Articles Posted in FCRA Class Actions

Published on:

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).

Continue reading

Published on:

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.)

Continue reading

Published on:

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.

Download file PDF of Premium Mortgage v. Equifax

Published on:

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.)

Continue reading

Published on:

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.

Continue reading

Published on:

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.

Continue reading

Published on:

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.

Continue reading

Published on:

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.

Continue reading

Published on:

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.

Continue reading

Published on:

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