Murray v. New Cingular Wireless-Class Action Defense Issues: Promotional Offer For Wireless Service Was “Firm Offer” Under Federal Fair Credit Reporting Act (FCRA) Illinois District Court Holds

Federal District Court Grants Defense Motion for Summary Judgment and Dismisses Putative Class Action Alleging Violations of FCRA (Fair Credit Reporting Act) Holding that Promotional Offer was a “Firm Offer of Credit” and that Failure to Provide “Clear and Conspicuous” Disclosure was not Willful

A putative class action was filed against New Cingular Wireless for alleged violations of the federal Fair Credit Reporting Act (FCRA), 15 U.S.C. §§ 1681 et seq., by accessing credit reports before sending promotional offers for wireless telephone services. Murray v. New Cingular Wireless Services, Inc., 432 F.Supp.2d 788, 789 (N.D. Ill. 2006). The class action defense argued that it obtained consumer credit reports for permissible purposes within the meaning of the FCRA. Specifically, defense attorneys maintained that Cingular used the reports pursuant to § 1681b to make a “firm offer of credit” – defined by FCRA as “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,” 15 U.S.C. § 1681a(1) – and that any deficiencies with respect to the required disclosures were inadvertent.

The facts underlying the lawsuit were as follows. In 2004, Cingular sent plaintiff a promotional offer for a free wireless phone with the following disclosure: “You were selected to receive this special offer because you satisfied certain credit criteria for creditworthiness, which we have previously established. We used information obtained from a consumer-reporting agency…. You have the right to prohibit information contained in your credit files with this and any other consumer-reporting agency from being used with any credit transaction that is not initiated by you …” Murray, at 789-90. Plaintiff filed a putative class action in federal court alleging that the promotion violated the FCRA. First, he argued that the promotion was not an “offer of credit” but simply an offer for a free phone, and that the word “credit” was never used in the promotion. Id., at 791. The court disagreed, explaining “wireless customers pay for services after the actual use of the services. By definition, such a payment scheme puts Cingular at risk that the customer could default on payment-which is essentially what credit is all about.” Id. (citation omitted). As the court explained at page 791,

Class Action Court Decisions FCRA Class Actions Uncategorized

AOL Class Action Defense Case-Simpson v. AOL: Defense Motion To Dismiss Class Action Securities Claims Against Securities Issuer’s Business Partners Properly Granted Ninth Circuit Holds

Class Action Securities Fraud Claims Against Business Partners of Internet Company Failed to Establish § 10(b) Liability for Secondary Actors

Plaintiff filed a putative class action against multiple defendants alleging securities fraud arising out of the overstating of revenues of an Internet company. Defense attorneys for several outside defendants and individual defendants successfully moved to dismiss the § 10(b) claims under the Securities Exchange Act of 1934 on the grounds that Central Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164 (1994) holds that § 10(b) does not permit recovery for aiding and abetting, and that the moving defendants were not “primary violators.” Simpson v. AOL Time Warner Inc., 452 F.3d 1040, 1042 (9th Cir. 2006). The Ninth Circuit disagreed with the interpretation of Central Bank proffered by the defense, but affirmed because plaintiff had not sufficiently alleged that defendants were primary violators of § 10(b). Id., at 1043. We do not here summarize the detailed fact pattern set forth in the Ninth Circuit opinion. Rather, we focus on the court’s holdings concerning Central Bank and § 10(b) liability.

Defense attorneys argued that “Central Bank limited primary liability under § 10(b) to defendants who personally made a public misstatement, violated a duty to disclose or engaged in manipulative trading activity, and not to those engaged in a broader scheme to defraud.” Simpson, at 1043. The Ninth Circuit disagreed. While the Supreme Court held that Rule 10b-5 liability “does not extend beyond the limits of § 10(b),” id., at 1046, it also cautioned “that secondary actors, other than the securities issuer, may be liable as primary violators under § 10(b) when all elements of the statute are satisfied,” id., at 1047. And while § 10(b) does not extend to the act of “merely ‘aiding and abetting’” a violation thereof, under Ninth Circuit authority one may be found to have primary liability under § 10(b) – even without making any statements – if they substantially participated or were intricately involved in preparing the fraudulent statements. Id., at 1048 (citing Howard v. Everex Sys., Inc., 228 F.3d 1057, 1061 n.5 (9th Cir. 2000).

Class Action Court Decisions PSLRA/SLUSA Class Actions Uncategorized

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

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

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

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

Arbitration Class Action Court Decisions Uncategorized

Class Action Defense Cases-Eufaula Drugs v. Tmesys: Defense Removal Of Class Action Improper Because CAFA (Class Action Fairness Act of 2005) Inapplicable And Insufficient Amount In Controversy Alabama Federal Court Holds

Federal Court Remands Putative Class Action Over Defense Objection Because at Least One Member of Class Must Satisfy Jurisdictional Requirement for Damages and Because Under Alabama State Law Class Action was Commenced Prior to CAFA Even Though Summons Issued After CAFA’s Effective Date Issues regarding removal and remand, and regarding federal court jurisdiction under the Class Action Fairness Action of 2005 (CAFA), have been covered in several separate articles. On May 22, 2006, an Alabama federal court remanded to state court a putative class action over defense claims that the court had either diversity jurisdiction or jurisdiction under CAFA.

Class Action Court Decisions Class Action Fairness Act (CAFA) Removal & Remand Uncategorized

Class Action ADA Claims Tie Employment Law Class Action Cases In California Weekly Filings

California class action defense attorneys will face a substantial number of new class action claims based on last weeks latest court filings. To allow the class action defense lawyer to anticipate claims against which she or he may have to defend, we provide weekly, unofficial summaries of the legal categories for class actions filed in California state and federal courts in the Los Angeles, San Francisco, San Jose, Sacramento, San Diego, San Mateo, Oakland/Alameda and Orange County areas.

