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MS Obtains Unanimous Jury Verdict in Favor of Clients in FDCPA Case

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On April 8, 2015, a jury of seven sitting in the Southern District of California determined that a law firm and its asset purchaser client did not violate the Fair Debt Collection Practices Act, 15 U.S.C. 1692 et seq. (“FDCPA”) by including a request for 10% interest in the prayer for relief of a state court collection complaint.  In Hadsell v. Mandarich Law Group, LLP and CACH, LLC, a consumer filed an FDCPA claim against the two companies alleging a myriad of false claims, including that the companies had disclosed the debt to third parties and failed to abide by a request to cease and desist. After success on motions to dismiss and summary judgment, the case proceeded to a jury trial on one sole issue: whether a request for 10% statutory interest in the prayer for relief of a state court complaint violates the FDCPA where the credit card contract in question provided for an 8.9% interest rate. Like many consumer law claims against law firms, this complaint was spurred from a state court collection action on the debt. In late 2011, Mandarich Law Group, LLP filed a state court complaint on behalf of CACH, LLC to collect on a defaulted Bank of America account.  The state court complaint had two counts, breach of contract and account stated.  In the prayer for relief, the complaint requested that the court find that a 10% interest apply under the account stated theory.

Approximately 30 days after the state court suit was filed, the consumer filed suit in the U.S. District Court for the Southern District of California, claiming that the collection action, among other activity, violated the FDCPA. Plaintiff was represented by the San Diego law firms of Hyde & Swigart and Kazerouni Law Group.

The Plaintiff’s focal point during the jury trial was that the defendants intentionally violated FDCPA § 1692(f) and (f)(1) by requesting 10% interest when they were aware of the 8.9% interest rate that was set by the initial contract between the consumer and creditor.  Defendants argued, in contrast, that there was a valid factual basis to pursue the account stated claim and for the Court to assess 10% interest--- the default rate under the California Code---- based on the final charge-off statement on the account.  Further, Defendants’ argued that asking the state court to decide the question of interest was not an attempt to collect an authorized amount as the court had the legal ability to award it under the facts.  The jury unanimously agreed and found that no violation of the FDCPA occurred.

Lead trial counsel for Defendants was Nicole M. Strickler of MS&S. For more information on this case or any other FDCPA related issues, contact her at nstrickler@messerstrickler.com or at 312-334-3442.

FOURTH CIRCUIT HOLDS DEFAULT STATUS HAS NO BEARING ON DEBT COLLECTOR SHOWING

The Fourth Circuit recently held that a debt’s default status does not automatically qualify a debt purchaser as a “debt collector” subject to the Fair Debt Collection Practices Act (“FDCPA”).  In Henson v. Santander Consumer USA, Inc., four consumers alleged that a purchaser of their defaulted automobile loans violated the FDCPA by engaging in prohibited collection practices.  The district court granted the purchaser’s motion to dismiss on the ground that the complaint did not allege facts showing that the defendant qualified as a “debt collector” under the FDCPA.  The court concluded that the complaint only demonstrated that the defendant was a consumer finance company that was collecting debts on its own behalf as a creditor and that the FDCPA generally does not regulate creditors collecting debts owed themselves.  The Fourth Circuit affirmed. In arguing that the defendant constituted a debt collector, plaintiffs relied heavily on § 1692a(6)(F)(iii) of the FDCPA which excludes from the definition of debt collector “any person collecting or attempting to collect any debt . . . owed or due another to the extent such activity . . . concerns a debt which was not in default at the time it was obtained.”  Plaintiffs maintained that because the provision excludes persons collecting debts not in default, the definition of debt collector must necessarily include persons collecting defaulted debt that they did not originate.  Essentially, plaintiffs argued that the default status of a debt determines whether a purchaser of debt, such as defendant, is a debt collector or a creditor.

The Fourth Circuit disagreed, concluding that the default status of a debt has no bearing on whether a person qualifies as a debt collector under the threshold definition set forth in § 1692a(6).  Such a determination is generally based on whether a person collects debt on behalf of others or for its own account, the main exception being when the “principal purpose” of the person’s business is to collect debt.  Section 1692a(6) defines a debt collector as (1) a person whose principal purpose is to collect debts; (2) a person who regularly collects debts owed to another; or (3) a person who collects its own debts, using a name other than its own.  Because the complaint did not allege that defendant’s principal business was to collect debt, instead alleging that defendant was a consumer finance company, nor allege that defendant was using a name other than its own in collecting the debts, defendant clearly did not fall within the first or third definitions of debt collector.  Moreover, because the debts that defendant was collecting were owed to it and not another, defendant was not a person collecting a debt on behalf of another so as to qualify as a debt collector under the second definition.

For more information on the Fourth Circuit decision or the FDCPA generally, contact Katherine Olson at (312) 334-3444 or kolson@messerstrickler.com.

