Source: https://www.classactiondefenseblog.com/category/20class-action-articles/24-fcra-class-actions/page/2/
Timestamp: 2019-04-22 14:12:47+00:00

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Plaintiff filed a putative class action against American Multi-Cinema for violating the federal Fair and Accurate Credit Transactions Act (FACTA); specifically, the class action complaint alleged that defendant printed not only the last four digits of a consumer’s credit or debit card on the customer’s receipt, but the first four digits as well. Bateman v. American Multi-Cinema, Inc., 252 F.R.D. 647, 648 (C.D. Cal. 2008). Notably, the class action complaint did not allege that plaintiff, or any putative member of the class action, suffered any harm as a result of the violation. Id. Defendant corrected its sales practices within two weeks of the filing the class action, id. Plaintiff moved the district court to certify the litigation as a class action; the district court denied the motion on the grounds that Rule 23(b)(3)’s superiority requirement had not been met: “The Court found that if certified, the potential statutory damages to be awarded could be enormous and completely out of proportion to any harm suffered by Plaintiff.” Id. (A copy of the district court order denying plaintiff’s initial motion for class action treatment may be found here.) However, the district court denied class action treatment without prejudice pending the Ninth Circuit’s decision in Soualian v. Int’l Coffee & Tea LLC, CV 07-502-RGK (JCx), 2007 WL 4877902 (C.D. Cal. filed June 11, 2007). Soualian, however, was settled so the Ninth Circuit dismissed the appeal. Id. The district court permitted plaintiff to renew his motion for class action certification, and again denied the motion.
After summarizing the legal standard for class action certification under Rule 23, see Bateman, at 648-49, the district court summarized the legislative history of FACTA and the statutory penalties provided for FACTA violations, see id., at 649. The federal court also discussed the 2007 Congressional amendment to FACTA, which clarified that the statute was not intended to provide for private rights of action based solely on the failure of a merchant to include the expiration date of the credit/debit card on the customer’s receipt. See id., at 649-50. The amendment, however, “does not provide Defendant with a safe-harbor for truncating its credit card receipts to eight (8) digits rather than five (5).” Id., at 650. Plaintiff argued that class action treatment was warranted because Congress essentially reaffirmed that the failure to truncate the credit or debit card account numbers supported such lawsuits. Id. But the district court observed that the purpose of the statute was to prevent identity theft, and that “the congressional record also supports an inference that members of Congress were primarily concerned with credit card receipts displaying the entire credit card account number.” Id. Accordingly, the federal court concluded that “it is far from clear whether Congress intended to approve class actions for printing eight (8) digits rather than five (5).” Id. However, the court found persuasive the purpose of the statute – viz., “The purpose of this Act is to ensure that consumers suffering from any actual harm to their credit or identity are protected while simultaneously limiting abusive lawsuits that do not protect consumers but only result in increased cost to business and potentially increased prices to consumers.” Id. (quoting Pub.L. 110-241, § 2(b), 122 Stat. 1565 (June 3, 2008)). Because no one suffered any harm as a result of the technical violation of the statute, the court denied class action treatment. Id.
Three class actions – one in California, Illinois and North Carolina – were filed against LendingTree and other defendants alleging that LendingTree failed to “limit access to and/or adequately safeguard private customer information in violation of the Fair Credit Reporting Act.” In re Lending Tree, LLC, Customer Data Security Breach Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. October 7, 2008) [Slip Opn., at 1]. Plaintiff’s lawyer for the North Carolina class action filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Western District of North Carolina; no responding party opposed centralization, but the parties could not agree on the appropriate transferee court. Id. Certain other plaintiffs, and defendants LendingTree and Home Loan Center supported the motion; plaintiffs in the Illinois and California class actions argued for transfer to the Central District of California. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, id., at 1-2. The Panel also agreed that the Western District of North Carolina was the appropriate transferee court “because (1) LendingTree is headquartered in Charlotte, North Carolina, and parties, witnesses and documents may be found there, and (2) this district has the capacity to handle this docket and, in the past, has been underutilized as a transferee district.” Id., at 2.
Three class actions – two in California and one in Illinois – were filed against Make-Up-Art Cosmetics (MAC) alleging violations of the federal Fair and Accurate Credit Transactions Act (FACTA); specifically, the class action complaints alleged that MAC printed “certain credit and debit card information on customer receipts” in violation of FACTA. In re Make-Up Art Cosmetics (M.A.C.) Fair & Accurate Credit Transactions Act (FACTA) Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. June 9, 2008) [Slip Opn., at 1]. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the class actions pursuant to 28 U.S.C. § 1407 in the Central District of California; plaintiffs in the class actions supported the motion but argued for transfer to the Northern District of Illinois. Id. The Judicial Panel granted the motion to centralize the class action lawsuits, finding that centralization will eliminate duplicative discovery and prevent inconsistent pretrial rulings, particularly with respect to class action certification. Id. The Panel agreed also that the Central District of California was the appropriate transferee court because two of the three class actions were pending in that district, “including the first-filed and broadest actions.” Id.
