Page 7 - Litigation

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Litigation | MONDAY, FEBRUARY 22, 2016 | S7
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have suffered any injury. Members of the class had similar yet slightly different wage- related claims. During the trial, the plaintiffs used statistical models—rather than indi- vidualized calculations—from a sample of employees to determine the damages owed by Tyson Foods to all the members of the class. The result was a single-sum classwide verdict, from which each purported class member, damaged or not, would receive a pro-rata portion of the jury’s one-figure verdict. The U.S. Court of Appeals for the Eighth Circuit affirmed the trial verdict. In appealing the Eighth Circuit’s ruling, the defendant argued that the district court’s approach violates Article III of the Consti- tution and the Rules Enabling Act, because it impermissibly expands the category of parties who may bring lawsuits to include those who have not suffered injury. This case provides the court with yet another opportunity to expand or limit the ability of plaintiffs without actual injury to participate in class action litigation.
Trending Theories of Liability
Telephone Consumer Protection Act.
In July 2015, the Federal Communications Commission issued a Declaratory Ruling and Order that responded to 21 requests for clarification concerning previous rules and orders the FCC has issued regarding the TCPA, which regulates telemarketing calls and text messages sent to wireless devices (2015 Order). The 2015 Order expanded the scope of liability under the TCPA by, among other things, imposing new requirements for obtaining “prior written consent” and by issuing an expansive interpretation of what may be considered an automatic telephone dialing system. The 2015 Order is being chal- lenged in federal court as exceeding the scope of the TCPA. Until these challenges are resolved, the 2015 Order is likely to guide court decisions, and potentially even prompt courts to revise rulings in previously decided cases.
The FCC may have extended the TCPA even further by an order it issued on January 11, in response to a Petition for a Declara- tory Ruling submitted by Club Texting. Club Texting provides broadcasting services for businesses. It sought a declaratory ruling that it is not a “sender” of the texts because its customers control the content and recipi- ent numbers and has the client relationship with the recipients. The FCC declined to nar- row the scope of entities potentially subject to the 2015 Order.
Overdraft Fees. The current wave of litiga- tion involving the Electronic Funds Transfer Act (EFTA), 15 U.S.C. 1693 et seq., began in 2012 in the wake of amendments to its implementing regulations.2 These amend- ments prohibited banks from charging overdraft fees for ATM and one-time debit card transactions unless the consumer con- sents to an overdraft protection program. The first overdraft cases accused banks of manipulating the order that transactions were processed to maximize the number of overdrafts and fees assessed.3 Later cases filed against credit unions and smaller banks alleged that they either did not have the customer’s consent to charge overdraft fees
or that the overdraft occurred because the bank used the customer’s “available” balance rather than the actual balance to determine whether the account had sufficient funds. For example, in McDermott v. Bethpage Federal Credit Union, a credit union promised that overdraft fees would be charged only if a customer did not have sufficient funds to cover a transaction.4 The suit alleged that the credit union assessed overdraft fees based on an “artificial internal calculation (available balance),” not the actual balance, which resulted in overdraft fees.5 Addition- ally, so-called “extended overdraft” charges have also been challenged, where account holders are charged additional fees for failing to cure an overdraft status within a specified period of time.6
Courts have been willing to grant class certification for proposed class action overdraft suits. Recently, the U.S. Court of Appeals for the Eleventh Circuit rejected bank motions to set aside class certifica- tions for three overdraft lawsuits.7 The court agreed with the lower court’s assessment that customers’ complaints stemmed from a common practice of posting customers’ largest debits first to cause more overdrafts. The district court found that the bank also misrepresented its posting practices in mar- keting materials by stating that such debits would post to accounts “automatically” and “immediately.” In fact, the bank held trans- actions and posted them in the middle of the night after arranging them from highest to lowest.
Scrutiny of overdraft fees is not likely to diminish soon. The CFPB has announced that it is preparing for rulemaking activities regarding overdraft programs on checking accounts, particularly on transaction posting order practices and fee structures.8
Automatic Deductions and Renewals. At least 22 states have enacted statutes regu- lating automatic renewals.9 These statutes generally require companies to disclose automatic renewal policies in a clear and conspicuous manner. Some statutes also require companies to obtain customers’ affir- mative consent before charging a credit card and to disclose how to cancel the subscrip- tion and avoid future recurring payments. California, New York, Connecticut, Oregon, Illinois, Georgia and Florida are among the states with the strictest statutes.10 These statutes, many of which recently were enact- ed, have triggered a wave of class action litigation.
Much of the class action litigation involv- ing auto-renewals has not involved financial services to date. However, the CFPB recently brought an enforcement proceeding against a payday lender under the ETFA and its unfair and deceptive practices authority for con- tinuing to deduct funds from consumers’ bank accounts after they cancelled autho- rizations for such withdrawals.11 Scrutiny of auto-renewal and auto-deduction practices of financial services companies is only likely to increase. Days after announcing above-ref- erenced enforcement action, the CFPB issued a Compliance Bulletin reminding companies that the EFTA requires that they have proper “affirmative consent” before automatically debiting funds from customers’ accounts.12 Additionally, all companies are » Page S10
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