Second Circuit Adopts FDCPA Least Sophisticated Consumer Safe Harbor Approach Established by the Seventh Circuit

In Avila, et al. v. Riexinger & Associates, LLC, et al., Case No. 15-1584(L), the Second Circuit Court of Appeals applied the least sophisticated consumer standard of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq. (“FDCPA”) to conclude that a consumer cannot be expected to know that a total debt provided in a given statement continues to increase interest or other fees.  The Second Circuit held that when a debt collector issues a notice to a borrower that includes a statement of the complete amount of their debt, the debt collector must either accurately inform the consumer that the amount of the debt stated in the notice will increase over time based upon interest or other fees, or clearly state that the holder of the debt will accept payment of the amount set forth in full satisfaction of the debt if payment is made by a specified date. In Avila, a consumer brought a putative class action against a debt collector for violation of § 1692e of the FDCPA alleging that the practice of disclosing in a collection notice only the “current balance” of the amount owed amounts to “false, deceptive, or misleading” collection practices under the statute.  The consumer alleged that the notice led them to believe that the amount owed was not increasing.  The Second Circuit agreed and held that the least sophisticated consumer could believe that payment in full of the current balance provided in the notice would satisfy the entire debt owed, and that a failure to mention the ongoing accrual of interest and fees was misleading. Further, the Court held that “the FDCPA requires debt collectors, when they notify consumers of their account balance, to disclose that the balance may increase due to interest and fees.”

The Second Circuit also held that Section 1692e requires additional disclosures to ensure that consumers are not misled into thinking that simply paying the “current balance” as listed on the collection notice will always result in full satisfaction of the amount owed. Accordingly, the Second Circuit adopted the “safe harbor” approach established by the Seventh Circuit in Miller v. McCalla, Raymer, Padrick, Cobb, Nichols, & Clark, L.L.C., 214 F.3d 872 (7th Cir. 2000).  The “safe harbor” doctrine allows a debt collector to prevent liability under Section 1692e “if the collection notice either accurately informs the consumer that the amount of the debt stated in the letter will increase over time, or clearly states that the holder of the debt will accept payment of the amount set forth in full satisfaction of the debt if payment is made by a specified date.”

Although the Second Circuit declined to establish the exact language of any disclosure that a debt collector must use to sidestep a possible FDCPA violation, the Court expressed that the language proposed in Miller, 214 F.3d, at 876, would certainly qualify a debt collector for treatment under the newly-created safe-harbor.

Debt collection agencies, or those that act as debt collectors, should pay particular attention to the language of Miller that the Second Circuit suggests will satisfy the newly-recognized safe harbor provision. For information on revising statements to consumers to comply with the safe harbor language, or for other information regarding this topic, contact Stephanie Strickler at 312-334-3465 or at sstrickler@messerstrickler.com.

Debt Collector Succeeds with FDCPA Bona Fide Error Defense

The United States District Court for the Southern District of Alabama recently granted a Motion for Summary Judgment in favor of a defendant debt collection agency.  In Robert L. Arnold v. Bayview Loan Servicing, LLC, et al., the plaintiff filed suit against the collection agency for multiple FDCPA violations.  Arnold fell behind on his mortgage payments and declared bankruptcy in 2012, under which the judge granted a discharge for the mortgage.  In January 2013, Arnold received written notification that the mortgage loan servicing had been transferred to Bayview.  Bayview was well aware of the default and that the debt had been discharged in bankruptcy.  Upon receipt of the account, Bayview started the foreclosure process, and purchased the property for most of the amount of the outstanding principal on Arnold’s loan.  While the account was properly coded in Bayview’s system upon transfer, and no billing statements were produced, in December 2013, ten months after the transfer, two billing statements were sent to Arnold.  The statements reflected the outstanding balance; they did not reference the bankruptcy discharge, and they did not reference a credit for the foreclosure sale.

Bayview sought summary judgment based solely on the bona fide error defense.  To succeed on this defense, Bayview must show “a preponderance of the evidence that the violation was not intentional and resulted from a bona fide error notwithstanding the maintenance of procedures reasonably adapted to avoid such an error.”  This defense is not available for mistakes of law or misinterpretations of the FDCPA, but instead “to protect against liability for errors like clerical or factual mistakes.”  See Edwards v. Niagara Credit Solutions, Inc.

The court found Bayview sufficiently demonstrated that the December 2013 mailings were unintentional based on the following:

  1. Arnold’s loan had been coded with a foreclosure man code when Bayview assumed servicing responsibilities, effectively suppressing all billing statements;
  2. Bayview sent no billing statements to Arnold between February 2013 and November 2013;
  3. The Bayview employee who performed a pre-foreclosure review of Arnold’s loan was bound to follow a Bayview checklist that did not call for changing the man code or issuing billing statements;
  4. Nothing in the checklist or employee comments suggested that this individual intended to change the man code or reactivate Arnold’s loan;
  5. The man code was changed anyway, even though Bayview had no reason to do so in its pre-foreclosure review;
  6. Bayview ceased communications to Arnold when it discovered the error; and
  7. Bayview provides extensive, ongoing training to employees in the area of FDCPA compliance.

The Court also concluded that Bayview’s violation was in good faith in that it properly relied on the foreclosure code to suppress monthly statements to Arnold, and that it had no reason to believe that the man code would be changed during the pre-foreclosure review process.  Furthermore, Bayview had provided appropriate training and checklists to its employees concerning pre-foreclosure review.

Finally, the Court also concluded that Bayview maintained policies and procedures to avoid readily discoverable errors.  Bayview had general training procedures and specific procedures for pre-foreclosure review.  It also had ongoing FDCPA compliance training for its employees.

