Friday, July 19, 2019

FYI: 8th Cir Affirms Cancellation of Lis Pendens Due to Imprecise Property Description and Prayer for Relief

The U.S. Court of Appeals for the Eighth Circuit recently affirmed a trial court's order canceling a lis pendens, finding that the description of the property at issue in the lis pendens was imprecise and did not connect to any particular request for equitable relief as required under Missouri law. 

 

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

 

The plaintiff lender ("Plaintiff") extended a $1.9 million loan ("Loan") to an entity that then made alleged fraudulent transfers of the loan proceeds to the defendant company ("Defendant"). Defendant used the fraudulently transferred Loan proceeds to purchase approximately 23.82 acres of real estate in Missouri (the "Property").

 

Plaintiff filed the instant action, and separately recorded a lis pendens against "Lot 2" of the Property (the "Lis Pendens"). 

 

Defendant filed a motion to cancel the Lis Pendens (the "Motion") arguing it was invalid under Missouri law. The trial court granted Defendant's Motion finding that the complaint "did not specifically request equitable relief, and instead seeks 'actual and exemplary damages' and 'any other relief the court deems appropriate.'"

 

Plaintiff appealed the trial court's order canceling the Lis Pendens.

 

As you may recall, "[f]or a lis pendens to have prospective effect, the judgment contemplated must adjudicate an equitable right, claim or lien, affecting or designed to affect [the] real estate in question."  Space Planners Architects, Inc. v. Frontier Town-Mo., Inc., 107 S.W.3d 398, 407 (Mo. Ct. App. 2003); see also, Mo. Rev. Stat. § 527.260. 

 

On appeal, Plaintiff argued the Lis Pendens was proper because the complaint sought equitable remedies such as "attachment of [D]efendants' assets and [the] appointment of a receiver."  The Eighth Circuit disagreed, finding that Plaintiff's complaint failed to "identify any specific property…as to which equitable relief is sought."  See e.g., Space Planners Architects, Inc. v. Frontier Town-Mo., Inc., 107 S.W.3d 398, 407 (Mo. Ct. App. 2003).

 

The Eighth Circuit noted that the complaint's description of the Property failed to: (1) specify whether it encompassed "Lot 2" as mentioned in the Lis Pendens; and (2) "connect the Property to any particular request for equitable relief." 

 

In light of the above, the Eighth Circuit held that the trial court acted within its discretion in canceling the Lis Pendens. 

 

Accordingly, the Eighth Circuit affirmed the trial court's order canceling the Lis Pendens.   

 

 

 

 

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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Tuesday, July 16, 2019

FYI: DC Cir Holds FACTA "Faulty Credit Card Receipt" Claim Enough for Spokeo Standing

The U.S. Court of Appeals for the District of Columbia Circuit held that where a company provided a consumer with a receipt that displayed her entire sixteen-digit credit card number and credit card expiration date in violation of the federal Fair and Accurate Credit Transactions Act of 2003 ("FACTA"), the consumer alleged a concrete injury in fact sufficient for standing under Spokeo, notwithstanding the fact that the consumer noticed the violation immediately and kept the receipt in a safe location. 

 

Accordingly, the D.C. Circuit reversed the judgment of the trial court granting the defendant company's motion to dismiss, and remanded the matter for further proceedings.  

 

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

 

A consumer ("Consumer") made a credit card purchase at a company ("Company") location and received a receipt that displayed her sixteen-digit credit card number, the credit card expiration date, and her credit card provider.

 

The Consumer immediately recognized that the receipt contained her personal information, and held onto it for safekeeping.  She then filed a class action lawsuit against the Company alleging a willful violation of FACTA, which prohibits printing "more than the last 5 digits of the card number or the expiration date upon any receipt provided to the cardholder at the point of sale or transaction." 

 

The Consumer alleged that the Company's conduct violated her statutory right and, as a result, exposed her to an increased risk of identity theft.  She also alleged that she was forced to take steps to safeguard the noncompliant receipt.  

 

The Company moved to dismiss the complaint for lack of standing under Spokeo.  The district court granted the motion, determining that the Consumer did not suffer an increased risk of identity theft because only she viewed the receipt containing her credit card information.  The district court also concluded that the burden of safeguarding the noncompliant receipt was insufficiently concrete to support standing. 

 

The trial court therefore held that the Consumer lacked standing, and dismissed the case for lack of subject-matter jurisdiction.

 

The Consumer appealed. 

 

On appeal, the D.C. Circuit first discussed the Spokeo ruling, wherein the Supreme Court held that plaintiff must meet three elements for standing: "(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." 

 

The Court noted that "[c]ausation and redressability are not in dispute," rather "[t]he issue is whether [the Consumer] alleged an adequate injury in fact."

 

The Consumer argued that a violation of her statutory right under FACTA constitutes an injury in fact without any additional showing of harm, and under Spokeo, "the violation of a procedural right granted by statute can be sufficient in some circumstances to constitute injury in fact."

 

However, the D.C. Circuit noted that "[f]or a statutory violation to constitute an injury in fact, . . . the statute must protect the plaintiff's concrete interest – i.e., afford the putative plaintiff a right to be free of a harm capable of satisfying Article III."

 

The Consumer argued that FACTA is such a statute and vests consumers with a concrete interest in using their credit and debit cards without incurring an increased risk of identity theft. 