Class Actions In The News Uncategorized

15 U.S.C. § 1681h – Conditions and Form of Disclosure to Consumers: Statutory Language for the Defense Lawyer of Class Action Lawsuits Under the FCRA (Fair Credit Reporting Act)

As a resource for attorneys defending against class actions under the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq., we provide the text of the FDCPA. This article sets forth for the statutory provisions concerning the conditions and form of disclosures to consumers:

§ 1681h. Conditions and form of disclosure to consumers

(a) In General

(1) Proper identification.

A consumer reporting agency shall require, as a condition of making the disclosures required under section 1681g of this title, that the consumer furnish proper identification.

(2) Disclosure in writing.

Except as provided in subsection (b), the disclosures required to be made under section 1681g of this title shall be provided under that section in writing.

(b) Other Forms of Disclosure

(1) In general.

If authorized by a consumer, a consumer reporting agency may make the disclosures required under 1681g of this title

(A) other than in writing; and

(B) in such form as may be

(i) specified by the consumer in accordance with paragraph (2); and

(ii) available from the agency.

(2) Form.

A consumer may specify pursuant to paragraph (1) that disclosures under section 1681g of this title shall be made

(A) in person, upon the appearance of the consumer at the place of business of the consumer reporting agency where disclosures are regularly provided, during normal business hours, and on reasonable notice;

(B) by telephone, if the consumer has made a written request for disclosure by telephone;

(C) by electronic means, if available from the agency; or

(D) by any other reasonable means that is available from the agency.

FCRA Class Actions Statutes & Rules Uncategorized

15 U.S.C. §§ 1681f and 1681g – Disclosures to Governmental Agencies/Disclosures to Consumers: Statutory Language for the Class Action Defense Lawyer of Class Action Lawsuits Under the FCRA (Fair Credit Reporting Act)

We continue today with the posting of the statutory provisions of the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq., as a resource for class action defense attorneys. The starkest contrast in Congressional treatment in the FCRA is evident from the statutory provisions concerning disclosures to governmental agencies (which consumes a single sentence) and disclosures to consumers (which consume several pages). Those provisions are contained in Sections 1681f and 1681g, respectively, set forth below:

§ 1681f. Disclosures to governmental agencies

Notwithstanding the provisions of section 1681b of this title, a consumer reporting agency may furnish identifying information respecting any consumer, limited to his name, address, former addresses, places of employment, or former places of employment, to a governmental agency.

§ 1681g. Disclosures to consumers

(a) Information on file; sources; report recipients.

Every consumer reporting agency shall, upon request, and subject to 1681h(a)(1) of this title, clearly and accurately disclose to the consumer:

(1) All information in the consumer’ s file at the time of the request except that–

(A) if the consumer to whom the file relates requests that the first 5 digits of the social security number (or similar identification number) of the consumer not be included in the disclosure and the consumer reporting agency has received appropriate proof of the identity of the requester, the consumer reporting agency shall so truncate such number in such disclosure; and

(B) nothing in this paragraph shall be construed to require a consumer reporting agency to disclose to a consumer any information concerning credit scores or any other risk scores or predictors relating to the consumer.

(2) The sources of the information; except that the sources of information acquired solely for use in preparing an investigative consumer report and actually use for no other purpose need not be disclosed: Provided, That in the event an action is brought under this title, such sources shall be available to the plaintiff under appropriate discovery procedures in the court in which the action is brought.

(3) (A) Identification of each person (including each end-user identified under section 1681e(e)(1) of this title) that procured a consumer report

(i) for employment purposes, during the 2-year period preceding the date on which the request is made; or

(ii) for any other purpose, during the 1-year period preceding the date on which the request is made.

(B) An identification of a person under subparagraph (A) shall include

(i) the name of the person or, if applicable, the trade name (written in full) under which such person conducts business; and

(ii) upon request of the consumer, the address and telephone number of the person.

(C) Subparagraph (A) does not apply if–

(i) the end user is an agency or department of the United States Government that procures the report from the person for purposes of determining the eligibility of the consumer to whom the report relates to receive access or continued access to classified information (as defined in section 1681b(b)(4)(E)(i) of this title); and

(ii) the head of the agency or department makes a written finding as prescribed under section 1681b(b)(4)(A) of this title.

(4) The dates, original payees, and amounts of any checks upon which is based any adverse characterization of the consumer, included in the file at the time of the disclosure.

(5) A record of all inquiries received by the agency during the 1-year period preceding the request that identified the consumer in connection with a credit or insurance transaction that was not initiated by the consumer.

(6) If the consumer requests the credit file and not the credit score, a statement that the consumer may request and obtain a credit score.

FCRA Class Actions Statutes & Rules Uncategorized

Federal Appeals Court Upholds IBM Defense To Class Action Judgment Against IBM Pension Plan

In a prior article, we summarized the Seventh Circuit opinion in Cooper v. IBM Personal Pension Plan and IBM Corp., ___ F.3d ___ (7th Cir. August 7, 2006). In _Cooper_, a district court entered judgment in favor of class action plaintiffs, concluding that IBM’s pension plan violated ERISA’s prohibition against age discrimination, but the Circuit Court agreed with defense attorneys that the plan was not age discriminatory and reversed. Mary Williams Walsh of the New York Times has written an excellent summary of _Cooper_ without the minutia of the statutory language at issue.

Class Actions In The News Uncategorized

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

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

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

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

Class Action Court Decisions FCRA Class Actions Uncategorized

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

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

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

Class Action Court Decisions Employment Law Class Actions Uncategorized