This case demonstrates the importance for debt collection agencies to have clear policies and procedures for FDCPA compliance, as well as ongoing training to reinforce the implementation of these policies and procedures.

For more information on this topic or questions regarding your FDCPA policies and procedures, please contact Stephanie Strickler at sstrickler@messerstrickler.com or at 312-334-3465.

SIXTH CIRCUIT REJECTS HYPERTECHNICAL READING OF TCPA CONSENT REQUIREMENT

The Sixth Circuit recently joined the Federal Communications Commission (FCC) and Eleventh Circuit in holding that “prior express consent” can be obtained and conveyed via intermediaries. In Braisden v. Credit Adjustments, Inc., plaintiffs filed a putative class action contending that defendant violated the Telephone Consumer Protection Act (“TCPA”) when it placed calls to their cell phone numbers using an automatic telephone dialing system and artificial or prerecorded voice in an attempt to collect a medical debt. Defendant did not dispute that it placed the calls or that it used an autodialer. Rather, defendant maintained that by virtue of giving their cell phone numbers to the hospital where they received medical care, plaintiffs gave their “prior express consent” to receive such calls. The district court entered summary judgment for defendant on this basis and the Sixth Circuit affirmed.

Specifically, plaintiffs had received medical care from a hospital which utilized the services of a third party anesthesiologist. When the anesthesiologist did not get paid, the anesthesiologist transferred the delinquent accounts to defendant for collection. Defendant contacted plaintiffs at the numbers provided by the anesthesiologist, which had received the numbers from the hospital. Notably, the plaintiffs had signed admission forms permitting the hospital to release their “health information” to third parties for purposes of “billing and payment” or “billing and collecting monies due.” Plaintiffs argued that because they had not given their numbers to defendant or the creditor on whose behalf it was calling, plaintiffs had not provided prior express consent to be called at those numbers. The Sixth Circuit disagreed, finding that the FCC held in a 2014 Declaratory Ruling that consent can be obtained and conveyed by intermediaries. The Sixth Circuit further found that cell phone numbers fell within the definition of “health information” under a logical reading of the admission forms and rejected plaintiffs’ narrow interpretation of a 2008 FCC Declaratory Ruling which stated that a number must be “provided during the transaction that resulted in the debt owed.” Relying on its own prior ruling on the matter, the Sixth Circuit found that “during the transaction that resulted in the debt owed” was to be read as only applying to the “ ‘initial transaction’ that creates the debt.” Thus, “consumers may give ‘prior express consent’ . . . when they provide a cell phone number to one entity as part of a commercial transaction, which then provides the number to another related entity from which the consumer incurs a debt that is part and parcel of the reason they gave the number in the first place.”

For more information on the Sixth Circuit’s decision, “prior express consent” or the TCPA generally, contact Katherine Olson at (312) 334-3444 or kolson@messerstrickler.com.

Faced with a FDCPA Claim Based on a Failed State Court Collection Act? MS&S Provides a Road Map for Success Based on Its Most Recent Win

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In the U.S. District Court for the Eastern District of Missouri, collection law firms have faced a surge of litigation concerning failed state court collection actions.  Intent on finding a way to recover their attorneys’ fees from defending collection actions when they are unavailable under state law, consumer attorneys’ have turned to the fee-shifting provisions found in the FDCPA. According to the theory advanced by consumer attorneys, any time a collection plaintiff dismisses its suit prior to trial, or misses a procedural deadline, a FDCPA claim results, which entitled them to collect their defense fees from the action.

In Layton v. CACH, LLC, a consumer attorney filed just such a claim. Layton alleged that the asset purchaser filed a collection lawsuit against him without the intent or ability to prove that the debt was owed. Instead of filing a motion to dismiss, the asset purchaser filed an answer to the complaint, attaching the very documents that Layton claimed the asset purchaser could not obtain: the bill of sale and twenty-eight pages of credit card statements.  It then moved for judgment on the pleadings.

The court explained unlike with a motion to dismiss a motion for judgment on the pleadings allows the court to consider materials attached to the answer to the complaint that are “necessarily embraced by the pleadings.” Because the asset purchaser attached the very documentation that Layton alleged it could not produce, he could not state a plausible cause of action for relief.

Layton’s arguments concerning an affidavit used in the state court collection action were similarly flawed. While he argued that an affidavit from the asset purchaser in the collection action was misleading because it was intended to give the appearance to the consumer that the asset purchaser had “personal knowledge” regarding all aspects of the purchaser’s collection action, the court found otherwise. The court concluded that the language used by the asset purchaser in the affidavit was not misleading in any fashion.

While the court mentioned that cases based on improper conduct in a collection action must be evaluated on a case-by-case basis, the opinion in Layton provides a road map for consumer litigation defense attorneys to use in defeating such claims.

Nicole M. Strickler represented the defendant in the Layton case and has defended countless claims based on the same, or similar theories. Contact her at nstrickler@messerstrickler.com or (312) 334-3442 for more information.

View the Memorandum and Order Here.

