Friday, August 24, 2018

FYI: CA Imposes SOL Notice Requirement on Debt Collectors; Bans Legal Action on 'Time-Barred' Debt

The California legislature recently passed Assembly Bill 1526, relating to the collection of a debt that is beyond the statute of limitations for bringing legal action.

 

As you may recall, since 2014, when collecting from California residents, debt buyers have been required by Cal. Civ. Code § 1788.52(d)(2) to provide one of two notices, as applicable, when a debt is "time-barred."

 

The new legislation creates the same requirement for debt collectors, making it a violation for a debt collector to send a collection letter to a consumer on a time-barred debt without providing the debtor with one of the following written notices, depending on the age of the debt:

 

"The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it. If you do not pay the debt, [insert name of debt collector] may [continue to] report it to the credit reporting agencies as unpaid for as long as the law permits this reporting.";

 

or,

 

"The law limits how long you can be sued on a debt. Because of the age of your debt, we will not sue you for it, and we will not report it to any credit reporting agency."

 

The applicable notice must be included in the first written communication sent to the consumer after the debt becomes time-barred.

 

The new law also amends Cal. Civ. Proc. Code § 337, pertaining to the statute of limitations for written contracts and book accounts, by prohibiting the initiation of a legal action on time-barred debt, rather than requiring a consumer to raise it as an affirmative defense.  A similar prohibition currently exists for debt buyers under Cal. Civ. Code § 1788.56.

 

Pending approval by the governor, the new law will become effective Jan. 1, 2019.

 

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

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Wednesday, August 22, 2018

FYI: 8th Cir Holds TCPA Plaintiff Lacked Standing, But Case Should Be Remanded Not Dismissed With Prejudice

The U.S. Court of Appeals for the Eighth Circuit held that a plaintiff lacked standing to pursue an alleged violation of the Telephone Consumer Protection Act ("TCPA") against a defendant that supposedly did not provide a proper opt-out notice in its advertisement faxes because the plaintiff invited and did not rebuke the faxes, and the faxes did not cause the concrete harm required to establish Article III jurisdiction.

 

Separately, the Eight Circuit reversed the dismissal with prejudice in this removed case, holding that the proper remedy when no case or controversy exists was to return the matter to the state court that is not bound by Article III's case or controversy requirement.

 

A copy of the opinion is available at:  Link to Opinion

 

A medical provider ("Plaintiff") filed a putative class action suit against the defendant company ("Defendant") in in Missouri state court alleging Defendant violated the TCPA by faxing twelve advertisements to Plaintiff without including a proper opt-out notice on each advertisement. See id. § 227(b)(l )(C)(iii); 47 C.F.R. § 64.1200(a)(4)(iii).

 

Defendant promptly removed the matter to federal court.  Defendant moved to dismiss arguing that Plaintiff lacked Article III standing.

 

Relevant to the appeal, Plaintiff alleged that Defendant sent plaintiff twelve fax advertisements promoting a potassium tablet.  Each fax listed a fax number for the Plaintiff to return a form to request product samples and provided the name, telephone number, and e-mail address of a contact person at Defendant. Six faxes included a box to check if Plaintiff no longer wished to receive faxes from Defendant.  Plaintiff alleged the faxes did not contain the required opt-out notice.  See 47 C.F.R. § 64.1200.

 

Plaintiff claimed several injuries.  Defendant allegedly caused Plaintiff to lose paper and toner when Plaintiff received the faxes.  Plaintiff also alleged that the faxes interfered with Plaintiff's use of its fax machine and its telephone line.  This also allegedly caused employees to waste time receiving, reviewing, and routing the faxes.  Finally, the faxes intruded upon Plaintiff's "privacy interests in being left alone."  Plaintiff sought injunctive relief and treble damages.

 

Plaintiff supposedly did not consent to receive Defendant's faxes, but Plaintiff acknowledged that it did not base its lawsuit "upon the fact that consent was not given."  Indeed, Plaintiff request product samples from Defendant at least four times.

 

The trial court found that "the opt out notice" on defendant's faxes "conveys to fax recipients the means and opportunity to opt-out of receiving future faxes, regardless of whether the faxes also meet all of the technical requirements of 47 C.F.R. § 64.1200."  Further, the trial court held, Plaintiff did not allege "a concrete or particularized harm resulting from faxes that [Plaintiff] both invited and did not rebuke." 

 

The trial court separately concluded that 28 U.S.C. § 1447(c) did not mandate remanding the case to state court.  Thus, the trial court ruled that plaintiff lacked standing and dismissed the matter with prejudice.

 

This appeal followed. 

 

As you may recall, the TCPA prohibits faxing an "unsolicited advertisement" to another person unless the fax contains a "clear and conspicuous" notice "on the first page of the advertisement," allowing the recipient to "opt-out." See 47 U.S.C. § 227(b)(1)(C)(iii); 47 C.F.R. § 64.1200(a)(4)(iii); 47 C.F.R. § 64.1200(a)(4)(iii)(A).  