The D.C. Circuit agreed, noting that "FACTA itself does not prohibit the crimes of identity theft or fraud," rather "its truncation requirement is a 'procedure[] designed to decrease th[e] risk' that a consumer would have his identity stolen." 

 

Thus, the truncation requirement that a merchant not print more than the last five digits of a credit card number or expiration date "vests consumers with an interest in using their credit card and debit cards without facing an increased risk of identity theft."    

 

As a result, the Court held, the question "becomes whether the interest protected by FACTA – avoiding an increased risk of identity theft – is concrete."  And, in determining whether an intangible injury is concrete, "both history and the judgment of Congress play important roles." 

 

In determining that "[h]istory tilts toward concreteness," the D.C. Circuit compared FACTA's truncation requirement to a common law breach of confidence claim where a person offers private information to a third party in confidence and the third party reveals that information to another.  There, the harm "occurs when the plaintiff's trust in the breaching party is violated, whether or not the breach has other consequences." Further, "FACTA protects against the risk of the very harm the breach of contract tort makes actionable – the unauthorized disclosure of privileged information to a third party." 

 

The D.C. Circuit also gave "weight to Congress's determination that printing too much credit card information on a receipt creates a 'real' or 'de facto' harm."

 

Having determined that FACTA protects a concrete interest, the D.C. Circuit explained that it "must also determine whether the challenged violation of [the Consumer's] statutory right harmed or created a 'risk of real harm' to the concrete interests protected by FACTA."

 

The D.C. Circuit observed that "not every violation of FACTA's truncation requirement creates of identity theft," noting that "our sister courts, applying Spokeo, have unanimously concluded that a FACTA violation based solely on a failure to truncate an expiration date does not qualify as a concrete injury in fact." 

 

However, "none of these courts encountered a FACTA violation as egregious as the one committed by [the Company]," which printed the Consumer's entire credit card number and expiration date, "creating the nightmare scenario FACTA was enacted to prevent."  

 

The D.C. Circuit therefore held that "[a]lthough not every FACTA violation creates a concrete injury in fact, . . . the alleged violation of [the Consumer's] right does."

 

Thus, the Consumer "pleaded enough facts to establish standing."  Accordingly, the D.C. Circuit reversed the judgment of the trial court, and remanded the matter for further proceedings.

 

 

 

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   |   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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Sunday, July 14, 2019

FYI: 2nd Cir Holds Post-Filing Amendment Can Divest Court of CAFA Jurisdiction

The U.S. Court of Appeals for the Second Circuit affirmed the dismissal of case for lack of jurisdiction because when the plaintiffs withdrew their class action allegations in an amended complaint it divested the court of jurisdiction under the federal Class Action Fairness Act ("CAFA"), 28 U.S.C. § 1332(d).

 

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

 

Plaintiff, an attorney on behalf of himself and a putative class sued several title insurance company defendants alleging that they had tortiously interfered with business opportunities and violated Connecticut law because under Conn. Gen. Stat. § 38a402(13) only attorneys licensed to practice in the state may act as title agents. 

 

The trial court exercised jurisdiction over the matter predicated solely on the CAFA.

 

After almost twelve years, Plaintiff filed a Fourth Amended Complaint ("FAC"). In the FAC Plaintiff voluntarily withdrew all class action allegations.  The FAC did not allege any other statutory basis to establish the trial court's jurisdiction.  The defendants then moved to dismiss arguing that the absence of any class action allegations deprived the federal court of jurisdiction under the CAFA.

 

The trial court granted the motion and dismissed the case for lack of jurisdiction. Plaintiff appealed.

 

As you may recall, the CAFA confers original jurisdiction over class actions where minimal diversity exists between the parties and the amount in controversy exceeds $5,000,000.  28 U.S.C. 8 § 1332(d).  Here, CAFA jurisdiction existed when plaintiff filed the case, and until plaintiff filed the FAC.

 

The Second Circuit observed that the only question before it was "whether the filing of the FAC, which omitted all class action allegations, divested the District Court of CAFA jurisdiction and required dismissal."

Plaintiff argued that the "time-of-filing" rule should establish jurisdiction even after he filed the FAC. 

 

As you may recall, the time of filing rule states that the federal trial court's jurisdiction "depends upon the state of things" when the plaintiff brings the action.  Plaintiff contended that the trial court continued to have CAFA jurisdiction after the FAC because jurisdiction existed when Plaintiff filed the case.  The Second Circuit rejected this argument.

 

The Second Circuit found the Supreme Court of the United States's ruling in Rockwell Int'l Corp. v. United States, 549 U.S. 457, 473–74 (2007) controlling.

 

There, the SCOTUS held that "the state of things" and "the alleged state of things" must both confer jurisdiction.  When a plaintiff voluntarily amends their complaint, the trial court must "look to the amended complaint to determine jurisdiction." 

 

Withdrawal of the allegations that conferred jurisdiction will defeat jurisdiction unless other allegations that establish jurisdiction replace them. The Second Circuit held that the trial court in this case properly determined that it lacked jurisdiction because the FAC removed the original basis for the court's jurisdiction and did not introduce "new jurisdiction-granting allegations."

 

Thus, the Second Circuit affirmed the trial court dismissal for lack of jurisdiction.

 

 

 

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   |   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:

 

Financial Services Law Updates

 

and

 

The Consumer Financial Services Blog

 

and

 

Webinars

 

and

 

California Finance Law Developments