Middle District of Florida Denies Class Certification in Time Barred Debt FDCPA Case Based on Ascertainability & Predominance

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The facts of the case were simple. Plaintiff received a collection letter offering to “settle” her time-bared debt for a reduction in the balance. She filed sued alleging 15 U.S.C. §1692 et seq. (“FDCPA”) violations as the letter did not disclose the debt’s time-barred nature. Plaintiff moved for class certification seeking to represent a class of similarly situated letter recipients. However, despite the simple nature of the alleged violation, complexities nevertheless prevented class certification.

The court first discussed the class action ascertainability prong that must be satisfied as part of Federal Rule of Civil Procedure (“FRCP”) 23(a). The court noted that only letters seeking to collect “consumer” debts (i.e. those incurred for personal, family, or household purposes) could be included in a class seeking relief under the FDCPA.  As such, an initial question that must be answered is whether plaintiff could ascertain whether the debts at issue were “consumer debts.” The court explained that a plaintiff could not establish ascertainability, a necessary requirement for a class action, simply by asserting that class members could be identified using defendant’s records. Plaintiff must actually establish that the records are in fact useful for identification purposes and that identification would be administratively feasible.

The issue for plaintiff was that she relied on her bare assertion that certain records would reveal the nature of the proposed class members’ debts without actually explaining those records. In contrast, defendants provided actual evidence to controvert this conclusion in the form of declarations attesting to the fact that defendant’s records did not show the reasons for which each proposed class member’s debt was incurred. Moreover, Plaintiff introduced no evidence that demonstrated how the original creditor’s records showed the nature of the debt or even whether the original creditor still possessed transactional information for the accounts.

The second barrier to class certification was in establishing the predominance prong of FRCP 23(b)(3). The court agreed that the debts of persons meeting the proposed class definition were not necessarily time-barred and such a determination would require an individualized inquiry into the statute of limitations on each debt.  The court explained that many factors must be considered when determining the expiration of a limitations period, such as the char-off date, tolling issues, revival issues, and any actions between the debtor and creditor that may have modified their original agreement. In short, the court found these inquiries too individualized and detailed to meet the predominance prong.

Recently, time-barred debt has been a “hot topic” with not only the consumer bar but also with federal and state agencies tasked with consumer financial regulation. For more information on this topic, and other consumer financial issues, contact Nicole Strickler at nstrickler@messerstrickler.com or direct at 312-334-3442.

Third Circuit Rules “Regular Users” of Residential Telephone Lines Can Sue under the TCPA

The Third Circuit Court of Appeals recently decided that a “regular user” of a residential telephone has standing to sue under the Telephone Consumer Protection Act (“TCPA”).  In Leyse v. Bank of America National Association, the plaintiff answered a prerecorded telemarketing call from Bank of America on a residential landline shared with his roommate.  The roommate was the telephone number subscriber and the intended recipient of the call. The Third Circuit reversed the lower court’s dismissal of the case disagreeing with the lower court judge’s finding that only the “intended recipient” of a robocall is a “called party” for purposes of the law.  Judge Fuentes of the Third Circuit wrote, “If the caller intended to call one party without its consent but mistakenly called another, neither the actual recipient nor the (uninjured) intended recipient could sue, even if the calls continued indefinitely.  We doubt Congress meant to leave the actual recipient with no recourse against even the most unrelenting caller.”

The TCPA restricts telephone solicitations and the use of telephone equipment.  The TCPA makes it unlawful “to initiate any telephone call to any residential telephone line using artificial or prerecorded voice to deliver a message without the prior express consent of the called party” except in emergencies or circumstances exempted by the Federal Communications Commission.

The plaintiff in Leyse still has the burden of proof to demonstrate that he answered the telephone when the robocall was received.  This ruling could greatly expand the scope of potential liability for errant calls.

For more information on this topic, contact Stephanie A. Strickler at 312-334-3465 or sstrickler@messerstrickler.com.

PAID SICK LEAVE POLICIES SPREADING AROUND THE U.S.

As a follow up to prior blogs, I wanted to provide a list of those states and cities that have enacted legislation compelling employers to provide their employees with paid sick leave.   We had previously discussed the new laws in California and Philadelphia.  Now Pittsburgh is following suit, and so have other states and cities. Under the new Pittsburgh law, effective January 11, 2016, all full-time and part-time employees working in the city of Pittsburgh, excluding independent contractors, state and federal employees, any members of construction unions subject to collective bargaining agreements, and seasonal employees notified in writing when hired that they will not work more more than 16 weeks during the year, will accrue one hour of paid sick leave for every 35 hours worked (including overtime hours).

Pittsburgh employers with 15 or more employees must permit employees to accrue 40 hours of paid sick leave per year while employers with less than 15 must permit employees to accrue 24 hours of paid sick leave per year.  Those employees must be allowed to carry over accrued sick leave from year to year but employers need not allow them to use more than 40 hours (or 24 for smaller employers) of that paid sick leave in a given year.  In lieu of the carryover, employers can choose to provide all of the required sick leave at the beginning of the year, to avoid that carryover of unused leave.   For those smaller employers, they are only required to provide unpaid sick leave (accrued at the same rate state above) for the first year after the law is enacted.  The Pittsburgh law also has stated terms and regulationsfor permitted use and increments of using the leave, notice, documentation and posting requirements, recordkeeping and prohibited conduct, to name a few.

