Kronemeyer v. U.S. Bank: Class Action Alleging Bank Wrongfully Charged Fee To Negotiate Checks Preempted By Federal National Bank Act Illinois Court Holds

Illinois Appellate Court Holds Defense Motion to Dismiss Class Action Should Have Been Granted Because Plaintiffs Lack Standing To Allege Wrongful Dishonor Of Check and Because Federal National Bank Act Preempts Illinois State Law Regarding Fees Charged to Negotiate Checks for Non-Customers

On July 5, 2006, an Illinois appellate court issued a surprising opinion in favor of the defense in a class action case. Illinois follows the rule that courts with interlocutory appeal/certified question procedures usually follow: “Th[e] court’s examination of an interlocutory appeal is usually limited to the questions certified by the trial court and, as with all questions of law, is a de novo review.” Kronemeyer v. U.S. Bank Nat’l Ass’n, ___ Ill.App.3d __ (Ill.App. 2006) (citation omitted) [Slip Opn., at 2]. Rarely do courts deviate from this general rule but the _Kronemeyer_ appellate court did just that, sidestepping one of the questions certified for appeal, addressing a question that had **_not_** been certified for appeal, and reversing the trial court’s order denying the defense motion to dismiss the class action.

Plaintiffs filed a putative nationwide class action alleging that U.S. Bank “regularly charges a fee of $10 to persons who do not have accounts at U.S. Bank and who present for payment checks drawn by its depositors,” and pleading state law causes of action. The defense filed a motion to dismiss the class action on the grounds, inter alia, that plaintiffs lacked standing to prosecute the “wrongful dishonor” claim, and that the claims were preempted by federal National Bank Act, 12 U.S.C. § 93a (2000), and the regulations and regulation interpretations issued by the Office of the Comptroller of the Currency (OCC). Slip Opn., at 2. The trial court denied the motion to dismiss, id., but certified for interlocutory appeal two questions: “(1) whether the plaintiffs’ claims are preempted under the National Bank Act . . . and the regulations and regulatory interpretations issued thereunder by the [OCC] and (2) whether the circuit court has jurisdiction to review whether the OCC correctly interpreted its own regulation or whether that review lies within the exclusive jurisdiction of the federal courts pursuant to the Administrative Procedures Act,” id., at 1 (citations omitted).

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WFS Financial v. Superior Court: Federal Home Owners’ Loan Act (HOLA) Preempts California Automobile Sales Finance Act California Court Holds

California Appellate Court Agrees With Defense And Dismisses Lawsuit Against Lender Based on Federal Preemption: Class Action Defense Issues

WFS Financial and its subsidiary are federal savings associations that operate under the federal HOLA (Home Owners’ Loan Act), 12 U.S.C. §§ 1461 et seq. A car dealer assigned WFS a motor vehicle loan and the borrower defaulted: “WFS repossessed the vehicle, gave notice of its intent to dispose of the vehicle by private sale, sold the vehicle, and filed suit against [the borrower] for the deficiency between the sale price and remaining balance due, including various costs and fees.” WFS Financial, Inc. v. Superior Court, 140 Cal.App.4th 637, 44 Cal.Rptr.3d 561 (Cal.App. 2006). The borrower cross-complained, alleging that WFS failed to comply with California’s Rees-Levering Automobile Sales Finance Act, California Civil Code, §§ 2981 et seq., and included an unfair business practice claim under California Unfair Competition Law (UCL), California Business & Professions Code, §§ 17200 et seq., based on the alleged violations of Rees-Levering. Id., at 563-64. In defense, WFS demurred, arguing that HOLA preempted Rees-Levering. The trial court disagree and overruled the demurrer, and WFS sought a petition for writ of mandate from the California Court of Appeal.. Id., at 564.

