SD FL Rejects Dismissal Attempt Under Spokeo

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As we continue to track standing decisions following the Supreme Court’s Spokeo ruling, a new decision from the Southern District of Florida is noteworthy.

In Guarisma v. Microsoft Corporation, the plaintiff brought suit under the Fair and Accurate Credit Transactions Act (FACTA) after a Microsoft store issued him a printed receipt that bore the first six and last four digits of his credit card account number, along with his name.

Microsoft moved to dismiss on standing grounds, arguing the plaintiff did not suffer a concrete injury.  In response, plaintiff argued that Microsoft’s failure to comply with the FACTA constituted a concrete injury in and of itself.

Under Spokeo and Eleventh Circuit precedent, the court framed the question as “whether, in enacting the FACTA, Congress created a substantive right for consumers to have their personal credit card information truncated on printed receipts, or merely created a procedural requirement for credit card-using companies to follow.”  The answer:

The Court is persuaded Congress intended to create a substantive right.  Notably, other courts have found the FACTA endows consumers with a legal right to protect their credit identities, both pre- and post-Spokeo.

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The FACTA’s legislative history supports the Court’s finding Congress desired to create a substantive legal right for consumers to utilize in protecting against identity theft.  

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3rd Circuit Continues to Recognize “Pick-Off” Exception to Mootness

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After the Supreme Court’s decision in Campbell-Ewald, courts around the country have been forced to reexamine not only when a plaintiff’s claims can be mooted, but also whether a defendant’s attempt to “pick off” the named plaintiff’s claim can moot the entire proposed class’s claims.

In Richardson v. Bledsoe, the Third Circuit became the most recent circuit court to hold that a defendant cannot moot class claims by picking off the named plaintiff — at least as long as the plaintiff did not unduly delay in bringing his or her motion for class certification:
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While Campbell-Ewald, as mentioned above, does not actually address the picking off exception, we see in it some support for the principles animating the exception in the Court’s discussion of class action standing. Specifically, the Court noted that while a class does not become an independent entity until certification, “a would-be class representative with a live claim of her own must be accorded a fair opportunity to show that certification is warranted.” This statement seems to suggest a corollary: when a would-be class representative is not given a “fair opportunity” to show that certification is warranted (perhaps because her individual claim became moot before she could reasonably have been expected to file for class certification), she should be permitted to continue seeking class certification for some period of time after her claim has become moot.
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SDNY: Defer Standing Until Class Certification

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Awhile back, we wrote about the practice of named plaintiffs asserting state-law claims arising under the laws of states in which no named plaintiff resides. Our last post looked at a decision out of the Northern District of California.  More recently, a decision from the Southern District of New York has addressed the issue.

In Kaatz v. Hyland’s, 2016 WL 3676697 (S.D.N.Y. July 6, 2016), the court addressed a defense argument that the plaintiffs lacked standing to bring a putative nationwide class action under any state’s laws except their own.  The court disagreed:

Although standing is generally a threshold issue for an Article III court to determine at the outset of the case, the Supreme Court created an exception for courts to address class certification prior to standing when certification issues are logically antecedent to Article III concerns.

There is a growing consensus among district courts that class certification is logically antecedent, where its outcome will affect the Article III standing determination, and the weight of authority holds that in general class certification should come first.  In other words, when class certification is the source of the potential standing problems, class certification should precede the standing inquiry.

(Quotations and citations omitted.)

The court also noted that plaintiffs in a “consumer protection class action may assert claims under laws of states where they do not reside to preserve those claims in anticipation of eventually being joined by class members who do reside in the states for which claims have been asserted.”
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GM Ignition and the “Benefit of the Bargain” Theory

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Last week, Judge Jesse M. Furman issued a 103-page ruling disposing of New GM’s partial motion to dismiss.  At the crux of the opinion were plaintiffs’ two damages theories.

First, as the court put it, plaintiffs “pursue an unprecedented theory of damages, one that turns not on whether the vehicles at issue were sold with known, latent defects … but rather on the alleged reduction in resale value of the vehicles due to damage to New GM’s reputation and brand.”  Not surprisingly, given the court’s tone in characterizing the theory, the court ruled the first theory was “unsound.”

Second, plaintiffs also seek damages based on a much more well-established methodology: the benefit of the bargain theory.  As the court described that theory:

The gravamen of the benefit-of-the-bargain defect theory is that Plaintiffs who purchased defective cars were injured when they purchased for x dollars a New GM car that contained a latent defect; had they known about the defect, they would have paid fewer than x dollars for the car (or not bought the car at all), because a car with a safety defect is worth less than a car without a safety defect.

Although New GM argued that this theory too failed “across the board” and that it “always requires a plaintiff to prove manifestation of the alleged defect,” the court held that while different jurisdictions have reached different conclusions, in many jurisdictions the damages theory is viable:

New GM is wrong in arguing that the benefit-of-the-bargain defect theory must fail because New GM did not warrant that its cars would have a particular resale value in the future.  

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CD Cal. Court Declines to Compel “Browsewrap” Arbitration

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In April, we wrote about a California Court of Appeal opinion in which the court decline to compel arbitration based on a “browsewrap” agreement (i.e., where a website’s terms and conditions of use posted via a hyperlink, often at the bottom of the screen).  A recent opinion from U.S. District Judge Cormac J. Carney reflects a similar outcome based on federal precedent.

In Nghiem v. Dick’s Sporting Goods Inc., a TCPA case, defendant argued that the plaintiff was on notice of the arbitration agreement posted on its website.  The plaintiff responded that he had been unaware of the clause’s presence.