As far as the rest of the country, California, Connecticut, and Massachusetts are the only states that have enacted legislation to allow statewide paid sick leave.  It is expected that other states and cities will attempt to follow the trend– specifically Oregon, who recently adopted a paid sick leave and safe[1] leave law that will be effective next year.  Tacoma, WA and Montgomery County, MD (the first county to do so) also passed sick and safe leave laws also to be effective in 2016.  In some jurisdictions, such as San Diego, proposed laws such as these have been met with opposition.

As far as cities go, Eugene, OR, Newark, Jersey City, Irvington, Passaic, East Orange, Paterson, Trenton, Montclair, Bloomfield, New York City, Oakland, Philadelphia, Pittsburgh (discussed above, effective 1/1/16), Portland, OR, San Francisco, Seattle, and Washington, D.C., already have laws on the books that allow workers to earn paid sick leave, or in a few of those cities, also allows workers to earn paid safe days as well.

For more detailed information on the new Pittsburgh law, or any employer vacation/sick/PTO policies around the country, please contact Dana Perminas at 312-334-3474 or dperminas@messerstrickler.com for more information.

[1] Safe Day laws involve allowing an employee paid days off in the event care or treatment is needed for domestic violence, sexual assault or stalking.

 

Related Articles:

EFFECTIVE MAY 13, 2015: UPDATE TO PHILADELPHIA SICK LEAVE REQUIREMENTS

EFFECTIVE JULY 1, 2015: UPDATE TO CALIFORNIA SICK LEAVE REQUIREMENTS

“Ban the Box” Introduced to Congress

On September 10, 2015, a bill was introduced by Senator Cory Booker (D-NJ) and Representative Elijah Cummings (D-MD) marking the first time “ban the box” has been proposed at the federal level.  If passed, The Fair Chance Act would prevent federal agencies and contractors from inquiring about prospective employees’ criminal records before extending a formal job offer.  Once a job offer is presented, the employer may ask about an applicant’s criminal background and revoke the job offer based on the result of a criminal background check.  Law enforcement, national security agencies, and positions with access to classified information will be exempt from this proposed law. For more information about the proposed Fair Chance Act, contact Joseph Messer at jmesser@messerstrickler.com or (312) 334-3440.

 

Read More on “Ban the Box”

                Illinois Enacts “Ban the Box” Law Impacting Private Employers

                Private Employers May be Impacted by the “Ban the Box” Approach in 2014

                The “Ban the Box” Movement Continues                

               “Ban the Box” and Local Ordinances – What Employers Should Know

Second Employment related FCRA Claim filed against AMAZON.COM

A second class action has been filed against Amazon.com in the U.S. District Court for the District of New Jersey alleging that Amazon violated the Fair Credit Reporting Act by failing to warn an applicant a negative reports it received and in turn, failing to allow the applicant an opportunity to clarify or fix what he deemed were errors on the report.   Plaintiff also alleges Amazon failed to provide him with a copy of that report or a list of his rights under the FCRA as required.  According to Plaintiff’s Complaint, Amazon allegedly offered him a position but later withdrew the offer after receiving negative information in a background check from a third party background screener.

The New Jersey Plaintiff seeks to represent a class of those people (employees or job applicants) at Amazon who did not receive a copy of their reports or correspondence explaining that the report would not be provided within 2 to five years from the date of filing.  As a best practice, employers should be aware of the requirements imposed by the FCRA and provide all applicable notices to employees or prospective employees as required.

For more information on the FCRA and its application in the employment law field, please contact Dana Perminas at 312-334-3474 or dperminas@messerstrickler.com.

15 Million Consumers Impacted by Experian Reports Data Breach

From September 1, 2013 through September 16, 2015, consumers who applied for postpaid services or device financing through Experian’s client, T-Mobile USA, were notified of an unauthorized breach from which consumers’ names, dates of birth, addresses, Social Security numbers, and drivers’ license numbers were at risk.  Personal payment cards and bank accounts were not accessed during the breach.  The breach, which affected Experian North America’s business units – not its consumer credit bureau, impacted approximately 15 million consumers in the United States.  As a result, Experian is offering credit protection resources to those who were or may have been affected. It is critical for credit and collection agencies to be aware of the risks of data breaches and the practices that will prevent them.  Identity theft is the fastest growing consumer complaint as determined by the 2014 Consumer Complaint Survey Report by the Consumer Federation of America and North American Consumer Protection Investigators. Be sure to take preventative measures to protect both your company and the consumers you serve.

For more information regarding the Experian Reports data breach, contact Joseph Messer at jmesser@messerstrickler.com or (312) 334-3440.

CFPB to Curb Mandatory Arbitration in Bank Contracts

On October 7th, 2015, the Consumer Financial Protection Bureau (“CFPB”) is set to propose new regulations which would prohibit financial institutions from including arbitration clauses that revoke consumers’ rights to class-action litigation. Such clauses appear in a broad range of financial contracts including, but not limited to, those for credit cards, checking and deposit accounts, prepaid cards, money transfer services, home mortgages, and private student loans. Through this proposal, the CFPB hopes to shift more power to consumers but in doing so, it has sparked national debate as to whether consumers are actually helped or harmed by arbitration agreements. According to a March study conducted by the CFPB, mandatory arbitration clauses affect millions of consumers, of which only 7% were aware such clauses restrict their rights to sue in court. The CFPB hopes their findings will justify the pending regulations; Opponents of the proposed regulation maintain that consumer class actions often times do little to help consumers and impose huge costs to businesses.