Before agreeing with the defense, the appellate court set forth a detailed summary of HOLA, the Federal Home Loan Bank Board (FHLBB) that originally regulated federal savings and loan associations, and FHLBB’s replacement by the Office of Thrift Supervision (OTS). Id., at 565-68. The Court highlighted evidence from numerous sources that Congress intended HOLA to preempt state laws and regulations, concluding:

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UC Irvine Settles Lawsuit Under Willed Body Program: Class Action And Individual Actions Remain Pending For Defense

Defense Opts to Settle Rather Than Take First Case to Trial Christian Berthelsen of the Los Angeles Times reports today that defense attorneys for the University of California at Irvine have settled what “would have been the first lawsuit to go to jury trial” arising out of its Willed Body Program: a class action defense must still be mounted, and dozens of individual lawsuits remain pending. The lawsuit alleged that rather than using bodies donated to the University for research, body parts were sold.

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Federal Administrative Actions Against Debt Collectors (15 U.S.C. § 1692l): Statutory Language for the Defense Lawyer of Class Action Lawsuits Under the FDCPA (Fair Debt Collection Practices Act)

When Congress enacted the Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq., in 1978, it provided not only for private rights of action by debtors against debt collectors, it also provided for administrative enforcement by the Federal Trade Commission. While defense against a class action is certainly a concern for debt collectors, the lawyer advising debt collectors does well to keep in mind and advise the client as to the administrative proceedings that may be brought to bear.

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Bell v. Farmers Insurance: Defense Deposit Of Class Action Judgment Funds With Claims Administrator Constituted Satisfaction Of Judgment Cutting Off Post-Judgment Interest California Court Holds

California Appellate Court Holds that Defense in Class Action Gave Up Control of Funds for Payment of Damages Satisfying Payment of Judgment and Ending Obligation to Pay Postjudgment Interest Employees filed an overtime pay class action against Farmers Insurance Exchange, ultimately resulting in a jury verdict against the defense totaling nearly $90,000,000 for unpaid time-and-a-half and double-time. The trial court awarded prejudgment interest in the class action, and approved a plan for distribution of the funds to the class members.

Class Action Court Decisions Uncategorized

Chong v. State Farm: Class Action Alleging Insurer’s Violation of California’s Make-Whole Rule Survives Defense Motion To Dismiss Federal District Court Holds

California District Court Rejects Defense Rule 12(b)(6) Motion to Dismiss Class Action and Holds, as Matter of First Impression, that Insured is Entitled to Recover Lawyer Fees and Costs to be Made Whole

Liability insurers may pay a first party claim and then seek reimbursement from the third-party tortfeasor either by (1) joining in and/or financing the insured’s action against the responsible party, or (2) waiting until the insured prevails in a lawsuit against the third party and then demanding reimbursement. Kathleen Chong filed a putative class action against State Farm Mutual Automobile Insurance Company alleging that it violates California’s make-whole rule waiting until the insured prevails in a lawsuit against the third party and then demanding reimbursement in full, regardless of the amount of the insured’s recovery. Defense attorneys filed a motion to dismiss the class action under Rule 12(b)(6), and the motion was denied. Chong v. State Farm Mut. Auto. Ins. Co., 428 F.Supp.2d 1136 (S.D. Cal. 2006),

The facts underlying the class action representative’s claim are as follows. Chong had first party medical insurance limits of $5,000; she was injured in a car accident, and State Farm paid her $5,000. Chong then filed suit against the driver of the other car; State Farm knew about the lawsuit but did not participate in it and did not fund it. Ultimately, Chong spent $28,000 in litigation costs and settled the case for $65,000. State Farm then demanded reimbursement of the $5,000 it paid under the policy. Chong, at 1138. Plaintiff filed a class action against State Farm, alleging that it acted improperly because “her net recovery after taking into account her attorney fees and costs was far below the amount she needed to make her whole.” Id.

