCRA by enacting the Fair and Accurate Credit Transactions Act (FACTA). The amendments included adding subsection (h) to § 1681m, which provides: Section 1681m(h)(8) states that no civil actions may be filed for "any failure by any person to comply with this section" (italics added); rather, such violations "shall be enforced exclusively under section 1681s" (italics added), which provides for administrative enforcement of FCRA violations.

Following a so-called "yo-yo" car sale, the consumer/purchaser filed suit in federal court against Brook Road, Inc. alleging violations of various state and federal laws, as well as common law causes of action. Barnette v. Brook Road, Inc., 429 F.Supp.2d 741 (D. Va. 2006). The complaint included an FCRA claim under § 1681m(a) and (b), based on the allegation that the lender had obtained and relied on her credit report, and had engaged in an "adverse action" in reliance on the report, but had failed to provide her with the required notice of the adverse action. Id., at 745. The defense moved for judgment on the pleadings on the grounds that FACTA eliminated private rights of action for all violations of § 1681m; the consumer argued that the use of the word "section" in § 1681m(h)(8) was a typographical error, and that Congress intended to bar private rights of action only for alleged violations of subsection (h). Id., at 746.

Continue reading "Class Action Defense Issues-Barnette v. Brook Road: 2003 Amendment to Federal Fair Credit Reporting Act (FCRA) Did Not Eliminate All Private Rights Of Action Under § 1681m But Only Those Under § 1681m(h) Virginia District Court Holds" »

Posted In: FCRA Class Actions, Class Action Court Decisions

Federal District Court Denies Defense Motion to Dismiss FCRA Claims Against Consumer Reporting Agency Because a Jury Could Find that it Acted Recklessly in Allowing Public Defender's Investigator to Access Consumer's Credit Report Even Though Reasons Given were Facially Valid

A consumer filed suit against credit reporting agencies for violating the federal Fair Credit Reporting Act (FCRA), 15 U.S.C. §§ 1681 et seq., after a public defender's office twice requested and received a credit report for the consumer, an alleged eyewitness to a crime, "in an attempt to impeach his credibility on the theory that his poor credit history created a financial motive to testify against the criminal defendant." Centuori v. Experian Information Solutions, Inc., 431 F.Supp.2d 1002 (D. Ariz. 2006). The investigator from the public defender's office gained access to the credit report through a written agreement with Merchants Information Solutions (MIS), which in turn had access to Experian's consumer records through an agreement whereby MIS promised to ensure that MIS's customers utilized Experian's records only for lawful purposes and in compliance with all state and federal laws. In 1998, the public defender's office had executed a "Permissible Purpose Certificate" for MIS "which listed the permissible and impermissible purposes of access a credit history under the FCRA." Id., at 1004-05 (footnote omitted).

In 2001, Experian allowed MIS customers direct access to its database via the Internet, thereby saving Experian's millions of dollars. Experian's internal policies required that access requests be "properly validated and authorized before access is provided." Centuori, at 1005. Experian's policies also generally disallowed access to records by private investigators and attorneys (save for attorneys involved in debt collection) "because of a 'high risk' that they would access credit reports for impermissible purposes"; nonetheless, Experian accepted an application from the "Chief Criminal Investigator" of the "Pima County Public Defender," and provided him with a user ID and password. Id. The access underlying the lawsuit consisted of two requests by the investigator for "collection purposes" and "government fee for service" - both of which are "facially proper purposes under the FCRA," id., at 1006, though the true purpose is noted above, id., at 1007-08.

Continue reading "Centuori v. Experian-FCRA Class Action Defense Cases: Consumer Reporting Agency May Be Liable Under Federal Fair Credit Reporting Agency (FCRA) For Failing To Ensure Public Defender Sought Consumer Report For Permissible Purpose Arizona Court Hold" »

Posted In: FCRA Class Actions, Class Action Court Decisions

Federal District Court Grants Defense Motion to Dismiss TILA Claims Against Lender Upholding Releases Signed by Plaintiffs and Distinguishing Case from Others that Held TILA Releases Void

Two homeowners filed suit against a lender seeking rescission and statutory damages for its alleged failure to make disclosures required under the federal Truth in Lending Act (TILA), 15 U.S.C. §§ 1601 et seq. Tucker v. Beneficial Mortgage Co., ___ F.Supp.2d ___, 2006 WL 1975769 (E.D. Va. 2006). Defense attorneys moved to dismiss the complaint on the grounds that plaintiffs were bound by a class action settlement negotiated by the Virginia Attorney General, and that the action was brought outside TILA's one-year limitations period. The district court agreed with the defense, specifically holding that plaintiffs released their TILA claims as part of the class action settlement, and that "[p]laintiffs may waive their rights to bring TILA claims in a class action lawsuit." Slip Opn., at 2.