Plaintiffs filed a class action complaint against Home Loan Center, doing business as HomeLoanCenter.com, alleging violations of the federal Fair Credit Reporting Act (FCRA); specifically, the class action alleged that Home Loan Center sent them a mailer for a “SmartLoan mortgage program” but that the mailer was not a “firm offer of credit” and therefore violated the FCRA. Cavin v. Home Loan Center, Inc., ___ F.3d ___ (7th Cir. July 2, 2008) [Slip Opn., at 1]. The letters referenced in the class action were sent “to thousands of Illinois residents” and stated that the recipient had been “pre-approved to receive HomeLoanCenter.com’s exclusive SmartLoan program.” Id., at 2. The mailers contained a box with the figures of 1.00%/4.27%, adjacent to two columns that listed various monthly payments for various loan amounts. Id. The letters stated that no fees would be charged to get the loan process started, and that defendant could “prequalify [the recipient] right over the phone in minutes and provide [the recipient] with a customized loan program that suits [the recipient’s] needs.” Id. The letter also provided, “This offer may not be extended if, after responding to this offer you do not meet the criteria used in the selection process. Further, HomeLoanCenter.com will verify income and employment, review credit, and analyze debt and your equity position in the subject property prior to final loan approval.” Id., at 2-3. The mailers stated that not all applicants would be approved and reiterated that terms and conditions applied to the offer, id., at 3. The parties filed cross-motions for summary judgment; the district court agreed with defense attorneys that the mailers did not violate the FCRA and accordingly entered judgment in favor of defendant. Id., at 1-2. The Seventh Circuit affirmed.
The FCRA permits a finance company to obtain an individual’s credit report, but “the company needs to obtain it with the intent of extending a firm offer of credit to the potential customer.” Cavin, at 4 (citing 15 U.S.C. § 1681b(c)(1)(B)(I)). Under the FCRA, a “firm offer of credit” is “any offer of credit or insurance to a consumer that will be honored if the consumer is determined, based on information in a consumer report on the consumer, to meet the specific criteria used to select the consumer for the offer except that the offer may be further conditioned…” 15 U.S.C. § 1681a(l). In this case, class action plaintiffs argued that defendant accessed their credit information “without a permissible purpose” because the mailers sent to them and other members of the putative class did not constitute a firm offer of credit within the meaning of the FCRA. Id., at 3-4. Specifically, plaintiffs argued that material terms of the loan program were not disclosed and/or were not adequately explained, id., at 5. The Seventh Circuit disagreed, explaining at page 5, “The mailer identified the basis for calculating interest, the length of the loan, the possibility of a rate change after thirty days, the minimum payment option with accompanying deferred interest, and the information needed to obtain the loan.” That is all that was required because the FCRA does not require the initial communication “‘contain all of the important terms that must be agreed on before credit is extended.’” Id., at 5 (citation omitted). On the contrary, requiring a financial institution to disclose all material terms would result in the mailer being more difficult for the consumer to understand. Id., at 5-6 (citation omitted). The Circuit Court explained that “the proper inquiry in ascertaining whether a letter is a firm offer is whether the offer will be honored, not whether all of the material terms are listed.” Id., at 6.
Two class action lawsuits – one in Illinois and one in Pennsylvania – were filed in against defendants Texas Roadhouse Holdings LLC and Texas Roadhouse, Inc., for violations of the Fair and Accurate Credit Transactions Act (FACTA), alleging that defendants printed information on credit card and debit card customer receipts that FACTA required be excluded therefrom. In re Texas Roadhouse Fair & Accurate Credit Transactions Act (FACTA) Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. April 7, 2008) [Slip Opn., at 1]. Plaintiff’s lawyer in the Pennsylvania class action filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the litigation pursuant to 28 U.S.C. § 1407 in the Northern District of Illinois; plaintiff in the Illinois class action supported the motion. Id. Defense attorneys opposed pretrial coordination, and alternatively filed motions under 28 U.S.C. § 1404 to transfer the class actions to Kentucky, id. The Judicial Panel granted the motion to centralize the class action lawsuits, explaining at page 1: “Common discovery is likely, as defendants have suggested that discovery related to their credit and debit card receipt policies will be company-wide. Centralization under Section 1407 will eliminate duplicative discovery; prevent inconsistent pretrial rulings, especially with respect to class certification; and conserve the resources of the parties, their counsel and the judiciary.” The Judicial Panel also agreed that the Northern District of Illinois was the appropriate transferee court. Id., at 1-2.