For more information regarding the proposed regulations or about the CFPB generally, contact Joseph Messer at 312-334-3440 or jmesser@messerstrickler.com.

33% Attorney’s Fee Award Reduced to Lodestar Calculation in FLSA Settlement

Marshall v. Deutsche Post DHL, decided September 21, 2015 involved a collective action against DHL and DHL Express (USA) Inc. The plaintiffs represented a class of DHL agents working at airports in New York, Miami and Los Angeles who were “undercompensated through defendants’ alleged unlawful rounding of time, automatic deductions for meals, and requests that employees work off-the-clock.” Plaintiffs, through class counsel, obtained a settlement of $1,500,000 for the 242 class members involved. In approving the settlement, the district court stated that it had no issues with the settlement amount for the class members, but took issue with the calculation of class counsel’s attorney’s fees pursuant to that settlement. Although class counsel appeared to have billed a total of 1,325 hours on the case for a total lodestar figure of $591,571.25, class counsel requested $500,000 in fees, or one third of the settlement amount, and sought to be reimbursed for $33,371.39 for costs. The magistrate judge approved the proposed settlement and no class member or other interested party made any objection. Fast forward to the settlement approval by the district court – as stated above, the court took no issue with the settlement amount as to the class stating “the settlement is substantively fair and adequate and therefore is approved.” The court next evaluated class counsels’ request for an award equal to 1/3 of the total settlement amount. The court stated a “court may calculate a reasonable attorneys’ fee either by determining the so-called “lodestar” amount or by awarding a percentage of the settlement. “See McDaniel v. Cnty. Of Schenectady, 595 F.3d 411, 417 (2d Cir. 2010). The court also acknowledged that “the trend in this Circuit is toward the percentage method,” but either approach is appropriate. McDaniel, 595 F.3d at 417 (quoting Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 121(2d Cir. 2005). Even so, the court, citing to McDaniel, 595 F.3d at 417, stated “the percentage-of-the fund method”…“create[s] perverse incentives of its own, potentially encouraging counsel to settle a case prematurely once their opportunity costs begin to rise.”

The district court ultimately disagreed with the magistrate’s finding that the 1/3 award was reasonable stating that “there is reason to be wary of much of the case law awarding attorney’s fees in FLSA cases in this circuit” citing to Fujiwara v. Sushi Yasuda Ltd., 58 F.Supp. 3d 424, 436 (S.D.N.Y. 2014). Therefore, the district court followed several other New York federal district judges partial to Fujiwara and applied the lodestar method but refused to apply a multiplier. In doing so, the court reduced the award to $370,236.50, approximately 25 percent of the total settlement, stating “[w]hile counsel urge the use of a lodestar multiplier, the various considerations that might justify a multiplier have already been factored into the determination of counsel’s reasonable hourly rate. I decline to add a multiplier to the fee award.” See Goldberger v. Integrated Res., Inc., 209 F.3d 43, 51-57 (2d Cir. 2000).

The Marshall decision could present a concern for mid-size or larger firms, who generally bill at much higher rates, who are considering taking on the risk of employment common fund class or collective actions.

For more information on the FLSA, class or collective actions or any other employment law issue, please contact Dana Perminas at 312-334-3474 or dperminas@messerstrickler.com.

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Employment related FCRA Claim against AMAZON

A class action filed against Amazon.com in a circuit court in Tampa, Florida alleges that Amazon wrongfully used consumer credit reports in hiring, firing and even for shift assignments for employees and prospective employees in the state of Florida.

The lead Plaintiff alleged that Amazon obtained his credit report without his permission and did not give him the ability to refute or clarify information in the report before it turned him down for a job in one of Amazon’s Florida warehouses.  According to the Plaintiff, by doing so, Amazon violated his rights under the Fair Credit Reporting Act (“the FCRA”) and manifests a pattern of systematic violations of other employees’ and job applicants’ rights under the FCRA.  Plaintiff also alleged that Amazon’s background check disclosure form, which contains a liability release, also violates the FCRA.

Plaintiff alleged that he was “given no pre-adverse notice whatsoever of the information contained in the consumer report upon which defendant based its decision" and that Amazon.com "did not provide plaintiff with a copy of the consumer report that it relied upon prior to defendant's adverse employment action.  As a result, in violation of the FCRA, plaintiff was deprived of any opportunity to review the information in the report and discuss it with defendant before he was denied employment."

As a best practice, employers should be aware of the requirements imposed by the FCRA and provide all applicable notices to employees or prospective employees as required.

For more information on the FCRA and its application in the employment law field, please contact Dana Perminas at 312-334-3474 or dperminas@messerstrickler.com for more information.

