Financial Regulatory Reform Moving Forward
Legislation for federal financial regulatory reform, introduced by the Obama administration in June, is moving forward through the legislative process. Treasury Secretary Geithner testified before the House Financial Services Committee on September 23.
The proposed financial regulatory reform legislation in the U.S. House is the Consumer Financial Protection Agency Act of 2009 in the House (HR 3126). The Financial Services Committee has issued a section-by-section summary of the proposed legislation as well as a September 25 discussion draft.
Track the progress of the legislation at the administration's Financial Stability website.
9th Circuit Details Corporate Citizenship Tests
In a significant case for credit card issuers and retailers, the Ninth Circuit has detailed the application of its tests of corporate citizenship for purposes of federal jurisdiction. In Davis v. HSBC Bank Nevada, N.A., et al., the Court held that retailer Best Buy is not a citizen of California merely because it has more presence in this state than in any other state.
In Davis, plaintiff sued credit card issuer HSBC and retailer Best Buy, asserting claims for violation of California's unfair competition statute, §17200, and false advertising statute, §17500, alleging the companies defrauded consumers by failing to adequately disclose the credit card's annual fee. Defendants removed the case to federal court based on the Class Action Fairness Act of 2005 ("CAFA"). Plaintiff moved to remand based on the local controversy exception to federal jurisdiction, 28 U.S.C. §1332(d)(4), which bars federal jurisdiction where, among other things, at least one defendant is a citizen of the original forum state. The district court granted plaintiff's motion to remand. Defendants appealed.
Continue Reading...9th Circuit Remands Class Arbitration Waiver
The Ninth Circuit last week addressed choice of law considerations in the context of a class wide arbitration waiver. In Hoffman v. Citibank (South Dakota), N.A., the Ninth Circuit held that the district court's analysis of California choice of law was flawed, and remanded for the district court to re-analyze whether California or South Dakota law applies to the class arbitration waiver.
In Hoffman, Citibank issued a credit card to Hoffman in 1994 which contained a choice of law provision favoring South Dakota law. In a mailing in 2001, Citibank gave Hoffman notice of a change in the arbitration provision of the cardholder agreement, including a waiver of class arbitration. Hoffman did not object and continued to use the card.
Hoffman later sued Citibank, alleging that Citibank had improperly retroactively increased cardholders' interest rates, among other things. Citibank removed the case to federal court and moved to compel arbitration. The district court applied South Dakota law pursuant to the choice of law provision. Holding that the class arbitration waiver was not unconscionable under South Dakota law, the district court granted Citibank's motion to compel arbitration of plaintiff's claims on an individual basis. Hoffman moved to certify the ruling for immediate appeal. The district court granted the motion and the Ninth Circuit granted Hoffman's petition to be heard.
Continue Reading...Will California Courts Enforce Your Choice of Law?
Defendant Omni, a Nevada corporation with its principal place of business in Nevada, provided a personal loan to plaintiff borrower Joshua Brack, a nonresident member of the military stationed at California's Camp Pendleton. Omni's loan agreement contained a choice of law provision in favor of Nevada law. Brack repaid the loan in full in 2002.
In 2003, Brack filed a class action against Omni, alleging violations of the California Finance Lenders Law (Fin.Code §22000 et seq.), the Consumers Legal Remedies Act ("CLRA") (Civ. Code §1750 et seq.) and California's Unfair Competition Law (Bus. and Prof. Code §17200). After a trial on Omni's Nevada choice of law defense, the trial court entered judgment in favor of Omni. Brack moved to set aside the judgment. The trial court denied the motion and Brack appealed.
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The Bell Tolls for Some FACTA Class Actions
On June 3, 2008, President Bush signed the Credit and Debit Card Receipt Clarification Act, retroactively amending the statute "to declare that any person who printed an expiration date on any receipt provided to a consumer cardholder at a point of sale (POS) or transaction between December 4, 2004, and the enactment of this Act, but otherwise complied with FCRA requirements for such receipt, shall not be in willful noncompliance by reason of printing such expiration date on it."
This revision does not remove all liability in this circumstance—a merchant may still be liable for actual damages for a negligent violation—but the amendment significantly reduces the prospect of onerous statutory penalties for a willful violation and, as a result, makes class certification in these cases less likely.