Citing the Ninth Circuit’s Nguyen v. Barnes & Noble, Inc., decision, Judge Carney began by noting that “courts enforce browsewrap agreements with ‘reluctance,’ and will generally only do so when a consumer has ‘actual or constructive knowledge of a website’s terms and conditions.”

Then, after rejecting the argument that plaintiff had actual knowledge of the contract, Judge Carney also found a lack of constructive knowledge.  The reasoning tracked closely to the Ninth Circuit’s Nguyen holding that “close proximity of the [arbitration clause] hyperlink to relevant buttons users must click on—without more—is insufficient to give rise to constructive notice”:

[Defendant] does not point to any “notice to users” of the Terms of Use, nor does it allege that users of [its] website were affirmatively required to accept the Terms of Use before completing certain functions.

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ND Cal. Finds Standing Allegations Sufficient Under Spokeo

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As we continue to keep an eye on post-Spokeo standing decisions, Judge Alsup of the Northern District of California recently issued a decision on the topic in a ruling granting class certification in a Truth In Lending Act (TILA) suit.

In McLaughlin v. Wells Fargo Bank, 2016 WL 3418337 (N.D. Cal. June 22, 2016), the plaintiff alleged that Wells Fargo had breached its TILA obligation to provide her with an accurate payoff statement regarding her home mortgage.

Defendant contested certification on adequacy grounds, arguing the plaintiff lacked standing under Spokeo to pursue her claims.

Judge Alsup rejected the argument:

The bank argues that the harm alleged by plaintiff borrower is “akin to the no-harm procedural violations” detailed by the Supreme Court in Spokeo.  Not so.  In Spokeo, the Court acknowledged that not all inaccuracies cause harm or present material risk of harm. As an example, the Court explained that “[i]t is difficult to imagine how the dissemination of an incorrect zip code, without more, could work any concrete harm.” The inaccuracy here is in no way akin to an inaccurate zip code. The bank’s effort to downplay the harm done by an inaccurate payoff statement is unconvincing.
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SDNY Finds Standing Well-Pleaded Post-Spokeo

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As we’ve discussed previously, following the Supreme Court’s Spokeo decision, there is some question of how courts will analyze the “concrete” injury requirement for Article III standing.

In Boelter v. Hearst Communications, 2016 WL 3369541 (S.D.N.Y. June 17, 2016), the plaintiffs filed a class action complaint alleging violations of the Michigan Video Rental Privacy Act, among other things. Defendant sought dismissal, arguing that plaintiffs lacked standing because they had “not suffered an ‘injury-in-fact’—that is, that violation of the VRPA, as well as the other harms alleged in the amended complaint, do not constitute a particularized, concrete injury sufficient to confer standing.”

The court denied the motion to dismiss, based on allegations that

Defendant disclosed protected information about Plaintiffs in two ways: by selling it to third parties, and by providing it to “data mining” companies who then supplemented it with additional data to enhance the value of the information for Defendant.

By that conduct, the court reasoned, the defendant had

deprived Plaintiffs of their right to keep their information private, subjected them to unwanted solicitations and the risk of being victimized by “scammers,” and unjustly retained the economic benefit the value of that information conferred. Moreover, had Plaintiffs known that Defendant would disclose their information, they “would not have been willing to pay as much, if at all, for [their magazine] subscriptions.”

Accordingly, the court held plaintiffs had suffered a particularized, concrete injury-in-fact, sufficient to establish their standing to sue.  … Read more

Dept. of Education Considers Limiting Forced Arbitration

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The Department of Education has issued newly revised draft regulations proposing to amend regulations governing the William D. Ford Federal Direct Loan Program in part to “prohibit[] participating schools from using certain contractual provisions regarding dispute resolution processes, such as mandatory pre-dispute arbitration agreements or class action waivers, and to require certain notifications and disclosures by schools regarding their use of arbitration.” The proposed rule, which was issued in advance of a third (and possibly final) round of negotiated rulemaking, is here. Comments are due 45 days from June 16, and may be submitted electronically at www.regulations.gov.

This is an important development that would deal directly with the all-too-frequent situation where a predatory, for-profit school engages in fraudulent recruitment practices, provides substandard education which does not yield career advancement, and bars students from seeking redress in court through pre-dispute arbitration agreements which students are required to sign at the time of enrollment.

This particular rulemaking was first requested by Public Citizen, Inc., and is consistent with efforts of certain members of Congress to condition Title IV funding–about $128 billion annually–on a school’s agreement not to force students to agree to waive their right to sue in court, including as part of a class action.… Read more

W.D. Wash. Court Finds Spokeo “Concrete Injury” in TCPA Case

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Following the Supreme Court’s recent decision in Spokeo, practitioners are keeping a close eye on how courts will analyze the “concrete” injury requirement for Article III standing.

One recent opinion comes from Judge James L. Robart of the Western District of Washington, who held that a plaintiff in the TCPA case before him contained sufficient allegations of a concrete injury:

Here, the court is satisfied that Plaintiffs’ allegations demonstrate “concrete injury” as elucidated in Spokeo. In Spokeo, the “injury” Plaintiffs incurred was arguably merely procedural and thus non-concrete. In contrast, the TCPA and WADAD violations alleged here, if proven, required Plaintiffs to waste time answering or otherwise addressing widespread robocalls. … As Congress and Washington State’s legislature agreed, such an injury is sufficiently concrete to confer standing.

Booth v. Appstack, Inc., 2016 WL 3030256 (W.D. Wash. May 25, 2016).… Read more