Briefly, plaintiffs refinanced their home with Beneficial Mortgage in September 2002 - three months before the Virginia Attorney General negotiated a settlement of a consumer class action lawsuit against the lender. Plaintiffs affirmatively joined the settlement and in October 2003 signed a general release absolving Beneficial of liability for "all civil claims . . . whether known or unknown." Slip Opn., at 3-4 (citation omitted). In September 2004, plaintiffs sought to rescind their Beneficial loan on the grounds that Beneficial "failed to make certain material TILA and Home Ownership and Equity Protection Act ('HOEPA') disclosures regarding the loan, including finance charges, the amount financed, and the annual percentage rate." Id., at 4. Plaintiffs then filed suit in October 2005, alleging that these failures extended their right to rescind the transaction to three years. Id. The district court disagreed.

Continue reading "Beneficial Mortgage TILA Class Action Defense Case: By Joining Class Action Settlement Homeowners Released Any Federal Truth In Lending Act (TILA) Claims Against Lender Virginia Court Holds" »

Posted In: Class Action Court Decisions, RESPA/TILA Class Actions

Federal District Court Order Granting Defense Motion to Dismiss FCRA Action Against Consumer Reporting Agency Reversed

A consumer (Stephen Levine) opened a store credit card account with a clothing retailer (Structure) through its financial affiliate (World Financial National Network Bank) that the consumer closed in 1998. Credit reports at a consumer reporting agency (Experian Information Solutions) showed that the account had been paid in full and closed. Nonetheless, in 2002 Structure requested credit reports on Levine from Experian, stating that it needed them for purposes of "account review." Structure had not reported Experian with any new information on Levine's account during the preceding four years, and Levine had not made any inquiries to Experian or Structure concerning his closed account. Experian provided copies of Levine's credit report to Structure in May 2002 and in August 2002. Levine sued Experian and Structure for violating the federal Fair Credit Reporting Act (FCRA). 15 U.S.C. §§ 1681 et seq. Experian's defense attorneys moved to dismiss the complaint. The district court granted the motion on two grounds: (1) "FCRA does not suggest that a credit report may only be permissibly obtained for account review during particular points in the parties' relationship" and "Experian had not duty to investigate a facially valid request for a consumer report," and (2) Levine failed to adequately allege damage. Levine v. World Financial Network Nat'l Bank, 437 F.3d 1118, 1119-20 (11th Cir. 2006). The Eleventh Circuit reversed.

Continue reading "Levine v. World Financial-FCRA Class Action Defense Cases: Facially Valid Request for Consumer Credit Report Does Not Relieve Consumer Reporting Agency Of Duty To Evaluate Permissible Purpose Of Request Pursuant To Federal FCRA (Fair Credit Reporting Act" »

Posted In: FCRA Class Actions, Class Action Court Decisions

Ninth Circuit Remands Case to Federal District Court to Determine Whether Any Portion of the Affiliate-Sharing Provisions of California's Financial Privacy Act Survive Preemption Under FCRA

Separate articles concerning class action defense cases and issues discuss the Fair Credit Reporting Act (FCRA), 15 U.S.C. §§ 1681 et seq., which establishes procedures for reporting and challenging information contained in consumer credit reports, Federal courts have described FCRA's statutory scheme as "comprehensive" and "complex." In 2003, California enacted the Financial Information Privacy Act, commonly referred to as SB1, California Finance Code, §§ 4050 et seq., which regulates the disclosure by financial institutions doing business in the State of personal consumer information. In 2004, certain financial lending associations filed suit in federal court alleging that certain provisions of SB1 concerning the sharing of information with affiliates are preempted by FCRA. American Bankers Ass'n v. Gould, 412 F.3d 1081 (9th Cir. 2005). The district court granted summary judgment against the Associations, holding that FCRA's affiliate-sharing provisions did not preempt SB1. Id., at 1085.

