In Jesinoski v. Countrywide Home Loans, Inc., the U.S. Supreme Court held that only written notice is required, and a borrower need not file suit, to rescind a loan under the Truth in Lending Act (TILA).
In Jesinoski, borrowers refinanced their mortgage with Countrywide in February 2007. Within three years, they mailed Countrywide a letter to rescind the loan. The lender denied the validity of the rescission, and in February 2011, four years and one day after the date of the loan, borrowers filed suit in federal court for a declaration of rescission. The district court granted the lender's Motion for Judgment on the Pleadings, holding TILA requires a borrower to file suit within three years of a loan in order to rescind: since borrowers had provided notice of rescission within three years, but did not file suit until more than four years after the date of the loan, their claim was time-barred. Borrowers appealed; the Eighth Circuit affirmed.Continue Reading...
Overturning Tenth Circuit precedent, the U.S. Supreme Court recently held that the Class Action Fairness Act of 2005, or "CAFA," does not require that a party seeking removal to federal court submit with its notice of removal evidentiary support of the amount in controversy. Rather, the high court held in Dart Cherokee Basin Operating Co., LLC v. Owens, CAFA requires the removal notice include only a plausible allegation of the amount in controversy. The Court also clarified that, contrary to Tenth Circuit precedent, there is no presumption against CAFA removal: Congress intended CAFA to facilitate the adjudication in federal court of certain types of class actions.
Owens filed a putative class action in a Kansas state court. The defendant, Dart, removed the action to a federal district court under CAFA. CAFA permits the removal to federal court of certain state law class actions filed in state court, even if there is not the "complete diversity" that is otherwise required for federal diversity jurisdiction. In order for an action to qualify for CAFA removal, three requirements must be met. First, there must be at least 100 class members. Second, there must be so-called minimal diversity, as defined by CAFA itself. And finally, there must be at least $5 million in controversy.
No Arbitration Without Contract Formation: 9th Circuit Holds Auto Buyer's Use of Trial Radio Service Insufficient to Manifest Assent
In Knutson v. Sirius XM Radio, Inc., the Ninth Circuit held that the consumer was not bound to an arbitration agreement where he was unaware, and could not reasonably have been expected to be aware, that he had entered a contractual relationship in the first place. The decision reversed a district court's order compelling arbitration and dismissing the Toyota buyer's putative class action under the Telephone Consumer Protection Act.
In November 2011, Erik Knutson purchased a new Toyota pick-up truck. It came equipped with Sirius XM satellite radio, and a 90-day free trial subscription to the service. At the time of the purchase, Knutson was given no paperwork or other information about Sirius XM or any potential contractual relationship he might have been entering with them by using the trial service. About a month later, Knutson received a "Welcome Kit" from Sirius XM that contained a Customer Agreement. The Customer Agreement contained an arbitration provision. Knutson did not review these materials. Knutson alleges that subsequently, during the trial subscription period, he received three unauthorized phone calls from Sirius XM on his cellphone.
Knutson then filed a class action against Sirius XM for violations of the TCPA. Sirius XM moved to compel arbitration under the Customer Agreement, and the district court granted their motion and dismissed the putative class action.
California Court Rejects Firm's Attempt to Collect Undisclosed Attorneys' Fees in Class Action Settlement
The apparent misconduct of counsel representing some class members recently led California's First Appellate District to uphold a temporary restraining order barring a law firm from collecting nearly $5 million in attorneys' fees. In Lofton v. Wells Fargo Home Mortgage, the court stated that the firm had tried to distribute the fees to itself without the approval, or even the knowledge, of the court. Moreover, the firm's clients, whose individual suits the firm settled along with a concurrently pending class action represented by other attorneys, also were not apprised of the relevant details regarding the settlement or the attorneys' fees. Ultimately, in upholding the temporary restraining order sought by an intervenor who was their former client, the First District suggested that the firm may not be entitled to any fees at all. The Lofton opinion provides an inside look at a class action settlement gone very wrong.Continue Reading...
California Appellate Court Decertifies Class and Endorses High Standard for Class Certification of Unauthorized Call Monitoring Claims
California's Fourth Appellate District recently upheld the decertification of a class of consumers who asserted that their lender monitored phone conversations without their consent. The decision in Kight v. CashCall, Inc. (Oct. 9, 2014) will make it more difficult for plaintiffs to certify classes under Penal Code section 632, which prohibits the unauthorized monitoring or recording of confidential conversations. Penal Code section 637.2 authorizes a minimum fine of $5,000 for violation of section 632. The court ultimately concluded, in accordance with Hataishi v. First American Home Buyers Protection Corp. (Feb. 21, 2014), that the confidentiality determination under section 632 required an individualized inquiry into each class member's background and experiences that precluded maintenance of a class action for the determination of liability. In light of these two decisions, unauthorized call recording class actions may well become a thing of the past.Continue Reading...