CLASS ACTION STATUS GRANTED AGAINST UBER TECHNOLOGIES

Judge Edward Chen of the Northern District Court of California recently certified a class action suit against Uber Technologies, Inc. which claims the service treated its drivers like employees rather than independent contractors. The plaintiffs in this case believe that since Uber controls much of the drivers’ experiences (i.e. setting fares, deciding when and why they can be terminated, etc.), drivers should be classified as employees and therefore be eligible for expense reimbursements for car repairs, tips, and insurance. The class action will not apply to drivers that waived their right to litigate, certain drivers who work for independent transportation companies and drivers outside the state of California.  If a ruling limiting the class to those employed in the state of California is successfully appealed, however, the class action could be applicable to drivers around the country.

For more information regarding the class action against Uber or employment law generally, contact Joseph Messer at jmesser@messerstrickler.com or (312) 334-3440.

Employer Alert - To What Extent Do Employees Have the Right to be Accommodated with Respect to Their Religious Beliefs?

Employees refusing to do their job duties based upon religious beliefs have been a trending topic in the news recently.  For example, Kim Davis, a county clerk in Kentucky, gained national media attention when she refused to issue marriage licenses after the U.S. Supreme Court ruled that the right to marriage is guaranteed to same-couples by the Fourteenth Amendment. In the midst of the news stories surrounding the Kim Davis controversy, another employee filed a federal lawsuit based upon her employer placing her on administrative leave due to her religious beliefs inhibiting her ability to perform her job duties.  Charee Stanley, a Muslim flight attendant for ExpressJet Airlines, was recently placed on administrative leave after she refused to serve alcohol for religious reasons.  Stanley began her employment prior to converting to the Muslim faith.

Stanley asked her supervisor for a religious accommodation, i.e., having one of her colleagues serve the alcohol while she did another job duty.  The supervisor agreed.  The accommodation worked for a while, until one of her colleagues filed an internal complaint against Stanley claiming she was not doing her job because she refused to serve alcohol.  Subsequently, the airline revoked the religious accommodation and placed her on administrative leave without pay for 12 months - “after which her employment would be administratively terminated.”

Stanley is now seeking redress from the EEOC.  Stanley claims she was disciplined for following the direction of her employer and that her employer had no justification to revoke her religious accommodation.  Stanley’s position is that ExpressJet acknowledged serving alcohol was “not an essential duty or function of flight attendant” by granting the religious accommodation and the fact that the revoked the accommodation is in violation of Title VII of the Civil Rights Act of 1964.

While employers should be mindful and knowledgeable about their duties when it comes to accommodating employees based on religious beliefs, employers also need to be aware of their rights.  Title VII provides that an employer must reasonably accommodate an employee’s religious beliefs and practices unless doing so would cause “undue hardship on the conduct of the employer’s business.”  The U.S. Supreme Court has ruled that “undue hardship” means that an employer need not incur more than minimal costs in order to accommodate an employee’s religious practices.  The EEOC has interpreted “undue hardship” to mean that an employer can show that a requested accommodation causes it an undue hardship if accommodating an employee’s religious practices requires anything more than ordinary administrative costs, diminishes efficiency in other jobs, infringes on other employees’ job rights or benefits, impairs workplace safety, causes coworkers to carry the accommodated employee’s share of potentially hazardous or burdensome work, or if the proposed accommodation conflicts with another law or regulation.

Accordingly, religion is not an automatic ticket employees can use to avoid certain job duties.  There are limitations and employers need to be aware of their rights under Title VII.

For more information on this topic, contact Stephanie Strickler at 312-334-3465 or sstrickler@messerstrickler.com.

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Sixth Circuit Expands the Definition of “Person” Under the FDCPA

The Sixth Circuit recently made a ruling which expanded the definition of “person” under the FDCPA to include artificial entities such as corporations or limited liability companies for purposes of 15 U.S.C. § 1692k.  In Anarion Investments LLC v. Carrington Mortgage Services, LLC et al., the district court dismissed the complaint on the basis that plaintiff, a limited liability company, was not a “person” under the FDCPA and could not recover under the statute’s civil liability provision.  This provision states that a debt collector who fails to comply with the FDCPA “with respect to any person is liable to such person.”  On appeal, the Sixth Circuit decided that under this provision, the term “person” includes artificial entities and natural persons.  The Sixth Circuit relied on the federal dictionary for the definition of “person” which includes artificial entities unless the context indicates otherwise.  The Sixth Circuit clearly ignored the FDCPA’s statutory purpose as the FDCPA’s legislative history and purpose to protect natural persons from abusive debt collection practices clearly “indicates otherwise” so as to not include artificial entities. Despite expanding the definition of “person” under Section 1692k, the Sixth Circuit’s opinion is unlikely to make a large impact because the FDCPA only applies to consumer debts - those incurred for personal, family, or household purposes.  Nonetheless, this type of ruling is troublesome as it demonstrates the unpredictability of court’s interpretations of even those terms that are defined within the statute.

For more information on this topic, contact Stephanie A. Strickler at 312-334-3465 or at sstrickler@messerstrickler.com.