The Ninth Circuit reversed. Congress amended FCRA in 2003 in a manner that expanded the preemption clause concerning sharing of information with affiliates: "Requirements with respect to the use by a person of information received from another person related to it by common ownership or affiliated by corporate control, such as the requirements of this section, constitute requirements with respect to the exchange of information among persons affiliated by common ownership or common corporate control, within the meaning of section 1681t(b)(2) of this title." Gould, at 1085 (quoting § 1681s-3(c) (italics added by court). The Ninth Circuit held that this clause "preempt[s] all state 'requirement[s]' and 'prohibition[s]' on the communication of 'information' between affiliated parties." Id., at 1086. It further held, however, that the term "information" as used in FCRA "includes only the sort of information described in the definition of 'consumer report' in § 1681a(d)(1)," id.; accordingly, it remanded the case to the district court to "determine whether, applying this restricted meaning of 'information,' any provision of the affiliate-sharing provisions of SB1 survives preemption," id., at 1087.

Posted In: FCRA Class Actions, Class Action Court Decisions

California Court Dismisses Class Action Agreeing With Defense Attorneys that Federal Fair Credit Report Act (FCRA) Does Not Require Terms of Equity Line Offer in Mailer to be a Specific Dollar Figure or Interest Rate, and that No Private Right of Action Exists for Alleged Violations of § 1681m's Disclosure Requirements

A putative class action was filed against a lender for allegedly violating the federal Fair Credit Reporting Act (FCRA), 15 U.S.C. §§ 1681 et seq., by sending out unsolicited mailers offering equity lines of credit in broad amounts (in plaintiff's case, $15,000 - $300,000) at a range of interest rates (in plaintiff's case, 5.65% - 16.9%), and by failing to include the disclosures required by § 1681m(d). Putkowski v. Irwin Home Equity Corp., 423 F.Supp.2d 1053, 1055-56 (N.D. Cal. 2006). Defense attorneys moved to dismiss the class action; plaintiff's lawyer argued that the mailer was nothing more than a "sales pitch" and that it did not constitute a "firm offer" under the FCRA because it "failed to state the rate of interest to be charged or the amount of credit to be extended." Id., at 1057. The class action defense team also argued that no private right of action exists for alleged violations of § 1681m. The district court agreed with the defense.

Defense attorneys argued that "firm offers of credit" under the FCRA may be "conditional" - that it need not specify the amount of the loan offered or the interest rate, and that "the offeror may later withdraw the offer if the consumer does not meet the creditworthiness criteria." Putkowski, at 1058. The district court distinguished Cole v. U.S. Capital, Inc., 389 F.3d 719 (7th Cir. 2004) [holding mailer failed to comply with FCRA], and found that the terms of the "offer" set forth in the mailer sent to plaintiff were sufficient "firm" to satisfy FCRA. Id., at 1059-60.

Continue reading "Putkowski v. Irwin Home Equity-FCRA Class Action Defense Cases: Mailer Offering Pre-Approved Equity Line From $15,000-$300,000 At Interest From 5.65%-16.9% Is "Firm Offer Of Credit" Under Federal FCRA (Fair Credit Reporting Act) California Court Holds" »

Posted In: FCRA Class Actions, Class Action Court Decisions

Federal Court Also Holds that Liability for Violations of Fair Credit Reporting Act (FCRA), and that "Willful" Noncompliance Under FCRA's Punitive Damage Provision Includes Reckless Disregard

In two class action lawsuits filed against insurance companies for alleged violations of the federal Fair Credit Reporting Act separate statement motion to compel responses, 15 U.S.C. §§ 1681 et seq., (1) class action defense attorneys representing Hartford moved for summary judgment on the grounds that the initial rate set for a new policy holder cannot constitute an "adverse action" because there is no "increase" in the rate charged; and (2) class action defense attorneys representing GEICO sought summary judgment claiming the class representative lacked standing, that it did not contract to issue the plaintiff a policy, and that the premium charged would have been the same even if it had not considered plaintiff's credit history. In each case, the district court granted summary judgment in favor of the insurers; the Ninth Circuit consolidated the cases for purposes of its opinion.