In Doyle v. OneWest Bank, FSB, the Ninth Circuit held that citizenship for purposes of removal under the Class Action Fairness Act (CAFA) must be determined based on the complaint at the time the case became removable.
In Doyle, two plaintiffs sued several defendants in a putative class action in California state court. Defendants removed the case to federal court based on CAFA jurisdiction. The parties stipulated that claims of one of the plaintiffs would be severed and transferred to another district court. The remaining plaintiff amended her complaint to reflect the severance, but also revised her changed her allegations related to citizenship. Plaintiff then moved to remand the case to state court, asserting that plaintiff's citizenship, as alleged in her amended complaint, put her within an exception to CAFA removal jurisdiction under 28 U.S.C. 1332(d)(4). The district court granted plaintiff's motion to remand. Defendants appealed.Continue Reading...
In Hawaii v. HSBC Bank Nevada, NA, the 9th Circuit reversed the district court's denial of motions to remand in several suits brought against credit card issuers by the Hawaii Attorney General, holding that there was no federal court subject matter jurisdiction under the doctrine of complete preemption and no jurisdiction under the Class Action Fairness Act (CAFA).
The Attorney General of Hawaii sued six credit card issuers in separate complaints in Hawaii state court, alleging unfair and deceptive practices under state law and unjust enrichment related to marketing and enrolling customers in debt protection products such as payment protection plans, extended warranties, identity theft protection plans, and similar products. Defendants removed the cases to the district court. The Attorney General moved to remand each case. The district court denied the motions to remand, holding that although there was no CAFA jurisdiction, there was federal court jurisdiction based on the doctrine of complete preemption. The Attorney General sought leave to file an interlocutory appeal, and the district court certified questions to the 9th Circuit, which granted permission to appeal.
In Tourgeman v. Collins Financial Services, Inc., et al., the Ninth Circuit Court of Appeals reversed the district court’s summary judgment in favor of defendants in a Fair Debt Collection Practices Act class action. Specifically, the panel held that the plaintiff had Article III standing and a statutory cause of action under the FDCPA based on debt collection letters he did not receive. The Court also held that dunning letters and a state court collection action were materially misleading by misstating the name of plaintiff’s original creditor.
Plaintiff Tourgeman financed a computer from Dell Financial Services, with a loan originated by CIT Online Bank. Although he lived in Mexico, he had the computer shipped to his parents’ home in California. After plaintiff allegedly defaulted on the loan, a collection agency and law firm sent dunning letters to plaintiff at the California address, incorrectly identifying the original creditor as American Investment Bank, N.A. Plaintiff never received the dunning letters, but discovered them when defending a collection action filed in state court.
In Laguna v. Coverall North America, Inc., the Ninth Circuit affirmed the district court's approval of a pre-certification class settlement, and further detailed factors for settlement approval under Federal Rule of Civil Procedure 23(e).
In Coverall, plaintiffs asserted a putative class against defendant, a janitorial franchising company, alleging mis-classification of franchisees as independent contractors, as well as breach of the franchise agreement, fraud, and unfair business practices for removing and reassigning customer accounts among franchisees without cause. The parties agreed to a settlement before class certification, after two years of significant litigation. The district court approved the settlement in a fairness hearing in November 2011. A sole objector appealed.Continue Reading...
The U.S. Supreme Court has granted certiorari in Dart Cherokee Basin v. Owens to determine "[w]hether a defendant seeking removal to federal court is required to include evidence supporting federal jurisdiction in the notice of removal, or is alleging the required 'short and plain statement of the grounds for removal' enough."
In Dart Cherokee, defendants removed a putative class action from state court to the District of Kansas based on the Class Action Fairness Act ("CAFA"). The district court granted plaintiff's remand motion, holding that defendants had failed to prove by a preponderance of the evidence that the amount in controversy exceeded $5 million, because they had failed "to incorporate any evidence supporting this calculation in the Notice of Removal, such as an economic analysis of the amount in controversy or settlement estimates." Although defendants submitted such evidence in opposition to plaintiff's remand motion, the district court held that this was insufficient, because defendants were "obligated to allege all necessary jurisdictional facts in the notice of removal."Continue Reading...