 

 

TEXAS COURT RULES CELL PHONE AREA CODE INSUFFICIENT TO ESTABLISH PERSONAL JURISDICTION IN TCPA CASE

In a recent Southern District of Texas decision, the court held that contacting a cell phone number with an area code assigned to a particular state, by itself, is insufficient to establish personal jurisdiction over an out-of-state defendant when the call gives rise to an alleged claim under the Telephone Consumer Protection Act (TCPA).  See Cantu v. Platinum Mktg. Grp., LLC, Case No. 1:14-cv-71, 2015 U.S. Dist. LEXIS 90824 (S.D. Tex. July 13, 2015).  In Cantu, plaintiff alleged that defendant placed automated calls to his cellular telephone without his permission in violation of the TCPA.  On plaintiff’s motion for default judgment, the court considered its jurisdiction over defendant, a Florida corporation.  Plaintiff argued that the court had specific personal jurisdiction over defendant because “the phone number at which it reached Plaintiff has a Texas area code of 956.”  Essentially, plaintiff analogized calling a cell phone number with a Texas area code to directing a letter to a Texas resident.  Recognizing that we live in a very mobile society such that people keep their cellphone numbers as they move state to state, the Court determine[d] that showing that a TCPA defendant called a phone number in an area code associated with the plaintiff’s alleged state of residence does not, by itself, establish minimum contacts with that state” to allow the court to exercise personal jurisdiction over the defendant. The Cantu decision is in line with case law in the Northern District of Illinois.  See e.g., Sojka v. Loyalty Media, LLC, Case. No. 14-CV-770, 2015 U.S. Dist. LEXIS 666045 at *7 (N.D. Ill. May 15, 2015) (holding that text messages directed at cell phone numbers in Illinois area code did not demonstrate purposeful availment).  Some district courts, however, have ruled to the contrary.  See e.g., Luna v. Shac, LLC, Case No. C14-00607 HRL (N.D. Cal. July 14, 2014) (holding that “where [defendant] intentionally sent text messages directly to cell phones with California based area codes, which conduct allegedly violated the TCPA and gave rise to this action, [defendant] expressly aimed its conduct at California”).  Nonetheless, the Cantu and Sojka decisions should be of use to TCPA defendants wishing to challenge jurisdiction, specifically where the plaintiff has failed to suggest any evidence, aside from the phone’s area code, that defendant knew the plaintiff was a resident of that particular state.

For more information on personal jurisdiction and/or the TCPA generally, contact Katherine Olson at (312) 334-3444 or kolson@messerstrickler.com.

 

SEVENTH CIRCUIT REVERSES PRIOR DECISIONS TO THE EXTENT THEY HOLD A DEFENDANT’S OFFER OF FULL COMPENSATION MOOTS THE LITIGATION OR OTHERWISE ENDS ARTICLE III STANDING

In a recent opinion, the Seventh Circuit ruled that a defendant’s offer of full compensation does not render an individual plaintiff’s claims moot.  See Chapman v. First Index, Inc., 2015 U.S. App. LEXIS 13767 (7th Cir. Aug. 6, 2015).  In Chapman, a facsimile recipient brought a lawsuit against the sender alleging two violations of the Telephone Consumer Protection Act (TCPA).  Defendant subsequently made an offer of judgment (“OOJ”) under Federal Rule of Civil Procedure 68 for $3,002.00, an injunction, and costs.  Section 227(b)(3)(B) of the TCPA authorizes awards of actual damages or $500 per fax, whichever is greater, and can be trebled if the violation was willful; while Section 227(b)(3)(A) allows for an injunction.  As Plaintiff failed to identify any actual damages, defendant’s OOJ constituted a fully compensatory offer.  Consequently, when the OOJ lapsed, the district court dismissed Plaintiff’s individual claims as moot. On appeal, the Seventh Circuit reversed and in doing so overruled Damasco, Thorogood, Rand, and similar decisions to the extent they held a defendant’s offer of full compensation moots the litigation.  The Court acknowledged that a case becomes moot only when it is impossible for a court to grant any effectual relief whatsoever to the prevailing party.  By that standard, plaintiff’s case was not moot as the district court could still award damages and enter an injunction.  “If an offer to satisfy all of the plaintiff’s demands really moots a case, then it self-destructs.”  Essentially, even if plaintiff had accepted the OOJ the district court could not have entered judgment, all it could do is dismiss the case, and in that sense as “soon as the offer was made, the case would have gone up in smoke[.]”

Importantly, but without ruling on same, the Seventh Circuit left open the possibility that the district court could have entered a judgment according to the offer’s terms.  Though Chapman holds a rejected OOJ, by itself, cannot render a case moot, Chapman certainly suggests that proper disposition of a case following an unaccepted offer of complete relief is for the district court to enter judgment in the plaintiff’s favor.  Consequently, defendants facing an unaccepted OOJ may choose to move for entry of judgment in accordance with the offer’s terms.  After judgment is entered, the plaintiff’s individual claims will become moot for purposes of Article III.

Notably, whether a class action is rendered moot when named plaintiffs receive an offer of complete relief is currently pending before the Supreme Court.  See Gomez v. Campbell-Ewald Co., 768 F.3d 871 (9th Cir. 2014), cert. granted sub nom. Campbell-Ewald Co. v. Gomez, 135 S. Ct. 2311 (May 18, 2015).  Recognizing same, the Seventh Circuit in Chapman admittedly felt compelled to “clean up the law of the circuit promptly[.]”

For more information on the Chapman decision, Rule 68 offers of judgment or the TCPA generally, contact Katherine Olson at (312) 334-3444 or kolson@messerstrickler.com