In a case of first impression, the Ninth Circuit Court of Appeals held that if the rate initially set by an insurance company would have been lower but for its reliance on a consumer's credit report, then a notice of adverse action must be provided under the FCRA. Reynolds v. Hartford Fin. Serv. Group, Inc., 435 F.3d 1081 (9th Cir. 2006). Congress enacted the FCRA to ensure fair and accurate reporting of credit information affecting consumers. The statutory scheme has been characterized by courts as both comprehensive and complex. One aspect of the FCRA requires that consumers be informed of "adverse actions" taken in reliance on credit reports so that they can dispute or explain any negative information contained in such reports. "Adverse action notices advise consumers that an adverse action has been taken against them, and the nature of that action, and alerts them that they may view a copy of the consumer report that triggered the adverse action free of charge and correct any errors affecting their economic well-being." Id., at 1085.

Continue reading "Reynolds v. Hartford-Class Action Defense Cases: "Adverse Action" Under Federal FCRA (Fair Credit Reporting Act) Applies To Initial Premium Set By Insurer Ninth Circuit Holds In Case Of First Impression" »

Posted In: FCRA Class Actions, Class Action Court Decisions

28 U.S.C. § 1447(d) Bars Review of Class Action Defense Appeal of Order Remanding Case to State Court on Grounds that Federal Court Lacked Subject Matter Jurisdiction Over Action

Roberts v. BJC Health System, 452 F.3d 737 (8th Cir. 2006), concerned a putative class action filed in Missouri state court alleging that certain medical procedures were systematically "miscoded" so that patients were overcharged for the procedures. The defense removed the action to federal court on the grounds of federal question subject matter jurisdiction, asserting that ERISA completely preempted the class action claims. In response to plaintiffs' motion for remand, the district court concluded that it lacked subject matter jurisdiction over the putative class action because the plaintiffs had not suffered any injury in fact, and therefore lacked standing. Id., at 738. Because plaintiffs lacked standing, the court never reached the issue of whether ERISA preempted plaintiffs' putative class action. Defense attorneys appealed, arguing that the case should have been dismissed; plaintiffs responded that the remand order was not appealable because it was based on lack of jurisdiction. Id.

On June 21, 2006, the Eighth Circuit agreed and dismissed the appeal. The Court reaffirmed well-settled law that "[w]hen a district court remands a case based on a lack of subject matter jurisdiction under [28 U.S.C. § 1447(c)], 'a court of appeals lacks jurisdiction to entertain an appeal of the remand order.'" Roberts, at 739 (citation omitted). The Circuit Court recognized that its decision "creates a potential Catch-22 for the parties" in that "the state court might dismiss the action for lack of jurisdiction because of ERISA preemption." Id. The Court's solution was to suggest that plaintiffs find a class member that had suffered an injury in fact. Id.

Posted In: Removal & Remand, Class Action Court Decisions

California Court Rejects Putative Class Action by Shareholder Whose Stock Escheated to the State Against Corporation Confirming Absolute Immunity Defense to UPL Claims

In a class action defense case of first impression, on July 19, 2006, a California appellate court upheld a court order sustaining a demurrer to a putative class action complaint against a corporation for alleged violations of California’s Unclaimed Property law (UPL), California Code Civ. Proc., §§1500-1582. Harris v. Verizon Communications, ___ Cal.App.4th ___, 2006 WL 20008884 (Cal.App. July 19, 2006). The putative class action was premised on the corporation’s alleged failure to provide notice required by the UPL. Specifically, plaintiff Gene Harris worked for GTE Corporation in the 1970s and 1980s, receiving shares in the corporation as a “fringe benefit.” Slip Opn., at 3. In 1990, without notice to Harris and without his knowledge, GTE transferred his shares to the State Controller. In accordance with California law, the Controller sold the shares and held the proceeds; eventually Harris submitted a claim and was 1999 the Controller sent him the funds held on his behalf. Id.

Despite receiving the funds, Harris filed two class actions. In September 2001, Harris filed a putative class action lawsuit against the State Controller for failure to provide notice to shareholders before selling stock that had escheated to the State. Slip Opn., at 3. That case was resolved in favor of the defense in 2004, when a California appellate court held that the UPL “do[es] not require the Controller to provide notice to apparent owners of escheated stock before the Controller sells the stock.” Harris v. Westly, 116 Cal.App.4thh 214, 224 (Cal.App. 2004). In October 2001, Harris filed a putative class action against GTE for delivering his shares of stock to the Controller without notice. Slip Opn., at 4. The defense demurred; the trial court dismissed the class action against GTE, agreeing that GTE had an absolute immunity defense under the UPL. Id.