The defense motion to dismiss argued that California has not adopted a “blanket make whole rule” and that “no California case . . . has ever held that a policyholder’s payment of attorney fees to secure a damage recovery from a third party means the policyholder has not bee made whole and that the carrier is therefore not entitled to reimbursement.” Chong, at 1139. The District Court disagreed. First, it concisely summarized California law on the make-whole rule:

Class Action Court Decisions Uncategorized

Merck Must Prepare State And Federal Class Action Defense Against New Lawsuits Involving Fosamax

Plaintiff Class Action Lawyers Again Set Sights On Pharmaceutical Giant, Still in Defense Mode on Vioxx Los Angeles Times reporter Molly Selvin believes pharmaceutical giant Merck & Co. is seeing the beginning of a new wave of class action litigation. Merck is already dealing with the near-daily filing of class action lawsuits involving pain reliever Vioxx. See, e.g., International Union of Operating Engineers Local #68 Welfare Fund v. Merck & Co.

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Civil Liability Under Federal FDCPA (Fair Debt Collection Practices Act) (15 U.S.C. § 1692k): Statutory Language for the Class Action Defense Lawyer

The Fair Debt Collection Practices Act (FDCPA), 15 U.S.C. § 1692 et seq., enacted by Congress in 1978, establishes certain that ethical guidelines for the collection of consumer debts, and provides debtors with a means for challenging payoff demands and determining the validity and accuracy of asserted debts. As class action defense attorneys know, the FDCPA has generated numerous class actions. The FDCPA expressly provides private rights of action and for the recovery statutory damages as well as actual damages.

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Summary of Judicial Consideration of Federal FDCPA Claims Based on Debt Collection Letters: Defense of Class Action Issues

To Defeat Federal Fair Debt Collection Practices Act Class Actions, Defense Lawyer Must Satisfy “Least Sophisticated Debtor” or “Unsophisticated Debtor” Standard

Class action lawsuits alleging violations of the Fair Debt Collection Practices Act (FDCPA) are commonplace. The class action defense lawyer frequently must defend against claims that the initial letter from the debt collector to the consumer failed to give the information required by 15 U.S.C. § 1692g. We discuss here the two main approaches taken by federal courts in determining whether such a violation occurred: the “least sophisticated debtor” standard, and the “unsophisticated debtor” standard.

We begin with the “least sophisticated debtor” approach because it is the most widely accepted. At least 6 courts have adopted this objective standard. See Greco v. Trauner, Cohen & Thomas, L.L.P., 412 F.3d 360, 365-66 (2d Cir. 2005); Wilson v. Quadramed Corp., 225 F.3d 350, 354-55 (3d Cir. 2000); United States v. National Fin. Serv., Inc., 98 F.3d 131, 136 (4th Cir. 1996); Smith v. Computer Credit, Inc., 167 F.3d 1052, 1054 (6th Cir. 1999); Terran v. Kaplan, 109 F.3d 1428, 1431-32 (9th Cir. 1997); Jeter v. Credit Bureau, Inc., 760 F.2d 1168, 1174-75 (11th Cir.1985). The least sophisticated debtor testis “lower than simply examining whether particular language would deceive or mislead a reasonable debtor.” Swanson v. Southern Oregon Credit Serv., Inc., 869 F.3d 1222, 1227 (9th Cir. 1998). Put another way, “The basic purpose of the least-sophisticated-consumer standard is to ensure that the FDCPA protects all consumers, the gullible as well as the shrewd.” Clomon v. Jackson, 988 F.2d 1314, 1318 (2d Cir. 1993). But while this standard “protects naïve consumers,” Wilson, at 354, it also “prevents liability for bizarre or idiosyncratic interpretations of collection notices by preserving a quotient of reasonableness and presuming a basic level of understanding and willingness to read with care.” National Financial Services, at 136 (citation omitted).

FDCPA Class Actions Uncategorized

Prediction Of A Class Action Defense Lawyer: Class Action Test Cases Alleging “Unlawful” Exposure To Secondhand Cigarette Smoke On The Horizon In California

On June 27, 2006, U.S. Surgeon General Richard H. Carmona released a mammoth report on secondhand cigarette smoke that is likely to benefit the class action plaintiff lawyers far more than the children the report seeks to protect. The report – entitled, “The Health Consequences of Involuntary Exposure to Tobacco Smoke” – spans more than 700 hundreds pages with exhibits, and provides a comprehensive analysis of the health risks associated with “passive” smoking, or in the words of the report, “involuntary smoking.

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