 

The opt-out notice must "state that the recipient may request that the sender not send future advertisements and that the sender must comply within 30 days, id. § 64.1200(a)(4)(iii)(B); set forth the requirements for an opt-out request, id. § 64.1200(a)(4)(iii)(C); provide a domestic contact telephone number and a fax number by which the recipient may transmit the opt-out request, id. § 64.1200(a)(4)(iii)(D)(l ); and set forth a cost-free mechanism by which the recipient can transmit the opt-out request." Id. § 64.1200(a)(4)(iii)(D)(2). The phone number, fax number, and cost-free mechanism provided must also allow the recipient to opt-out 24 hours a day, 7 days a week. Id. § 64.1200(a)(4)(iii)(E).

 

The Eighth Circuit observed that the TCPA created a private right of action to enjoin a violation of these provisions, or "to recover for actual monetary loss from such a violation, or to receive $500 in damages for each such violation, whichever is greater." 47 U.S.C. ' 227(b)(3).  Further, the court may award treble damages if the defendant "willfully or knowingly" violated the statute.  Id.

 

However, the Court noted, just because Congress created a private right of action does not automatically mean that a plaintiff alleging a TCPA violation has Article III standing.  Even though the TCPA "grants a person a statutory right and purports to authorize that person to sue to vindicate that right," a plaintiff cannot "allege a bare procedural violation, divorced from any concrete harm, and satisfy the injury-in-fact requirement of Article III." Spokeo, Inc. v. Robins, 136 S. Ct. 1540, 1549 (2016).  Instead, to invoke Article III standing, a plaintiff must demonstrate it "(1) suffered an injury in fact, (2) that is fairly traceable to the challenged conduct of the defendant, and (3) that is likely to be redressed by a favorable judicial decision." Id. at 1547.

 

The Eight Circuit found that the trial court's conclusion that Plaintiff "invited and did not rebuke" the faxes was not clearly erroneous because the Plaintiff requested samples "on at least four occasions." Further, Plaintiff acknowledged that its claim is not based upon withholding consent. Given this, the faxes would have used Plaintiff's "paper and toner, occupied its phone lines, and invaded its privacy" even if it contained a proper opt-out notice.  Thus, even taking Plaintiffs allegations as true, Plaintiff did not "establish that its alleged injury is fairly traceable to an alleged violation of the TCPA."  See Lujan v. Defs. of Wildlife, 504 U.S. 555, 560 (1992).

 

The Eight Circuit next examined and rejected Plaintiff's argument that Defendant's alleged failure to make all required disclosures in the opt-out notice itself establishes an "intangible injury" because it creates a "real risk of harm."  Spokeo, Inc., 136 S. Ct. at 1549; see Braitberg v. Charter Commcns, Inc., 836 F.3d 925, 930 (8th Cir. 2016).  

 

The trial court's finding that despite any technical deficiencies the opt-out notices all conveyed the "means and opportunity to opt-out of receiving future faxes" was not clearly erroneous because the notices "contained a box that the recipient could check if he did not wish to receive future faxes, and a domestic fax number to which the form could be returned"   Plaintiff never tried to opt-out and there is no evidence Defendant would not have honored an opt-out request.  Thus, the Eighth Circuit held that the trial court correctly found that Defendant's alleged failure to include "a proper opt-out notice compliant with the federal regulations" did not create "a risk of real harm."

 

The Eight Circuit then turned to Plaintiff's claim that the trial court should have remanded the case to state court instead of dismissing it with prejudice.  The removal statute provides that: "[i]f at any time before final judgment it appears that the district court lacks subject matter jurisdiction, the case shall be remanded." 28 U.S.C. ' 1447(c).

 

The Eight Circuit addressed this issue in Wallace v. ConAgra Foods, Inc., 747 F.3d 1025 (8th Cir. 2014), finding that "when no Article III case or controversy exists and the case did not originate in federal court but was removed there by the defendants, the federal court must remand the case to the state court from whence it came." Id. at 1033. This is because "state courts are not bound by the limitations of an Article III case or controversy."

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Georgia   |   Illinois   |   Indiana   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Texas   |   Washington, DC

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.


Our updates and webinar presentations are available on the internet, in searchable format, at:

 

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and

 

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Monday, August 20, 2018

FYI: 7th Cir Rules Class Settlements Do Not Bar Objector's Fees Without Express Agreement

The U.S. Court of Appeals for the Seventh Circuit recently held that, unless the parties to a class action settlement agreement expressly agree otherwise, class settlement agreements should not be read to bar objectors from requesting fees for their efforts in adding value to a settlement. 

 

Because the Court determined that the objector did add value to the settlement, it reversed the ruling of the trial court denying the objector's motion for fees and an incentive award.

 

A copy of the opinion is available at:  Link to Opinion

 

Class action counsel ("Class Counsel") settled a class action litigation against the defendant airline ("Airline") wherein the Airline made its customers whole by giving them a replacement voucher after it stopped honoring in-flight drink vouchers for customers who bought select fares. 