Plaintiff filed a putative class action against Greenwood Credit Union alleging violations of the Fair Credit Reporting Act (FCRA) arising out of “an unsolicited letter to a consumer about the offering of credit for a home loan.” Sullivan v. Greenwood Credit Union, 520 F.3d 70, 71 (1st Cir. 2008). Greenwood had purchased credit reports for purposes of pre-screening individuals, and then sent home loan offers to “a list of individuals meeting certain minimal credit requirements”: the class action complaint alleged that the unsolicited letters fall within the FCRA and that consumer credit information had been obtained for an improper purpose; defense attorneys argued that the FCRA permits obtaining credit reports for various purposes, including extending a “firm offer of credit.” Id. The First Circuit explained at page 71, “This case is about plaintiff’s efforts to collect that statutory penalty for a class of consumers; there is no claim [he] was wrongfully denied credit.” The thrust of the class action claims was that the offer of credit “was based on such minimal criteria and the actual extension of credit was so contingent on other conditions that the letter could not be a firm offer of credit.” Id. Defense attorneys moved for summary judgment on the class action complaint, and the district court granted the motion. As a matter of first impression in the First Circuit, the Circuit Court considered the phrase “firm offer of credit” and affirmed.
Defense attorneys argued that Greenwood limited its offer of credit to homeowners “having at least $10,000 in revolving debt and a credit score of 500 or greater.” Sullivan, at 71. Greenwood did not obtain a consumer’s entire credit report; rather, it obtained from the credit reporting agency only contact information for consumers who met these criteria. Id., at 71-72. Greenwood then sent consumers a letter offering them, for a limited time, loans up to 100% of the value of their home at “some of the lowest rates in decades”; however, the letter did not provide the interest rate being offered, nor did it state the duration of the loan. Id., at 72. The letter noted, however, “Limited time offer to customers who qualify based on equity, income, debts, and satisfactory credit. Rates and terms subject to change without notice. Most loan programs require both a satisfactory property appraisal and title exam for final approval…. If at time of offer you no longer meet initial criteria, offer may be revoked.” Id. The letter also informed consumers as to the steps they could take if they wanted to stop receiving prescreened offers of credit. See id. Plaintiff responded to the letter by filing the class action complaint, id. Plaintiff’s theory was that Greenwood had not extended a “firm offer of credit” because the letter “‘is lacking crucial terms for it to be an offer’ and ‘is so vague and lacking in terms as not to constitute an “offer capable of acceptance”.’” Id. The class action complaint sought statutory damages of $1,000 per class member on behalf of approximately 2 million individuals, id.
Plaintiff filed a putative class action lawsuit in California state court against Polo Ralph Lauren alleging violations of California’s Song-Beverly Act; specifically, the class action complaint alleged that defendant requested personal information from customers as part of credit card transactions in violation of California Civil Code § 1747.08. Korn v. Polo Ralph Lauren Corp., 536 F.Supp.2d 1199, 1202 (E.D. Cal. 2008). Defense attorneys removed the class action to federal court alleging removal jurisdiction under the Class Action Fairness Act (CAFA); plaintiffs moved to remand the class action to state court on the grounds that defendant failed to establish the requisite diversity or amount in controversy. Id. As the district court explained, “CAFA grants district courts original jurisdiction over civil class actions filed under federal or state law in which any member of a class of plaintiffs is a citizen of a state different from any defendant and the amount in controversy for the putative class members in the aggregate exceeds the sum or value of $5,000,000, exclusive of interest and costs.” Id. (citing 28 U.S.C. § 1332(d)(2)). The district court refused to remand the class action to state court, holding that defendant sufficiently established CAFA removal jurisdiction.
Plaintiff first argued that Polo Ralph Lauren did not establish that it was not a citizen of California, Korn, at 1201; the district court rejected this argument, noting that plaintiff is bound by the judicial admission in his complaint that defendant is a Delaware corporation with its principal place of business in New Jersey, id., at 1203. Accordingly, the federal court held plaintiff “bound by the allegations in his complaint that assert defendant’s citizenship, for purposes of diversity jurisdiction, is in Delaware and New Jersey.” Id. Plaintiff next argued that the defense failed to establish the $5,000,000 amount in controversy requirement. Id., at 1201. While the class action complaint did not seek a specific amount of damages, the district court observed that the class action seeks “statutory civil penalties for the alleged violations [of] up to $1000 per violation.” Id., at 1202. Further, as part of the documentation supporting removal of the class action to federal court, defense attorneys had submitted a declaration establishing that Polo Ralph Lauren had “processed more than 5,000 credit card transactions over the last year in the state of California.” Id. The district court held that this was sufficient.