Continue reading "Verizon Class Action Defense Case-Harris v. Verizon: Corporations That Comply With California Unclaimed Property Law (UPL) By Delivering Duplicate Stock Certificates To State Controller Have Absolute Immunity Against Suit From Shareholders" »

Posted In: Class Action Court Decisions

Federal District Court Grants Motion to Strike Third-Party Complaint for Indemnity/Contribution Against Parent

Plaintiffs Kristen and William McSherry Jr. ("William Jr.") filed suit against Capital One FSB and others alleging violations of the federal Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA), and Truth in Lending Act (TILA), together with Washington state law claims for defamation and invasion of privacy. McSherry v. Capital One FSB, ___ F.R.D. ___, 2006 WL 1420839 (W.D. Wash. 2006). Capital One filed a third-party complaint against plaintiff's father, William McSherry Sr., ("William Sr.") for indemnity and contribution because "[a]ccording to several documents in the record, including Plaintiffs' complaint, it appears that the debt allegedly incurred by [William Jr.], may have been incurred by [William Sr.]." Slip Opn., at 2. The district court granted plaintiffs' motion to strike, finding that "[w]hile it does appear that Capital One's allegedly tortuous actions or omissions would not have occurred but for [William Sr.'s] alleged actions, this is not enough." Id., at 1 and 12.

The federal court began with a summary of federal law on impleader actions, noting that it must be based on "an assertion of the third-party defendant's derivative liability to the third-party plaintiff" and that it "cannot be used to assert any . . . rights to recovery arising from the same transaction or occurrence as the underlying action." Slip Opn., at 3-4 (citation omitted). Here, the plaintiffs' complaint was carefully drafted to seek damages solely based on Capital One's acts or omissions in response to communications from plaintiffs concerning the debt:

Continue reading "McSherry v. Capital One-Class Action Defense Issues: No Right Of Indemnity Under FCRA (Fair Credit Reporting Act) Or TILA (Truth In Lending Act) Federal Court Holds" »

Posted In: FCRA Class Actions, Class Action Court Decisions, RESPA/TILA Class Actions

California Supreme Court's Decision Adds "Standing" to Class Action Defense Arsenal Against UCL Claims Pending at Time of Proposition 64's Passage

California's Unfair Competition Law (UCL), California Bus. & Prof. Code, §§ 17200 et seq., was enacted "to protect consumers and competitors" alike from unfair competition in commercial markets for goods and services "by promoting fair competition," Kasky v. Nike, 27 Cal.4th 939, 949 (Cal. 2002). While government entities may enforce the provisions of the UCL, California law also permits private parties to enforce its terms. Generally, however, the UCL was not intended to provide a means of redressing a personal injury; rather, California's statutory scheme permits a party on behalf of the public (other consumers or competitors) to enjoin an unlawful or unfair business practice. These so-called "representative actions" are often filed as class actions. The California Supreme Court today resolved the issue of whether Proposition 64, approved in November 2004, applies to cases pending at the time of its passage. Californians for Disability Rights v. Mervyn's, ___ Cal.4th ___ (Cal. July 24, 2006).

The scope of the UCL is extremely broad. It defines "unfair competition" to "include any unlawful, unfair or fraudulent business act or practice and unfair, deceptive, untrue or misleading advertising and any act prohibited by Chapter 1 (commencing with Section 17500) of Part 3 of Division 7 of the Business and Professions Code." The Supreme Court has referred to this as "sweeping language" and declared that it is intended to cover "'anything that can properly be called a business practice and that at the same time is forbidden by law.'" Bank of the West v. Superior Court, 2 Cal.4th 1254, 1266 (Cal. 1992) (citation omitted). As the court explained, "[i]n essence, an action based on Business and Professions Code section 17200 to redress an unlawful business practice 'borrows' violations of other laws and treats these violations, when committed pursuant to business activity, as unlawful practices independently actionable under section 17200 et seq. and subject to the distinct remedies provided thereunder." Farmers Ins. Exchange v. Superior Court, 2 Cal.4th 377, 383 (Cal. 1992) (citation omitted).

Continue reading "Mervyn's Class Action Defense Case-Californians for Disability Rights v. Mervyn's: California Supreme Court Holds Proposition 64 Applies "Retroactively" To Section 17200 Unfair Competition Law (UCL) Claims" »

Posted In: Class Actions In The News, Class Action Court Decisions