 

In an initial appeal of the case, the Seventh Circuit "held that 28 U.S.C. § 1712, enacted as part of the Class Action Fairness Act allowed the trial court to award [Class Counsel] an attorney fee based on the lodestar method rather than the value of the redeemed vouchers," and therefore affirmed the approval of settlement.  The Seventh Circuit further affirmed but modified the trial court's decision to award Class Counsel only $1,649,118 in fees even though the Airline agreed not to oppose $3 million, by further reducing the awarded fees to $1,365,882 because one of Class Counsel's lawyers failed to disclose a potential conflict of interest.

 

Following the first appeal, Class Counsel requested supplemental fees in the trial court for work on a motion to amend the fee award and the appeal.  Specifically, Class Counsel "essentially requested the difference between the $3 million [the Airline] agreed not to oppose" and the $1,365,882 that was approved by the Seventh Circuit in the first appeal. 

 

To get to that amount, Class Counsel requested a 1.5 multiplier for its post-judgment time as for the initial fee award and by claiming 572 hours in attorney time for the motion to amend and 970 hours in attorney time for the appeal. 

 

The trial court determined that time was "grossly excessive" and instead awarded Class Counsel $455,294 plus expenses.

 

An individual ("Objector") moved for reconsideration under Rule 59 or, alternatively, for vacatur of the settlement approval and accompanying fee orders under Rule 60(b).  The trial court granted the motion for reconsideration and vacated the additional fee award so that the class would receive notice of any a chance to object to it.  The Objected appealed.  

 

Before the parties briefed the second appeal, they reached an agreement wherein the Objector agreed to dismiss his appeal and Class Counsel agreed to take half its supplemental fee award ($227,647 plus $3,529.68 in expenses), and the Airline agreed to triple its relief to the class (two additional vouchers for every one claimed). 

 

Additionally, the trial court was told for the first time that the correct number of vouchers claimed under the original settlement was less than one third what the parties told the trial court earlier about the original settlement it approved. Still, the trial court approved the new settlement and the Airline distributed the vouchers and paid Class Counsel.

 

The Objector then moved for $80,000 in attorneys' fees and an incentive award of $1,000 to come out of the more than $1.8 million attorney fee award to Class Counsel.  The trial court denied that motion and the Objector appealed.

 

On appeal, the Seventh Circuit noted that the "underlying settlement agreement and the agreement to settle the second appeal . . . are silent on the issue of objector's fees," and therefore the Court looked to the law, which permits objectors who add value to a class settlement to be compensated for their efforts.

 

Specifically, "[u]nless the parties expressly agree otherwise, settlement agreements should not be read to bar attorney fees for objectors who have added genuine value.  Because the equitable common-fund doctrine applies, [the Objector's] counsel should receive fees for improving settlement." 

 

Thus, because the original settlement agreement and joint status reports leading up to the settlement of the second appeal were silent as to objectors' fees, the trial court "made legal error by reading them to bar [the Objector's] request."

 

In so ruling, the Seventh Circuit noted that "because of the skewed incentives in some class action settlements, objectors who bring those incentives back into balance by increasing a settlement's benefit to a class may be compensated for their efforts." 

 

The Court further stated this is consistent with the common-fund doctrine, which provides that "a litigant or a lawyer who recovers a common fund for the benefit of persons other than himself or his client is entitled to a reasonable attorney's fee from the fund as a whole." 

 

The Seventh Circuit observed that "[t]he common-fund doctrine applies as a default rule unless that parties draft their settlement agreement to depart from it." 

 

In this case, "[b]ecause these parties did not address objector's fees, we 'interpolate' the common-fund doctrine to avoid wreaking unintended consequences." 

 

Moreover, "[i]t would be inequitable for [the Objector's] lawyer to receive nothing despite negotiating . . . a tripling of relief for the class and a significant cut in [Class Counsel's] fees."  Particularly where the Objector's "$80,000 fee request is a modest 10% of the market value of the additional vouchers, $825,630."

 

Accordingly, the Seventh Circuit reversed the denial of the Objector's motion for fees and remanded the matter for entry of judgment granting the Objector's request, payable from Class Counsel.

 

 

 

Ralph T. Wutscher
Maurice Wutscher LLP
The Loop Center Building
105 W. Madison Street, 18th Floor
Chicago, Illinois 60602
Direct:  (312) 551-9320
Fax: (312) 284-4751

Mobile:  (312) 493-0874
Email: rwutscher@MauriceWutscher.com

 

Admitted to practice law in Illinois

 

 

 

Alabama   |   California   |   Florida   |   Georgia   |   Illinois   |   Indiana   |   Massachusetts   |   New Jersey   |   New York   |   Ohio   |   Pennsylvania   |   Texas   |   Washington, DC   |   Wisconsin

 

 

NOTICE: We do not send unsolicited emails. If you received this email in error, or if you wish to be removed from our update distribution list, please simply reply to this email and state your intention. Thank you.


Our updates and webinar presentations are available on the internet, in searchable format, at:

 

Financial Services Law Updates

 

and

 

The Consumer Financial Services Blog

 

and

 

Webinars

 

and

 

California Finance Law Developments