Four class action lawsuits were filed against OSI Restaurant Partners (OSI) alleging violations of the federal Fair and Accurate Credit Transactions Act (FACTA) based on OSI’s failure to delete certain information from customer credit and debit card receipts. The class actions were pending in the Eastern District of Pennsylvania (two), and the Western District of Pennsylvania and Northern District of Illinois (one each). In re OSI Restaurant Partners, LLC, Fair & Accurate Credit Transactions Act (FACTA) Litig., ___ F.Supp.2d ___ (Jud.Pan.Mult.Lit. February 20, 2008) [Slip Opn., at 1]. Defense attorneys filed a motion with the Judicial Panel for Multidistrict Litigation (MDL) requesting centralization of the litigation pursuant to 28 U.S.C. § 1407 in the Eastern District of Pennsylvania; all parties agreed that pretrial coordination was appropriate, but plaintiffs’ lawyers in two of the class actions argued that the Western District of Pennsylvania was the appropriate transferee court. Id. The Judicial Panel granted the motion for centralization, but agreed with defense attorneys that the Eastern District of Pennsylvania was the appropriate transferee court. Id.
The Seventh Circuit yesterday issued an opinion that resolved various issues of interest under the federal Fair Credit Reporting Act (FCRA) presented by three lower court opinions – the putative class action styled Murray v. New Cingular Wireless Servs., Inc., out of the Northern District of Illinois, Case No. 04 CV 7666, the putative class action styled Bruce v. KeyBank N.A., out of the Northern District of Indiana, Case No. 2:05cv330, and the putative class action styled Price v. Capital One Bank (USA), N.A., out of the Eastern District of Wisconsin, Case No. 05-C-947 – explaining that the cases involve “issues that have arisen in numerous suits” and that each of the three cases “presents at least two issues, several of which recur in multiple appeals.” Murray v. New Cingular Wireless Servs., Inc., 523 F.3d 719 (7th Cir. 2008) [Slip Opn., at 2]. The Circuit Court organized its discussion around issues, rather than the facts of each appeal, id., so we summarize the opinion without providing an introductory factual summary of the cases. (For the convenience of the reader, the facts underlying the Murray class action may be found in lower court opinion at Murray v. New Cingular Wireless Servs., Inc., 432 F.Supp.2d 788 (N.D. Ill. 2006), the facts underlying the Bruce class action may be found in lower court opinion atBruce v. KeyBank N.A., 2006 WL 3743749 (N.D. Ind. December 15, 2006), and the facts underlying the Price class action may be found in the lower court opinion at Price v. Capital One Bank (USA), N.A., 2007 WL 1521525 (E.D. Wis. May 22, 2007). Additionally, our summary of the district court decision in Murray may be found here.) The issues addressed and conclusions reached by the Seventh Circuit, of importance to class action and non-class action cases alike, are: (1) whether an offer of credit must be valuable to all or most recipients, id., concluding the offer must be “firm” but need not be ‘valuable,” id., at 5, (2) whether an offer of “free” merchandise can constitute an offer of “credit,” id., concluding that it may, id., at 6, (3) whether flyers must contain all material terms of the offer of credit, id., concluding that it need not, id., at 8, (4) whether the fact that the terms of the offer may vary means that the offer is not “firm,” id., concluding that an offer may be firm even though “some matters [are left] for future determination,” id., at 10, (5) whether 6-point type is “conspicuous,” id., concluding that it is not, id., at 12, (6) whether use of 6-point type is a “willful” violation of the FCRA, id., concluding that it would be reckless “today” to do so but was not so at the time the documents in question were prepared, id., at 15.
Must an offer of credit must be valuable to all or most recipients? In Cole v. U.S. Capital, Inc., 389 F.3d 719 (7th Cir. 2004), the Seventh Circuit held that if one offers a product (such as furniture) along with a “token line of credit,” then the FCRA requires that the credit offer have value to the consumer: “’From the consumer’s perspective, an offer of credit without value is the equivalent of an advertisement or solicitation [for the product rather than the loan].’” Murray, at 3 (quoting Cole, at 726-27). The Circuit Court noted that plaintiffs have twisted Cole to argue that it requires “even a simple offer of credit [to be] valuable enough to justify the use of consumers’ credit files.” Murray, at 3. These efforts must fail, the Seventh Circuit held, because the FCRA “calls for a firm offer of credit but not a valuable firm offer of credit.” Id., at 4 (citing 15 U.S.C. § 1681b(c)(1)(B)(i)). By contrast, “[t]he problem in Cole was how to disentangle an offer of merchandise from an offer of credit when they are made jointly.” Id. Cole thus does not apply to cases involving “pure offers of credit.” Id., at 5.

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